<PAGE>
Draft of March 3, 1999
----------------------
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington
----------------
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER
THE TRUST INDENTURE ACT OF 1939
DOW CORNING CORPORATION
2200 West Salzburg Road
Midland, Michigan 48686
Telephone: (517) 496-4000
----------------
Securities to be Issued under the Indenture to be Qualified:
Title of Class Amount
-------------- ------
Senior Notes Due 2009 Up to $_______ aggregate principal amount
Approximate date of proposed public offering: As soon as practicable after this
application for qualification becomes effective.
----------------
JAMES R. JENKINS, ESQ.
Vice President, Secretary and
General Counsel
Dow Corning Corporation
2200 West Salzburg Road
Midland, Michigan 48686
Telephone: (517) 496-4000
(agent for service)
Copies to:
WILLIAM H. COQUILLETTE, ESQ.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44144
Telephone: (216) 586-3939
----------------
The obligor hereby amends this application for qualification on such date or
dates as may be necessary to delay its effectiveness until (i) the 20th day
after the filing of a further amendment which specifically states that it shall
supersede this amendment or (ii) such date as the Securities and Exchange
Commission, acting pursuant to Section 307(c) of the Act, may determine upon the
written request of the obligor.
===============================================================================
<PAGE>
GENERAL
=======
Item 1. General information. Furnish the following information as to the
-------------------
applicant:
(a) Form of organization: A corporation.
(b) State or other sovereign power under the laws of which organized:
Michigan.
Item 2. Securities Act Exemption Applicable. State briefly the facts relied
-----------------------------------
upon by the applicant as a basis for the claim that registration of
the indenture securities under the Securities Act of 1933 is not
required.
Dow Corning Corporation (the "Company") relies upon Section 1145(a)(1) of
the Bankruptcy Reform Act of 1978, as amended, Title 11, United States Code (the
"Bankruptcy Code"), as the basis for its claim that registration of the offer
and sale of its Senior Notes due 2009 (the "Senior Notes") pursuant to its Plan
of Reorganization (as hereinafter defined) is not required under the Securities
Act of 1933, as amended (the "Securities Act").
On May 15, 1995, the Company filed a petition for relief under Chapter 11
("Chapter 11") of the Bankruptcy Code in the United States District Court for
the Eastern District of Michigan, Northern Division (the "Bankruptcy Court").
Since such time, the Company has continued to operate its business as a debtor
in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
The Company's Amended Joint Plan of Reorganization, dated February 4, 1999
(as it may be altered, amended or modified from time to time, the "Plan of
Reorganization"), provides for, among other things, the reorganization of the
Company under Chapter 11 and the satisfaction and discharge of various
prepetition claims against the Company. Pursuant to the Plan of Reorganization,
on or as soon as practicable after the Effective Date (as defined in the Plan of
Reorganization), the Senior Notes will be issued to certain holders of Allowed
Claims (as defined in the Plan of Reorganization) in exchange therefor. It is
anticipated that a confirmation hearing with respect to the Plan of
Reorganization will be held in late June 1999. Because the offer and sale of the
Senior Notes in connection with and pursuant to the Plan of Reorganization will
satisfy the requirements of Section 1145(a)(1) of the Bankruptcy Code, such
offer and sale will be exempt from registration under the Securities Act.
AFFILIATIONS
Item 3. Affiliates. Furnish a list or diagram of all affiliates of the
----------
applicant and indicate the respective percentages of voting
securities or other bases of control.
See Item 5 for the names, addresses and stock ownership of the Company's
---
two stockholders, each of which may be deemed to be an "affiliate" of the
Company by virtue of such stock ownership. See Item 4 for the names and
---
addresses of the directors and executive officers
<PAGE>
of the Company, some of whom may be deemed to be "affiliates" of the Company by
virtue of their positions. See Annex I for information regarding the Company's
---
subsidiaries and joint venture companies. Except as otherwise noted in Item 4,
the status of the information set forth in Items 4 and 5 and Annex I is expected
to exist upon consummation of the Plan of Reorganization.
MANAGEMENT AND CONTROL
Item 4. Directors and Executive Officers. List the names and complete mailing
--------------------------------
addresses of all directors and executive officers of the applicant and
all persons chosen to become directors or executive officers. Indicate
all offices with the applicant held or to be held by each person.
Name Address Office(s)
- ----------------------- --------------------------- ------------------------
Richard A. Hazleton c/o Dow Corning Corporation Chairman of the Board
2200 West Salzburg Road and Chief Executive
Midland, Michigan 48686 Officer; Director
Gary E. Anderson c/o Dow Corning Corporation President; Director
2200 West Salzburg Road
Midland, Michigan 48686
Roger G. Ackerman c/o Dow Corning Corporation Director
2200 West Salzburg Road
Midland, Michigan 48686
David T. Buzelli c/o Dow Corning Corporation Director
2200 West Salzburg Road
Midland, Michigan 48686
Van C. Campbell c/o Dow Corning Corporation Director
2200 West Salzburg Road
Midland, Michigan 48686
Enrique C. Falla c/o Dow Corning Corporation Director
2200 West Salzburg Road
Midland, Michigan 48686
Norman E. Garrity c/o Dow Corning Corporation Director
2200 West Salzburg Road
Midland, Michigan 48686
W.S. Stavropoulos c/o Dow Corning Corporation Director
2200 West Salzburg Road
Midland, Michigan 48686
2
<PAGE>
Name Address Office(s)
- ----------------------- --------------------------- ------------------------
Gifford E. Brown c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Barbara S. Carmichael c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
James V. Chittick c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
John W. Churchfield c/o Dow Corning Corporation Vice President and Chief
2200 West Salzburg Road Financial Officer
Midland, Michigan 48686
Leon D. Crossman c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Richard J. Francel c/o Dow Corning Corporation Corporate Controller
2200 West Salzburg Road
Midland, Michigan 48686
Siegfried Haberer c/o Dow Corning Corporation Executive Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Richard H. Hoover c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
James R. Jenkins c/o Dow Corning Corporation Vice President,
2200 West Salzburg Road Secretary
Midland, Michigan 48686 and General Counsel
Burnett S. Kelly c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Robert P. Krasa c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Jere D. Marciniak c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
3
<PAGE>
Name Address Office(s)
- ----------------------- --------------------------- ------------------------
Endvar Rossi c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Ronney R. Sexton c/o Dow Corning Corporation Treasurer
2200 West Salzburg Road
Midland, Michigan 48686
Neville J. Whitfield c/o Dow Corning Corporation Vice President
2200 West Salzburg Road
Midland, Michigan 48686
Item 5. Principal Owners of Voting Securities. Furnish the following
-------------------------------------
information as to each person owning 10% or more of the voting
securities of the applicant.
As of March 12, 1999
Percentage of
Name and Voting
Mailing Address Title of Class Amount Owned Securities Owned
- --------------------------- ---------------- ------------ ----------------
Corning Incorporated Common Stock, 1,250,000 50.0%
One Riverfront Plaza $5.00 par value shares
Corning, NY 14831
Dow Holdings, Inc. Common Stock, 1,250,000 50.0%
2030 Dow Center $5.00 par value shares
Midland, Michigan 48674
UNDERWRITERS
4
<PAGE>
Item 6. Underwriters. Give the name and complete mailing address of (a) each
------------
person who, within three years prior to the date of filing the
application, acted as an underwriter of any securities of the obligor
which were outstanding on the date of filing the application, and (b)
each proposed principal underwriter of the securities proposed to be
offered. As to each person specified in (a), give the title of each
class of securities underwritten.
(a) None.
(b) None.
5
<PAGE>
CAPITAL SECURITIES
Item 7. Capitalization. (a) Furnish the following information as to each
--------------
authorized class of securities of the applicant.
As of March 12, 1999
Title of Class Amount Authorized Amount Outstanding
- ------------------------------------ ----------------- ------------------
Common Stock, $5.00 par value 2,500,000 shares 2,500,000 shares
Medium Term Notes, Series A* $100,000,000 $40,000,000**
Medium Term Notes, Series B* $175,000,000 $ -0-
9 3/8% Debentures due February 1, $ 75,000,000 $75,000,000
2008*
8.15% Debentures due February 1, $ 50,000,000 $50,000,000
2029*
Following Consummation of the Plan of Reorganization
Common Stock, $5.00 par value 2,500,000 shares 2,500,000 shares
Medium Term Notes, Series A* $0 $0*
Medium Term Notes, Series B* $0 $0*
9 3/8% Debentures due February 1, $0 $0*
2008*
8.15% Debentures due February 1, $0 $0*
2029*
Senior Notes due 2009*** $_________ ***
* To be cancelled pursuant to the Plan of Reorganization.
** Notes having an aggregate principal amount of $5,500,000 are held by the
Company.
*** To be issued pursuant to the Plan of Reorganization in an aggregate
principal amount not to exceed the authorized amount to be determined
by the Bankruptcy Court.
(b) Description of Voting Rights.
The holders of the Company's Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders.
6
<PAGE>
INDENTURE SECURITIES
Item 8. Analysis of Indenture Provisions. Insert at this point the analysis
--------------------------------
of indenture provisions required under 305(a)(2) of the Act.
The Senior Notes will be issued under an Indenture and a First Supplemental
Indenture to be dated as of the Effective Date and entered into by the Company
and a trustee to be determined (the "Trustee"). Forms of such Indenture and
First Supplemental Indenture (collectively, the "Indenture") are attached as
exhibits hereto and incorporated herein by reference. The following analysis
represents a summary description only, and is qualified in its entirety by
reference to the terms of the Indenture.
Events of Default. The following events constitute "Events of Default"
-----------------
with respect to the Senior Notes: (i) default in the payment of any interest on
any Note of that series when it becomes due and payable, and continuance of such
default for a period of 30 days; (ii) default in the payment of the principal of
any Senior Note when it becomes due and payable, either at maturity, upon
redemption, by declaration or otherwise; (iii) default in the performance, or
breach, of any covenant or warranty of the Company in the Indenture (other than
(a) a covenant or warranty included in the Indenture solely for the benefit of
one or more series of securities other than that series or (b) a default in
performance or breach which is elsewhere specifically dealt with in the
Indenture), and continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in
principal amount of the outstanding Senior Notes affected thereby a written
notice specifying such default or breach and requiring it to be remedied; (iv)
Debt of the Company, or any Domestic Subsidiary, is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default, the total amount of such Debt unpaid or
accelerated exceeds $100,000,000 or its foreign currency equivalent and such
default continues for 10 days after the Company receives notice thereof; or (v)
any judgment or decree for the payment of money in excess of $100,000,000 is
rendered against the Company or any Domestic Subsidiary and is not discharged
and either (A) an enforcement proceeding has been commenced by any creditor upon
such judgment or decree or (B) there is a period of 60 days following such
judgment or decree during which such judgment or decree is not discharged,
waived or the execution thereof stayed and, in the case of (B), such default
continues for 10 days after the Company receives notice thereof; (vi) a court
having jurisdiction in the premises shall enter a decree or order (A) for relief
in respect of the Company in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or (B)
appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator
(or similar official) of the Company or for any substantial part of its property
or (C) ordering the winding up or liquidation of its affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or (vii) the Company shall (A) commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or (B) consent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the
7
<PAGE>
Company or for any substantial part of its property, or (C) make any general
assignment for the benefit of creditors.
If a default occurs under the Indenture with respect to securities of any
series, the Trustee will give the holders of securities of such series notice
thereof as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the type specified in clause (iv) of
the preceding paragraph, no such notice will be given until at least 30 days
after the occurrence thereof.
Registration and Delivery of Senior Notes; Application of Proceeds. The
------------------------------------------------------------------
aggregate principal amount of the Senior Notes to be issued will be determined
in accordance with the Plan of Reorganization, and will be limited to an amount
to be determined by the Bankruptcy Court. All of the Senior Notes will be
distributed to holders of certain Allowed Claims in accordance with the terms
of the Plan of Reorganization. Each Senior Note will be signed by the Company,
authenticated by the Trustee, registered in the security register by the Trustee
or an agent appointed by the Company to act as the transfer agent and registrar
and delivered to the holders of Allowed Claims by the Company or an exchange or
disbursing agent acting on behalf of the Company.
Satisfaction and Discharge of Indenture. The Company may satisfy and
---------------------------------------
discharge the Indenture (subject to certain surviving obligations) if (i) all
securities previously authenticated and delivered (with certain exceptions) have
been delivered to the Trustee for cancellation, or all such securities not so
delivered have become due and payable, or will become due and payable or will be
called for redemption within one year, and the Company has deposited in trust
with the Trustee an amount sufficient to pay and discharge the entire
indebtedness on such securities not so delivered, (ii) the Company has paid all
other sums payable under the Indenture by the Company, and (iii) the Company has
delivered to the Trustee an officer's certificate and an opinion of counsel,
each stating that all conditions precedent in the Indenture relating to such
satisfaction and discharge have been satisfied.
The Company may effect a defeasance (i.e., the discharge of certain of its
----
obligations under the Indenture, including the indebtedness represented by the
securities), or covenant defeasance (i.e., the release of certain covenant
----
obligations of the Company under the Indenture) with respect to any defeasible
series of securities (including the Senior Notes but excluding any securities
convertible or exchangeable into other securities) upon the satisfaction of
certain conditions, including (i) the deposit by the Company with the Trustee in
trust for the benefit of the holders of such series of sufficient money, U.S.
Government Obligations (as defined in the Indenture) or a combination thereof to
pay the principal of and any premium and interest on the securities of such
series when the same shall be due and (ii) the delivery of certain prescribed
opinions of counsel, including an opinion with respect to certain federal income
tax matters.
Evidence as to Compliance with the Indenture. The Company will deliver to
--------------------------------------------
the Trustee a quarterly officer's certificate stating whether or not the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of the Indenture and/or whether an event which has a material
adverse effect has occurred, and if the Company is in default, specifying all
such defaults and the nature and status thereof.
8
<PAGE>
Item 9. Other Obligors. Give the name and complete mailing address of any
--------------
person, other than the applicant, who is an obligor upon the
indenture securities.
None.
Contents of application for qualifications. This application for qualification
comprises:
(a) Pages numbered 1 to 14, consecutively.
(b) The statement of eligibility and qualification of the Trustee.*
(c) The following exhibits in addition to those filed as part of the statement
of eligibility and qualification of the Trustee:
(i) Exhibit T3A. Restated Articles of Incorporation of the Company
-----------
(ii) Exhibit T3B. By-Laws of the Company
-----------
(iii) Exhibit T3C-1. Form of Indenture
-------------
(iv) Exhibit T3C-2. Form of First Supplemental Indenture
-------------
(v) Exhibit T3E. Disclosure Statement of the Company, dated
-----------
February 4, 1999, Pursuant to Section 1125 of the Bankruptcy Code
(vi) Exhibit T3F. A cross reference sheet (included with the form of
-----------
indenture filed herewith as Exhibit T3C-1)
* To be filed by amendment.
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Dow Corning Corporation, a corporation organized and existing under
the laws of the State of Michigan, has duly caused this application to be signed
on its behalf by the undersigned, thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Midland, and State of
Michigan, on the 12th day of March, 1999.
DOW CORNING CORPORATION
[SEAL]
By: /s/ John W. Churchfield
-----------------------------------------
Name: John W. Churchfield
Title: Vice President and Chief Financial
Officer
Attest:
By: /s/ James R. Jenkins
---------------------------------------
Name: James R. Jenkins, Esq.
Title: Vice President, Secretary
and General Counsel
10
<PAGE>
Annex I
-------
LIST OF SUBSIDIARIES AND JOINT VENTURE COMPANIES/1/
------------------------------------------------
NAME GOVERNING OWNERSHIP
JURISDICTION INTEREST OF
THE COMPANY
- -----------------------------------------------------------------------------
Bay Asset Funding Corporation Delaware 100%
- -----------------------------------------------------------------------------
DC Belgium Pension Fund (ASBL) Belgium 100%
- -----------------------------------------------------------------------------
DC Krafft S.A./2/ Spain 65%
- -----------------------------------------------------------------------------
DC Liquid System Technologies, Inc. Delaware 100%
- -----------------------------------------------------------------------------
DC STI S.A. France 100%
- -----------------------------------------------------------------------------
Devonshire Underwriters Ltd. Bermuda 100%
- -----------------------------------------------------------------------------
Dow Corning de Argentina S.A.I.C./3/ Argentina 95%
- -----------------------------------------------------------------------------
Dow Corning Asia Ltd. Japan 100%
- -----------------------------------------------------------------------------
Dow Corning Australia Pty, Ltd. Australia 100%
- -----------------------------------------------------------------------------
Dow Corning Do Brazil Limitada /3/ Brazil 99.9%
SIL Trade Industria E Commercio Brazil 49%
Ltda./2/
- -----------------------------------------------------------------------------
Dow Corning Canada, Inc. Canada 100%
- -----------------------------------------------------------------------------
Dow Corning Chile S.A./3/ Chile 60%
- -----------------------------------------------------------------------------
Dow Corning China Limited Hong Kong 100%
- -----------------------------------------------------------------------------
Dow Corning de Colombia, S.A./4/ Colombia 60%
- -----------------------------------------------------------------------------
Dow Corning Construction S.A. France 100%
- -----------------------------------------------------------------------------
Dow Corning Enterprises Inc. Delaware 100%
Dow Corning Polska Sp.zo.o/5/ Poland 100%
Universal Silicones and Lubricants India 49.9%
Ltd./2,5/
- -----------------------------------------------------------------------------
Dow Corning Foreign Sales Corporation /7/ U.S. Virgin Islands 100%
- -----------------------------------------------------------------------------
Dow Corning France S.A. France 100%
- -----------------------------------------------------------------------------
Dow Corning GesmbH (Austria) Austria 100%
- -----------------------------------------------------------------------------
Dow Corning GmbH (Weisbaden) Germany 100%
- -----------------------------------------------------------------------------
Dow Corning Iberica S.A. Spain 100%
- -----------------------------------------------------------------------------
11
<PAGE>
NAME GOVERNING OWNERSHIP
JURISDICTION INTEREST OF
THE COMPANY
- -----------------------------------------------------------------------------
Dow Corning Investment S.A. Belgium 100%
Dow Corning Coordination Center Belgium 100%
S.A./1/
- -----------------------------------------------------------------------------
Dow Corning Korea Ltd. South Korea 100%
- -----------------------------------------------------------------------------
Dow Corning Limited United Kingdom 100%
Dow Corning Hansil, Ltd./6/ England 99.9%
Dow Corning STI Limited England 100%
- -----------------------------------------------------------------------------
100% Dow Corning Malaysia Sdn. Bhd. Malaysia 100%
- -----------------------------------------------------------------------------
Dow Corning de Mexico S.A. de C.V./3/ Mexico 99.9%
- -----------------------------------------------------------------------------
Dow Corning New Zealand Ltd. New Zealand 100%
- -----------------------------------------------------------------------------
Dow Corning Nordic AB Sweden 100%
- -----------------------------------------------------------------------------
Dow Corning Puerto Rico, Inc. Puerto Rico 100%
- -----------------------------------------------------------------------------
Dow Corning S.A. Belgium 100%
- -----------------------------------------------------------------------------
Dow Corning (Shanghai) Co., Ltd./5/ China 100%
- -----------------------------------------------------------------------------
Dow Corning Silicon Energy Systems, Inc. Delaware 100%
- -----------------------------------------------------------------------------
Dow Corning Singapore Pte. Ltd. Singapore 100%
- -----------------------------------------------------------------------------
Dow Corning S.p.A. Italy 100%
- -----------------------------------------------------------------------------
Dow Corning STI, Inc. Delaware 100%
- -----------------------------------------------------------------------------
Dow Corning Taiwan Inc. Taiwan 100%
- -----------------------------------------------------------------------------
Dow Corning (Thailand) Ltd. Thailand 100%
- -----------------------------------------------------------------------------
Dow Corning Toray Silicone Co., Ltd./2/ Japan 65%
- -----------------------------------------------------------------------------
Dow Corning de Venezuela S.A./3/ Venezuela 99.9%
- -----------------------------------------------------------------------------
Hemlock Semiconductor Corporation/2/ Michigan 63.25%
- -----------------------------------------------------------------------------
SDC Technologies, Inc./2,6/ Delaware 50%
SDC Coatings, Inc./1,2/ Delaware 50%
Applied Hardcoating Technologies,
Inc./1,2/ Delaware 50%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Site Services, Inc. Delaware 100%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
12
<PAGE>
NAME GOVERNING OWNERSHIP
JURISDICTION INTEREST OF
THE COMPANY
- -----------------------------------------------------------------------------
Wickhen Products of Delaware, Inc. Delaware 100%
Recon Associates Inc./1/ Delaware 100%
Wickhen Products, Inc./1/ Wisconsin 100%
Agron, Inc./1/ Delaware 100%
______________
1. Entities the names of which are indented are owned by the subsidiary or
joint venture company named at the margin; ownership interest indicated is the
indirect ownership interest of the Company.
2. Joint venture company.
3. Remaining ownership interest held by Dow Corning Canada, Inc.
4. Each of Dow Corning Do Brazil Limitada, Dow Corning de Argentina
S.A.I.C., Dow Corning Canada, Inc. and Dow Corning de Mexico S.A. de C.V. hold a
10% ownership interest.
5. Interest held through subsidiary holding company, Dow Corning
Enterprises.
6. Remaining ownership interest held by an individual nominated by the
Company.
7. 50% ownership interest held by Hemlock Semiconductor Corporation.
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------
Exhibit T3A Restated Articles of Incorporation of the Company
Exhibit T3B By-Laws of the Company
Exhibit T3C-1 Form of Indenture
Exhibit T3C-2 Form of First Supplemental Indenture
Exhibit T3E Amended Joint Disclosure Statement of the Company,
dated February 4, 1999, Pursuant to Section 1125
of the Bankruptcy Code
Exhibit T3F A cross reference sheet (included with the form of
indenture filed herewith as Exhibit T3C-1)
14
<PAGE>
RESTATED ARTICLES OF INCORPORATION
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is: Dow Corning Corporation.
ARTICLE II
The purpose of purposes for which the corporation is organized are:
1. To engage in any activity within the purposes for which corporations may be
organized under the Michigan Business Corporation Act.
2. To manufacture, sell and deal in silicon metal, organo-silicon compounds
and other chemicals of all kinds and all products manufactured or derived
therefrom and to do all things incidental thereto, and to acquire, hold and
dispose of all property necessary or convenient therefor.
3. To manufacture, purchase or otherwise acquire, own, mortgage, pledge, sell,
assign, and transfer, or otherwise dispose of, to invest, trade, deal in
and deal with goods, wares and merchandise of every class and description.
4. To acquire, purchase, hold and convey real and personal estate and to
mortgage or lease any such real and personal estate with or without any of
its franchises, corporate or otherwise; the power to hold real and personal
estate shall include the power to take the same by gift, devise or bequest.
5. To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the goodwill, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any
person, firm, association, or corporation.
6. To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and tradenames, relating
to or useful in connection with any business of this corporation.
7. To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of the shares of the capital stock of, or any bonds,
securities or evidences of indebtedness created by any other corporation or
corporations of this state or any other state, country, nation or
government, banking corporations or trust companies (provided such stock of
banking corporations or trust companies is acquired as a part of a plan of
reorganization
<PAGE>
of such banking corporation or trust company) and, while the owner of the
same, to exercise all the rights, powers and privileges of ownership
including the right to vote thereon if such right be an incident of the
same.
8. To enter into, make and perform contracts of every kind and description
with any person, firm, association, corporation, municipality, county,
state, body politic or government or colony or dependency thereof.
9. To borrow money and issue, sell, or pledge bonds, promissory notes, bills
of exchange, debentures, and other obligations and evidences of
indebtedness whether secured by mortgage, pledge or otherwise, or
unsecured.
10. To acquire, purchase, hold, sell and transfer the shares of its own capital
stock; provided it shall not use its funds or property for the purchase of
its own shares of capital stock when such use would cause any impairment of
the capital of the corporation, and provided further that shares of its own
capital stock shall not be voted directly or indirectly.
11. To conduct its business in this state, other states, the District of
Columbia, the territories and colonies of the United States and in foreign
countries and the territories and colonies thereof and have one or more
offices out of this state and to acquire, purchase, hold, mortgage, pledge,
assign, transfer and convey real and personal property out of this state.
12. In general to engage in any business in connection therewith and incident
thereto not forbidden by the laws of the State of Michigan and with all the
powers conferred upon corporations by the laws of the State of Michigan.
ARTICLE III
The total authorized capital stock is: 2,500,000 common shares, par value
per share $5.00.
The shares of stock shall all be of one and the same class and each shall
have full voting powers and each shareholder shall be entitled to a number of
votes equal to the number of shares held by him.
ARTICLE IV
The address of the current registered office is: 614 Griswold Street,
Detroit, Michigan 48226.
The name of the current registered agent is: The Corporation Company.
ARTICLE V
The duration of the corporation is perpetual.
2
<PAGE>
ARTICLE VI
The shareholder entitled to vote at an election for directors may vote, in
person or by proxy, the number of shares owned by him for as many persons as
there are directors to be elected and for whose election he has a right to vote,
or to cumulate his votes by giving one candidate as many votes as the number of
such directors multiplied by the number of his shares, or by distributing his
votes on the same principle among any member of the candidates.
ARTICLE VII
The shareholders of this corporation shall have a preemptive right to
subscribe for any additional shares of capital stock (whether unissued or
treasury shares), option rights, or securities having conversion or option
rights into capital stock that may from time to time be issued by this
corporation.
ARTICLE VIII
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them a
court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on this corporation.
ARTICLE IX
Section 1 - Action or Suit by Others Than the Corporation
---------------------------------------------
The board of directors may authorize the indemnification of any person who
was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director,
3
<PAGE>
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, to the full extent
provided by the Michigan Business Corporation Act from time to time in effect;
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders, and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to be the best interests of the corporation or its shareholders,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful; provided, however, that except with
respect to actions, suits or proceedings initiated by any such person to enforce
his or her rights to indemnification or advancement of expenses under this
Article or otherwise, the corporation shall indemnify any such person in
connection with an action, suit or proceeding initiated by such person only if
such action, suit or proceeding was authorized or ratified by the Board of
Directors of the corporation. "Proceeding" as used in this Article shall include
any proceeding within an action or suit.
Section 2 - Action or Suit by the Corporation
---------------------------------
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of his or her,
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for a violation of Section 551(l) of the
Michigan Business Corporation Act, (iv) for any transaction from which the
director derived an improper personal benefit, or (v) for an act or omission
occurring before the date that this amendment to the Articles of Incorporation
becomes effective in accordance with the pertinent provisions of the Michigan
Business Corporation Act. In addition to the circumstances in which a director
of the Corporation is not personally liable as set forth in the preceding
sentence, a director shall not be liable to the fullest extent permitted by any
amendment to the Michigan Business Corporation Act hereafter enacted that
further limits the liability of a director. Any repeal, amendment or other
modification of this section shall not adversely affect any right or protection
of any director of the corporation existing at the time of such repeal,
amendment or other modification for or with respect to any act or omission
occurring prior to the time of such repeal amendment or other modification.
The board of directors may authorize the indemnification of any person who
was or is a party to or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was an
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, or proceeding
to the full extent provided by the Michigan Business Corporation Act from time
to time in effect; if he acted in good faith and in a manner he reasonably
believed to be in or not
4
<PAGE>
opposed to the best interests of the corporation or its shareholders and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Section 3 - Indemnification Against Expenses
--------------------------------
(1) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Section 1 or 2 of this
Article, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
(2) Any indemnification under Section 1 or 2 of this Article (unless
ordered by a court) shall be made only as authorized in the specific
case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Section 1 and 2
of this Article. Such determination shall be made in either of the
following ways:
(a) By a majority vote of a quorum of the board consisting of
directors who were not parties to the action, suit or proceeding.
(b) If such quorum described in subdivision (a) is not obtainable,
then by a majority vote of a committee of directors who are not
parties to the action. The committee shall consist of not less
than 2 disinterested directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
ARTICLE X
The corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights, conferred upon shareholders
herein are granted subject to this reservation.
These Restated Articles of Incorporation were duly adopted on the 25th day
of March, 1988, in accordance with the provisions of Section 642 of the Act and
were duly adopted by the shareholders. The necessary number of shares as
required by statute were voted in favor of these Restated Articles.
5
<PAGE>
Signed this 13th day of April, 1988
/s/ James R. Jenkins
------------------------------------------
J.R. Jenkins, Vice President, Secretary &
General Counsel
6
<PAGE>
DOW CORNING CORPORATION
BY-LAWS
TABLE OF CONTENTS
ARTICLE I - LOCATION OF OFFICES..................................... PAGE 1
ARTICLE II - NOTICES................................................ PAGE 1
SECTION 1 - DELIVERY.......................................... PAGE 1
SECTION 2 - WAIVER............................................ PAGE 2
ARTICLE III - SHAREHOLDERS.......................................... PAGE 2
SECTION 1 - PLACE OF MEETINGS................................. PAGE 2
SECTION 2 - ANNUAL MEETING.................................... PAGE 2
SECTION 3 - NOTICE OF ANNUAL MEETING.......................... PAGE 3
SECTION 4 - SPECIAL MEETINGS.................................. PAGE 3
SECTION 5 - NOTICE OF SPECIAL MEETINGS........................ PAGE 4
SECTION 6 - ACTION WITHOUT A MEETING.......................... PAGE 4
SECTION 7 - FIXING OF RECORD DATE............................. PAGE 4
SECTION 8 - VOTING LISTS...................................... PAGE 5
SECTION 9 - QUORUM............................................ PAGE 6
SECTION 10 - PROXIES............................................ PAGE 6
SECTION 11 - VOTING OF SHARES -................................. PAGE 7
ELECTION OF DIRECTORS
SECTION 12 - VOTING OF SHARES................................... PAGE 7
OTHER THAN ELECTION OF DIRECTORS
<PAGE>
TABLE OF CONTENTS (CONTINUED)
SECTION 13 - REQUEST FOR FINANCIAL STATEMENT..................... PAGE 7
SECTION 14 - REMOVAL OF DIRECTORS................................ PAGE 8
ARTICLE IV - BOARD OF DIRECTORS....................................... PAGE 8
SECTION 1 - GENERAL POWERS...................................... PAGE 8
SECTION 2 - NUMBER, TENURE AND QUALIFICATIONS................... PAGE 9
SECTION 3 - REGULAR MEETINGS.................................... PAGE 9
SECTION 4 - SPECIAL MEETINGS.................................... PAGE 10
SECTION 5 - NOTICE OF SPECIAL MEETINGS.......................... PAGE 10
SECTION 6 - PARTICIPATION....................................... PAGE 10
SECTION 7 - ACTION WITHOUT A MEETING............................ PAGE 11
SECTION 8 - QUORUM AND MANNER OF ACTING......................... PAGE 11
SECTION 9 - VACANCIES........................................... PAGE 11
SECTION 10 - COMPENSATION........................................ PAGE 12
SECTION 11 - COMMITTEES OF THE BOARD............................. PAGE 12
SECTION 12 - POWERS OF COMMITTEES................................ PAGE 13
SECTION 13 - DIRECTORS' ANNUAL STATEMENT......................... PAGE 14
ARTICLE V - OFFICERS.................................................. PAGE 14
SECTION 1 - ELECTION AND TERM OF OFFICE......................... PAGE 14
SECTION 2 - OFFICES............................................. PAGE 15
SECTION 3 - VACANCIES........................................... PAGE 15
SECTION 4 - CHAIRMAN OF THE BOARD............................... PAGE 15
<PAGE>
TABLE OF CONTENTS (CONTINUED)
SECTION 5 - PRESIDENT........................................... PAGE 16
SECTION 6 - VICE PRESIDENTS..................................... PAGE 16
SECTION 7 - SECRETARY........................................... PAGE 17
SECTION 8 - TREASURER........................................... PAGE 17
SECTION 9 - GENERAL COUNSEL..................................... PAGE 18
SECTION 10 - CONTROLLER.......................................... PAGE 18
SECTION 11 - AUDITOR............................................. PAGE 19
SECTION 12 - ASSISTANT OFFICERS.................................. PAGE 19
ARTICLE VI - EXECUTION OF INSTRUMENTS AND APPOINTMENT
OF PROXIES AND AGENTS.................................... PAGE 20
SECTION 1 - CONTRACTS AND CONVEYANCES........................... PAGE 20
SECTION 2 - LOANS............................................... PAGE 20
SECTION 3 - CHECKS, DRAFTS AND SO FORTH......................... PAGE 20
SECTION 4 - APPOINTMENT OF PROXIES AND AGENTS................... PAGE 21
ARTICLE VII - SEAL.................................................... PAGE 21
ARTICLE VIII - CERTIFICATES OF SHARES AND
THEIR TRANSFER......................................... PAGE 21
SECTION 1 - SHARE CERTIFICATES.................................. PAGE 21
SECTION 2 - TRANSFER OF SHARES.................................. PAGE 23
ONLY ON BOOKS OF CORPORATION
SECTION 3 - REGISTERED SHAREHOLDERS............................. PAGE 24
ARTICLE IX - FISCAL YEAR.............................................. PAGE 24
ARTICLE X - DIVIDENDS AND RESERVES.................................... PAGE 24
SECTION 1 - DIVIDENDS AND OTHER DISTRIBUTIONS................... PAGE 24
<PAGE>
TABLE OF CONTENTS (CONTINUED)
SECTION 2 - SOURCE OF DIVIDENDS................................. PAGE 25
SECTION 3 - RESERVES............................................ PAGE 26
ARTICLE XI - INDEMNIFICATION OF OFFICER
DIRECTORS AND EMPLOYEES................................. PAGE 26
SECTION 1 - ACTION OR SUIT BY OTHERS THAN
THE CORPORATION..................................... PAGE 26
SECTION 2 - ACTION OR SUIT BY THE CORPORATION................... PAGE 28
SECTION 3 - INDEMNIFICATION AGAINST EXPENSES.................... PAGE 30
SECTION 4 - REIMBURSEMENT OF EXPENSES........................... PAGE 31
SECTION 5 - RIGHT NOT EXCLUSIVE................................. PAGE 31
SECTION 6 - RIGHT TO INDEMNIFICATION SURVIVES................... PAGE 32
SECTION 7 - INSURANCE TO PROTECT OFFICERS,
DIRECTORS, EMPLOYEES, AND AGENTS.................... PAGE 32
SECTION 8 - MERGED AND REORGANIZED CORPORATION.................. PAGE 33
ARTICLE XII - AMENDMENT OF BY-LAWS................................... PAGE 33
<PAGE>
DOW CORNING CORPORATION
BY-LAWS
ARTICLE I - LOCATION OF OFFICES
The registered office shall be at the offices of The Corporation
Company, 615 Griswold Street, Detroit, Michigan 48226. The principal office for
the transaction of business shall be at the Dow Corning Center in Williams
Township, Bay County, State of Michigan. The corporation may also have offices
at such other places as the Board of Directors may from time to time appoint or
the business of the corporation may require.
ARTICLE II - NOTICES
Section 1 - Delivery
--------
Whenever under the provisions of these By-Laws, notice is required to
be given to any director or shareholder, it shall not be construed to mean
personal notice, but such notice may also be given in writing, by mail, by
depositing the same in a post office or letter box, in a post-paid sealed
wrapper, addressed to such director or shareholder, at the address designated by
him for that purpose, or, if none is designated, at his last known address and
such notice shall be deemed to be given at the time when the same shall be
deposited.
1
<PAGE>
Section 2 - Waiver
------
When the corporation, board or committee thereof may take action after
notice to any person or after lapse of a prescribed period of time, the action
may be taken without notice and without lapse of the period of time, if at any
time before or after the action is completed the person entitled to notice or to
participate in the action to be taken submits a signed waiver of such
requirements.
ARTICLE III - SHAREHOLDERS
Section 1 - Place of Meetings
-----------------
Meetings of the shareholders shall be held at Dow Corning Center in
Williams Township, Bay County, State of Michigan, or at such other place either
within or without the State of Michigan as shall be stated in the notice of
meeting.
Section 2 - Annual Meeting
--------------
Unless otherwise agreed to by unanimous consent of the shareholders,
the annual meeting of shareholders shall be held on the first Friday following
the first Wednesday of March in each year, if not a legal holiday, and if a
legal holiday, then on the next business day following, at 9:00 a.m., for the
purpose of electing, by a plurality vote, a board of directors to serve until
the next annual meeting of
2
<PAGE>
shareholders and until their successors are elected or chosen and qualify, and
for the transaction of such other business as may properly come before the
meeting.
Section 3 - Notice of Annual Meeting
------------------------
Written notice of the time, place and purposes of the annual meeting
shall be given to each shareholder entitled to vote at the meeting, not less
than ten (10) nor more than sixty (60) days before the date of the meeting.
Section 4 - Special Meetings
----------------
Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the chairman of the
board or the president, and shall be called by the chairman of the board or the
president or secretary at the request in writing by shareholders owning 50
percent in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at all special meetings
shall be confined to the purpose or purposes stated in the call.
3
<PAGE>
Section 5 - Notice of Special Meetings
--------------------------
Written notice of a special meeting of shareholders stating the time,
place and purposes thereof, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, to each shareholder entitled to
vote at the meeting.
Section 6 - Action Without a Meeting
------------------------
Any action required or permitted to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice and
without a vote, if all the shareholders entitled to vote thereon consent thereto
in writing.
Section 7 - Fixing of Record Date
---------------------
(1) For the purpose of determining shareholders entitled to notice of
and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action, the board of
directors may fix, in advance, a date as the record date for any such
determination of shareholders. The date shall not be more than sixty (60) nor
less than ten (10) days before the date
4
<PAGE>
of the meeting, nor more than sixty (60) days before any other action.
(2) If a record date is not fixed (a) the record date for
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the close of business on the day next preceding the day on
which notice is given, or, if no notice is given, the day next preceding the day
on which the meeting is held, and (b) the record date for determining
shareholders for any purpose other than that specified in subdivision (a) shall
be the close of business on the day on which the resolution of the board
relating thereto is adopted.
Section 8 - Voting Lists
------------
The secretary shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof. The list shall:
(a) Be arranged alphabetically within each class and series, with the
address of, and the number of shares held by, each shareholder.
(b) Be produced at the time and place of the meeting.
(c) Be subject to inspection by any shareholder during the whole time
of the meeting.
5
<PAGE>
(d) Be prima facie evidence as to who are the shareholders entitled
to examine the list or to vote at the meeting.
Section 9 - Quorum
------
Shares entitled to cast a majority of the votes at a meeting
constitute a quorum at the meeting. The shareholders present in person or by
proxy at such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. Whether or not a quorum is present, the meeting may be adjourned by a
vote of the shares present.
Section 10 - Proxies
-------
A shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize other persons to act
for him by proxy. A proxy shall be signed by the shareholder or his authorized
agent or representative and filed with the secretary before or at the time of
the meeting or action. A proxy is not valid after the expiration of three (3)
years from its date unless otherwise provided in the proxy.
6
<PAGE>
Section 11 - Voting of Shares - Election of Directors
----------------------------------------
Every shareholder entitled to vote at an election for directors may
vote in person or by proxy the number of shares of stock owned by him for as
many persons as there are directors to be elected and for whose election he has
the right to vote or to cumulate his votes by giving one (1) candidate as many
votes as the number of such directors multiplied by the number of his shares, or
by distributing his votes on the same principle among any number of the
candidates. The entire number of directors to be elected shall be balloted for
at one and the same time and not separately.
Section 12 - Voting of Shares - Other than Election of Directors
---------------------------------------------------
Each outstanding share entitled to vote shall be entitled to one (1)
vote upon each matter submitted to a vote at a meeting of shareholders.
Section 13 - Request for Financial Statement
-------------------------------
(1) Upon written request of a shareholder, the secretary shall mail to
the shareholder its balance sheet as at the end of the preceding fiscal year;
its statement of
7
<PAGE>
income for such fiscal year; and, if prepared by the corporation, its statement
of source and application of funds for such fiscal year.
(2) A person who is a shareholder of record of the corporation, upon
at least ten (10) days' written demand may examine for any proper purpose in
person or by agent or attorney, during usual business hours, its minutes of
shareholders' meetings and record of shareholders and make extracts therefrom.
Section 14 - Removal of Directors
--------------------
At any meeting of shareholders a director may, by a vote of a majority
of shares entitled to vote at an election of directors, be removed from office,
with or without cause and another elected in his place. If the shareholders
remove a director and fail to elect another in his place the vacancy may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the board.
ARTICLE IV - BOARD OF DIRECTORS
Section 1 - General Powers
--------------
The business and affairs of the corporation shall be managed by its
board of directors which may exercise all
8
<PAGE>
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the Articles of Incorporation or by these By-Laws directed or
required to be exercised or done by the shareholders.
Section 2 - Number, Tenure and Qualifications
---------------------------------
The maximum number of directors which shall constitute the whole board
shall be seventeen (17). Directors need not be shareholders. Directors shall
be elected by the shareholders at the annual meeting of shareholders of the
corporation, and each director shall be elected to serve until the next annual
meeting of shareholders and until his successor shall be elected and shall
qualify.
Section 3 - Regular Meetings
----------------
A regular meeting of the board of directors shall be held without
other notice than this by-law immediately after, and at the same place as, the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place, either within or without the State of Michigan
for the holding of additional regular meetings without other notice than such
resolution.
9
<PAGE>
Section 4 - Special Meetings
----------------
Special meetings of the board of directors may be called by or at the
request of the chairman, the president, the secretary, or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the State of Michigan, as the place
for holding any special meeting of the board of directors called by them.
Section 5 - Notice of Special Meetings
--------------------------
Written or telegraphic notice of any special meeting shall be given to
each director at least five (5) days prior thereto. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
Section 6 - Participation
-------------
A member of the board or a committee designated by the board may
participate in a meeting by means of conference telephone or similar
communications equipment by means of
10
<PAGE>
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section constitutes presence in
person at the meeting.
Section 7 - Action Without a Meeting
------------------------
Action required or permitted to be taken pursuant to authorization
voted at a meeting of the board or a committee thereof, may be taken without a
meeting if, before or after the action, all members of the board or of the
committee consent thereto in writing. The written consents shall be filed with
the minutes of the proceedings of the board or Committee. The consent has the
same effect as a vote of the board or committee for all purposes.
Section 8 - Quorum and Manner of Acting
---------------------------
A majority of the directors then in office shall constitute a quorum.
The acts of a majority of the directors present at any meeting at which a quorum
is present shall be the acts of the board of directors, except as may be
otherwise specifically provided by statute or by the Articles of Incorporation
or by these By-Laws.
Section 9 - Vacancies
---------
Vacancies in the board of directors may be filled by the affirmative
vote of a majority of the remaining
11
<PAGE>
directors and each person so elected to fill a vacancy shall be a director until
his successor is elected by the shareholders who may make such election at the
next annual meeting of the shareholders or any special meeting duly called for
that purpose and held prior thereto.
Section 10 - Compensation
------------
Directors shall receive such salary for their services as shall from
time to time be determined by resolution of the board, provided that nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 11 - Committees of the Board
-----------------------
(1) The board may designate one (1) or more committees; each committee
to consist of one (1) or more of the directors of the corporation. The board
may designate one (1) or more directors as alternate members of a committee, who
may replace an absent or disqualified member at a meeting of the committee. In
the absence or disqualification of a member of the committee, the members
thereof present at a meeting and not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint another member of the board
12
<PAGE>
to act at the meeting in place of such an absent or disqualified member.
(2) A committee, and each member thereof, shall serve at the pleasure
of the board.
Section 12 - Powers of Committees
--------------------
A committee designated pursuant to Article IV, Section 11 to the
extent provided in the resolution of the board, may exercise all powers and
authority of the board in management of the business and affairs of the
corporation. However, such a committee does not have power or authority to:
(a) Amend the Articles of Incorporation.
(b) Adopt an agreement of merger or consolidation.
(c) Recommend to shareholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets.
(d) Recommend to shareholders a dissolution of the corporation or a
revocation of a dissolution.
(e) Amend the By-laws of the corporation.
(f) Fill vacancies in the board.
(g) Fix compensation of the directors for serving on the board or on
a committee.
(h) Declare a dividend or to authorize the issuance of stock.
13
<PAGE>
(i) Elect or appoint a chairman, president, vice presidents,
secretary or treasurer.
Section 13 - Directors' Annual Statement
---------------------------
The directors shall at least once in each year cause a financial report of
the corporation for the preceding fiscal year to be made and distributed to each
shareholder thereof within four (4) months after the end of the fiscal year. The
report shall include the corporation's statement of income, its year-end balance
sheet and, if prepared by the corporation, its statement of source and
application of funds and such other information required by law.
ARTICLE V - OFFICERS
Section 1 - Election and Term of Office
---------------------------
The officers of the corporation shall be elected or appointed by the
directors immediately after the annual meeting of shareholders. The officers
shall hold office until the first meeting of the board of directors following
the next annual meeting of shareholders and until their respective successors
are chosen and qualify, or until their resignation or removal. Any officer
elected or appointed by the board may be removed at any time by the board with
or without cause. An officer may resign by written notice to the corporation.
The resignation is effective upon its
14
<PAGE>
receipt by the corporation or at a subsequent time specified in the notice of
resignation.
Section 2 - Offices
-------
The officers of the corporation shall be a chairman of the board, a
president, a secretary, and a treasurer. Other officers if desired shall be one
or more vice presidents (the number thereof to be determined by the board of
directors), a general counsel, controller and an auditor. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the board of directors. Any three of the aforesaid offices may be held by the
same person, but no officer may execute, acknowledge or verify any instrument in
more than one capacity.
Section 3 - Vacancies
---------
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the board of directors for the
unexpired portion of the term.
Section 4 - Chairman of the Board
---------------------
The chairman of the board shall be the chief executive officer of the
corporation and under the direction of the board., shall have general management
and direction of the affairs and business of the corporation. He shall, when
15
<PAGE>
present, preside at all meetings of the shareholders and of the board of
directors.
Section 5 - President
---------
The president shall, under the direction of the chairman of the board,
have general management and direction of the affairs and business of the
Corporation. He shall also perform assignments from time to time as delegated
by the chairman of the board and board of directors. In the absence of the
chairman of the board, he shall preside at all meetings of the shareholders and
of the board of directors.
Section 6 - Vice Presidents
---------------
The vice presidents shall perform the function and duties delegated to
them by the board of directors, the chairman of the board, or the president.
The board may designate one or more vice presidents as executive vice presidents
for the purpose of assisting the chairman of the board or the president in the
management of the business and affairs of the corporation.
16
<PAGE>
Section 7 - Secretary
---------
The secretary shall attend all meetings of the shareholders and board
of directors, and when directed by the board, of other committees, and preserve
in books of the company true minutes of all proceedings, including a record of
all votes. He shall give all notices required by statute, by-law or resolution.
He shall safely keep in his custody the seal of the corporation and shall have
authority to affix the same to all instruments where its use is required. He
shall perform such other duties as may be delegated to him by the board of
directors or the chairman of the board, under whose supervision he shall be.
Section 8 - Treasurer
---------
The treasurer shall have the custody of all corporate funds and
securities and shall keep in books belonging to the corporation full and
accurate accounts of all receipts and disbursements; he shall deposit all
moneys, securities and other valuable effects in the name of the corporation in
such depositories as may be designated for that purpose by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board, taking proper vouchers for such disbursements, and shall render to
the chairman of the board, the president, and the directors at the regular
meetings of the board, and whenever requested by
17
<PAGE>
them, an account of all his transactions as treasurer and of the financial
condition of the corporation. He shall perform such other and further duties as
may be assigned to him by the board of directors, the chairman of the board, or
the president. The board of directors may secure the fidelity of the treasurer
or any assistant treasurer by bond or otherwise.
Section 9 - General Counsel
---------------
The general counsel shall act as attorney, legal advisor to, and
counsel for the corporation, the board of directors, the chairman of the board,
the president and other officers in matters relating to the business, properties
and affairs of the corporation, and shall, when authorized by the corporation,
institute, prosecute and defend on its behalf suits and other proceedings before
the courts and administrative agencies. He may employ or retain special counsel
to assist in the above.
Section 10 - Controller
----------
The controller shall be in charge of the accounts of the corporation.
He shall have such powers and perform such
18
<PAGE>
duties as may be assigned to him by the board of directors, chairman of the
board, or the president. He shall submit such reports and records to the board
of directors as may be requested by it.
Section 11 - Auditor
-------
The auditor shall be in charge of the internal auditing of the
corporation. He shall report to the Audit Committee of the board of directors.
He shall have such powers and perform such duties as may be assigned to him by
the board of directors, chairman of the board, or the president. He shall
submit such reports and records to the board of directors as may be requested
by it.
Section 12 - Assistant Officers
------------------
There may be appointed one or more assistant secretaries, assistant
treasurers, and assistant controllers each of whom shall perform such duties as
shall be assigned to them by the secretary, the treasurer, the controller, or
the board of directors.
19
<PAGE>
ARTICLE VI - EXECUTION OF INSTRUMENTS AND APPOINTMENT OF
PROXIES AND AGENTS
Section 1 - Contracts and Conveyances
-------------------------
Except as otherwise prescribed by the board of directors, the officers
of the corporation shall sign and execute all contracts, instruments,
conveyances and documents in the name of the corporation.
Section 2 - Loans
-----
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the board of directors. Such authority may be general or confined
to specific instances.
Section 3 - Checks, Drafts and So Forth
---------------------------
All checks, drafts and orders of payment of money shall be signed in
the name of the corporation by either the chairman, the president, the treasurer
or such other officer or officers or such other person or persons as the board
of directors may from time to time designate, provided, however, that the board
of directors may authorize the treasurer to change the authorized signatories
for any bank account of the corporation. No check, draft, or orders for payment
of money shall be signed in blank.
20
<PAGE>
Section 4 - Appointment of Proxies and Agents
---------------------------------
The board may by resolution appoint proxies to vote shares owned by
the corporation in another corporation. In the absence of such resolution
shares owned by the corporation in another corporation may be voted by the
chairman of the board or president or by proxy appointed by either. The board
may appoint such agents as they deem necessary for the transaction of the
business of the corporation.
ARTICLE VII - SEAL
The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Michigan." The seal may be used by causing it or a facsimile thereof to be
impressed or reproduced.
ARTICLE VIII - CERTIFICATES OF SHARES AND THEIR TRANSFER
Section 1 - Share Certificates
------------------
(1) The shares of the corporation shall be represented by certificates
signed by the chairman of the board, president or a vice president and by the
treasurer, assistant treasurer, secretary or assistant secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof. The signatures of the
21
<PAGE>
officers may be facsimiles if the certificate is countersigned by the transfer
agent or registered by a registrar other than the corporation itself or its
employee. In case an officer who has signed or whose facsimile signature has
been placed upon a certificate ceases to be such officer before the certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer at the date of issue.
(2) A certificate representing shares shall state upon its face:
(a) That the corporation is formed under the laws of this state.
(b) The name of the person to whom issued.
(c) The number and class of shares, and the designation of the
series, if any, which the certificate represents.
(d) The par value of each share represented by the certificate,
or a statement that the shares are without par value.
(3) A certificate representing shares shall set forth on its face or
back or state that the corporation will furnish to a shareholder upon request
and without charge a full statement of the designation, relative rights,
preferences and limitations of the shares of each class authorized to be issued,
and if the corporation is
22
<PAGE>
authorized to issue any class of shares in series, the designation, relative
rights, preferences and limitations of each series so far as the same have been
prescribed and the authority of the board to designate and prescribe the
relative rights, preferences and limitations of other series.
(4) Each certificate representing shares of the corporation shall,
among other things contain substantially the following notice: "The shares
represented by this certificate cannot be mortgaged, pledged or otherwise
encumbered and are held and may be sold, assigned, or transferred only subject
to the terms and conditions of an agreement between Corning Glass Works and The
Dow Chemical Company, dated February 9, 1943, a copy of which is lodged with
this corporation."
Section 2 - Transfer of Shares - Only on Books of Corporation
-------------------------------------------------
Shares shall be transferable only on the books of the corporation by
the person named in the certificate, or by his attorney-in-fact lawfully
constituted in writing, and upon surrender of the certificate therefor. A
record shall be made of each such transfer and issue. Upon surrender to the
corporation or the transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by
23
<PAGE>
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transfer upon its books.
Section 3 - Registered Shareholders
-----------------------
The corporation shall have the right to treat the registered holder of
any share as the absolute owner thereof, and shall not be bound to recognize any
equitable or other claim to, or interest in, such share on the part of any other
person, whether or not the corporation shall have express or other notice
thereof, save as may be otherwise provided by the statutes of Michigan.
ARTICLE IX - FISCAL YEAR
The fiscal year of the corporation shall begin the first day of
January and terminate on the thirty-first day of December each year.
ARTICLE X - DIVIDENDS AND RESERVES
Section I - Dividends and Other Distributions
---------------------------------
The board of directors of this corporation may declare and pay
dividends or make other distribution in cash, its bonds or its property,
including the shares or bonds of other corporations, on its outstanding shares,
except when
24
<PAGE>
currently the corporation is insolvent or would thereby be made insolvent, or
when the declaration, payment or distribution would be contrary to any
restriction contained in the Articles of Incorporation.
Section 2 - Source of Dividends
-------------------
Dividends may be declared or paid and other distributions may be made
out of surplus only. "Surplus" is the excess of the net assets of the
corporation over its stated capital. In determining surplus either the book
value or the current fair market value of the properties and rights of the
corporation may be included whether or not realized. A dividend paid or any
other distribution made, in any part, from sources other than earned surplus,
shall be accompanied by a written notice (a) disclosing the amounts by which the
dividend or distribution affects stated capital, capital surplus and earned
surplus, or (b) if such amounts are not determinable at the time of the notice,
disclosing the approximate effect of the dividend or distribution upon stated
capital, capital surplus and earned surplus and stating that the amounts are not
yet determinable.
25
<PAGE>
Section 3 - Reserves
--------
Before the payment of any dividends the directors may set apart out of
any funds of the corporation available for dividends a reserve or reserves for
any proper purpose and may abolish any such reserve created by the board.
ARTICLE XI - INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES
Section 1 - Action or Suit by Others Than the Corporation
---------------------------------------------
The board of directors may authorize the indemnification of any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the full extent provided by the Michigan Business Corporation Act
from time to time in effect; if he acted in good faith and
26
<PAGE>
in a manner he reasonably believed to be in or not opposed to be the best
interests of the corporation or its shareholders, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to be the best interests of the corporation or its shareholders, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful; provided, however, that except with
respect to actions, suits or proceedings initiated by any such person to enforce
his or her rights to indemnification or advancement of expenses under this
Article or otherwise, the corporation shall indemnify any such person in
connection with an action, suit or proceeding initiated by such person only if
such action, suit or proceeding was authorized or ratified by the Board of
Directors of the corporation. "Proceeding" as used in this Article shall include
any proceeding within an action or suit.
27
<PAGE>
Section 2 - Action or Suit by the Corporation
---------------------------------
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of his or her,
fiduciary duty as a director except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for a violation of Section 551(l) of the
Michigan Business Corporation Act, (iv) for any transaction from which the
director derived an improper personal benefit, or (v) for an act or omission
occurring before the date that this amendment to the Articles of Incorporation
becomes effective in accordance with the pertinent provisions of the Michigan
Business Corporation Act. In addition to the circumstances in which a director
of the Corporation is not personally liable as set forth in the preceding
sentence, a director shall not be liable to the fullest extent permitted by any
amendment to the Michigan Business Corporation Act hereafter enacted that
further limits the liability of a director. Any repeal, amendment or other
modification of this section shall not adversely affect any right or protection
of any director of the corporation existing at the time of such repeal,
amendment or other modification for or with respect to any
28
<PAGE>
act or omission occurring prior to the time of such repeal amendment or other
modification.
The board of directors may authorize the indemnification of any person
who was or is a party to or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was an
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other-enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, or proceeding
to the full extent provided by the Michigan Business Corporation Act from time
to time in effect; if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation or its
shareholders and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the
29
<PAGE>
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonable entitled to indemnity for such expenses which
such court shall deem proper.
Section 3 - Indemnification Against Expenses
--------------------------------
(1) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or 2 of this Article, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(2) Any indemnification under Section 1 or 2 of this Article (unless
ordered by a court) shall be made only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1 and 2 of this Article. Such determination shall
be made in either of the following ways:
(a) By a majority vote of a quorum of the board consisting of
directors who were not parties to the action, suit or
proceeding.
30
<PAGE>
(b) If such quorum described in subdivision (a) is not
obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The committee
shall consist of not less than 2 disinterested directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
Section 4 - Reimbursement of Expenses
-------------------------
If authorized by the board of directors, expenses incurred in
defending a civil or criminal action, suit or proceeding described in Section 1
or 2 of this Article may be paid in advance of the final disposition of such
action, suit or proceeding as authorized in the manner provided in subsection
(2) of Section 3 of this Article upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation.
Section 5 - Right Not Exclusive
-------------------
Nothing contained in Sections 1 through 4 of this Article shall affect
any rights to indemnification to which
31
<PAGE>
persons other than directors and officers may be entitled by contract or
otherwise by law.
Section 6 - Right to Indemnification Survives
---------------------------------
The indemnification provided in Sections 1 through 4 of this Article
continues as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
Section 7 - Insurance to Protect Officers, Directors, Employees, and Agents
---------------------------------------------------------------
The board of directors may authorize the purchase and maintenance of
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the corporation would have power to indemnify him against
such liability under the laws of the State of Michigan.
32
<PAGE>
Section 8 - Merged and Reorganized Corporations
-----------------------------------
For the purposes of Sections 1 through 7 of this Article references to
the corporation include all constituent corporations absorbed in a consolidation
or merger and the resulting or surviving corporation, so that a person who is or
was a director, officer, employee or agent of such constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this section with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
ARTICLE XII - AMENDMENT OF BY-LAWS
These by-laws may be altered or amended or repealed by the affirmative
vote of a majority of the shares entitled to vote at any regular or special
meeting of the shareholders, or by the affirmative vote of a majority of the
members of the board then in office; provided that the board of
33
<PAGE>
directors shall not make or alter any by-laws fixing their qualifications, or
term of office or the number of shares which shall constitute a quorum at a
meeting of shareholders.
34
<PAGE>
================================================================================
Dow Corning Corporation
and
[_______________________________],
Trustee
_______________________
INDENTURE
Dated as of ______________, 1999
_______________________
DEBT SECURITIES
================================================================================
<PAGE>
[______________________________]
===============================
Debt Securities
Cross Reference Sheet*
This Cross Reference Sheet shows the location in the
Indenture of the provisions inserted pursuant to Sections 310 - 318(a),
inclusive, of the Trust Indenture Act of 1939, as amended.
Trust Indenture Act Sections of Indenture
- ------------------- ---------------------
(S) 310(a)(1) ............................. 9.08
(a)(2) ............................. 9.08
(a)(3) ............................. Inapplicable
(a)(4) ............................. Inapplicable
(a)(5) ............................. 9.08
(b) ............................. 9.07 and 9.09
(c) ............................. Inapplicable
(S) 311(a) ............................. 9.12
(b) ............................. 9.12
(c) ............................. Inapplicable
(S) 312(a) ............................. 7.01 and 7.02
(b) ............................. 7.02
(c) ............................. 7.02
(S) 313(a) ............................. 7.03
(b) ............................. 7.03
(c) ............................. 7.03
(d) ............................. 7.03
(S) 314(a) ............................. 7.04
(a)(4) ............................. 1.01 and 6.07
(b) ............................. Inapplicable
(c)(1) ............................. 13.05
(c)(2) ............................. 13.05
(c)(3) ............................. Inapplicable
(d) ............................. Inapplicable
(e) ............................. 13.05
(f) ............................. Inapplicable
(S) 315(a) ............................. 9.01
(b) ............................. 8.08
(c) ............................. 9.01
(d) ............................. 9.01
(e) ............................. 8.07
(S) 316(a) ............................. 1.01
(a)(1)(A)............................. 8.01 and 8.06
(a)(1)(B)............................. 8.01
(a)(2) ............................. Inapplicable
(b) ............................. 8.09
(c) ............................. 13.11
(S) 317(a)(1) ............................. 8.02
(a)(2) ............................. 8.02
(b) ............................. 6.03
(S) 318(a) ............................. 13.08
- -----------------
* The Cross Reference Sheet is not part of the Indenture.
<PAGE>
Table of Contents*
Page
----
Recitals.................................................................... 1
Article I. Definitions.................................................. 1
Section 1.01. Certain Terms Defined.............................. 1
Act......................................................... 1
Affiliate................................................... 2
Authenticating Agent........................................ 2
Board of Directors.......................................... 2
Board Resolution............................................ 2
Business Day................................................ 2
Capital Lease............................................... 2
Capital Lease Obligation.................................... 2
Commission.................................................. 2
Common Stock................................................ 2
Company..................................................... 3
Company Request or Company Order............................ 3
Consolidated Net Tangible Assets............................ 3
Corporate Trust Office...................................... 3
Covenant Defeasance......................................... 3
Debt........................................................ 3
Default..................................................... 3
Defaulted Interest.......................................... 3
Defeasance.................................................. 4
Defeasible Series........................................... 4
Depositary.................................................. 4
Domestic Subsidiary......................................... 4
Event of Default............................................ 4
Exchange Act................................................ 4
Funded Debt................................................. 4
GAAP........................................................ 4
Global Security............................................. 5
Holder...................................................... 5
Indebtedness................................................ 5
Indenture................................................... 5
Interest.................................................... 5
Interest Payment Date....................................... 6
Material Adverse Effect..................................... 6
- ---------------
*The Table of Contents is not part of the Indenture.
<PAGE>
Maturity.................................................... 6
Notice of Default........................................... 6
Officer's Certificate....................................... 6
Opinion of Counsel.......................................... 6
Original Issue Discount Security............................ 6
Outstanding................................................. 6
Paying Agent................................................ 7
Person...................................................... 7
Place of Payment............................................ 7
Predecessor Security........................................ 7
Principal Domestic Manufacturing Property................... 8
Redemption Date............................................. 8
Redemption Price............................................ 8
Regular Record Date......................................... 8
Responsible Officer......................................... 8
Securities.................................................. 9
Security Register and Security Registrar.................... 9
Special Record Date......................................... 9
Stated Maturity............................................. 9
Subsidiary.................................................. 9
Trust Indenture Act......................................... 9
Trustee..................................................... 10
U.S. Government Obligation.................................. 10
Vice President.............................................. 10
Article II. The Securities.............................................. 11
Section 2.01. Designation and Amount of Securities.................. 11
Section 2.02. Form of Securities and Trustee's Certificate
of Authentication..................................... 12
Section 2.03. Date and Denominations................................ 13
Section 2.04. Execution, Authentication and Delivery of Securities.. 13
Section 2.05. Registration of Transfer and Exchange................. 15
Section 2.06. Temporary Securities.................................. 16
Section 2.07. Mutilated, Destroyed, Lost, and Stolen Securities..... 16
Section 2.08. Cancellation of Surrendered Securities................ 17
Section 2.09. Payment of Interest; Interest Rights Preserved........ 17
Section 2.10. Persons Deemed Owners................................. 19
Section 2.11. Computation of Interest............................... 19
Article III. Redemption of Securities.................................... 19
Section 3.01. Applicability of Article.............................. 19
Section 3.02. Election to Redeem; Notice to Trustee................. 19
Section 3.03. Deposit of Redemption Price........................... 20
- ---------------
*The Table of Contents is not part of the Indenture.
(ii)
<PAGE>
Section 3.04. Securities Payable on Redemption Date................. 20
Section 3.05. Securities Redeemed in Part........................... 21
Article IV. Sinking Funds................................................ 21
Section 4.01. Applicability of Article.............................. 21
Section 4.02. Satisfaction of Sinking Fund Payments
With Securities....................................... 21
Section 4.03. Redemption of Securities for Sinking Fund............. 21
Article V. Defeasance and Covenant Defeasance........................... 22
Section 5.01. Company's Option to Effect Defeasance or
Covenant Defeasance................................... 22
Section 5.02. Defeasance and Discharge.............................. 22
Section 5.03. Covenant Defeasance................................... 22
Section 5.04. Conditions to Defeasance or Covenant Defeasance....... 23
Section 5.05. Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provisions... 25
Section 5.06. Reinstatement......................................... 25
Article VI. Particular Covenants of the Company.......................... 26
Section 6.01. Payment of Principal, Premium and Interest
on Securities......................................... 26
Section 6.02. Maintenance of Office or Agency....................... 26
Section 6.03. Money for Securities Payments to be Held in Trust..... 26
Section 6.04. Payment of Taxes and Other Claims..................... 27
Section 6.05. Maintenance of Properties............................. 28
Section 6.06. Existence............................................. 28
Section 6.07. Compliance with Laws.................................. 28
Section 6.08. Statement by Officers as to Default................... 28
Section 6.09. Financial Reporting................................... 28
Section 6.10. Waiver of Certain Covenants........................... 29
Article VII. Securities Holders' Lists And Reports By The Company
And The Trustee.............................................. 29
Section 7.01. Company to Furnish Trustee Names and Addresses
of Holders............................................ 29
Section 7.02. Preservation of Information; Communication
to Holders............................................ 29
Section 7.03. Reports by Trustee.................................... 30
Section 7.04. Reports by Company.................................... 30
Article VIII. Default...................................................... 30
Section 8.01. Event of Default...................................... 30
Section 8.02. Covenant of Company to Pay to Trustee Whole Amount
Due on Securities on Default in Payment of
Interest or Principal; Suits for Enforcement
by Trustee............................................ 33
Section 8.03. Application of Money Collected by Trustee............. 34
- ---------------
*The Table of Contents is not part of the Indenture.
(iii)
<PAGE>
Section 8.04. Limitation on Suits by Holders of Securities.......... 34
Section 8.05. Rights and Remedies Cumulative; Delay or Omission
in Exercise of Rights not a Waiver of Event
of Default............................................ 35
Section 8.06. Rights of Holders of Majority in Principal Amount of
Outstanding Securities to Direct Trustee.............. 35
Section 8.07. Requirement of an Undertaking to Pay Costs
in Certain Suits Under the Indenture or
Against the Trustee................................... 35
Section 8.08. Notice of Defaults.................................... 35
Section 8.09. Unconditional Right of Holders to Receive
Principal, Premium, and Interest...................... 36
Section 8.10. Restoration of Rights and Remedies.................... 36
Section 8.11. Trustee May File Proofs of Claims..................... 36
Article IX. Concerning the Trustee....................................... 37
Section 9.01. Certain Duties and Responsibilities................... 37
Section 9.02. Certain Rights of Trustee............................. 37
Section 9.03. Not Responsible for Recitals or Issuance
of Securities......................................... 38
Section 9.04. May Hold Securities................................... 38
Section 9.05. Money Held in Trust................................... 38
Section 9.06. Compensation and Reimbursement........................ 38
Section 9.07. Disqualification; Conflicting Interests............... 39
Section 9.08. Corporate Trustee Required Eligibility................ 38
Section 9.09. Resignation and Removal; Appointment of Successor..... 39
Section 9.10. Acceptance of Appointment by Successor................ 40
Section 9.11. Merger, Conversion, Consolidation, or Succession
to Business........................................... 41
Section 9.12. Preferential Collection of Claims Against Company..... 41
Section 9.13. Appointment of Authenticating Agent................... 41
Article X. Supplemental Indentures And Certain Actions.................. 43
Section 10.01. Purposes for Which Supplemental Indentures
May Be Entered Into Without Consent of Holders........ 43
Section 10.02. Modification of Indenture With Consent of Holders
of at Least a Majority in Principal Amount
of Outstanding Securities............................. 44
Section 10.03. Execution of Supplemental Indentures.................. 45
Section 10.04. Effect of Supplemental Indentures..................... 45
Section 10.05. Conformity with Trust Indenture Act................... 45
Section 10.06. Reference in Securities to Supplemental Indentures.... 45
Article XI. Consolidation, Merger, Sale, or Transfer..................... 46
Section 11.01. Consolidations and Mergers of Company and
Sales Permitted Only on Certain Terms................. 46
- ---------------
*The Table of Contents is not part of the Indenture.
(iv)
<PAGE>
Article XII. Satisfaction and Discharge of Indenture..................... 46
Section 12.01. Satisfaction and Discharge of Indenture.............. 46
Section 12.02. Application of Trust Money........................... 47
Article XIII. Miscellaneous Provisions.................................... 47
Section 13.01. Successors and Assigns of Company Bound by
Indenture............................................ 47
Section 13.02. Service of Required Notice to Trustee and Company.... 47
Section 13.03. Service of Required Notice to Holders; Waiver........ 47
Section 13.04. Indenture and Securities to be Construed in
Accordance with the Laws of the State of
New York............................................. 48
Section 13.05. Compliance Certificates and Opinions................. 48
Section 13.06. Form of Documents Delivered to Trustee............... 48
Section 13.07. Payments Due on Non-Business Days.................... 48
Section 13.08. Provisions Required by Trust Indenture Act
to Control........................................... 49
Section 13.09. Invalidity of Particular Provisions.................. 49
Section 13.10. Indenture May be Executed In Counterparts............ 49
Section 13.11. Acts of Holders; Record Dates........................ 49
Section 13.12. Effect of Headings and Table of Contents............. 51
Section 13.13. Benefits of Indenture................................ 52
- ---------------
*The Table of Contents is not part of the Indenture.
(v)
<PAGE>
Indenture, dated as of _________ __, 1999, between Dow Corning
Corporation, a corporation duly organized and existing under the laws of the
State of Michigan (the "Company"), and [______], a [____________], organized and
existing under the laws of the United States of America, as Trustee (the
"Trustee").
Recitals
A. The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
debentures,
notes, and other evidences of indebtedness (the "Securities"), to be issued in
one or more series as in this Indenture provided.
B. All acts and things necessary to make the Securities, when the
Securities have been executed by the Company and authenticated by the Trustee
and delivered as provided in this Indenture, the valid, binding, and legal
obligations of the Company and to constitute these presents a valid indenture
and agreement according to its terms, have been done and performed, and the
execution and delivery by the Company of this Indenture and the issue hereunder
of the Securities have in all respects been duly authorized; and the Company, in
the exercise of legal right and power in it vested, is executing and delivering
this Indenture and proposes to make, execute, issue, and deliver the Securities.
Now, Therefore, this Indenture Witnesseth:
In order to declare the terms and conditions upon which the Securities
are authenticated, issued, and delivered, and in consideration of the premises
and of the purchase and acceptance of the Securities by the Holders thereof, it
is mutually agreed, for the equal and proportionate benefit of the respective
Holders from time to time of the Securities or of a series thereof, as follows:
Article I. Definitions.
Section 1.01. Certain Terms Defined.
(a) The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context of this Indenture otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto have
the respective meanings specified in this Section 1.01. All other terms used in
this Indenture that are defined in the Trust Indenture Act, either directly or
by reference therein (except as herein otherwise expressly provided or unless
the context of this Indenture otherwise requires), have the respective meanings
assigned to such terms in the Trust Indenture Act as in force at the date of
this Indenture as originally executed.
Act:
- ----
The term "Act", when used with respect to any Holder, has the meaning
set forth in Section 13.11.
1
<PAGE>
Affiliate:
- ----------
The term "Affiliate" means, with respect to a particular Person, any
Person that, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of this definition,
control of a Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
Authenticating Agent:
- ---------------------
The term "Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 9.13 to act on behalf of the Trustee to authenticate
Securities of one or more series.
Board of Directors:
- -------------------
The term "Board of Directors" means the Board of Directors of the
Company or a duly authorized committee of such Board.
Board Resolution:
- -----------------
The term "Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
Business Day:
- -------------
The term "Business Day", when used with respect to any Place of
Payment, means each Monday, Tuesday, Wednesday, Thursday, and Friday which is
not a day on which banking institutions in that Place of Payment are authorized
or required by law or executive order to close.
Commission:
- -----------
The term "Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
Common Stock:
- -------------
The term "Common Stock" means the common stock of the Company.
2
<PAGE>
Company:
- --------
The term "Company" means Dow Corning Corporation, a Michigan
corporation, until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" will mean such
successor Person.
Company Request or Company Order:
- ---------------------------------
The term "Company Request" or "Company Order" means a written request
or order signed in the name of the Company by the Chairman of the Board of
Directors, any Vice Chairman of the Board of Directors, the President, a Vice
President, the Treasurer, an Assistant Treasurer, the Secretary, or an Assistant
Secretary of the Company, and delivered to the Trustee.
Consolidated Net Tangible Assets:
- --------------------------------
The term "Consolidated Net Tangible Assets" means the aggregate amount
of assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities (excluding any thereof
constituting Funded Debt by reason of being renewable or extendible) and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other intangibles, all as set forth on the most recent consolidated
balance sheet of the Company and its consolidated Subsidiaries and computed in
accordance with GAAP.
Corporate Trust Office:
- -----------------------
The term "Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business is principally
administered, which on the date hereof is [_______________________].
Covenant Defeasance:
- --------------------
The term "Covenant Defeasance" has the meaning set forth in Section
5.03.
Debt:
- ----
The term "Debt" means any indebtedness for money borrowed evidenced by
notes, bonds, debentures or other similar evidences of indebtedness.
Default:
- --------
The term "Default" means any event which, with notice or passage of
time or both, would constitute an Event of Default.
3
<PAGE>
Defaulted Interest:
- -------------------
The term "Defaulted Interest" has the meaning set forth in Section
2.09.
Defeasance:
- -----------
The term "Defeasance" has the meaning set forth in Section 5.02.
Defeasible Series:
- ------------------
The term "Defeasible Series" has the meaning set forth in Section
5.01.
Depositary:
- -----------
The term "Depositary" means, with respect to Securities of any series
issuable in whole or in part in the form of one or more Global Securities, a
clearing agency registered under the Exchange Act that is designated to act as
Depositary for such Securities in accordance with Section 2.01.
Domestic Subsidiary:
- -------------------
The term "Domestic Subsidiary" means any Subsidiary of the Company (i)
substantially all of the property of which is located, and substantially all of
the business of which is carried on, within the United States of America
(excluding its territories and possessions and the Commonwealth of Puerto Rico),
and (ii) which (A) owns or operates one or more Principal Domestic Manufacturing
Properties or (B) owns capital stock of another Domestic Subsidiary; except that
a Subsidiary which is primarily engaged in the business of a finance company or
insurance company shall not constitute a Domestic Subsidiary.
Event of Default:
- -----------------
The term "Event of Default" has the meaning set forth in Section
8.01(a).
Exchange Act:
- -------------
The term "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, as the same may be in effect from time to time.
Funded Debt:
- -----------
The term "Funded Debt" means all Debt having a maturity of more than
12 months from the date as of which the amount thereof is to be determined or
having a maturity of less than 12 months but by its terms being renewable or
extendible beyond 12 months from such date at the option of the borrower.
4
<PAGE>
GAAP:
- -----
The term "GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and The American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by any
successor entity as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances as of the date
of determination.
Global Security:
- ----------------
The term "Global Security" means a Security that evidences all or part
of the Securities of any series and is authenticated and delivered to, and
registered in the name of, the Depositary for such Securities or a nominee
thereof.
Holder:
- -------
The term "Holder" means a person in whose name a particular Security
is registered in the Security Register.
Indebtedness:
- -------------
The term "Indebtedness" means, as applied to any Person, without
duplication, (a) indebtedness for borrowed money, all indebtedness evidenced by
notes, bonds, debentures or other evidences of indebtedness, and all
indebtedness under purchase money mortgages or other purchase money liens or
conditional sales or similar title retention agreements, in each case where such
indebtedness has been created, incurred, assumed or guaranteed by such Person or
where such Person is otherwise liable therefor, and (b) indebtedness for
borrowed money secured by any mortgage, pledge or other lien or encumbrance upon
property owned by such Person even though such Person has not assumed or become
liable for the payment of such indebtedness; provided, however, that
-------- -------
indebtedness of the type referred to in clause (b) above shall be included
within the definition of "Indebtedness" only to the extent of the lesser of: (i)
the amount of the underlying indebtedness referred to in clause (b) above and
(ii) the aggregate value (as determined in good faith by the Board of Directors)
of the security for such indebtedness.
Indenture:
- ----------
The term "Indenture" means this Indenture, as this Indenture may be
amended, supplemented, or otherwise modified from time to time, including, for
all purposes of this Indenture and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" will also include the terms of particular series of Securities
established in accordance with Section 2.01.
5
<PAGE>
Interest:
- ---------
The term "interest," (i) when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, means
interest which accrues from and after and is payable after Maturity and (ii)
when used with respect to any Security, means the amount of all interest
accruing on such Security, including any default interest and any interest that
would have accrued after any Event of Default but for the occurrence of such
Event of Default, whether or not a claim for such interest would be otherwise
allowable under applicable law.
Interest Payment Date:
- ----------------------
The term "Interest Payment Date," when used with respect to any
Security, means the Stated Maturity of an installment of interest on such
Security.
Material Adverse Effect:
- ------------------------
The term "Material Adverse Effect" means a material adverse effect on
the business, assets, financial condition or results of operations of the
Company (taken together with its Subsidiaries as a whole).
Maturity:
- ---------
The term "Maturity," when used with respect to any Security, means the
date on which the principal of that Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, or otherwise.
Notice of Default:
- ------------------
The term "Notice of Default" means a written notice of the kind set
forth in Section 8.01(a)(iv).
Officer's Certificate:
- ----------------------
The term "Officer's Certificate" means a certificate executed on
behalf of the Company by a Responsible Officer, and delivered to the Trustee.
Opinion of Counsel:
- -------------------
The term "Opinion of Counsel" means an opinion in writing signed by
legal counsel, who, subject to any express provisions hereof, may be an employee
of or counsel for the Company or any Subsidiary, reasonably acceptable to the
Trustee.
6
<PAGE>
Original Issue Discount Security:
- ---------------------------------
The term "Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 8.01(b).
Outstanding:
- ------------
The term "Outstanding" means, when used with reference to Securities
as of a particular time, all Securities theretofore issued by the Company and
authenticated and delivered by the Trustee under this Indenture, except (a)
Securities theretofore cancelled by the Trustee or delivered to the Trustee for
cancellation, (b) Securities in respect of which money in the necessary amount
for the payment or redemption of which has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company is acting as its own Paying
Agent) for the Holders of such Securities; provided that, if such Securities are
--------
to be redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made, and
(c) Securities in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company; provided,
--------
however, that in determining whether the Holders of the requisite principal
- -------
amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent, or waiver hereunder, (i) the
principal amount of an Original Issue Discount Security that will be deemed to
be Outstanding will be the amount of the principal thereof that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof to such date pursuant to Section 8.01(b), (ii) the principal amount of a
Security denominated in one or more foreign currencies or currency units will be
the U.S. dollar equivalent, determined in the manner contemplated by Section
2.01 on the date of original issuance of such Security, of the principal amount
(or, in the case of an Original Issue Discount Security, the U.S. dollar
equivalent on the date of original issuance of such Security of the amount
determined as provided in clause (i) above) of such Security, and (iii)
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor will be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee will be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, or waiver, only Securities which the Trustee knows to be so
owned will be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
Paying Agent:
- -------------
The term "Paying Agent" means any Person authorized by the Company to
pay the principal of or any premium or interest on any Securities on behalf of
the Company.
7
<PAGE>
Person:
- -------
The term "Person" means any individual, partnership, corporation,
limited liability company, limited liability partnership, joint stock company,
business trust, trust, unincorporated association, joint venture, or other
entity, or government or political subdivision or agency thereof.
Place of Payment:
- -----------------
The term "Place of Payment," when used with respect to the Securities
of any series, means the place or places for the payment of the principal of and
any premium and interest on the Securities of that series established in
accordance with Section 2.01.
Predecessor Security:
- ---------------------
The term "Predecessor Security," when used with respect to any
particular Security, means every previous Security evidencing all or a portion
of the same debt as that evidenced by such Security; and, for the purposes of
this definition, any Security authenticated and delivered under Section 2.07 in
exchange for or in lieu of a mutilated, destroyed, lost, or stolen Security will
be deemed to evidence the same debt as the mutilated, destroyed, lost, or stolen
Security.
Principal Domestic Manufacturing Property:
- -----------------------------------------
The term "Principal Domestic Manufacturing Property" means any
building, structure or other facility, together with the land upon which it is
erected and fixtures comprising a part thereof, used primarily for manufacturing
or warehousing and located in the United States of America, owned or leased by
the Company or any Domestic Subsidiary, the gross book value (without deduction
for any depreciation reserves) of which on the date as of which the
determination is being made exceeds 1.5% of Consolidated Net Tangible Assets,
other than any such building, structure or other facility or portion thereof or
any land or fixture (i) which is financed by obligations issued by a State,
Territory, or a possession of the United States, or any political subdivision of
any of the foregoing, or the District of Columbia, the interest on which is
excludable from gross income of the holder thereof pursuant to the provisions of
Section 103(a)(1) of the Internal Revenue Code of 1986, as amended or as
hereafter amended (or any successor of such provision), as in effect at the time
of issuance of such obligations, or (ii) which, in the opinion of the Board of
Directors of the Company is not of material importance to the total business
conducted by the Company and its Subsidiaries as an entirety.
Redemption Date:
- ----------------
The term "Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
8
<PAGE>
Redemption Price:
- -----------------
The term "Redemption Price," when used with respect to any Security to
be redeemed, means the price (including premium, if any) at which it is to be
redeemed pursuant to this Indenture.
Regular Record Date:
- --------------------
The term "Regular Record Date" for the interest payable on any
Interest Payment Date on the Securities of any series means the date established
for that purpose in accordance with Section 2.01.
Responsible Officer:
- --------------------
The term "Responsible Officer," when used (a) with respect to the
Company, means the Chairman, any Vice Chairman, Chief Executive Officer, the
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Secretary, or an Assistant Secretary of the Company and (b) with respect to the
Trustee, means the Chairman or any Vice Chairman of the Board of Directors (if
an officer), the Chairman or any Vice Chairman of the Executive Committee of the
Board of Directors (if an officer), the Chief Executive Officer, the President,
any Vice President, any Second or Assistant Vice President, the Secretary, any
Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer
or Assistant Trust Officer, or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time are such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.
Securities:
- ----------
The term "Securities" has the meaning set forth in the first recital
of this Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
Security Register and Security Registrar:
- -----------------------------------------
The terms "Security Register" and "Security Registrar" have the
respective meanings set forth in Section 2.05.
Special Record Date:
- --------------------
The term "Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 2.09.
9
<PAGE>
Stated Maturity:
- ----------------
The term "Stated Maturity," when used with respect to any Security,
any installment of interest thereon, or any other amount payable under this
Indenture or the Securities, means the date specified in this Indenture or such
Security as the regularly scheduled date on which the principal of such
Security, such installment of interest, or such other amount, is due and
payable.
Subsidiary:
- -----------
The term "Subsidiary" means, as applied with respect to any Person,
any corporation, partnership, or other business entity of which, in the case of
a corporation, more than 50% of the issued and outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation has or might have voting power upon the
occurrence of any contingency), or, in the case of any partnership or other
legal entity, more than 50% of the ordinary voting equity capital interests, is
at the time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries, or by one or more of such
Person's other Subsidiaries.
Trust Indenture Act:
- --------------------
The term "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
- -------- -------
after such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
Trustee:
- --------
The term "Trustee" means the Person named as the "Trustee" in the
first paragraph of this Indenture until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" will mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series will mean each Trustee with respect to
Securities of that series.
U.S. Government Obligation:
- ---------------------------
The term "U.S. Government Obligation" means (a) any security that is
(i) a direct obligation of the United States of America for the payment of which
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof and (b) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the
10
<PAGE>
Securities Act of 1933, as amended) as custodian with respect to any U.S.
Government Obligation specified in clause (a), which U.S. Government Obligation
is held by such custodian for the account of the holder of such depositary
receipt, or with respect to any specific payment of principal of or interest on
any such U.S. Government Obligation, provided that (except as required by law)
--------
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal or interest evidenced by such depositary receipt.
Vice President:
- ---------------
The term "Vice President," when used with respect to the Company or
the Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president."
(b) The words "Article" and "Section" refer to an Article and
Section, respectively, of this Indenture. The words "herein", "hereof," and
"hereunder" and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section, or other subdivision. Certain terms
used principally in Articles V, VI, and IX are defined in those Articles. Terms
in the singular include the plural and terms in the plural include the singular.
Article II. The Securities.
Section 2.01. Designation and Amount of Securities.
(a) The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is unlimited.
(b) The Securities may be issued in one or more series. There
will be established in or pursuant to a Board Resolution and, subject to Section
2.04, set forth or determined in the manner provided in an Officer's
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series: (i) the title of the Securities of
the series (which will distinguish the Securities of the series from Securities
of any other series); (ii) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon registration
of transfer of, or in the exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.05, 2.06, 2.07, 3.05, or 10.06 and except for any
Securities which, pursuant to Section 2.04, are deemed never to have been
authenticated and delivered hereunder); (iii) the Person to whom any interest on
a Security of the series will be payable, if other than the Person in whose name
that Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest; (iv) the date or dates
on which the principal of the Securities of the series is payable; (v) the rate
or rates at which the Securities of the series will bear interest, if any, the
date or dates from which such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, and the Regular Record Date for any
interest payable on any Interest Payment Date; (vi) the place or places where
the principal of and any premium and interest on Securities of the series will
be
11
<PAGE>
payable; (vii) the period or periods within which, the price or prices at which,
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company; (viii) the
obligation, if any, of the Company to redeem or purchase Securities of the
series pursuant to any sinking fund or analogous provisions or at the option of
a Holder thereof and the period or periods within which, the price or prices at
which, and the terms and conditions upon which Securities of the series will be
redeemed or purchased, in whole or in part, pursuant to such obligation; (ix) if
other than denominations of $1,000 and integral multiples thereof, the
denominations in which Securities of the series will be issuable; (x) the
currency, currencies, or currency units in which payment of the principal of and
any premium and interest on any Securities of the series will be payable if
other than the currency of the United States of America and the manner of
determining the equivalent thereof in the currency of the United States of
America for purposes of the definition of "Outstanding" in Section 1.01; (xi) if
the amount of payments of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index, based
upon a formula, or in some other manner, the manner in which such amounts will
be determined; (xii) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the Company or a
Holder thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies, or currency units in which payment of the principal of and any
premium and interest on Securities of such series as to which such election is
made will be payable, and the periods within which and the terms and conditions
upon which such election is to be made; (xiii) if other than the principal
amount thereof, the portion of the principal amount of Securities of the series
which will be payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 8.01(b); (xiv) if applicable, that the Securities of the
series will be subject to either or both of Defeasance or Covenant Defeasance as
provided in Article V, provided that no series of Securities that is convertible
into Common Stock pursuant to Section 2.01(b)(xvi) or convertible into or
exchangeable for any other securities pursuant to Section 2.01(b)(xvii) will be
subject to Defeasance pursuant to Section 5.02; (xv) if and as applicable, that
the Securities of the series will be issuable in whole or in part in the form of
one or more Global Securities and, in such case, the Depositary or Depositaries
for such Global Security or Global Securities and any circumstances other than
those set forth in Section 2.05 in which any such Global Security may be
transferred to, and registered and exchanged for Securities registered in the
name of, a Person other than the Depositary for such Global Security or a
nominee thereof and in which any such transfer may be registered; (xvi) the
terms and conditions, if any, pursuant to which the Securities are convertible
into Common Stock; (xvii) the terms and conditions, if any, pursuant to which
the Securities are convertible into or exchangeable for any other securities,
including (without limitation) securities of Persons other than the Company;
(xviii) if and as applicable, that the Securities of the series will be
subordinate and subject in right of payment to the prior payment of other
Indebtedness; and (xix) any other terms of, or provisions, covenants, rights or
other matters applicable to, the series (which terms, provisions, covenants,
rights or other matters will not be inconsistent with the provisions of this
Indenture, except as permitted by Section 10.01(e)).
(c) All Securities of any one series will be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to below and (subject to Section 2.04) set
forth or determined in the manner provided in the Officer's Certificate referred
to above or in any such indenture supplemental hereto.
12
<PAGE>
(d) If any of the terms of the series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action will be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee concurrently with or prior to the delivery
of the Officer's Certificate setting forth the terms of the series.
Section 2.02. Form of Securities and Trustee's Certificate of Authentication.
(a) The Securities of each series will be in such form as may be
established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, and may have such letters, numbers, or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. If the form of Securities of
any series is established by action taken pursuant to a Board Resolution, a copy
of an appropriate record of such action will be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee concurrently
with or prior to the delivery of the Company Order contemplated by Section 2.04
for the authentication and delivery of such Securities.
(b) The definitive Securities will be printed, lithographed, or
engraved on steel engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
(c) The Trustee's certificate of authentication will be in
substantially the following form:
[Form of Trustee's Certificate Of Authentication for Securities]
Trustee's Certificate of Authentication
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
[______________],
as Trustee
By: ______________________________
Authorized Officer
(d) Every Global Security authenticated and delivered hereunder
will bear a legend in substantially the following form:
13
<PAGE>
[Form of Legend for Global Securities]
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be transferred to, or registered or
exchanged for Securities registered in the name of, any Person other than the
Depositary or a nominee thereof, and no such transfer may be registered, except
in the limited circumstances described in the Indenture. Every Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, this Security will be a Global Security subject to the
foregoing, except in such limited circumstances.
Section 2.03. Date and Denominations.
Each Security will be dated the date of its authentication.
The Securities of each series will be issuable only in registered form without
coupons in such denominations as may be specified in accordance with Section
2.01. In the absence of any such specified denomination with respect to the
Securities of any series, the Securities of such series will be issuable in
denominations of $1,000 and integral multiples thereof.
Section 2.04. Execution, Authentication and Delivery of Securities.
(a) The Securities will be executed on behalf of the Company by
the Chairman or any Vice Chairman of the Board of Directors, the Chief Executive
Officer, the President, or any Vice President of the Company and attested by the
Treasurer, the Secretary, any Assistant Treasurer, or any Assistant Secretary of
the Company under its corporate seal. The signature of any of these officers on
the Securities may be manual or facsimile. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted, or
otherwise reproduced on the Securities.
(b) Only such Securities bearing the Trustee's certificate of
authentication, signed manually by the Trustee, will be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such execution of
the certificate of authentication by the Trustee upon any Securities executed by
the Company will be conclusive evidence that the Securities so authenticated
have been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 2.08, for all
purposes of this Indenture such Security will be deemed never to have been
authenticated and delivered hereunder and will never be entitled to the benefits
of this Indenture.
(c) Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company will bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
(d) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the
14
<PAGE>
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities, and the Trustee in accordance with the Company
Order will authenticate and deliver such Securities. If the form or terms of the
Securities of the series have been established in or pursuant to one or more
Board Resolutions as permitted by Sections 2.01 and 2.02, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee will be entitled to receive, and
(subject to Section 9.01) will be fully protected in relying upon, an Opinion of
Counsel stating (i) if the form of such Securities has been established by or
pursuant to a Board Resolution as permitted by Section 2.02, that such form has
been established in conformity with the provisions of this Indenture, (ii) if
the terms of such Securities have been established by or pursuant to a Board
Resolution as permitted by Section 2.01, that such terms have been established
in conformity with the provisions of this Indenture, and (iii) that such
Securities, when authenticated and delivered by the Trustee and issued by the
Company in the manner and subject to any conditions specified in such Opinion of
Counsel, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
laws relating to or affecting creditors' rights and by general principles of
equity.
(e) Notwithstanding the provisions of Sections 2.01 and 2.04(d),
if all Securities of a series are not to be originally issued at one time, it
will not be necessary to deliver the Officer's Certificate otherwise required
pursuant to Section 2.01 or the Company Order and Opinion of Counsel otherwise
required pursuant to Section 2.04(d) at or prior to the time of authentication
of each Security of such series if such documents are delivered at or prior to
the authentication upon original issuance of the first Security of such series
to be issued.
Section 2.05. Registration of Transfer and Exchange.
(a) The Company will cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company will provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
(b) Upon surrender for registration of transfer of any Security
of any series at the office or agency in a Place of Payment for that series, the
Company will execute, and the Trustee will authenticate and deliver, in the name
of the designated transferee or transferees, one or more new Securities of the
same series, of any authorized denominations and of a like aggregate principal
amount and tenor.
(c) At the option of the Holder, Securities of any series may be
exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company will execute,
15
<PAGE>
and the Trustee will authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
(d) Every Security presented or surrendered for registration of
transfer or exchange will (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument or instruments of transfer,
in form reasonably satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing. No
service charge will be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 2.06, 3.05, or 10.06 not involving any transfer. The
Company will not be required (i) to issue, register the transfer of, or exchange
Securities of any series during a period beginning at the opening of business 15
calendar days before the mailing of a notice of redemption of Securities of that
series selected for redemption under Section 3.02(c) and ending at the close of
business on the day of such mailing or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except, in
the case of any Securities to be redeemed in part, the portion thereof not being
redeemed.
(e) All Securities issued upon any registration of transfer or
exchange of Securities will be valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
(f) Notwithstanding any other provision in this Indenture,
no Global Security may be transferred to, or registered or exchanged for
Securities registered in the name of, any Person other than the Depositary for
such Global Security or any nominee thereof, and no such transfer may be
registered, unless (i) such Depositary (A) notifies the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (B)
ceases to be a clearing agency registered under the Exchange Act, (ii) the
Company executes and delivers to the Trustee a Company Order that such Global
Security shall be so transferable, registrable, and exchangeable, and such
transfers shall be registrable, (iii) there shall have occurred and be
continuing an Event of Default with respect to the Securities evidenced by such
Global Security, or (iv) there shall exist such other circumstances, if any, as
have been specified for this purpose in accordance with Section 2.01.
Notwithstanding any other provision in this Indenture, a Global Security to
which the restriction set forth in the preceding sentence shall have ceased to
apply may be transferred only to, and may be registered and exchanged for
Securities registered only in the name or names of, such Person or Persons as
the Depositary for such Global Security shall have directed and no transfer
thereof other than such a transfer may be registered. Every Security
authenticated and delivered upon registration of transfer of, or in exchange for
or in lieu of, a Global Security to which the restriction set forth in the first
sentence of this Section 2.05(f) shall apply, whether pursuant to this Section
2.05, Section 2.06, 2.07, 3.05, or 10.06 or otherwise, will be authenticated and
delivered in the form of, and will be, a Global Security.
16
<PAGE>
Section 2.06. Temporary Securities.
Pending the preparation of definitive Securities of any series,
the Company may execute and register and upon Company Order the Trustee will
authenticate and deliver temporary Securities (printed, lithographed, or
typewritten), of any authorized denomination, and substantially in the form of
the definitive Securities but with such omissions, insertions, and variations as
may be appropriate for temporary Securities, all as may be determined by the
officers executing such Securities as evidenced by their execution of such
Securities; provided, however, that the Company will use reasonable efforts to
-------- -------
have definitive Securities of that series available at the times of any issuance
of Securities under this Indenture. Every temporary Security will be executed
and registered by the Company and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with like effect, as the
definitive Securities. The Company will execute and register and furnish
definitive Securities of such series as soon as practicable and thereupon any or
all temporary Securities of such series may be surrendered in exchange therefor
at the office or agency of the Company in the Place of Payment for that series,
and the Trustee will authenticate and deliver in exchange for such temporary
Securities of such series one or more definitive Securities of the same series,
of any authorized denominations, and of a like aggregate principal amount and
tenor. Such exchange will be made by the Company at its own expense and without
any charge to the Holder therefor. Until so exchanged, the temporary Securities
of any series will be entitled to the same benefits under this Indenture as
definitive Securities of the same series authenticated and delivered hereunder.
Section 2.07. Mutilated, Destroyed, Lost, and Stolen Securities.
(a) If any mutilated Security is surrendered to the Trustee, the
Company will execute and the Trustee will authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
(b) If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss, or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company will execute and the Trustee will authenticate
and deliver, in lieu of any such destroyed, lost, or stolen Security, a new
Security of the same series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
(c) In case any such mutilated, destroyed, lost, or stolen
Security has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security.
(d) Upon the issuance of any new Security under this Section
2.07, the Company may require the payment of a sum sufficient to cover any tax
or other governmental
17
<PAGE>
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
(e) Every new Security of any series issued pursuant to this
Section 2.07 in exchange for any mutilated Security or in lieu of any destroyed,
lost, or stolen Security will constitute an original additional contractual
obligation of the Company, whether or not the mutilated, destroyed, lost, or
stolen Security shall be at any time enforceable by anyone, and will be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Securities of that series duly issued hereunder.
(f) The provisions of this Section 2.07 are exclusive and will
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost, or stolen Securities.
Section 2.08. Cancellation of Surrendered Securities.
All Securities surrendered for payment, redemption, registration
of transfer or exchange, or for credit against any sinking fund payment will, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and will be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered will be promptly cancelled by the Trustee. No Securities will be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section 2.08, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee will be disposed of as directed by a
Company Order.
Section 2.09. Payment of Interest; Interest Rights Preserved.
(a) Except as otherwise provided in accordance with Section 2.01
with respect to any series of Securities, interest on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date will be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest.
(b) Any interest on any Security of any series which is payable,
but is not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") will forthwith cease to be payable to the
Holder on the relevant regular Record Date by virtue of having been such Holder,
and such Defaulted Interest may be paid by the Company together with interest
thereon (to the extent permitted by law) at the rate of interest applicable to
such Security, at its election in each case, as provided in clause (i) or (ii)
below:
(i) The Company may elect to make payment of any Defaulted
Interest (and interest thereon, if any) to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on a
18
<PAGE>
Special Record Date for the payment of such Defaulted Interest, which will
be fixed in the following manner. The Company will notify the Trustee in
writing of the amount of Defaulted Interest (and interest thereon, if any)
proposed to be paid on each Security of such series and the date of the
proposed payment, and at the same time the Company will deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest (and interest thereon, if any)
or will make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the persons entitled to such Defaulted
Interest (and interest thereon, if any) as provided in this clause (i).
Thereupon the Trustee will fix a Special Record Date for the payment of
such Defaulted Interest (and interest thereon, if any) which will be not
more than 15 calendar days and not less than 10 calendar days prior to the
date of the proposed payment and not less than 10 calendar days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
will promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, will cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of Securities of
such series at his address as it appears in the Security Register, not less
than 10 calendar days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest (and interest thereon, if any)
and the Special Record Date therefor having been so mailed, such Defaulted
Interest will be paid to the Persons in whose names the Securities of such
series (or their respective Predecessor Securities) are registered at the
close of business on such Special Record Date and will no longer be payable
pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted Interest (and
interest thereon, if any) on the Securities of any series in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice as
may be required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause (ii), such
manner of payment shall be deemed practicable by the Trustee.
(c) Subject to the foregoing provisions of this Section 2.09,
each Security delivered under this Indenture upon registration of transfer of
or in exchange for or in lieu of any other Security will carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 2.10. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee, and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and any
premium and (subject to Section 2.09) any interest on such Security and for all
other purposes whatsoever, whether or not such Security shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
will be affected by notice to the contrary.
19
<PAGE>
Section 2.11. Computation of Interest.
Except as otherwise specified in accordance with Section 2.01 for
Securities of any series, interest on the Securities of each series will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Article III. Redemption of Securities.
Section 3.01. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity will be redeemable in accordance with their terms and (except as
otherwise specified in accordance with Section 2.01 for Securities of any
series) in accordance with this Article III.
Section 3.02. Election to Redeem; Notice to Trustee.
(a) The election of the Company to redeem any Securities will be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all the Securities of any series, the Company will, at
least 60 calendar days prior to the Redemption Date fixed by the Company (unless
a shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities of such series to
be redeemed. In the case of any redemption of Securities prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, the Company will furnish the Trustee
with an Officer's Certificate evidencing compliance with such restriction.
(b) Notice of redemption of Securities to be redeemed at the
election of the Company will be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company and will
be irrevocable. Notice of redemption will be given by mail, first-class postage
prepaid, not less than 30 or more than 60 calendar days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register. All notices of redemption will identify the Securities to
be redeemed (including the CUSIP numbers thereof, if applicable) and will state
(i) the Redemption Date, (ii) the Redemption Price, (iii) if less than all the
Outstanding Securities of any series are to be redeemed, the identification
(and, in the case of partial redemption of any Securities, the principal
amounts) of the particular Securities to be redeemed, (iv) that on the
Redemption Date the Redemption Price will become due and payable upon each such
Security to be redeemed and, if applicable, that interest thereon will cease to
accrue on and after said date, (v) the place or places where such Securities are
to be surrendered for payment of the Redemption Price, (vi) that the redemption
is for a sinking fund, if such is the case, and (vii) the specific provision of
this Indenture pursuant to which such Securities are to be redeemed.
(c) If less than all the Securities of any series are to be
redeemed, the particular Securities to be redeemed will be selected not more
than 60 calendar days prior to the Redemption Date by the Trustee (from the
Outstanding Securities of such series not previously
20
<PAGE>
called for redemption) by such method as the Trustee may deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to the minimum authorized denomination for Securities of that series or
any integral multiple thereof) of the principal amount of Securities of such
series of a denomination larger than the minimum authorized denomination for
Securities of that series. The Trustee will promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
(d) For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities will
relate, in the case of any Securities redeemed or to be redeemed only in part,
to the portion of the principal amount of such Securities which has been or is
to be redeemed.
Section 3.03. Deposit of Redemption Price.
At or prior to 10:00 a.m., New York City time, on any Redemption
Date, the Company will deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 6.03) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
any accrued interest on, all of the Securities that are to be redeemed on that
date.
Section 3.04. Securities Payable on Redemption Date.
(a) Notice of redemption having been given as aforesaid, the
Securities so to be redeemed will, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company defaults in the payment of the Redemption Price and accrued
interest) such Securities will cease to accrue interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security will
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified in
-------- -------
accordance with Section 2.01, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates in accordance with their terms
and the provisions of Section 2.09.
(b) If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and any premium will, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 3.05. Securities Redeemed in Part.
Any Security that is to be redeemed only in part will be
surrendered at a Place of Payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company will execute, and
the Trustee will authenticate and deliver to the Holder of such Security without
service
21
<PAGE>
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
Article IV. Sinking Funds.
Section 4.01. Applicability of Article.
The provisions of this Article IV will be applicable to any
sinking fund for the retirement of Securities of a series except as otherwise
specified in accordance with Section 2.01 for Securities of such series. The
minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." If provided for by the terms of Securities of any series, the
amount of any sinking fund payment may be subject to reduction as provided in
Section 4.02. Each sinking fund payment with respect to Securities of a
particular series will be applied to the redemption of Securities of such series
as provided for by the terms of Securities of such series.
Section 4.02. Satisfaction of Sinking Fund Payments With Securities.
The Company (a) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (b) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series, provided that such Securities have not been previously so credited.
Such Securities will be received and credited for such purpose by the Trustee at
the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment will
be reduced accordingly.
Section 4.03. Redemption of Securities for Sinking Fund.
Not less than 60 calendar days prior to each sinking fund
payment date for any series of Securities, the Company will deliver to the
Trustee an Officer's Certificate specifying the amount of the next ensuing
sinking fund payment for that series pursuant to the terms of that series, the
portion thereof, if any, that is to be satisfied by payment of cash and the
portion thereof, if any, that is to be satisfied by delivering and crediting
Securities of that series pursuant to Section 4.02 and will also deliver to the
Trustee any Securities to be so delivered. Not less than 30 calendar days before
each such sinking fund payment date, the Trustee will select the Securities to
be redeemed upon such sinking fund payment date in the manner specified in
Section 3.02(c) and cause notice of the redemption thereof to be given in the
name of and at the expense of the Company in the manner provided in Section
3.02(b). Such notice having been duly given, the redemption of such Securities
will be made upon the terms and in the manner stated in Sections 3.04 and 3.05.
22
<PAGE>
Article V. Defeasance and Covenant Defeasance.
ection 5.01. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option by Board Resolution at any
time, to have either Section 5.02 or Section 5.03 applied to the Outstanding
Securities of any series designated pursuant to Section 2.01 as being defeasible
pursuant to this Article V (hereinafter called "Defeasible Series"), upon
compliance with the conditions set forth below in this Article V, provided that
--------
Section 5.02 will not apply to any series of Securities that is convertible into
Common Stock pursuant to Section 2.01(b)(xvi) or convertible into or
exchangeable for any other securities pursuant to Section 2.01(b)(xvii).
Section 5.02. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section
5.01 to have this Section 5.02 applied to the Outstanding Securities of any
Defeasible Series and subject to the proviso to Section 5.01, the Company will
be deemed to have been discharged from its obligations with respect to the
Outstanding Securities of such series as provided in this Section 5.02 on and
after the date the conditions set forth in Section 5.04 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company will be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of such series and to have satisfied
all its other obligations under the Securities of such series and this Indenture
insofar as the Securities of such series are concerned (and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging the same),
subject to the following which will survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Securities of such series to
receive, solely from the trust fund described in Section 5.04 and as more fully
set forth in Section 5.04, payments in respect of the principal of and any
premium and interest on such Securities of such series when payments are due,
(b) the Company's obligations with respect to the Securities of such series
under Sections 2.05, 2.06, 2.07, 6.02, 6.03, and 10.06, (c) the rights, powers,
trusts, duties, and immunities of the Trustee hereunder, and (d) this Article V.
Subject to compliance with this Article V, the Company may exercise its option
provided in Section 5.01 to have this Section 5.02 applied to the Outstanding
Securities of any Defeasible Series notwithstanding the prior exercise of its
option provided in Section 5.01 to have Section 5.03 applied to the Outstanding
Securities of such series.
Section 5.03. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section
5.01 to have this Section 5.03 applied to the Outstanding Securities of any
Defeasible Series, (a) the Company will be released from its obligations under
Sections 6.04 through 6.07, inclusive, Section 11.01, and such provisions of any
Supplemental Indenture with respect to such Defeasible Series that provide that
this Section 5.03 may apply to such provisions, and (b) the occurrence of any
event specified in Sections 8.01(a)(iii), 8.01(a)(iv) (with respect to any of
Sections 6.04 through 6.07, inclusive, Section 11.01, and such provisions of any
Supplemental Indenture as may be specified in such Supplemental Indenture),
8.01(a)(v), 8.01(a)(vi), and 8.01(a)(ix) will be deemed not to be or result in
an Event of Default, in each case with respect to the Outstanding Securities of
such
23
<PAGE>
series as provided in this Section on and after the date the conditions set
forth in Section 5.04 are satisfied (hereinafter called "Covenant Defeasance").
For this purpose, such Covenant Defeasance means that the Company may omit to
comply with and will have no liability in respect of any term, condition, or
limitation set forth in any such specified Section or provision (to the extent
so specified in the case of Section 8.01(a)(iv)), whether directly or indirectly
by reason of any reference elsewhere herein to any such Section or provision or
by reason of any reference in any such Section or provision to any other
provision herein or in any other document, but the remainder of this Indenture
and the Securities of such series will be unaffected thereby.
Section 5.04. Conditions to Defeasance or Covenant Defeasance.
The following will be the conditions to application of either
Section 5.02 or Section 5.03 to the Outstanding Securities of any Defeasible
Series:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee that satisfies the
requirements contemplated by Section 9.08 and agrees to comply with the
provisions of this Article V applicable to it) as trust funds in trust for
the benefit of the Holders of Outstanding Securities of such series (i)
money in an amount, or (ii) U.S. Government Obligations that through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, without reinvestment, not later
than one day before the due date of any payment, money in an amount, or
(iii) a combination thereof, in each case sufficient to pay and discharge,
and which will be applied by the Trustee (or any such other qualifying
trustee) to pay and discharge, the principal of and any premium and
interest on the Securities of such series on the respective Stated
Maturities or on any earlier date or dates on which the Securities of such
series shall be subject to redemption and the Company shall have given the
Trustee irrevocable instructions satisfactory to the Trustee to give notice
to the Holders of the redemption of the Securities of such series, all in
accordance with the terms of this Indenture and the Securities of such
series.
(b) In the case of an election under Section 5.02, the Company shall
have delivered to the Trustee an Opinion of Counsel (from a counsel who
shall not be an employee of the Company) to the effect that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon, such opinion shall confirm that, the
Holders of the Outstanding Securities of such series will not recognize
gain or loss for federal income tax purposes as a result of the deposit,
Defeasance, and discharge to be effected with respect to the Securities of
such series and will be subject to federal income tax on the same amount,
in the same manner, and at the same times as would be the case if such
deposit, Defeasance, and discharge were not to occur.
(c) In the case of an election under Section 5.03, the Company shall
have delivered to the Trustee an Opinion of Counsel (from a counsel who
shall not be an employee of the Company) to the effect that the Holders of
the Outstanding Securities of
24
<PAGE>
such series (i) will not recognize gain or loss for federal income tax
purposes as a result of the deposit and Covenant Defeasance to be effected
with respect to the Securities of such series and (ii) will be subject to
federal income tax on the same amount, in the same manner, and at the same
times as would be the case if such deposit and Covenant Defeasance were not
to occur.
(d) The Company shall have delivered to the Trustee an Opinion of
Counsel (from a counsel who shall not be an employee of the Company)
stating that the defeasance trust does not violate the Investment Company
Act of 1940.
(e) The Company shall have delivered to the Trustee the opinion of a
nationally recognized independent public accounting firm certifying the
sufficiency of the amount of the moneys, U.S. Government Obligations, or a
combination thereof, placed on deposit to pay, without regard to any
reinvestment, the principal of and any premium and interest on the
Securities on the Stated Maturity thereof or on any earlier date on which
the Securities shall be subject to redemption.
(f) The Company shall have delivered to the Trustee an Officer's
Certificate (i) stating that the deposit was not made by the Company with
the intent of preferring the holders of the Securities over the other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others, and (ii) to the
effect that the Securities of such series, if then listed on any securities
exchange, will not be delisted solely as a result of such deposit.
(g) No Event of Default or event that (after notice or lapse of time
or both) would become an Event of Default shall have occurred and be
continuing at the time of such deposit or, with regard to any Event of
Default or any such event specified in Sections 8.01(a)(vii) and (viii), at
any time on or prior to the 90th calendar day after the date of such
deposit (it being understood that this condition will not be deemed
satisfied until after such 90th calendar day).
(h) Such Defeasance or Covenant Defeasance will not cause the Trustee
to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming all Securities are in default within the meaning of such
Act).
(i) Such Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company is a party or by which it is bound.
(j) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
25
<PAGE>
Section 5.05. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
(a) Subject to the provisions of Section 6.03(e), all money and
U.S. Government Obligations (including the proceeds thereof) deposited with the
Trustee or other qualifying trustee (solely for purposes of this Section 5.05
and Section 5.06, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 5.04 in respect of the
Securities of any Defeasible Series will be held in trust and applied by the
Trustee, in accordance with the provisions of the Securities of such series and
this Indenture, to the payment, either directly or through any such Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of Securities of such series, of all sums due and to
become due thereon in respect of principal and any premium and interest, but
money so held in trust need not be segregated from other funds except to the
extent required by law.
(b) The Company will pay and indemnify the Trustee against any
tax, fee, or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 5.04 or the principal and interest
received in respect thereof other than any such tax, fee, or other charge that
by law is for the account of the Holders of Outstanding Securities.
(c) Notwithstanding anything in this Article V to the contrary,
the Trustee will deliver or pay to the Company from time to time upon a Company
Request any money or U.S. Government Obligations held by it as provided in
Section 5.04 with respect to Securities of any Defeasible Series that are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Defeasance or Covenant Defeasance with respect to the
Securities of such series.
Section 5.06. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money
in accordance with this Article V with respect to the Securities of any series
by reason of any order or judgment of any court or governmental authority
enjoining, restraining, or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Securities of such series
will be revived and reinstated as though no deposit had occurred pursuant to
this Article V with respect to Securities of such series until such time as the
Trustee or Paying Agent is permitted to apply all money held in trust pursuant
to Section 5.05 with respect to Securities of such series in accordance with
this Article V; provided, however, that if the Company makes any payment of
-------- -------
principal of or any premium or interest on any Security of such series following
the reinstatement of its obligations, the Company will be subrogated to the
rights of the Holders of Securities of such series to receive such payment from
the money so held in trust.
26
<PAGE>
Article VI. Particular Covenants of the Company.
Section 6.01. Payment of Principal, Premium, and Interest on Securities.
The Company, for the benefit of each series of Securities, will
duly and punctually pay the principal of and any premium and interest on the
Securities of that series in accordance with the terms of the Securities and
this Indenture.
Section 6.02. Maintenance of Office or Agency.
(a) The Company will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices, and demands may be made or served at
the Corporate Trust Office, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices, and demands.
(b) The Company may also from time to time designate one or more
other offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
-------- -------
rescission will in any manner relieve the Company of its obligation to maintain
an office or agency in each Place of Payment for Securities of any series for
such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 6.03. Money for Securities Payments to be Held in Trust.
(a) If the Company shall at any time act as its own Paying Agent
with respect to any series of Securities, it will, on or before each due date of
the principal of or any premium or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
(b) Whenever the Company shall have one or more Paying Agents
for any series of Securities, it will, prior to each due date of the principal
of or any premium or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
(c) The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying
27
<PAGE>
Agent will agree with the Trustee, subject to the provisions of this Section
6.03, that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) during the continuance
of any default by the Company (or any other obligor upon the Securities of that
series) in the making of any payment in respect of the Securities of that
series, and upon the written request of the Trustee, forthwith pay to the
Trustee all sums held in trust by such Paying Agent for payment in respect of
the Securities of that series.
(d) The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent will be released from all further liability with respect to
such money.
(e) Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or any
premium or interest on any Security of any series and remaining unclaimed for
two years after such principal, premium, or interest has become due and payable
will be paid to the Company upon a Company Request (or, if then held by the
Company, will be discharged from such trust); and the Holder of such Security
will thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, will thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which will not
be less than 30 calendar days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 6.04. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments,
and governmental charges levied or imposed upon the Company or any Subsidiary of
the Company or upon the income, profits, or property of the Company or any
Subsidiary of the Company, and (b) all lawful claims for labor, materials, and
supplies, in each case which, if unpaid, would by law become a lien upon the
property of the Company or any Subsidiary of the Company and would have a
Material Adverse Effect; provided, however, that (x) the Company will not be
-------- -------
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge, or claim the amount, applicability, or validity of which is
being contested in good faith by appropriate proceedings, and (y) any failure to
pay any such tax, assessment, charge, or claim shall not constitute a breach of
this Section 6.04 if such failure (i) was not willful and (ii) does not and will
not result in any Material Adverse Effect.
28
<PAGE>
Section 6.05. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary of the Company to be
maintained and kept in good condition, repair, and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments, and improvements thereof; provided,
-------- -------
however, that nothing in this Section 6.05 will (i) require the Company to take
any action that it determines in good faith to be contrary to its best
interests, so long as the failure to take such action will not have a Material
Adverse Effect, or (ii) prevent the Company from taking any action that it
determines in good faith to be in its best interests, so long as the taking of
such action will not have a Material Adverse Effect.
Section 6.06. Existence.
Subject to Article XI, the Company will, and will cause each of
its Subsidiaries to, do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights (charter and statutory), and
franchises; provided, however, that, except with respect to the preservation of
-------- -------
the Company's existence, nothing in this Section 6.06 will (i) require the
Company to take any action that it determines in good faith to be contrary to
its best interests, so long as the failure to take such action will not a
Material Adverse Effect, or (ii) prevent the Company from taking any action that
it determines in good faith to be in its best interests, so long as the taking
of such action will not have a Material Adverse Effect.
Section 6.07. Compliance with Laws.
The Company will, and will cause each of its Subsidiaries to,
comply with all applicable federal, state, local, or foreign laws, rules,
regulations, or ordinances, including without limitation such laws, rules,
regulations, or ordinances relating to pension, environmental, employee, and tax
matters, to the extent that, in the aggregate, the failure so to comply would
have a Material Adverse Effect.
Section 6.08. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 30 days after
the end of each calendar quarter of the Company following the date hereof, an
Officer's Certificate signed by either the Chief Executive Officer, Chief
Financial Officer or the Controller of the Company stating whether or not to the
knowledge of such person after due inquiry the Company is in default in the
performance and observance of any of the terms, provisions, and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and/or whether an event which has a Material Adverse Effect
has occurred, and, if the Company is in default, specifying all such defaults
and the nature and status thereof of which such person may have such knowledge.
29
<PAGE>
Section 6.09. Financial Reporting.
To the extent the Company is required to file reports with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, the Company
shall provide copies to the Trustee of each Annual Report on Form 10-K, each
Quarterly Report on Form 10-Q, and each Current Report on Form 8-K that is filed
by the Company with the Commission within 15 days of the filing of the same. To
the extent that the Company is not required to file such periodic reports with
the Commission, the Company shall provide copies to the Trustee of consolidated
audited financial statements (including notes) of the Company covering the most
recently completed fiscal year as soon as available but not later than 120 days
after the end of the fiscal year until this Indenture terminates and shall also
provide quarterly unaudited financial statements (including notes to the extent
prepared) within 45 days after the end of each quarter until the eighth
anniversary of the date hereof; provided, however, that the Company shall
provide quarterly unaudited financial statements to the Trustee beyond the
eighth anniversary to the extent it is required to do so under the Funding
Payment Agreement (Classes 5 through 19) among the Company, The Dow Chemical
Company, Corning Incorporated, the Settlement Facility, the Litigation Facility,
and the Claimants' Advisory Committee (the capitalized terms used in this
proviso, to the extent not otherwise defined, have the meanings set forth in the
Company's Amended Joint Plan of Reorganization dated February 4, 1999).
Section 6.10. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision, or condition set forth in Sections 6.04 through 6.07,
inclusive, and the provisions of any Supplemental Indenture specified in such
Supplemental Indenture, with respect to the Securities of any series if the
Holders of a majority in principal amount of the Outstanding Securities of such
series shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision, or condition,
but no such waiver will extend to or affect such term, provision, or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision, or condition will remain in full force and
effect.
Article VII. Securities Holders' Lists And Reports By
The Company And The Trustee.
Section 7.01. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 calendar days after the applicable Regular
Record Date and to the extent known by the Company, a list for each series of
Securities, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders of Securities of such series as of such Regular Record
Date and (b) at such other times as the Trustee may request in writing, within
30 calendar days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 calendar days prior to
the time such list is
30
<PAGE>
furnished; excluding from any such list names and addresses received by the
---------
Trustee in its capacity as Security Registrar.
Section 7.02. Preservation of Information; Communication to Holders.
(a) The Trustee will preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 7.01 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and privileges of the Trustee, will be as provided by
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them will be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
Section 7.03. Reports by Trustee.
The Trustee will transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act or any rule or regulation of the Commission promulgated
pursuant thereto at the times and in the manner provided therein. A copy of
each such report will, at the time of such transmission to Holders, be filed by
the Trustee with each stock exchange upon which any Securities are listed, with
the Commission, and with the Company. The Company will promptly notify the
Trustee when any Securities are listed on any stock exchange.
Section 7.04. Reports by Company.
The Company will file with the Trustee and the Commission, and
transmit to Holders, such information, documents, and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act or any
rule or regulation of the Commission promulgated pursuant thereto at the times
and in the manner provided therein; provided that any such information,
--------
documents, or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act will be filed with the Trustee within 15
calendar days after the same is so required to be filed with the Commission.
31
<PAGE>
Article VII. Default.
Section 8.01. Event of Default.
(a) "Event of Default," wherever used herein with respect to
Securities of any series, means each one of the following events which shall
have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree, or order of any court or any order,
rule, or regulation of any administrative or governmental body):
(i) default in the payment of any installment of interest upon
any Security of that series as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; or
(ii) default in the payment of all or any part of the principal
of (or premium, if any, on) any Security of that series as and when the
same shall become due and payable either at maturity, upon redemption, by
declaration or otherwise; or
(iii) default in the making of any sinking fund payment when and
as due by the terms of a Security of that series, and the continuance of
such default for a period of 5 calendar days;
(iv) default in the performance, or breach, of any covenant or
warranty of the Company in respect of the Securities (other than a covenant
or warranty in respect of any Security a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with or which
has expressly been included in this Indenture solely for the benefit of one
or more series of Securities other than that series), and continuance of
such default or breach for a period of 90 days after there has been given,
by registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the Outstanding Securities of that series affected thereby a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder;
(v) Debt of the Company, or any Domestic Subsidiary, is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default, the total amount of such Debt
unpaid or accelerated exceeds $100,000,000 or its foreign currency
equivalent and such default continues for 10 days after the Company
receives notice thereof;
(vi) any judgment or decree for the payment of money in excess of
$100,000,000 is rendered against the Company or any Domestic Subsidiary and
is not discharged and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof
stayed and, in the case of (B), such default continues for 10 days after
the Company receives notice thereof;
32
<PAGE>
(vii) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the Company or
for any substantial part of its property or ordering the winding up or
liquidation of its affairs, and such decree or order shall remain unstayed
and in effect for a period of 60 consecutive days;
(viii) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary
case under any such law, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or for any substantial
part of its property, or make any general assignment for the benefit of
creditors; or
(ix) any other Event of Default provided with respect to
Securities of that series.
(b) If an Event of Default (other than an Event of Default
arising under Section 8.01(a)(vii) or (viii)) with respect to Securities of any
series at the time Outstanding occurs and is continuing, then in every case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
any of the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such Securities as may be specified in
the terms thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) will become immediately due and payable. If an Event of Default under
Section 8.01(a)(vii) or (viii) occurs, then the principal of, premium, if any,
and accrued interest on the Securities shall become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
(c) At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article VIII provided, the Holders of a majority in
principal amount of the outstanding Securities of that series, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if (i) the Company has paid or deposited with the Trustee a sum
---
sufficient to pay (A) all overdue interest on all Securities of that series, (B)
the principal of (and premium, if any, on) any Securities of that series which
have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate or rates prescribed therefor in such Securities, and (D)
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements, and advances of the Trustee and its
agents and counsel and (ii) all Events of Default with respect to Securities
----
of that series, other than the non-payment of the principal of Securities of
that series that has become due solely by such
33
<PAGE>
declaration of acceleration, have been cured or waived as provided in Section
8.01(d). No such rescission will affect any subsequent default or impair any
right consequent thereon.
(d) The Holders of a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default (i) in the payment of the
principal of or any premium or interest on any Security of such series or (ii)
in respect of a covenant or provision hereof which under Article X cannot be
modified or amended without the consent of the Holder of each Outstanding
Security of such series affected. Upon any such waiver, such default will cease
to exist, and any Event of Default arising therefrom will be deemed to have been
cured, for every purpose of this Indenture, but no such waiver will extend to
any subsequent or other default or impair any right consequent thereon.
Section 8.02. Covenant of Company to Pay to Trustee Whole Amount Due on
Securities on Default in Payment of Interest or Principal; Suits
for Enforcement by Trustee.
(a) The Company covenants that if (i) default is made in the
payment of any interest on any Security when such interest becomes due and
payable and such default continues for a period of 30 calendar days or (ii)
default is made in the payment of the principal of (or premium, if any, on) any
Security when it becomes due and payable and such default continues for a period
of 5 calendar days, the Company will, upon demand of the Trustee, pay to it, for
the benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal and any premium and interest and, to
the extent that payment of such interest will be legally enforceable, interest
on any overdue principal and premium and on any overdue interest, at the rate or
rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as will be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements, and
advances of the Trustee and its agents and counsel.
(b) If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
(c) In case of any judicial proceeding relative to the Company
(or any other obligor upon the Securities), its property or its creditors, the
Trustee will be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee will be authorized to collect and receive
any money or other property payable or deliverable on any such claims and to
distribute the same, and any custodian, receiver, assignee, trustee, liquidator,
sequestrator, or other similar official in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee consents to the making of such
34
<PAGE>
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements, and advances of the
Trustee and its agents and counsel, and any other amounts due the Trustee under
Section 9.06.
(d) No provision of this Indenture will be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment, or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding;
provided, however, that the Trustee may, on behalf of the Holders, vote for
- -------- -------
the election of a trustee in bankruptcy or similar official and be a member of a
creditors' or other similar committee.
(e) All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee will be brought in
its own name as trustee of an express trust, and any recovery of judgment will,
after provision for the payment of the reasonable compensation, expenses,
disbursements, and advances of the Trustee and its agents and counsel, be for
the ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 8.03. Application of Money Collected by Trustee.
Any money collected by the Trustee pursuant to this Article VIII
will be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or any premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 9.06; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the
Securities in respect of which or for the benefit of
which such money has been collected, ratably, without
preference or priority of any kind, except to the extent
the Securities of a series by their express terms are
subordinate and subject in right of payment to the prior
payment of other Indebtedness, according to the amounts
due and payable on such Securities for principal and any
premium and interest, respectively.
Section 8.04. Limitation on Suits by Holders of Securities.
No Holder of any Security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless (a) such Holder has previously
35
<PAGE>
given written notice to the Trustee of a continuing Event of Default with
respect to the Securities of that series, (b) the Holders of not less than 25%
in principal amount of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder, (c) such Holder or Holders have
offered to the Trustee reasonable indemnity against the costs, expenses, and
liabilities to be incurred in compliance with such request, (d) the Trustee for
60 calendar days after its receipt of such notice, request, and offer of
indemnity has failed to institute any such proceeding, and (e) no direction
inconsistent with such written request has been given to the Trustee during such
60-day period by the Holders of a majority in principal amount of the
Outstanding Securities of that series, it being understood and intended that no
one or more of such Holders will have any right in any manner whatever by virtue
of, or by availing of, any provision of this Indenture to affect, disturb, or
prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all of such Holders.
Section 8.05. Rights and Remedies Cumulative; Delay or Omission in Exercise of
Rights not a Waiver of Event of Default.
(a) Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost, or stolen Securities in the last
paragraph of Section 2.07, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy will, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, will not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
(b) No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any Event of Default
will impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article VIII or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
Section 8.06. Rights of Holders of Majority in Principal Amount of Outstanding
Securities to Direct Trustee.
The Holders of a majority in principal amount of the Outstanding
Securities of any series will have the right to direct the Trustee with respect
to the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, and the exercise of any trust or power conferred on
the Trustee, in each case with respect to the Securities of such series,
provided that (a) such direction will not be in conflict with any rule of law or
- --------
with this Indenture and (b) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
36
<PAGE>
Section 8.07. Requirement of an Undertaking to Pay Costs in Certain Suits
Under the Indenture or Against the Trustee.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered, or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section 8.07 nor the Trust Indenture
--------
Act will be deemed to authorize any court to require such an undertaking or to
make such an assessment in any suit instituted by the Trustee or by the Company.
Section 8.08. Notice of Defaults.
If a Default occurs hereunder with respect to Securities of any
series, the Trustee will give the Holders of Securities of such series notice of
such Default actually known to it as and to the extent provided by the Trust
Indenture Act; provided, however, that in the case of any Default of the
-------- -------
character specified in Section 8.01(a)(iv) with respect to Securities of such
series no such notice to Holders will be given until at least 30 calendar days
after the occurrence thereof. The Company will give the Trustee notice of any
uncured Event of Default within 10 days after any Responsible Officer of the
Company becomes aware of or receives actual notice of such Event of Default.
Section 8.09. Unconditional Right of Holders to Receive Principal, Premium,
and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security will have the right, which is absolute and unconditional,
to receive payment of the principal of and any premium and (subject to Section
2.09) interest on such Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such Holder.
Section 8.10. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee, and the Holders will
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders will continue
as though no such proceeding had been instituted.
37
<PAGE>
Section 8.11. Trustee May File Proofs of Claims.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements, and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceeding relative to the Company or the
Subsidiaries (or any other obligor upon the Securities), their creditors or
their property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claim and to
distribute the same, and any custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements, and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee hereunder. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Article IX. Concerning the Trustee.
Section 9.01. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee will be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture will require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee will be subject to the provisions of this Section 9.01.
Section 9.02. Certain Rights of Trustee.
Subject to the provisions of Section 9.01: (a) the Trustee may
rely and will be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness, or other paper or document reasonably believed by it to be genuine
and to have been signed or presented by the proper party or parties; (b) any
request or direction of the Company mentioned herein will be sufficiently
evidenced by a Company Request or Company Order and any resolution of the Board
will be sufficiently evidenced by a Board Resolution; (c) whenever in the
administration of this Indenture the Trustee shall deem it desirable that a
matter be proved or established prior to taking, suffering, or omitting any
action hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon an Officer's
Certificate; (d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel will be full and complete authorization
and
38
<PAGE>
protection in respect of any action taken, suffered, or omitted by it hereunder
in good faith and in reliance thereon; (e) the Trustee will be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses, and liabilities which might
be incurred by it in compliance with such request or direction; (f) the Trustee
will not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness, or other paper or document, but the Trustee, in its reasonable
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it will be entitled to examine the books,
records, and premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys and the
Trustee will not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
Section 9.03. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, may be taken as the statements of the
Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee or any Authenticating Agent will not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 9.04. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar, or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 9.07 and 9.12, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar, or such other agent.
Section 9.05. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required herein or by law. The
Trustee will be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Company.
Section 9.06. Compensation and Reimbursement.
The Company will (a) pay to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder (which
compensation will not be limited to any provision of law in regard to the
compensation of a trustee of an express trust); (b) except as otherwise
expressly provided herein, reimburse the Trustee upon its request for all
reasonable expenses, disbursements, and advances incurred or made by the Trustee
in accordance with any
39
<PAGE>
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of agents and counsel), except any such expense,
disbursement, or advance as may be attributable to its negligence or bad faith;
and (c) indemnify the Trustee for, and hold the Trustee harmless against, any
loss, liability, or expense incurred without negligence or bad faith on its part
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
Section 9.07. Disqualification; Conflicting Interests.
If the Trustee has or acquires a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee will either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 9.08. Corporate Trustee Required Eligibility.
There will at all times be one or more Trustees hereunder with
respect to the Securities of each series, at least one of which will be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $100,000,000 and its Corporate Trust
Office or principal office in New York City, or any other major city in the
United States that is acceptable to the Company. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of a supervising or examining state or federal authority, then for the purposes
of this Section 9.08, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of financial condition so published. If at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section 9.08, it
will resign immediately in the manner and with the effect hereinafter specified
in this Article IX.
Section 9.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article IX will become effective until
the acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 9.10.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 9.10 shall not have been delivered to the Trustee within 30 calendar
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
40
<PAGE>
(d) If, at any time, (i) the Trustee fails to comply with
Section 9.07 after written request therefor by the Company or by any Holder who
has been a bona fide Holder of a Security for at least six months, (ii) the
Trustee ceases to be eligible under Section 9.08 and fails to resign after
written request therefor by the Company or by any such Holder, or (iii) the
Trustee becomes incapable of acting or is adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property is appointed or any public officer
takes charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation, or liquidation, then, in any such case,
(A) the Company by a Board Resolution may remove the Trustee with respect to all
Securities or (B) subject to Section 8.07, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee resigns, is removed, or becomes incapable of
acting, or if a vacancy occurs in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company by a Board
Resolution will promptly appoint a successor Trustee or Trustees with respect to
the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there will be only one Trustee with
respect to the Securities of any particular series) and will comply with the
applicable requirements of Section 9.10. If, within one year after such
resignation, removal, or incapability or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series is appointed by
Act of the Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed will, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 9.10,
become the successor Trustee with respect to the Securities of such series and
to that extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 9.10, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company will give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all holders of Securities of such series in the manner provided in Section
13.03. Each notice will include the name of the successor Trustee with respect
to the Securities of such series and the address of its Corporate Trust Office.
Section 9.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee
with respect to all Securities, every such successor Trustee so appointed will
execute, acknowledge, and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee will become effective and such successor Trustee,
without any further act, deed, or conveyance, will become vested with all the
41
<PAGE>
rights, powers, trusts, and duties of the retiring Trustee, but, on the request
of the Company or the successor Trustee, such retiring Trustee will, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers, and duties of the retiring Trustee and
will duly assign, transfer, and deliver to such Trustee all property and money
held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee, and each successor Trustee with respect to the Securities
of one or more series will execute and deliver an indenture supplemental hereto
wherein such successor Trustee will accept such appointment and which (i) will
contain such provisions as may be necessary or desirable to transfer and confirm
to, and to vest in, each successor Trustee all the rights, powers, trusts, and
duties of the retiring Trustee with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates, (ii) if the
retiring Trustee is not retiring with respect to all Securities, will contain
such provisions as may be deemed necessary or desirable to confirm that all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring will continue to be vested in the retiring Trustee, and (iii) will add
to or change any of the provisions of this Indenture as may be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture will constitute such Trustees as co-trustees of the same
trust and that each such Trustee will be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustees and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee will become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed, or conveyance, will become vested with all the rights, powers,
trusts, and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates;
but on request of the Company or any successor Trustee, such retiring Trustee
will duly assign, transfer, and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the Securities
of that or those series to which the appointment of such successor Trustee
relates.
(c) Upon request of any such successor Trustee, the Company will
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all applicable rights, powers, and trusts
referred to in the preceding paragraphs of this Section 9.10.
(d) No successor Trustee will accept its appointment unless at
the time of such acceptance such successor Trustee is qualified and eligible
under this Article IX.
Section 9.11. Merger, Conversion, Consolidation, or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion, or consolidation to which the Trustee may be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, will be the successor of the Trustee
42
<PAGE>
hereunder, provided such corporation is otherwise qualified and eligible under
this Article IX, without the execution or filing of any paper or any further act
on the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion, or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 9.12. Preferential Collection of Claims Against Company.
If and when the Trustee is or becomes a creditor of the Company
(or any other obligor upon the Securities), the Trustee will be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 9.13. Appointment of Authenticating Agent.
(a) The Trustee may appoint an Authenticating Agent or Agents
with respect to one or more series of Securities which will be authorized to
act on behalf of the Trustee to authenticate Securities of such series issued
upon original issue and upon exchange, registration of transfer, or partial
redemption thereof or pursuant to Section 2.07, and Securities so authenticated
will be entitled to the benefits of this Indenture and will be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference will be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any state thereof, or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by federal or state authority. If such Authenticating Agent publishes reports
of financial condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section 9.13, the combined capital and surplus of such Authenticating Agent will
be deemed to be its combined capital and surplus as set forth in its most recent
report of financial condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section 9.13, such Authenticating Agent will resign immediately in the manner
and with the effect specified in this Section 9.13.
(b) Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion, or consolidation to which such
Authenticating Agent may be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, will
continue to be an Authenticating Agent, provided such corporation is otherwise
eligible under this Section 9.13, without the execution or filing of any paper
or any further act on the part of the Trustee or the Authenticating Agent.
43
<PAGE>
(c) An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions this Section 9.13, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and will mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder will
become vested with all the rights, powers, and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent will be appointed unless eligible under the
provisions of this Section 9.13.
(d) The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section 9.13,
and the Trustee will be entitled to be reimbursed for such payments, subject to
the provisions of Section 9.06.
(e) If an appointment with respect to one or more series of
Securities is made pursuant to this Section 9.13, the Securities of such series
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative form of certificate of authentication in the
following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
------------------------------------------
As Trustee
By:
---------------------------------------
As Authenticating Agent
By:
--------------------------------------
Authorized Officer
44
<PAGE>
Article X. Supplemental Indentures And Certain Actions.
Section 10.01. Purposes for Which Supplemental Indentures May Be Entered Into
Without Consent of Holders.
Without the consent of or notice to any Holders, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities, all to the extent otherwise permitted
hereunder;
(b) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company;
(c) to add any additional Events of Default;
(d) to add to or change any of the provisions of this Indenture
to such extent as may be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form;
(e) to add to, change, or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any
--------
such addition, change, or elimination (i) will neither (A) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (B) modify the
rights of the Holder of any such Security with respect to such provision or
(ii) will become effective only when there is no such Security Outstanding;
(f) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 and 2.02;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as may be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee, pursuant to the requirements of
Section 9.10; or
(h) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any
45
<PAGE>
other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this clause (h) will
--------
not adversely affect the interests of the Holders of Securities of any
series in any material respect.
Section 10.02. Modification of Indenture With Consent of Holders of at Least a
Majority in Principal Amount of Outstanding Securities.
(a) With the consent of the Holders of a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
-------- -------
that no such supplemental indenture will, without the consent of the Holder
of each Outstanding Security affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
8.01(b), or change any Place of Payment where, or the coin or currency in
which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date);
(ii) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of the Holders of which
is required for any such supplemental indenture, or the consent of the
Holders of which is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture; or
(iii) modify any of the provisions of this Section 10.02,
Section 8.01(d) or Section 6.09, except to increase the percentage in
principal amount of Holders required under any such Section or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby, provided, however, that this clause (c) will not be
-------- -------
deemed to require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section 10.02
and Section 6.09, or the deletion of this proviso, in accordance with the
requirements of Sections 9.10 and 10.01(g).
(b) A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, will be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
46
<PAGE>
(c) It will not be necessary for any Act of Holders under this
Section 10.02 to approve the particular form of any proposed supplemental
indenture, but it will be sufficient if such Act approves the substance thereof.
Section 10.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article X or the modifications thereby
of the trusts created by this Indenture, the Trustee will be entitled to
receive, and (subject to Section 9.01) will be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but will not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, or immunities under this Indenture or otherwise.
Section 10.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article X, this Indenture will be modified in accordance therewith, and such
supplemental indenture will form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder will be bound thereby.
Section 10.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article X
will conform to the requirements of the Trust Indenture Act.
Section 10.06. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article X may, and will
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
Article XI. Consolidation, Merger, Sale, or Transfer.
Section 11.01. Consolidations and Mergers of Company and Sales Permitted Only
on Certain Terms.
(a) The Company covenants that it will not merge or consolidate
with any other corporation or sell or convey (including by way of lease) all or
substantially all of its assets to any Person, unless (i) either the Company or
one of its wholly-owned Subsidiaries shall be the continuing corporation, or the
successor corporation or the Person which acquires by sale or conveyance
substantially all the assets of the Company (if other than the Company or one of
its
47
<PAGE>
wholly-owned Subsidiaries) shall be a corporation or entity organized under the
laws of the United States of America or any State thereof and shall expressly
assume the due and punctual payment of the principal of and interest on all the
Securities, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of the Indenture to be
performed or observed by the Company, by supplemental indenture reasonably
satisfactory to the Trustee, executed and delivered to the Trustee by such
corporation or entity, and (ii) the Company or such successor corporation or
entity, as the case may be, shall not, immediately after such merger or
consolidation, or such sale or conveyance, be in default in the performance of
any such covenant or condition.
(b) Such successor corporation or entity under paragraph (a) of
this Section will succeed to and be substituted for the Company with the same
effect as if it had been named as a party to this Indenture, and thereafter the
Company will be relieved of all obligations and covenants under this Indenture
and the Securities.
Article XII. Satisfaction and Discharge of Indenture.
Section 12.01. Satisfaction and Discharge of Indenture.
This Indenture will upon a Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense the Company, will execute proper instruments acknowledging satisfaction
and discharge of this Indenture, when: (a) either (i) all Securities
theretofore authenticated and delivered (other than (A) Securities which have
been destroyed, lost, or stolen and which have been replaced or paid as provided
in Section 2.07 and (B) Securities for the payment of which money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 6.03) have been delivered to the Trustee for cancellation or
(ii) all such Securities not theretofore delivered to the Trustee for
cancellation (A) have become due and payable, (B) will become due and payable at
their Stated Maturity within one year, or (C) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of the
Company, and the Company, in the case of clause (A), (B), or (C) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal and any premium and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be; (b) the Company has paid or caused to be
paid all other sums payable hereunder by the Company; and (c) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 9.06, the obligations of
the Company to any Authenticating Agent under Section 9.13, and, if money shall
have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of
this Section 12.01, the obligations of the Trustee under Sections 6.03(e) and
12.02, will survive.
48
<PAGE>
Section 12.02. Application of Trust Money.
Subject to provisions of Section 6.03(e), all money deposited
with the Trustee pursuant to Section 12.01 will be held in trust and applied by
it, in accordance with the provisions of the Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and any premium and interest for whose
payment such money has been deposited with the Trustee.
Article XII. Miscellaneous Provisions.
Section 13.01. Successors and Assigns of Company Bound by Indenture.
All the covenants, stipulations, promises, and agreements in this
Indenture contained by or on behalf of the Company will bind its successors and
assigns, whether so expressed or not.
Section 13.02. Service of Required Notice to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver, Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with (a) the Trustee by any
Holder or by the Company will, upon receipt, be sufficient for every purpose
hereunder if made, given, furnished, or filed in writing received by the Trustee
at its Corporate Trust Office (addressed to the attention of Corporate Trust
Department) or (b) the Company by the Trustee or by any Holder will, upon
receipt, be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished, or filed in a writing received by
the Company at its principal executive offices (addressed to the attention of
both its Chief Financial Officer and its General Counsel).
Section 13.03. Service of Required Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice will be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder will affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver will be the equivalent of such notice. Waivers of notice by Holders
will be filed with the Trustee, but such filing will not be a condition
precedent to the validity of any action taken in reliance upon such waiver. In
case by reason of the suspension of regular mail service or by reason of any
other cause it will be impracticable to give such notice by mail, then such
notification as may be made with the approval of the Trustee will constitute a
sufficient notification for every purpose hereunder.
49
<PAGE>
Section 13.04. Indenture and Securities to be Construed in Accordance with the
Laws of the State of New York.
This Indenture and the Securities will be deemed to be a
contract made under the laws of the State of New York, and for all purposes will
be construed in accordance with the laws of said State without giving effect to
principles of conflict of laws of such State.
Section 13.05. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any of the provisions of this Indenture, the Company will
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion will be given in the
form of an Officer's Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and will comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Section 13.06. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents. Where any
Person is required to make, give, or execute two or more applications, requests,
consents, certificates, statements, opinions, or other instruments under this
Indenture, they may, but need not, be consolidated and form one instrument.
Section 13.07. Payments Due on Non-Business Days.
In any case where any Interest Payment Date, Redemption Date, or
Stated Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of the Securities of any series which
specifically states that such provision will apply in lieu of this Section
13.07)) payment of interest or principal (and premium, if any) need not be made
at such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date or Redemption Date, or at the Stated Maturity, and
---
no interest shall accrue for the intervening period.
- --
Section 13.08. Provisions Required by Trust Indenture Act to Control.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed on any Person by Sections 310 through 317 of
the Trust Indenture Act (including provisions automatically deemed included in
this Indenture pursuant to the Trust Indenture Act unless this Indenture
provides that such provisions are excluded), which are deemed to be a part
50
<PAGE>
of and govern this Indenture, whether or not contained herein, then such imposed
duties will control.
Section 13.09. Invalidity of Particular Provisions.
In case any one or more of the provisions contained in this
Indenture or in the Securities is for any reason held to be invalid, illegal, or
unenforceable in any respect, such the validity, illegality, or enforceability
will not affect any other provision of this Indenture or of the Securities, but
this Indenture and such Securities will be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
Section 13.10. Indenture May be Executed In Counterparts.
This instrument may be executed in any number of counterparts,
each of which will be an original, but such counterparts will together
constitute but one and the same instrument.
Section 13.11. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver, or other action provided or permitted by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action will become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent will be sufficient for any
purpose of this Indenture and (subject to Section 9.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section
13.11.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit will also constitute sufficient proof of
his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities will be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver, or other Act of the Holder of any Security will bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange thereof or in lieu thereof
in respect of anything done, omitted, or suffered to be done by the
51
<PAGE>
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(e) The Company may, in the circumstances permitted by the Trust
Indenture Act, set any day as the record date for the purpose of determining the
Holders of Outstanding Securities of any series entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver, or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities of such series. With regard to any record date set pursuant to
this paragraph, the Holders of Outstanding Securities of the relevant series on
such record date (or their duly appointed agents), and only such Persons, will
be entitled to give or take the relevant action, whether or not such Holders
remain Holders after such record date. With regard to any action that may be
given or taken hereunder only by Holders of a requisite principal amount of
Outstanding Securities of any series (or their duly appointed agents) and for
which a record date is set pursuant to this paragraph, the Company may, at its
option, set an expiration date after which no such action purported to be given
or taken by any Holder will be effective hereunder unless given or taken on or
prior to such expiration date by Holders of the requisite principal amount of
Outstanding Securities of such series on such record date (or their duly
appointed agents). On or prior to any expiration date set pursuant to this
paragraph, the Company may, on one or more occasions at its option, extend such
date to any later date. Nothing in this paragraph will prevent any Holder (or
any duly appointed agent thereof) from giving or taking, after any such
expiration date, any action identical to, or, at any time, contrary to or
different from, the action or purported action to which such expiration date
relates, in which event the Company may set a record date in respect thereof
pursuant to this paragraph. Nothing in this Section 13.11(e) will be construed
to render ineffective any action taken at any time by the Holders (or their duly
appointed agents) of the requisite principal amount of Outstanding Securities of
the relevant series on the date such action is so taken. Notwithstanding the
foregoing or the Trust Indenture Act, the Company will not set a record date
for, and the provisions of this Section 13.11(e) will not apply with respect to,
any notice, declaration, or direction referred to in the next paragraph.
(f) Upon receipt by the Trustee from any Holder of Securities
of a particular series of (a) any notice of default or breach referred to in
Section 8.01(a)(iv) or 8.01(a)(v) with respect to Securities of such series, if
such default or breach has occurred and is continuing and the Trustee shall not
have given such notice to the Company, (b) any declaration of acceleration
referred to in Section 8.01(b), if an Event of Default with respect to
Securities of such series has occurred and is continuing and the Trustee shall
not have given such a declaration to the Company, or (c) any direction referred
to in Section 8.06 with respect to Securities of such series, if the Trustee
shall not have taken the action specified in such direction, then a record date
will automatically and without any action by the Company or the Trustee be set
for determining the Holders of Outstanding Securities of such series entitled to
join in such notice, declaration, or direction, which record date will be the
close of business on the tenth calendar day following the day on which the
Trustee receives such notice, declaration, or direction. Promptly after such
receipt by the Trustee, and in any case not later than the fifth calendar day
thereafter, the Trustee will notify the Company and the Holders of Outstanding
Securities of such series of any such record date so fixed. The Holders of
Outstanding Securities of such series on such record date (or their duly
appointed agents), and only such Persons, will be entitled to join in such
notice,
52
<PAGE>
declaration, or direction, whether or not such Holders remain Holders
after such record date; provided that, unless such notice, declaration, or
--------
direction shall have become effective by virtue of Holders of the requisite
principal amount of Outstanding Securities of such series on such record date
(or their duly appointed agents) having joined therein on or prior to the 90th
calendar day after such record date, such notice, declaration, or direction will
automatically and without any action by any Person be cancelled and of no
further effect. Nothing in this Section 13.11(f) will be construed to prevent a
Holder (or a duly appointed agent thereof) from giving, before or after the
expiration of such 90-day period, a notice, declaration, or direction contrary
to or different from, or, after the expiration of such period, identical to, the
notice, declaration, or direction to which such record date relates, in which
event a new record date in respect thereof will be set pursuant to this Section
13.11(f). Nothing in this Section 13.11(f) will be construed to render
ineffective any notice, declaration, or direction of the type referred to in
this Section 13.11(f) given at any time to the Trustee and the Company by
Holders (or their duly appointed agents) of the requisite principal amount of
Outstanding Securities of the relevant series on the date such notice,
declaration, or direction is so given.
(g) Without limiting the foregoing, a Holder entitled hereunder
to give or take any action hereunder with regard to any particular Security may
do so with regard to all or any part of the principal amount of such Security or
by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
Section 13.12. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and will not affect the construction hereof.
Section 13.13. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, will give to any Person, other than the parties hereto and their
successors hereunder and the Holders any benefit or any legal or equitable
right, remedy, or claim under this Indenture.
____________________
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
[Seal] DOW CORNING CORPORATION
By: ____________________________________________
Name: John W. Churchfield
Title: Vice President and Chief Financial Officer
Attest:
Name: James R. Jenkins, Esq.
Title: Vice President, Secretary and
General Counsel
[_______________]
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
Attest:
_____________________
Name: _______________
Title:_______________
54
<PAGE>
STATE OF ___________)
) ss.:
COUNTY OF __________)
On this ____ day of ___________ ___, 1999, before me personally came
John W. Churchfield, to me known, who, being by me duly sworn, did depose and
say that he/she is Vice President and Chief Financial Officer of Dow Corning
Corporation, one of the entities described in and which executed the above
instrument; that he/she knows the seal of said entity; that the seal or a
facsimile thereof affixed to said instrument is such seal; that it was so
affixed by authority of the Board of Directors of said entity, and that he/she
signed his/her name thereto by like authority.
------------------------------------
Notary Public
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
------------------------------------
Notary Public
55
<PAGE>
STATE OF ____________)
) ss.:
COUNTY OF ___________)
On this ____ day of ___________ ___, 1999, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he/she is ___________________ of _______________, one of the entities
described in and which executed the above instrument; that he/she knows the seal
of said entity; that the seal or a facsimile thereof affixed to said instrument
is such seal; that it was so affixed by authority of the Board of Directors of
said entity, and that he/she signed his/her name thereto by like authority.
------------------------------------
Notary Public
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
------------------------------------
Notary Public
56
<PAGE>
Dow Corning Corporation
and
[______________________________________________]
Trustee
First Supplemental Trust Indenture
Dated as of ___________, 1999
Supplementing that certain
INDENTURE
Dated as of ___________, 1999
Authorizing the Issuance and Delivery of
Debt Securities
consisting of $[ ] aggregate principal amount of
[_____]% Senior Notes due 2009
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ................................................................................. -1-
[Form of Face of Security] ............................................................... -2-
[Form of Reverse of Security] ............................................................ -3-
ARTICLE I. ISSUANCE OF SENIOR NOTES ...................................................... -5-
Section 1.1. Issuance of Senior Notes; Principal Amount; Maturity ................. -5-
Section 1.2. Interest on the Senior Notes; Payment of Interest .................... -5-
ARTICLE II. CERTAIN DEFINITIONS .......................................................... -6-
Section 2.1. Certain Definitions. ................................................. -6-
ARTICLE III. CERTAIN COVENANTS ........................................................... -6-
Section 3.1. Limitation on Liens .................................................. -6-
Section 3.2 Limitation on Sale and Lease-Back .................................... -8-
ARTICLE IV. REDEMPTION OF SECURITIES. ................................................... -8-
Section 4.1. Right of Redemption .................................................. -8-
ARTICLE V. MISCELLANEOUS ................................................................ -8-
Section 5.1. Reference to and Effect on the Indenture ............................. -8-
Section 5.2. First Supplemental Indenture May Be Executed in Counterparts ......... -9-
Section 5.3 Effect of Headings ................................................... -9-
Section 5.4 Defeasance and Waiver ................................................ -9-
</TABLE>
(i)
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of _________________, 1999, between
Dow Corning Corporation, a corporation duly organized and existing under the
laws of the State of Michigan (the "Company"), and [ ], a [ ]
organized under the laws of the United States of America, as Trustee (the
"Trustee"), supplementing that certain Indenture, dated as of _________________,
1999, between the Company and the Trustee (the "Indenture").
RECITALS
A. The Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes and/or other unsecured evidences of indebtedness (the
"Securities") to be issued in one or more series as provided for in the
Indenture.
B. The Indenture provides that the Securities of each series shall be in
substantially the form set forth in the Indenture, or in such other form as may
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental thereto, in each case with such appropriate insertions, omissions,
substitutions, and other variations as are required or permitted by the
Indenture, and may have such letters, numbers, or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof.
C. The Company and the Trustee have agreed that the Company shall issue
and deliver, and the Trustee shall authenticate, Securities denominated "[ ]%
Senior Notes due 2009" (the "Senior Notes") pursuant to the terms of this First
Supplemental Indenture and substantially in the form set forth below, in each
case with such appropriate insertions, omissions, substitutions, and other
variations as are required or permitted by the Indenture and this First
Supplemental Indenture, and with such letters, numbers, or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof.
1
<PAGE>
[Form of Face of Security]
DOW CORNING CORPORATION
[_____]% SENIOR NOTE DUE 2009
No. R- ________ $________
DOW CORNING CORPORATION, a corporation duly organized and existing under
the laws of the State of Michigan (hereinafter called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to [ ], or registered assigns, the
principal sum of $____________ on ______________, 2009, subject to earlier
redemption as described below, and to pay interest thereon from ____ , 1999, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, at the rate of _____% per annum, payable semiannually on [
] and [ ] of each year, commencing on [ ], until the principal hereof is
paid or made available for payment. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date shall, as provided in said
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the [__________] or
[_____________] (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 calendar days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.
Payment of the principal of and any such interest on this Security shall be
made at the office or agency of the Company maintained for such purpose in New
York, New York, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address appears in the Security Register.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS SET FORTH ON THE REVERSE
HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH
FULLY SET FORTH IN THIS PLACE.
This Security shall not be valid or become obligatory for any purpose until
the certificate of authentication herein has been signed manually by the Trustee
under said Indenture.
IN WITNESS WHEREOF, this instrument has been duly executed in accordance
with the Indenture.
DOW CORNING CORPORATION
Date Issued:__________ By:__________________________________
Attest:
By:___________________
2
<PAGE>
[Form of Reverse of Security]
DOW CORNING CORPORATION
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities") issued and to be issued in one or more
series under an Indenture, dated as of _________, 1999, (herein called the
"Indenture"), between the Company and [ ], as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties, and
immunities thereunder of the Company, the Trustee, and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $[ ].
No sinking fund is provided for the Securities. The Securities are subject
to redemption at the option of the Company in whole or in part at any time,
without premium or penalty, together with accrued and unpaid interest to the
date of redemption.
If less than all of the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed will be selected by such method as
the Trustee may deem fair and appropriate. In the event of the redemption of
this Security in part only, a new Security or Securities of this series and of
like tenor for the portion hereof not so redeemed shall be issued in the name of
the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of this Security or (b) certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request and shall have failed to institute such proceeding for 60 calendar
days after receipt of such notice, request, and offer of indemnity. However,
the foregoing shall not apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of principal hereof or interest
hereon on or after the respective due dates expressed herein.
3
<PAGE>
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Security at the times, place, and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registerable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and interest on this
Security are payable, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, shall be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof. As provided
in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee, and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security shall be overdue, and neither the
Company, the Trustee, nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security that are defined in the Indenture shall
have the respective meanings assigned to them in the Indenture.
4
<PAGE>
D. The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
[ ], as Trustee
--------------------
By: ____________________________________________
Authorized Officer
E. All acts and things necessary to make the Senior Notes, when the
Senior Notes have been executed by the Company and authenticated by the Trustee
and delivered as provided in the Indenture and this First Supplemental
Indenture, the valid, binding, and legal obligations of the Company and to
constitute these presents a valid indenture and agreement according to its
terms, have been done and performed, and the execution and delivery by the
Company of the Indenture and this First Supplemental Indenture and the issue
hereunder of the Senior Notes have in all respects been duly authorized; and the
Company, in the exercise of legal right and power in it vested, has executed and
delivered the Indenture and is executing and delivering this First Supplemental
Indenture and proposes to make, execute, issue, and deliver the Senior Notes.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
In order to declare the terms and conditions upon which the Senior Notes
are authenticated, issued, and delivered, and in consideration of the premises
and of the purchase and acceptance of the Senior Notes by the Holders thereof,
it is mutually agreed, for the equal and proportionate benefit of the respective
Holders from time to time of the Senior Notes, as follows:
ARTICLE I. ISSUANCE OF SENIOR NOTES.
Section 1.1 Issuance of Senior Notes; Principal Amount; Maturity.
(a) On ________, 1999, the Company shall issue and deliver to the Trustee,
and the Trustee shall authenticate, Senior Notes substantially in the form set
forth above, in each case with such appropriate insertions, omissions,
substitutions, and other variations as are required or permitted by the
Indenture and this First Supplemental Indenture, and with such letters, numbers,
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such Senior
Notes, as evidenced by their execution thereof.
(b) The Senior Notes shall be issued in the aggregate principal amount of
$[ ] and shall mature on ___________________, 2009.
Section 1.2 Interest on the Senior Notes; Payment of Interest.
(a) The Senior Notes shall bear interest at the rate of [________]% per
annum, payable semiannually on ______________ and _________________ of each
year, commencing on _______________________, except in the case of Senior Notes
delivered pursuant to Sections 2.05 or 2.07 of the Indenture, which shall bear
interest from the last Interest Payment Date through which interest has been
paid, until the principal thereof is paid or made available for payment.
5
<PAGE>
(b) The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided in the Indenture, be paid to the
Person in whose name a Senior Note (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the [_________] or [___________] (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name the Senior Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
calendar days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.
(c) Payment of the principal of and any such interest on the Senior Notes
shall be made at the office or agency of the Company maintained for such purpose
in New York, New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address appears in the Security Register.
ARTICLE II. CERTAIN DEFINITIONS.
Section 2.1. Certain Definitions.
The terms defined in this Section 2.1 (except as herein otherwise expressly
provided or unless the context of this First Supplemental Indenture otherwise
requires) for all purposes of this First Supplemental Indenture and of any other
indenture supplemental hereto have the respective meanings specified in this
Section 2.1. All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP. All other terms used in this
First Supplemental Indenture that are defined in the Indenture or the Trust
Indenture Act, either directly or by reference therein (except as herein
otherwise expressly provided or unless the context of this First Supplemental
Indenture otherwise requires), have the respective meanings assigned to such
terms in the Indenture or the Trust Indenture Act, as the case may be, as in
force at the date of this First Supplemental Indenture as originally executed.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof (after giving effect to any
extensions at the option of the lessee), discounted from the respective due
dates thereof to such date at the rate per annum borne by the Senior Notes
compounded semi-annually. The net amount of rent required to be paid under any
such lease for any such period shall be the amount of rent payable by the lessee
with respect to such period, after excluding amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates
and similar changes. In the case of any lease which is terminable by the lessee
upon the payment of a penalty, such net amount shall also include the amount of
such penalty, but no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated.
"Mortgage" means any mortgage, pledge, lien, charge, security interest,
conditional sale or other title retention agreement or other similar
encumbrance.
ARTICLE III CERTAIN COVENANTS.
The following covenants shall be applicable to the Company for so long as
any of the Senior Notes are Outstanding.
Section 3.1 Limitation on Liens.
6
<PAGE>
The Company will not itself, and will not permit any Domestic Subsidiary
to, incur, issue, assume or guarantee any Debt secured by a Mortgage on any
Principal Domestic Manufacturing Property of the Company or any Domestic
Subsidiary, or any shares of stock of any Domestic Subsidiary, without
effectively providing that the Senior Notes (together with, if the Company shall
so determine, any other Debt of the Company or such Domestic Subsidiary then
existing or thereafter created which is not subordinated to the Senior Notes)
shall be secured equally and ratably with (or prior to) such secured Debt, so
long as such secured Debt shall be so secured, unless, after giving effect
thereto, the aggregate amount of all such secured Debt then outstanding plus all
Attributable Debt of the Company and its Domestic Subsidiaries in respect of
Sale and Leaseback Transactions (as that term is defined in Section 3.2 of this
First Supplemental Indenture) entered into after the date of this First
Supplemental Indenture (other than Sale and Leaseback Transactions permitted
herein) would not exceed 10% of Consolidated Net Tangible Assets; provided,
however, that this Section shall not apply to, and there shall be excluded from
secured Debt in any computation under this Section, Debt secured by:
a. Mortgages of the Company or any Domestic Subsidiary existing at the time
of this First Supplemental Indenture;
b. Mortgages on property or any shares of stock (or other equity interest)
or arising out of any Debt of any entity existing at the time such
entity was merged into the Company or became a Domestic Subsidiary;
c. Mortgages in favor of the Company or any Subsidiary of the Company;
d. Mortgages in favor of the United States of America, any State of the
United States of America, or any subdivision, agency, department or
other instrumentality thereof, to secure progress, advance or other
payments pursuant to any contract or provision of any statute;
e. Mortgages on property or shares of stock (or other equity interest)
existing at the time of acquisition thereof (including acquisition
through merger or consolidation) or to secure the payment of all or any
part of the purchase price or construction cost thereof or to secure any
Debt incurred prior to, at the time of, or within 180 days after, the
acquisition of such property or shares or the completion of any such
construction for the purpose of financing all or any part of the
purchase price or construction cost thereof;
f. Mortgages of carriers, warehousemen, mechanics and materialmen incurred
in the ordinary course of business for sums not yet due or being
contested in good faith;
g. Mortgages arising by reason of any judgment, decree or order of any
court, so long as any appropriate legal proceedings which may have been
duly initiated for the review of such judgment, decree or order shall
not have been finally terminated or so long as the period within which
such proceedings may be initiated shall not have expired; or pledges or
deposits to secure payment of workers' compensation or other insurance,
good faith deposits in connection with tenders, contracts (other than
contracts for the payment of money) or leases, deposits to secure public
or statutory obligations, deposits to secure or in lieu of surety or
appeal bonds, or deposits as security for the payment of taxes;
h. Mortgages in connection with the issuance of tax-exempt industrial
development or pollution control bonds or other similar bonds issued
pursuant to Section 103(b) of the Internal Revenue Code of 1986, as
amended or as hereafter amended, to finance all or any part of the
purchase price of or the cost of constructing, equipping or improving
property; provided that such Mortgages shall be limited to such property
acquired (including personal property) or constructed or such
improvement and to theretofore substantially unimproved real property on
which such construction or improvement is located; and provided,
further, that the Company and its Domestic Subsidiaries may further
secure all or any part of such purchase price or the cost of
construction of such improvements and personal property by an interest
on additional property of the Company and its Domestic Subsidiaries only
to the extent necessary for the construction,
7
<PAGE>
maintenance and operation of, and access to, such property so
acquired or constructed or such improvement;
i. Mortgages in favor of any customer arising in respect of partial,
progress, advance or other payments made by or on behalf of such
customer for goods produced for or services rendered to such customer in
the ordinary course of business not exceeding the amount of such
payments;
j. any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Mortgage
referred to in the foregoing clauses (a) to (i), inclusive; provided,
that (i) such extension, renewal or replacement Mortgage shall be
limited to all or a part of the same property or shares of stock (or
other equity interest) that secured the Mortgage extended, renewed or
replaced (plus improvements on such property) and (ii) the principal
amount of the Debt secured by such Mortgage shall not exceed the
principal amount of Debt so secured at the time of such extension,
renewal or replacement; and
k. Mortgages for taxes or assessments or governmental charges or levies not
yet due or delinquent or which can thereafter be paid without penalty,
or which are being contested in good faith by appropriate proceedings;
landlord's liens on property held under lease, and tenants' rights under
leases; easements; and any other Mortgages of a nature similar to those
hereinabove described in this clause (k) which do not, in the opinion of
the Company, materially impair the use of such property in the operation
of the business of the Company or a Domestic Subsidiary or the value of
such property for the purposes of such business.
Section 3.2. Limitation on Sale and Lease-Back.
The Company will not itself, and it will not permit any Domestic Subsidiary
to, enter into any arrangement with any bank, insurance company or other lender
or investor (not including the Company or any Subsidiary of the Company) or to
which any such lender or investor is a party, providing for the leasing by the
Company or a Domestic Subsidiary for a period, including renewals, in excess of
three years of any Principal Domestic Manufacturing Property which has been or
is to be sold or transferred, more than 180 days after the acquisition thereof
or the completion of construction and commencement of full operation thereof, by
the Company or any Domestic Subsidiary to such lender or investor or to any
person to whom funds have been or are to be advanced by such lender or investor
on the security of such Principal Domestic Manufacturing Property (herein
referred to as a "Sale and Leaseback Transaction") unless either:
(a) the Attributable Debt of the Company and its Domestic
Subsidiaries in respect of such Sale and Leaseback Transaction and all
other Sale and Leaseback Transactions entered into after the date of this
First Supplemental Indenture (other than Sale and Leaseback Transactions
permitted herein), plus the aggregate amount of Debt secured by Mortgages
on Principal Domestic Manufacturing Properties then outstanding (excluding
any such Debt secured by Mortgages covered in clauses (a) through (k) of
Section 3.1 of this First Supplemental Indenture) without equally and
ratably securing the Senior Notes, would not exceed 10% of Consolidated Net
Tangible Assets, or
(b) the net proceeds of the sale of the Principal Domestic
Manufacturing Property are at least equal to the fair value (as determined
by the Board of Directors of the Company) of such property.
ARTICLE IV. REDEMPTION OF SECURITIES.
Section 4.1. Right of Redemption
The Senior Notes may be redeemed in accordance with the provisions of the
form thereof set forth herein.
ARTICLE V. MISCELLANEOUS.
Section 5.1. Reference to and Effect on the Indenture.
8
<PAGE>
This First Supplemental Indenture shall be construed as supplemental to the
Indenture and all the terms and conditions of this First Supplemental Indenture
shall be deemed to be part of the terms and conditions of the Indenture. Except
as set forth herein, the Indenture heretofore executed and delivered is hereby
(i) incorporated by reference in this First Supplemental Indenture and (ii)
ratified, approved and confirmed.
9
<PAGE>
Section 5.2. First Supplemental Indenture May Be Executed in Counterparts.
This instrument may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
Section 5.3 Effect of Headings.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
Section 5.4 Defeasance and Waiver.
The Senior Notes and the covenants contained in this First Supplemental
Indenture are subject to Defeasance and Covenant Defeasance as provided in
Article V of the Indenture and waiver as provided in Section 6.10 of the
Indenture.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
[Seal] DOW CORNING CORPORATION
By: ___________________________________
Name: John W. Churchfield
Title: Vice President and Chief Financial Officer
Attest:
- -------------------------------------
Name: James R. Jenkins, Esq.
Title: Vice President, Secretary and
General Counsel
[________________________________], as Trustee
By: ___________________________________
Name:
Title:
Attest:
- -------------------------------------
Name:
Title:
11
<PAGE>
STATE OF [______] )
) ss.:
COUNTY OF [______] )
On this ____ day of [_____________], 1999, before me personally came John
W. Churchfield, to me known, who, being by me duly sworn, did depose and say
that he is a Vice President and Chief Financial Officer of DOW CORNING
CORPORATION, one of the entities described in and which executed the above
instrument; that he knows the seal of said entity; that the seal or a facsimile
thereof affixed to said instrument is such seal; that it was so affixed by
authority of the Board of Directors of said entity, and that he signed his name
thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_____________________________________________
Notary Public
12
<PAGE>
STATE OF [______________] )
) ss.:
COUNTY OF [_____] )
On this ____ day of [___________], 1999, before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he/she is a ____________ of [ ], one of the entities described in
and which executed the above instrument; that he/she knows the seal of said
entity; that the seal or a facsimile thereof affixed to said instrument is such
seal; that it was so affixed by authority of the Board of Directors of said
entity, and that he/she signed his/her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_____________________________________________
Notary Public
13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
IN RE: NORTHERN DIVISION
(S)
DOW CORNING CORPORATION (S)
CASE NO. 95-20512
(S)
(CHAPTER 11)
DEBTOR (S)
(S) JUDGE ARTHUR J. SPECTOR
(S)
AMENDED JOINT DISCLOSURE STATEMENT WITH
RESPECT TO AMENDED JOINT PLAN OF REORGANIZATION
Barbara J. Houser Kenneth H. Eckstein
Craig J. Litherland Jeffrey S. Trachtman
David Ellerbe Philip Bentley
Thomas S. Henderson KRAMER LEVIN NAFTALIS &
SHEINFELD, MALEY & KAY, FRANKEL LLP
A PROFESSIONAL CORPORATION 919 Third Avenue
1700 Pacific Avenue, Suite 4400 New York, New York 10022-3850
Dallas, Texas 75201-4618
ATTORNEYS FOR
ATTORNEYS FOR OFFICIAL COMMITTEE
DOW CORNING OF TORT CLAIMANTS
CORPORATION
DATED: February 4, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
TABLE OF CONTENTS
<TABLE>
<C> <C> <C> <C> <S> <C>
PRELIMINARY STATEMENT................................................. 1
ARTICLE I--PLAN OVERVIEW.............................................. 2
1.1 Summary of How Personal Injury Claims Are Treated Under the Plan. 2
A. Options Under the Plan...................................... 2
B. Settlement.................................................. 3
1. Breast Implant Claims.................................. 3
a. Explantation Payment Option...................... 3
b. Rupture Payment Option........................... 3
Disease Payment Option/Expedited Release Payment
c. Option........................................... 4
(1)Disease Payment Option........................ 4
(2)Expedited Release Payment Option.............. 5
2. Other Products Claims (TMJ, Hip, Knee, Etc.)........... 5
3. Silicone Material Claims............................... 6
4. Foreign Claimants...................................... 6
5. Family Member Claims................................... 7
a. Consortium Claims................................ 7
b. Children Direct Claims........................... 7
6. Procedure Under Settlement Facility.................... 7
a. Use of MDL 926 Claims Office and Protocols....... 7
b. Administrators of the Settlement Facility........ 7
(1)MDL 926 Court................................. 7
(2)Claims Administrator.......................... 7
(3)Financial Advisor............................. 8
(4)Operations Manager............................ 8
(5)Quality Control Supervisor.................... 8
(6)Appeals Judge................................. 8
c. Processing of Settlement Claims.................. 8
d. Review of Claims Office Decisions................ 8
C. Litigation.................................................. 8
1. The Litigation Facility................................ 8
2. Processing of Claims in the Litigation Facility........ 9
Payment of Allowed Claims; First Priority and Second
D. Priority Payments........................................... 9
E. Funding..................................................... 10
F. Release of Dow Corning, the Shareholders, the Settling
Insurers and Limited Release of Certain Third Parties....... 11
G. Effect on Non-Electing Claimants............................ 12
H. Summary Is Not Controlling.................................. 12
1.2 Summary of How Physician Claims Are Treated Under the Plan....... 12
A. Definition of Physician Claims.............................. 12
1. Physician Products Liability Reimbursement Claims...... 12
2. Physician Tortious Conduct Claims...................... 12
B. Classification of Physician Claims under the Plan........... 12
C. Treatment of Physician Claims under the Plan................ 12
1. The Settlement Option.................................. 12
a. Releases by the Settling Physician............... 12
b. Protections Afforded Settling Physicians......... 12
c. Settling Physicians Remain Exposed to Claims by
Non-Settling Personal Injury Claimants........... 13
2. The Litigation Option.................................. 13
a. Litigation Procedure for Claims of Non-Settling
Physicians....................................... 13
b. Payment of Allowed Physician Claims.............. 14
c. Treatment of Punitive Damage Claims of Non-
Settling Physicians.............................. 14
3. The Election Process................................... 14
</TABLE>
Page i
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
D. Summary not Controlling...................................... 15
1.3 Summary of How Unsecured Claims Are Treated Under the Plan........ 15
A. General...................................................... 15
B. Summary Not Controlling...................................... 15
Summary of the Treatment of Claims Against, and Interests in, the
1.4 Debtor............................................................ 16
A. Treatment of Claims and Interests............................ 16
B. Treatment of Tort Claims..................................... 20
1.5 Alternatives to the Plan.......................................... 22
ARTICLE II--INTRODUCTION............................................... 23
2.1 Purpose of Disclosure Statement................................... 23
2.2 Explanation of Chapter 11......................................... 23
2.3 Procedure for Filing Proofs of Claim and Proofs of Interest....... 24
A. Bar Date for Filing of All Proofs of Claim (Other Than
Administrative Claims) and Proofs of Interest................ 24
B. Confidentiality Regarding Filed Personal Injury Claims....... 24
C. Filing of Claims on Behalf of Personal Injury Claimants...... 24
D. Bar Date for Administrative Claims........................... 25
E. Effect of Amendments to Schedules............................ 25
F. Executory Contracts and Unexpired Leases..................... 25
G. Voting Procedures and Requirements........................... 25
1. Persons Entitled to Vote................................ 25
2. Voting Instructions..................................... 26
a. Coded Ballots...................................... 26
b. Returning Ballots.................................. 26
3. Special Instructions for Holders of Public Debt Claims.. 26
4. Public Debt Claims Held in Nominee Name................. 26
5. Incomplete or Irregular Ballots......................... 27
6. Ballot Retention........................................ 27
7. Approval of Disclosure Statement........................ 27
8. Confirmation Hearing.................................... 27
9. Objections.............................................. 27
ARTICLE III--GENERAL INFORMATION ABOUT THE DEBTOR...................... 29
3.1 Dow Corning Corporation........................................... 29
A. Formation of DCC............................................. 29
1. DCC Management.......................................... 29
a. Current DCC Officers............................... 29
b. Current DCC Directors.............................. 30
2. Business of DCC and Its Subsidiaries.................... 30
a. Raw Materials Used by DCC and Its Subsidiaries to
Manufacture Products............................... 30
b. Products Manufactured by DCC....................... 30
B. Distribution and Sale of Products............................ 30
C. Research and Development Operations.......................... 30
D. Corporate Organization of DCC and Its Operating Divisions.... 31
Corporate Organization of Non-Debtor Joint Ventures and
3.2 Subsidiaries of DCC............................................... 31
3.3 Breast Implant Litigation......................................... 33
A. Background................................................... 33
B. Procedural Posture of Silicone Gel Breast Implant Litigation. 33
Substantive Allegations of Silicone Gel Breast Implant
C. Litigation................................................... 34
D. Attempted Global Settlement of the Breast Implant Litigation. 34
3.4 Other Claims, Litigation and Investigations....................... 35
A. Other Implant Litigation..................................... 35
1. TMJ Claims.............................................. 35
2. SJO Claims.............................................. 35
3. LJO Claims.............................................. 36
4. LTCI Claims............................................. 36
</TABLE>
Page ii
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
Insurance Coverage for
Products Liability
B. Claims................ 36
General
Discussion of
1. Coverage....... 36
Litigation
Against
Insurance
2. Carriers....... 37
Other Potential
Product-Related
C. Claims................ 37
D. Environmental Matters. 38
Securities Laws Class
E. Action Lawsuits....... 38
ARTICLE IV--TRANSACTIONS WITH
JOINT VENTURES AND SUBSIDIARIES. 38
4.1 General.................... 38
Intercompany Financings and
4.2 Guarantees................. 38
A. Financings............ 38
4.3 Guarantees................. 39
4.4 Product Sales and
Miscellaneous Transactions
Between the Debtor and Its
Joint Ventures and
Subsidiaries............... 40
ARTICLE V--THE REORGANIZATION
CASE............................ 41
Factors Precipitating the
Filing of the
5.1 Reorganization Case........ 41
Breast Implant
A. Litigation............ 41
Other Pending Products
Liability Litigation
and Potential
B. Litigation............ 41
5.2 The Debtor's Assets........ 41
Cash and Cash-
Equivalent Assets and
A. Marketable Securities. 41
B. Inventory............. 41
C. Fixed Assets.......... 41
Intellectual Property
D. Rights................ 42
E. Real Property Leases.. 42
F. Insurance............. 42
Significant Case
5.3 Developments............... 42
Commencement of the
A. Case.................. 42
Appointment of
B. Committees............ 42
DCC's Request to
Transfer Breast
C. Implant Claims........ 42
Transfer of Other
D. Products Claims....... 43
E. Payment of Wages,
Salaries, Expenses and
Benefits for Employees
and Retirees.......... 43
Exclusivity Matters;
DCC's Prior Proposed
F. Plans................. 43
G. Insurance Settlements. 44
H. Bar Date Motions...... 45
Estimation
Procedures/Scientific
Advisory Panel
I. Motions............... 46
Motion to Withdraw the
J. Reference............. 47
MDL Registrations as
K. Proofs of Claim....... 47
Omnibus Objection to
L. Implant Claims........ 47
Appointment of Judge
M. Pointer............... 48
Appointment of
Mediator and Agreement
on Terms of Joint
N. Plan.................. 48
Appointment of Rule
706 Panel in the MDL
O. Case.................. 48
ARTICLE VI--DESCRIPTION OF THE
PLAN............................ 49
6.1 Classification of Claims
and Interests.............. 49
A. General............... 49
B. Unclassified Claims... 49
Administrative
1. Claims......... 49
Priority Tax
2. Claims......... 49
C. Classes............... 50
Class 1--Other
Priority
1. Claims......... 50
Class 2--
2. Secured Claims. 50
Class 3--
Convenience
3. Claims......... 50
Class 4--
Unsecured
4. Claims......... 50
Class 4A--
Prepetition
Judgment
5. Claims......... 52
Class 4B--DCC
Guaranty
6. Claims......... 52
Class 5--
Domestic Breast
Implant
Personal Injury
7. Claims......... 52
</TABLE>
Page iii
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
Classes 6.1 and
6.2--Foreign Breast
Implant Personal
8. Injury Claims...... 52
Class 6A--Quebec
Class Action
Settlement
9. Claimants.......... 52
Class 6B--Ontario
Class Action
Settlement
10. Claimants.......... 52
Class 6C--B.C.
Class Action
Settlement
11. Claimants.......... 52
Class 6D--Electing
Australia Breast
Implant Settlement
12. Claimants.......... 52
Class 7--Silicone
13. Material Claims.... 53
Class 8--
Miscellaneous Raw
Material Personal
14. Injury Claims...... 53
Class 9--Domestic
Other Products
Personal Injury
15. Claims............. 53
16. Classes 10.1 and
10.2--Foreign Other
Products Personal
Injury Claims...... 53
Class 11--Co-
17. Defendant Claims... 53
Class 12--Physician
18. Claims............. 53
Class 13--Health
Care Provider
19. Claims............. 53
Class 14--Domestic
Health Insurer
20. Claims............. 54
Class 14A--Foreign
Health Insurer
21. Claims............. 54
Class 15--
Government Payor
22. Claims............. 54
Class 16--
23. Shareholder Claims. 54
Class 17--General
Contribution
24. Claims............. 54
Class 18--LTCI
Personal Injury
25. Claims............. 54
Class 19--LTCI
26. Other Claims....... 54
Class 20--
Intercompany
27. Claims............. 54
Class 21--
Subordinated
28. Claims............. 54
Class 22--
Environmental
29. Claims............. 54
Class 23--Retiree
30. Benefit Claims..... 54
Class 24--
31. Interests.......... 54
6.2 Impaired Classes............. 54
6.3 Non-Voting and Unimpaired
Classes...................... 54
6.4 Treatment of Claims and
Interests.................... 54
A. General................. 54
Other Priority Claims--
B. Class 1................. 54
C. Secured Claims--Class 2. 55
Convenience Claims--
D. Class 3................. 55
Unsecured Claims--Class
E. 4....................... 55
Prepetition Judgment
F. Claims--Class 4A........ 56
DCC Guaranty Claims--
G. Class 4B................ 56
Domestic and Foreign
Personal Injury Claims--
H. Classes 5 through 10.2.. 56
Quebec Class Action
I. Claims--Class 6A........ 57
Eligible Class 6A
1. Claimants.......... 57
2. Funding............ 57
3. Claim Liquidation.. 57
4. Payment Grid....... 57
Claims of Family
5. Members............ 57
Effect of Opt-Out
Elections/Failure
to Obtain Court
6. Approval........... 57
Ontario Class Action
J. Claims--Class 6B........ 58
Eligible Class 6B
1. Claimants.......... 58
2. Funding............ 58
3. Claim Liquidation.. 58
4. Payment Grid....... 58
Claims of Family
5. Members............ 58
Effect of Opt-Out
Elections/Failure
to Obtain Court
6. Approval........... 58
B.C. Class Action
K. Claims--Class 6C........ 58
Eligible Class 6C
1. Claimants.......... 58
2. Funding............ 58
3. Claim Liquidation.. 58
4. Payment Grid....... 58
Claims of Family
5. Members............ 59
</TABLE>
Page iv
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
6. Effect of Opt-Out and Opt-In Elections/Failure to
Obtain Court Approval.................................. 59
L. Australia Breast Implant Claims--Class 6D................... 59
1. Eligible Class 6D Claimants............................ 59
2. Funding................................................ 59
3. Claim Liquidation...................................... 60
4. Payment Grid........................................... 60
a. Expedited Option................................. 60
b. Medical Conditions Option........................ 60
c. Localized Injury................................. 61
d. Raw Material Claimants........................... 61
5. Treatment of "Advanced Claims"......................... 62
6. Claims of Family Members............................... 62
7. Counsel's Fees......................................... 63
8. Effect of Registration Elections/Failure to Obtain 63
Court Approval.........................................
9. Risks Related to Treatment of Class 6D................. 63
M. Other Claims Related to Implants--Classes 11 through 17..... 63
1. Claims in Class 11..................................... 63
2. Claims in Class 12..................................... 64
3. Claims in Class 13..................................... 64
a. Settlement Option for Health Care Providers...... 64
b. The Litigation Option............................ 65
c. The Election Process............................. 66
d. Recommendation Regarding Plan.................... 66
4. Claims in Classes 14 and 14A........................... 66
a. Settlement Fund.................................. 67
b. Proportionate Shares of Settlement Fund.......... 67
c. Minimum Participation............................ 67
d. Release of Reimbursement Claims.................. 67
e. If Settlement Not Effective...................... 67
f. Treatment of Class 14A Claimants................. 67
g. Notice of Claim Resolution of Settling Personal
Injury Claims.................................... 67
h. Cutoff of Rights to Recover Against the 68
Settlement Facility..............................
i. Notice of Claim Resolution of Non-Settling
Personal Injury Claims........................... 68
5. Claims in Classes 15 and 17............................ 68
6. Class 16 Claims........................................ 68
7. Basis for Disallowance of Other Claims................. 68
N. LTCI-Related Claims--Classes 18 and 19...................... 69
O. Allowed Intercompany Claims--Class 20....................... 69
P. Allowed Subordinated Claims--Class 21....................... 69
Q. Environmental Claims--Class 22.............................. 69
R. Retiree Benefit Claims--Class 23............................ 69
S. Interests--Class 24......................................... 69
6.5 Conditions Precedent to Confirmation and Effective Date.......... 69
A. Conditions Precedent to Confirmation........................ 69
B. Conditions to the Effective Date............................ 70
C. Waiver of Conditions........................................ 70
6.6 Means for Implementation of the Plan............................. 70
A. Litigation Process.......................................... 70
Settlement Regarding Allocation of Insurance Proceeds and
B. Coverage.................................................... 70
C. Filing and Payment of Allowed Administrative Claims......... 71
D. Payment of Allowed Other Priority Claims.................... 71
E. Payment to United States Trustee............................ 72
F. Closing..................................................... 72
G. Debtor's Obligations at Closing............................. 72
1. Payment, Cure and Reinstatement or Setoff of Allowed
Secured Claims......................................... 72
</TABLE>
Page v
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
2. Satisfaction of Allowed Unsecured Claims............... 72
3. Satisfaction of Personal Injury Claims and LTCI Claims. 72
Satisfaction of Allowed Other Claims Related to
4. Implants............................................... 72
Satisfaction of Settling Domestic Health Insurer
5. Claims................................................. 72
6. Satisfaction of Allowed Subordinated Claims............ 72
H. MATERIAL PROVISIONS OF THE SETTLEMENT FACILITY AND
LITIGATION FACILITY AGREEMENTS.............................. 73
1. Purposes, Organization and Operation................... 73
2. Transfer of Consideration.............................. 73
3. Governance of the Settlement Facility.................. 73
a. MDL 926 Court.................................... 73
b. Claims Administrator............................. 73
c. Financial Advisor................................ 73
d. MDL Claims Administrator......................... 73
e. Appeals Judge.................................... 73
f. Quality Control Supervisor....................... 74
g. Operations Manager............................... 74
h. Claims Office Staff.............................. 74
4. Governance of the Litigation Facility.................. 74
a. Manager.......................................... 74
b. Special Master................................... 74
5. Common Governance Entities............................. 74
a. Finance Committee................................ 74
b. Claimants' Advisory Committee.................... 75
c. Debtor's Representatives......................... 75
6. Liability of Facilities' Administrators; Indemnity..... 75
7. Duties of the Claims Office and the Litigation Manager. 75
8. Accounting............................................. 75
9. Reporting Duties....................................... 75
10. Liability for Assumed Claims and Expenses of Settlement
Facility and Litigation Facility....................... 76
11. Irrevocability; Amendments............................. 76
12. Termination............................................ 76
Disposition of Excess Funds from the Settlement
13. Facility............................................... 76
I. Material Provisions of the Funding Payment Agreement........ 76
Unified Funding of Settlement Facility and Litigation
1. Facility............................................... 76
2. Funds Administration; Establishment of Dedicated Funds. 77
3. The Shareholder Credit Facility........................ 77
4. Covenants; Reporting Obligations....................... 77
5. Effect of Default Under the Funding Payment Agreement.. 78
J. Claims Resolution Procedures Under the Settlement Facility
and the Litigation Facility................................. 78
1. Resolving Breast Implant Personal Injury Claims Under
the Settlement Facility: The Philosophy of Settlement.. 78
a. Explantation Payment Option...................... 78
b. Rupture Payment Option........................... 78
c. Disease Payment Option or the Expedited Release
Payment Option................................... 79
(1)Disease Payment Option........................ 79
(2)Expedited Release Payment Option.............. 80
d. Claims of Family Members......................... 81
e. How Claims Are Processed......................... 81
f. Payment of Claims--Generally..................... 82
g. Release.......................................... 82
h. Review........................................... 82
2. Resolving Other Products Personal Injury Claims and
Silicone Material Claims Under the Settlement Facility. 82
a. Other Products Settlement Options................ 83
b. Silicone Material Claims......................... 83
</TABLE>
Page vi
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
c. Other Settlement Provisions...................... 83
3. Payment of Foreign Claims.............................. 84
a. Payment Adjustment............................... 84
b. Categorization of Foreign Claims................. 84
c. Procedure for Adjustment to Categorization....... 84
4. Resolving Claims Under the Litigation Facility......... 84
a. Election to Litigate............................. 85
b. Pre-Trial Settlement Procedures.................. 85
c. Trial............................................ 86
d. Participation Under the Plan by Rule 3005 86
Claimants........................................
e. Payment of Claims................................ 87
5. LTCI Claims............................................ 88
6. Punitive Damages....................................... 88
7. Claims in Classes 11 Through 15 and 17................. 88
8. Claims in Class 16..................................... 88
K. Other Obligations of the Reorganized Debtor................. 88
6.7 Effects of Plan Confirmation..................................... 88
A. Discharge................................................... 88
B. Vesting..................................................... 88
C. Release..................................................... 89
1. Description of Release................................. 89
2. History of Litigation Against Dow Chemical............. 89
3. History of Litigation Against Corning.................. 90
Consideration Given by the Shareholders to Support the
4. Plan................................................... 90
5. Tort Committee Support of Release...................... 91
D. Injunctive Relief........................................... 91
Supplemental Release and Injunction For Certain Settling
E. Insurers.................................................... 92
F. Retention of Jurisdiction................................... 92
6.8 Treatment of Executory Contracts, Unexpired Leases and
Employee/Retiree Benefits Under the Plan......................... 93
A. General..................................................... 93
B. Specific Plan Provisions.................................... 93
C. Continuation of Pension Plan................................ 93
6.9 Other Provisions of the Plan..................................... 94
A. Survival of Certain Corporate Indemnification Obligations... 94
B. Modification of the Plan.................................... 94
C. Committees; Representatives................................. 94
ARTICLE VII--CERTAIN RISK FACTORS..................................... 94
7.1 Limitations on Aggregate Funding/Timing of Distributions by
Settlement Facility/Potential for Reduction in Payments and
Delay............................................................ 94
Limited Funding/Potential for Limitation or Reduction in
A. Payments.................................................... 94
1. Settling Claimants..................................... 94
a. Breast Implant Claimants......................... 95
b. Silicone Material Claims......................... 96
c. Other Products Claimants......................... 96
2. Non-Settling Personal Injury Claimants................. 96
B. Timing/Potential for Delay.................................. 97
1. Settling Claimants..................................... 97
a. Timing of Payment for Settling Breast Implant 97
Claimants........................................
b. Timing of Payment for Settling Silicone Material 97
Claimants........................................
c. Timing of Payments for Settling Other Products 97
Claimants........................................
Timing of Payment for Non-Settling Personal Injury
2. Claimants.............................................. 98
3. Temporary Delays in Payment............................ 98
Payment Delays Attributable to Delays in the Effective
4. Date................................................... 98
7.2 Business and Competition......................................... 99
Page vii
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
7.3 Certain Risks of Non-
Confirmation............... 99
7.4 Potential Effects of a
Prolonged Chapter 11
Proceeding................. 99
7.5 Risks Relating to the
Projections................ 99
7.6 Partial Holding Company
Structure.................. 99
7.7 Subordination of
Subordinated Notes......... 99
7.8 Absence of Trading Market
for the Notes.............. 100
7.9 Risks Associated With the
Settlement Facility and the
Litigation Facility........ 100
ARTICLE VIII--FINANCIAL INFORMATION
AND FEASIBILITY................... 100
ARTICLE IX--LIQUIDATION ANALYSIS... 100
9.1 Effects of Liquidation on
Claims Generally........... 100
Commercial Claims and
A. Other Claims......... 101
Personal Injury
B. Claims............... 101
The Treatment
of Personal
Injury Claims
1. Under the Plan. 101
The Treatment
of Personal
Injury Claims
in a Chapter 7
2. Liquidation.... 101
9.2 Other Liquidation Factors.. 102
ARTICLE X--POST-CONFIRMATION
MANAGEMENT........................ 103
10.1 Directors of Reorganized
Debtor..................... 103
A. Appointment.......... 103
B. Tenure............... 103
C. Compensation......... 103
10.2 Corporate Governance of the
Reorganized Debtor......... 103
10.3 Officers of the Reorganized
Debtor..................... 103
A. Appointment.......... 103
B. Tenure............... 103
C. Compensation......... 103
1. Salary......... 103
Employee
2. Benefit Plans.. 104
ARTICLE XI--DISTRIBUTIONS/CLAIM
RESOLUTION WITH RESPECT
TO ALL CLAIMS OTHER THAN
PRODUCT LIABILITY
CLAIMS.................. 104
11.1 General.................... 104
11.2 Distribution Shall be Made
Only to Holders of Allowed
Claims..................... 104
11.3 Objection Process.......... 105
11.4 No Distribution Pending
Resolution................. 105
11.5 Initial/Final
Distributions.............. 105
11.6 Unclaimed Distributions of
Certain Claimants.......... 105
11.7 Preservation of the
Debtor's Affirmative
Claims..................... 105
ARTICLE XII--SECURITIES LAWS
CONSIDERATIONS.................... 106
12.1 General.................... 106
A. Issuance............. 106
B. Resale............... 106
ARTICLE XIII--FEDERAL INCOME TAX
CONSEQUENCES OF THE PLAN.......... 107
13.1 General.................... 107
13.2 Federal Income Tax
Consequences to the Debtor. 107
Cancellation of
A. Indebtedness......... 107
Deductibility of
Payments to
B. Depository Trust..... 108
13.3 Federal Income Tax
Consequences to Claimants.. 109
A. General.............. 109
Holders of Claims
Other Than Personal
B. Injury Claims........ 109
Original Issue
1. Discount....... 109
Definition of
2. Tax Securities. 109
Holders of
Claims
Constituting
3. Tax Securities. 109
Holders of
Claims Not
Constituting
4. Tax Securities. 110
Holders of Personal
C. Injury Claims........ 110
</TABLE>
Page viii
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<C> <C> <C> <C> <S> <C>
Certain Other Tax
Considerations for
D. Claimants.......... 110
Receipt of
1. Interest..... 110
Installment
2. Method....... 111
Reinstated
3. Claims....... 111
Bad Debt
and/or
Worthless
Securities
4. Deduction.... 111
Backup
5. Withholding.. 111
13.4 Request for IRS Ruling.. 111
13.5 Importance of Obtaining
Professional Tax
Assistance.............. 111
ARTICLE XIV--REQUIREMENTS FOR
CONFIRMATION OF THE PLAN...... 112
14.1 General Confirmation
Requirements............ 112
14.2 Potential Cram down of
the Plan................ 112
14.3 Absolute Priority Rule.. 113
ARTICLE XV--CONCLUSION......... 114
EXHIBITS TO JOINT DISCLOSURE
STATEMENT:
</TABLE>
<TABLE>
<C> <C> <C> <S> <C>
n Exhibit "A" -- Order Approving Disclosure Statement with Respect to
Plan of Reorganization of Dow Corning Corporation.... A-1
n Exhibit "B" -- Plan of Reorganization of Dow Corning Corporation.... B-1
n Exhibit "C" -- Foreign Claim Adjustment Categories.................. C-1
n Exhibit "D" -- Biographies of Directors and Officers of Dow Corning
Corporation.......................................... D-1
n Exhibit "E" -- Non-Debtor Joint Ventures and Subsidiaries of Dow
Corning Corporation.................................. E-1
n Exhibit "F" -- Projected Financial Statements....................... F-1
n Exhibit "G" -- Summary of Insurance Settlements and Remaining
Coverages............................................ G-1
n Exhibit "H" -- Liquidation Analysis................................. H-1
</TABLE>
Page ix
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
THE MANAGEMENT OF DOW CORNING CORPORATION AND THE OFFICIAL COMMITTEE OF
TORT CLAIMANTS BELIEVE THAT THE AMENDED JOINT PLAN OF REORGANIZATION IS IN THE
BEST INTEREST OF CREDITORS AND URGES ALL CREDITORS TO VOTE IN FAVOR OF THE
PLAN.
VOTING INSTRUCTIONS ARE PROVIDED AT PAGES 25 TO 28 OF THIS DISCLOSURE
STATEMENT AND IN THE VOTING MATERIALS THAT ACCOMPANY THIS DISCLOSURE
STATEMENT. TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED, EXECUTED, AND
RECEIVED BY 5:00 P.M., EASTERN TIME, ON MAY 14, 1999.
ALL CREDITORS ARE ENCOURAGED TO READ AND CONSIDER CAREFULLY THIS ENTIRE
DISCLOSURE STATEMENT, INCLUDING THE PLAN ATTACHED AS EXHIBIT "B," THE MATTERS
DESCRIBED IN THIS DISCLOSURE STATEMENT UNDER "RISK FACTORS" IN ARTICLE VII,
AND THE ADDITIONAL DOCUMENTS IN THIS SOLICITATION PACKAGE PRIOR TO SUBMITTING
BALLOTS PURSUANT TO THIS SOLICITATION.
The summaries of the Plan and the other documents contained in this
Disclosure Statement are qualified by reference to the Plan itself, the
exhibits thereto, and Plan Documents described as being filed with the Court
prior to the deadline for objection to confirmation of the Plan. In the event
of any conflict between the provisions of this Disclosure Statement and the
Plan or the Plan Documents, the provisions of the Plan and the Plan Documents
shall, in that order, control.
PRELIMINARY STATEMENT
On May 15, 1995 (the "PETITION DATE"), Dow Corning Corporation
(hereinafter, "DOW CORNING," "DCC" or the "DEBTOR") filed its voluntary
petition under chapter 11 of the United States Bankruptcy Code (the
"BANKRUPTCY CODE") in the United States Bankruptcy Court for the Eastern
District of Michigan, Northern Division (the "COURT").
After lengthy and intensive negotiations supervised by a court-appointed
mediator with extensive experience in resolving mass tort litigation, DCC, its
Shareholders (Dow Chemical and Corning) and the Official Committee of Tort
Claimants (the "TORT COMMITTEE" or the "TCC"), the Court-designated
representative of all Personal Injury Claimants, have reached agreement on an
Amended Joint Plan of Reorganization dated February 4, 1999 (the "PLAN"). The
Plan differs from Dow Corning's prior proposed plans in several important
ways: It increases the amount available to compensate all Products Liability
Claimants from the prior proposed maximum amount of $1.9 billion (NPV)/1/ to
$2.35 billion (NPV); it offers claims resolution standards and procedures
negotiated and agreed to by the Tort Committee; and it provides litigation
procedures that the Tort Committee believes more closely mirror non-bankruptcy
litigation. As discussed in greater detail elsewhere in this Disclosure
Statement, the Plan offers Domestic Breast Implant Claimants the opportunity
to settle their Claims under a procedure, including Claim payment levels and
eligibility criteria, modeled on the Revised Settlement Program (the "REVISED
SETTLEMENT PROGRAM" or "RSP"). The RSP has been used by the MDL 926 Court
(described below) successfully to resolve tens of thousands of claims against
other manufacturers of silicone breast implants. The MDL 926 Court has also
approved a Foreign Settlement Program ("FSP"). While the Plan treatment of
Domestic Breast Implant Claimants is modeled after the RSP, the treatment of
Foreign Breast Implant Claims under the Plan is different from the treatment
under the FSP. Dow Corning and the Tort Committee (the "PROPONENTS") hope that
Personal Injury Claimants will take advantage of the opportunity to settle
their Claims. However, those Claimants who choose to litigate their Claims
will be entitled to do so in jury trials against a newly created Litigation
Facility. The Plan, a copy of which is attached as EXHIBIT "B" to this
Disclosure Statement, is described in further detail below.
This Disclosure Statement is submitted jointly by Dow Corning and the Tort
Committee pursuant to section 1125 of the Bankruptcy Code in connection with
the Plan. For purposes hereof, any term used in an initially capitalized form
in this Disclosure Statement, and not otherwise separately defined herein,
shall have the defined meaning ascribed to it in the Plan, in section 101 of
the Bankruptcy Code, in the Settlement Facility Agreement (and annexes
thereto), the Litigation Facility Agreement and the Funding Payment Agreement.
- ----------------------
/1 /Amounts referred to in this Disclosure Statement as being "NPV" or "NET
PRESENT VALUE" mean amounts that are to be paid over time or in the future and
that have been adjusted, or "discounted," to reflect the amount in today's
dollars. The discount factor used in the Plan and this Disclosure Statement is
7%; the date to which the amounts are adjusted is the Effective Date of the
Plan. (For example, if the amount of $107 is to be paid one year after the
Effective Date, its NPV is $100.) Those amounts that are referred to as
"NOMINAL" have not been adjusted or discounted.)
Page 1
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
On February 4, 1999, after notice and a hearing, the Court approved this
Disclosure Statement as containing information of a kind and in sufficient
detail adequate to enable a hypothetical, reasonable investor typical of the
classes of Claimants and Shareholders entitled to vote pursuant to the Plan to
make an informed judgment on whether to accept or reject the Plan. Approval of
this Disclosure Statement does not, however, constitute a determination by the
Court as to the fairness or merits of the Plan.
The Tort Committee, the Debtor, the Shareholders, or any creditor or other
Official Committee may communicate with creditors for the purpose of
soliciting acceptances or rejections of the Plan. No promises made to secure
acceptance or rejection of the Plan other than as set forth in this Disclosure
Statement should be relied upon by you in arriving at your decision. If any
additional promises are made to you, you may contact one or all of the parties
listed on pages 27 and 28 of this Disclosure Statement.
The statements and the financial information about the Debtor and/or the
Reorganized Debtor have been prepared by the Debtor from its books and records
and from court records. While the Debtor believes the information to be
accurate and complete, the Proponents' advisors have not taken any independent
action to verify the accuracy or completeness of such statements and
information and expressly disclaim any representation concerning the accuracy
or completeness thereof.
The statements contained in this Disclosure Statement are made as of the
date hereof unless another time is specified, and neither delivery of this
Disclosure Statement nor any exchange of rights made in connection with the
Plan shall, in any circumstances, create an implication that there has been no
change in the information set forth herein since the date the Disclosure
Statement and the materials relied upon in the preparation of the Disclosure
Statement were compiled.
This Disclosure Statement may not be relied on for any purpose other than
to determine whether to vote to accept or reject the Plan. This Disclosure
Statement contains projected financial information regarding the Debtor and
the Reorganized Debtor and certain other forward-looking statements, all of
which are based on various assumptions and estimates and will not be updated
to reflect events occurring after the date hereof. Such information and
statements are subject to inherent uncertainties and to a wide variety of
significant business, economic and competitive risks including, among others,
those described herein. See "Article VII--Certain Risk Factors." Consequently,
actual events, circumstances, effects and results may vary significantly from
those included in or contemplated by such projected financial information and
such other forward-looking statements.
In reliance upon the exemption from registration pursuant to section 1145
of the Bankruptcy Code, any securities to be issued pursuant to the Plan, if
consummated, will not have been registered with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
ACT"), or under any state securities act or similar state laws, nor have the
securities been approved by the SEC or any state securities commission.
Neither the SEC nor any state securities commission has passed upon the
accuracy or adequacy of this Disclosure Statement or upon the merits of the
Plan.
ARTICLE I
PLAN OVERVIEW
1.1 SUMMARY OF HOW PERSONAL INJURY CLAIMS ARE TREATED UNDER THE PLAN.
A. OPTIONS UNDER THE PLAN. The Plan provides Personal Injury Claimants,
including Breast Implant Claimants, with a basic option to resolve their
Claims. If the Plan is confirmed by the Court, a Participation Form will be
sent to all Personal Injury Claimants. Each Personal Injury Claimant will
indicate on this Participation Form if she wishes to settle or litigate her
Claim. An election to settle permits you to settle your Claim on the terms
offered in the Plan. An election to litigate places your Claim in the
Litigation Facility, which allows you to litigate your Claim.
The settlement process for Breast Implant Claims is based largely on the
criteria and procedures used to resolve breast implant claims in the
consolidated breast implant litigation pending in the United States
District Court for the Northern District of Alabama (the "MDL 926 COURT").
As many Breast Implant Claimants may be aware, a prior settlement, called
the "ORIGINAL GLOBAL SETTLEMENT," was attempted in 1994, and, after the
bankruptcy filing by Dow Corning, was revised by certain other breast
implant manufacturers. This revised settlement is called the "REVISED
SETTLEMENT PROGRAM" or "RSP." The Revised Settlement Program was approved
by the MDL 926 Court in December, 1995, and has been processing and paying
claims since that time. As discussed further below, the settlement program
offered under this Plan for the compensation of Breast Implant Claims
adopts the disease definitions in both the Original Global Settlement and
the Revised Settlement Program. In addition, as in the Revised Settlement
Program,
Page 2
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
the Plan offers compensation for explantation and rupture. The disease,
explantation and rupture payment options in this Plan all offer increased
compensation and eligibility options as compared to the Revised Settlement
Program. For example, all Breast Implant Claimants may assert Claims for
disease relying on the criteria in the Original Global Settlement (unlike
the RSP which allowed only "Current Claimants" to rely on these criteria).
Also, the explantation compensation has been increased from $3,000 in the
RSP to $5,000 under this Plan and it covers a broader time frame (i.e.,
anyone explanted after December 31, 1990 may apply, as opposed to the RSP
provisions which limit the payment for explantation procedures after April
1, 1994).
Another feature in this Plan that differs from the RSP--and will
increase the compensation received by many Breast Implant Claimants--is the
separate Rupture Payment Option. In the RSP, only "Current Claimants" who
also had acceptable proof of a disease condition under the Fixed Amount
Benefit Schedule could recover for rupture. Under this Plan, Breast Implant
Claimants do not have to be "Current Claimants" and do not also have to
have disease Claims. Claimants may recover for rupture without filing any
other Claim. Some Claimants who have a Disease Payment Option I--Claim
Severity Level A may recover slightly less money under this Plan compared
to the RSP. However, Claimants electing Disease Payment Option II who also
have a rupture will recover more than under the RSP.
B. SETTLEMENT. Claimants who do not timely elect to litigate will have
their Claims considered and resolved using the various settlement options
described herein. The Claims will be processed through a Claims Office (the
"CLAIMS OFFICE") in Houston, Texas, the same office, with generally the
same personnel, that processes RSP settlements under the authority of the
MDL 926 Court (the "MDL 926 CLAIMS OFFICE"). Claimants who elect to settle
must submit certain information (unless that information was previously
submitted to the MDL 926 Claims Office) and meet certain eligibility
criteria to qualify for compensation. For example, all Claimants must
submit acceptable proof that they had or have a Dow Corning product
(Silicone Material Claimants must submit proof of a specific breast
implant--see section 1.1(B)(3) below). This may be established through
medical records, a statement from your implanting doctor, or one of the
other ways described in the Dow Corning Settlement Program and Claims
Resolution Procedures ("CRP")/2/. Each settlement option also has criteria
to recover compensation. They are all described in detail in this
Disclosure Statement. You should review them carefully.
1. BREAST IMPLANT CLAIMS. The settlement options for Claimants with
Dow Corning Breast Implants are described generally below. A Claimant
can qualify for any or all of three different options: (1) the
Explantation Payment Option, (2) the Rupture Payment Option, and (3) the
Disease/Expedited Release Payment Option.
A. EXPLANTATION PAYMENT OPTION. Claimants who had a Dow Corning
Breast Implant removed after December 31, 1990 and before the tenth
anniversary of the Effective Date of the Plan can receive a one-time
payment in the amount of $5,000 regardless of the number of explant
operations. The documentation supporting a Claim under this option
must be submitted to the Claims Office on or before the tenth
anniversary of the Effective Date. That payment will be made after
the Claimant provides proof that she had a Dow Corning Breast Implant
(or Breast Implants) and that the Breast Implant(s) has been removed.
If the Breast Implant for which explantation benefits are sought was
removed during 1991 and replaced with another silicone gel implant in
the course of the same procedure, the Claimant is not eligible to
receive payment under this option. If the Breast Implant for which
explantation benefits are sought was removed after January 1, 1992,
and the Claimant received another silicone gel breast implant in the
same or any other procedure, the Claimant is not eligible to receive
payment under this option. Claimants who receive replacement breast
implants made of saline are still eligible for the Explantation
compensation.
B. RUPTURE PAYMENT OPTION. Under this option, Claimants whose Dow
Corning Breast Implants have in the past ruptured or rupture prior to
the second anniversary of the Effective Date of the Plan may apply
for a one-time Rupture Payment in the "Base" amount of $20,000
(regardless of the number of ruptures) and, if allowed, a "Premium"
payment of an additional $5,000. Documentation supporting a Claim
under this option must be submitted to the Claims Office on or before
the second anniversary of the Effective Date. However, if the
explantation of the Breast Implant occurs within 90 days of that
deadline, the Claimant must submit the Claim information no later
than 30 days after the second anniversary of the Effective Date.
- ----------------------
/2 /The CRP is an exhibit to the Settlement Facility Agreement, which is a
Plan Document. Information on how to obtain copies of the Plan Documents
appears on page 22.
Page 3
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
If a Claimant has an approved Claim under the Rupture Payment
Option, an approved Claim under the Disease Payment Option, and has
Dow Corning Breast Implants and acceptable proof of a silicone gel
breast implant(s) manufactured by Bristol, Baxter or 3M and if the
Claimant received a "rupture enhancement payment" under the Revised
Settlement Program, then her Rupture and Disease compensation
collectively will be reduced by 50%.
A qualified Rupture is defined as a tear or other opening in the
envelope surrounding the silicone gel. Gel bleed does not qualify as
Rupture. To document a Rupture Claim, you will need to submit
explantation operative and/or pathology reports and, perhaps,
additional statements from doctors depending on when the ruptured
Implant was removed. The documentation required is the same as is
required under the Revised Settlement Program, except that where the
type of proof required is keyed to the date the ruptured Implant is
removed, the dates have been modified. You should review the
description of the Rupture documentation in the CRP to determine how
it applies to you.
The Settlement Program also offers a feature that was not present
in the RSP. If your rupture proof is found to be unacceptable, you
can still qualify if you meet one of two additional standards for
Rupture. These standards require medical documentation of visual
confirmation of a breach in the elastomer envelope found upon or
prior to removal of the Dow Corning silicone gel Breast Implant or
medical documentation demonstrating migration along tissue planes
distant from the site of breast implantation of a substantial mass of
material confirmed by biopsy to be silicone from a ruptured Dow
Corning silicone gel Breast Implant.
In addition to this Individual Review process of certain Rupture
Claims, there is a provision that allows Claimants who have not been
explanted to recover rupture benefits provided that explantation is
medically contraindicated (as specifically defined in the CRP)
because the Claimant suffers from a serious chronic medical condition
that precludes surgical removal.
C. DISEASE PAYMENT OPTION/EXPEDITED RELEASE PAYMENT OPTION.
(1) DISEASE PAYMENT OPTION. A Claimant may qualify for payment
depending on her disease or medical condition. Compensation is
determined by two payment grids (collectively, the "GRID")
established in the CRP. Under the Grid, more severe medical
conditions will be compensated at higher levels than less severe
conditions. The "Base"/3/ Grid payments for Domestic Claimants
range from $10,000 to $250,000. If additional "Premium" payments
are allowed by the District Court, the total Grid payments will
range from $12,000 to $300,000.
To qualify for payment, a Claimant must document one of the
conditions defined in the CRP. Disease Payment Option I provides
payments for Breast Implant Claimants who meet the disease and
disability criteria under the Original Global Settlement (the
Fixed Amount Benefit Schedule in the Revised Settlement Program).
If a Breast Implant Claimant meets the Original Global Settlement
disease and disability criteria, the Claimant will receive a
"Base" payment of $10,000 for disability Severity Level C, $20,000
for disability Severity Level B, or $50,000 for disability
Severity Level A. Disease Payment Option II, which has more
stringent criteria, provides "Base" payments ranging from $75,000
to $250,000. These Disease Payment Option II eligibility criteria
are the same as the Long-Term Benefit Schedule criteria under the
Revised Settlement Program.
To qualify for payment under the Disease Payment Option the
Claimant must submit medical records that document one of the
covered conditions defined in the CRP. A Claimant may rely on the
claim forms and supporting records and documents previously
submitted to the MDL 926 Claims Office. To qualify for higher
payments under Disease Payment Option II, Claimants may need to
submit additional documentation and undergo further testing and
examination. Not all conditions or symptoms will qualify under
either Disease Payment Option and you should carefully evaluate
your own condition and your medical records to determine if and to
what extent you would qualify under either Disease Payment Option.
- ----------------------
/3 /"BASE" payments under the Settlement Facility Agreement are also called
"FIRST PRIORITY PAYMENTS." First Priority Payments are the highest priority
payments made from the Settlement Fund. Those payments designated as "PREMIUM"
payments, also called "SECOND PRIORITY PAYMENTS," will be made only if funds
are available after payment of all First Priority Payments is adequately
assured.
Page 4
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
In some circumstances, the Disease Payment Option compensation
may be reduced. For example, a Claimant who elects Disease Payment
Option II and who does not qualify under that option may, if
qualified, receive payment under Disease Payment Option I. In this
circumstance, there is no reduction in compensation. However, a
Claimant who returns to Disease Payment Option I after failing to
qualify for Disease Payment Option II within the allotted time
period (i.e., one year after the date of notification of a
deficiency in her submission) will receive a 25 percent reduction
in the amount, if any, she qualifies for under Disease Payment
Option I.
Claimants who had Breast Implants manufactured by Dow Corning
and also had any silicone gel breast implant(s) manufactured by
"Baxter," "Bristol" or "3M" (as defined in Exhibit "G" to the
Revised Settlement Program) (collectively, the "PARTICIPATING CO-
DEFENDANTS") and who qualify for the Disease Payment Option will
have their payment under that option reduced by 50%. This
reduction applies whether or not any payment was received from any
of the Participating Co-Defendants pursuant to the RSP or
otherwise.
Any Claimant who has received a payment under Disease Payment
Option I and who, subsequent to such payment and during the 15
years of the Settlement Program, documents an increase in the
severity of her condition that meets the criteria for Severity
Level A under Disease Payment Option I shall be entitled to apply
for an additional payment based on that Severity Level A
condition. The maximum amount for which that Claimant may qualify
is the difference between the maximum payment amount applicable
for Level A (including, if allowed, the "Premium" payment of up to
20%), and the amount previously Allowed for the Claim. The
aggregate amount available for all Claimants seeking increased
severity payments under Disease Payment Option I is $15 million
Net Present Value. Similarly, a Claimant who has received a
payment under Disease Payment Option II and who subsequently
documents a Covered Condition (as defined in the CRP) that would
entitle her to a larger payment than previously Allowed shall be
entitled to apply for an additional payment based on this
increased severity condition. There is no separate cap for
increased severity payments under Disease Payment Option II. These
claims will, however, be treated as Second Priority Payments under
the Plan.
The Claims Office will notify Claimants of the status of their
Claims after a review of the Claim information submitted. This
notification will describe any deficiencies in the Claim Forms and
documentation. Claimants will also be notified of procedures
necessary to cure any deficiencies in the supporting documentation
for their Claims.
If you choose but do not qualify under the Disease Payment
Option (after reasonable opportunity to cure any deficiencies),
the Claims Office will nevertheless offer you the Expedited
Release Payment Option, described in the next section.
Additionally, a settling Claimant who timely applies for payment
but does not qualify, and does not accept payment under the
Expedited Release Payment Option, and who subsequently develops a
new Covered Condition may submit a new application for
compensation at any time up to the fifteenth anniversary of the
Effective Date.
(2) EXPEDITED RELEASE PAYMENT OPTION. This option provides an
immediate payment of $2,000 in exchange for a release of the right
to participate in the Disease Payment Option. No records (other
than to show that Dow Corning manufactured the implant) and no
proof of injury are required. This option will be available to
Claimants for three years following the Effective Date, unless
that period is extended by the Claims Administrator. Claimants who
elect the Expedited Release Payment Option are still eligible to
apply for Explantation and Rupture benefits.
If you do not have a current Claim eligible for payment under the
Disease Payment Option, you may apply for the Explantation Payment
Option, the Rupture Option and/or the Expedited Release Payment
Option. Claimants who develop a Covered Condition under either
Disease Payment Option any time up until the fifteenth anniversary of
the Effective Date can apply for the Disease Payment Option unless
they have accepted the Expedited Release Payment Option or previously
accepted a payment under the Disease Payment Option.
2. OTHER PRODUCTS CLAIMS (TMJ, HIP, KNEE, ETC.). Implant Claimants
with other implant products manufactured by Dow Corning ("OTHER
PRODUCTS") may choose from two settlement options provided such products
are among those listed as "Covered Other Products" in Schedule I, Part
II of the Claims Resolution
Page 5
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Procedures attached as Annex "A" to the Settlement Facility Agreement.
"Covered Other Products" include such implants as knee, hip, large or
small joint orthopedic devices, chin or facial implants and TMJ devices.
(If the Dow Corning product is not a "Covered Other Product," the Claim
will be treated and paid, if Allowed, in the Litigation Facility.) The
Expedited Release Payment is $1,000 per Other Implant Claimant.
Alternatively, Claimants may elect the Medical Condition Payment Option,
which provides compensation if the Dow Corning implant broke or
ruptured, or if it has caused an inflammatory reaction. TMJ Claimants
may in addition be eligible to receive payment for an inflammatory
response with active, localized bone resorption. Claimants with proof of
one of these conditions will be offered payments ranging from $5,000 to
$10,000, depending on the type of implant involved. To be eligible,
Other Products Claimants must file their Claim Forms and supporting
documents by the second anniversary of the Effective Date.
The total of all payments to settling Covered Other Products
Claimants with Allowed Claims and related administrative costs and
attorney's fees (called the "OTHER PRODUCTS FUND") shall not exceed $36
million (Net Present Value). All settling Covered Other Product Claims
must be resolved within this sum. If the aggregate costs of
administering and resolving these Claims exceed or are forecast to
exceed this amount, payments to settling Covered Other Products
Claimants on their Allowed Claims may be reduced pro rata or on some
other equitable basis (e.g., reduced for Claimants who have had their
implants for more than five years) to be determined by the Claims
Administrator and the Finance Committee. On the other hand, if funds
remain in the Other Products Fund after resolution and payment of
Allowed Claims, then the Claimants' Advisory Committee and the Claims
Administrator shall determine guidelines to distribute additional
compensation to those Settling Other Products Claimants (including
implant Claimants with TMJ devices, knee, hip, large or small orthopedic
devices, and chin or facial implants) who have demonstrated the most
serious injuries or conditions. If the Claims Administrator determines
that costs of administering the Other Product Claims will exceed $3.6
million (NPV), the Claims Administrator will establish simpler
procedures to reduce costs.
3. SILICONE MATERIAL CLAIMS. Claimants who have or have had breast
implants manufactured by Baxter, Bristol, Bioplasty, Mentor or Cox-
Uphoff (CUI) may apply for the Disease Payment Option or the Expedited
Release Payment Option, with payments to be made from a fund of $57.5
million (NPV). To be eligible to participate, Silicone Material
Claimants must file their Claim Forms and supporting documents by the
second anniversary of the Effective Date. The amount to be paid to each
Claimant will be determined after the Claims have been received and
evaluated, but payments for the Disease Payment Option will not be more
than 40% of the amount payable to Claimants with Dow Corning Breast
Implants. The potential compensation to each Silicone Material Claimant
will be reduced by the amount the Claimant received or could receive
from another manufacturer, except that Silicone Material Claimants whose
silicone gel breast implants were made by Mentor, CUI or Bioplasty, or
who are an "Other Registrant" in the RSP with one of these breast
implants and a post August, 1984 McGhan breast implant will not have
their compensation reduced. Any funds remaining in the $57.5 million
fund after these calculations will be divided equally among eligible
Silicone Material Claimants.
Those Raw Material Breast Implant Claimants who are not Silicone
Material Claimants shall have their Claims resolved and, as Allowed,
paid in the Litigation Facility in the same manner as Non-Settling
Breast Implant Claimants.
4. FOREIGN CLAIMANTS. The description of settlement payment amounts
described earlier in this section applies to Domestic Claimants. The
same proof requirements for product identification and medical condition
generally apply to both Foreign and Domestic Claimants. Payment levels
to Foreign Claimants are lower. Depending on the country in which you
live, the payment will be either 60% (for Category 1 or 2 countries) or
35% (for Category 3 or 4 countries) of the amounts described earlier
(see EXHIBIT "C" to the Disclosure Statement for a list of countries and
the payment adjustment for each). Additionally, the Claims Administrator
is authorized, if deemed economically appropriate, to establish separate
claims offices in Europe and in South America to handle processing of
settling Foreign Claims in those areas in languages other than English.
The Claims of the Quebec Class Action Settlement Claimants, the
Ontario Class Action Settlement Claimants and the B.C. Class Action
Settlement Claimants are treated, respectively, under Classes 6A, 6B and
6C of the Plan. The treatment offered to these Claimants is based on
negotiated settlements reached between representatives of certain of
those Claimants and the Debtor. While those Claimants are settling
separately, the treatment of their Claims is generally consistent with
the treatment of Foreign Claims under the Plan although each of the
settlement options has somewhat different settlement grid options,
eligibility criteria and compensation structure.
Claimants who reside in Australia or who received their Breast
Implants in Australia have an option either to elect treatment in Class
6D of the Plan or to remain in Class 6.1. The optional treatment in
Class 6D results from negotiations between Dow Corning and Mr. Peter
Gordon of the firm Slater & Gordon. The optional treatment is
Page 6
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
based upon a settlement grid that is similar in some respects to the
treatment offered other Foreign Claimants but the settlement grid has
some additional settlement options, omits certain settlement options
open to Foreign Claimants in Classes 6.1 and 6.2, has somewhat different
eligibility criteria and somewhat different requirements for submitting
eligibility criteria. To participate in Class 6D, eligible Claimants
must elect to participate by indicating their election on the ballot for
voting on the Plan; provided the Australia Breast Implant Settlement
Option is approved by the Court and becomes effective, such election
will be irrevocable. This option is described in more detail in section
6.4(L), at pages 59 through 63.
5. FAMILY MEMBER CLAIMS. Certain Claims have been asserted by the
spouses, parents and children of Personal Injury Claimants. These
Claims, referred to as "FAMILY MEMBER CLAIMS," are comprised of (i)
"CONSORTIUM CLAIMS," and (ii) "CHILDREN DIRECT CLAIMS."
A. CONSORTIUM CLAIMS are Claims that derive from the relationship
of a spouse, parent, child or other individual related to or claiming
some personal relationship to a Breast Implant User, Other Product
User, or a Non-Dow Corning Breast Implant User to the extent those
claims are recognized under applicable non-bankruptcy law. The option
to settle Consortium Claims shall be controlled by and be subject to
the election of the Breast Implant Claimant, the Other Products
Claimant or the Non-Dow Corning Breast Implant Claimant (the "Primary
Claimant"). If the Primary Claimant elects the settlement option
described in Section 5.4 of the Plan or is deemed to be a Settling
Claimant because of a failure to timely elect to litigate, then any
and all Consortium Claims related to that Primary Claimant shall be
deemed settled and discharged for no additional compensation
regardless of whether the Family Member elects or would have elected
to litigate his or her Consortium Claim separately. Thus, the
settlement Grid amount specified for such Primary Claimant is
intended to cover both the Primary Claimant and the related
Consortium Claims, and, accordingly, the Primary Claimant's election
to take the settlement option shall operate as a release of both her
Claims and all related Consortium Claims.
If the Primary Claimant elects to litigate, any Consortium Claims
that could be brought under applicable non-bankruptcy law must be
brought against the Litigation Facility pursuant to Section 5.4.2 of
the Plan, which provides for liquidation of all Non-Settling Personal
Injury Claims pursuant to the Litigation Facility Agreement.
B. CHILDREN DIRECT CLAIMS are Claims asserted by children born to
a Breast Implant User or Non-Dow Corning Breast Implant User arising
from the alleged exposure to the Breast Implant, Other Product or the
component parts of those products in utero, through breast feeding or
otherwise.
Any Children Direct Claims made will be resolved through the
procedures established by the Litigation Facility. For these
purposes, such "CHILDREN DIRECT CLAIMANTS" shall be deemed to be
"Non-Settling Personal Injury Claimants." There is no settlement
option available to Children Direct Claimants. See pages 84-88 for
information regarding litigation procedures applicable to holders of
Children Direct Claims.
6. PROCEDURE UNDER SETTLEMENT FACILITY. The Claims of settling
Claimants, except for those Claimants in Classes 6A, 6B, 6C and 6D, will
be processed in accordance with the Settlement Facility Agreement and
the CRP.
A. USE OF MDL 926 CLAIMS OFFICE AND PROTOCOLS. Except as otherwise
provided in the Settlement Facility Agreement, the Claims Office will
apply the guidelines and protocols established by the MDL 926 Claims
Office.
B. ADMINISTRATORS OF THE SETTLEMENT FACILITY. The administration
and day-to-day operations of the Settlement Facility are to be
divided among a number of individuals. These parties and their roles
and responsibilities are the following:
(1) MDL 926 COURT. The Honorable Sam C. Pointer, the MDL 926
judge in Birmingham, Alabama, will oversee and supervise all
operations of the Claims Office.
(2) CLAIMS ADMINISTRATOR. The Claims Administrator, who will
be designated by the Proponents and approved by the MDL 926 Court,
will be responsible for oversight of the Claims processing
functions of the Settlement Facility, and will be the party to
whom first appeals from disputes regarding Claims resolution will
be addressed. The Claims Administrator will also be responsible,
in consultation with the Finance Committee (described below) for
the payment of Allowed Claims.
Page 7
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
(3) FINANCIAL ADVISOR. The Financial Advisor, who will be
selected by the Finance Committee, will have the primary
responsibility, along with the Finance Committee, for overseeing
the investment of all funds paid to the Settlement Facility and
held by the Depository Trust, for providing investment
instructions to the Depository Trust, and for overseeing the
preparation of financial statements and reports required by the
Settlement Facility Agreement.
(4) OPERATIONS MANAGER. The Operations Manager will be
responsible for supervising the staff of personnel who will review
and evaluate Claims.
(5) QUALITY CONTROL SUPERVISOR. The Quality Control Supervisor
will be responsible for monitoring the staff of the Claims Office
to ensure that the eligibility criteria for Claims are accurately
and consistently applied.
(6) APPEALS JUDGE. The initial Appeals Judge will be Frank
Andrews, the same person designated by the MDL 926 Court to hear
appeals from disputes in the resolution of claims by the MDL 926
Claims Office. The Appeals Judge will hear appeals from Claims
decisions of the Claims Administrator. The Appeals Judge also will
be a member of the Finance Committee.
C. PROCESSING OF SETTLEMENT CLAIMS. The Claims Office is directed
to process and resolve Claims as rapidly and efficiently as possible.
Because of many unknown factors, such as when each Claimant will
provide the necessary medical information to the Claims Office, it is
difficult to predict when any individual Claim will be paid. However,
the Settlement Facility Agreement provides the following directives
for the processing of Claims:
(1) The Claims Office shall adopt procedures to maintain the
confidentiality of all Claim files and Claimants' identities.
Every Claimant is entitled to a copy of his/her Claim file.
(2) Claims will generally be processed within each payment
option elected in the order in which completed submissions are
received.
(3) Review of Proof of Manufacturer, and of Claims for
explantation and rupture may begin as soon as Claimants submit the
appropriate form(s) and documentation. Breast Implant Claims for
disease will not be allowed or processed until the Claimant has
acceptable proof (or only a minor deficiency) in her Proof of
Manufacturer.
(4) All Claimants may supplement their prior submissions to
the MDL 926 Claims Office to support a Claim under the CRP.
D. REVIEW OF CLAIMS OFFICE DECISIONS. If a Claimant believes the
Claims Office made a mistake in the processing of her Claim, she may
notify the Claims Office of the error. If the Claims Office
determines that an error was made, the error will be corrected and
the Claimant will be notified of the correction.
Any Claimant not satisfied with the treatment of her Claim (after
all error correction procedures) may seek a review of the benefit
status determination by written request to the Claims Administrator.
The Claimant must first submit any supplemental documentation she
wishes to have considered. The Claims Administrator will review the
written materials in the Claimant's file including the supplemental
documentation, and will either affirm or adjust the determination
made by the Claims Office based on a de novo review. If the Claimant
disagrees with the determination made by the Claims Administrator,
the Claimant may submit an appeal to the Appeals Judge. The Appeals
Judge shall provide a written determination regarding the ruling made
by the Claims Administrator, which determination shall be final and
not further appealable. Dow Corning will not have any right of appeal
or review from determinations made by the Claims Office.
C. LITIGATION. If you want to litigate your Claim through the courts,
you must choose (on the Participation Form to be sent by the Settlement
Facility after confirmation of the Plan) to litigate your Claim. If you so
elect, your Claim will be handled by the Litigation Facility.
1. THE LITIGATION FACILITY. Claims of Non-Settling Personal Injury
Claimants and Children's Direct Claims, together with all Miscellaneous
Raw Material Claims/4/ and the Claims of Other Products Users whose
Claims do not arise from a Covered Other Product, will be handled as
lawsuits against the Litigation Facility under
- ----------------------
/4 /This class is made up of (a) all Claimants with a Non-Dow Corning
Breast Implant manufactured by a company which (i) is neither located nor
manufactured its product within the United States and (ii) did not use a gel
system from Dow Corning, and (b) all other Non-Dow Corning Implant Claimants.
Page 8
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
the jurisdiction of the District Court for the Eastern District of
Michigan (the "DISTRICT COURT"). The Claims of Non-Settling Personal
Injury Claimants and Miscellaneous Raw Material Claimants will be
resolved under the terms of the Litigation Facility Agreement and a Case
Management Order prepared by the Proponents and approved by the District
Court. The District Court will be assisted in the resolution of the Non-
Settling Personal Injury Claims and Miscellaneous Raw Material Claims by
a Special Master. The initial Special Master will be Professor Francis
McGovern.
2. PROCESSING OF CLAIMS IN THE LITIGATION FACILITY. The procedure for
the liquidation of Domestic Personal Injury Claims in the Litigation
Facility will, in many respects, resemble the litigation process in a
non-bankruptcy setting. Non-Settling Personal Injury Claimants and
Miscellaneous Raw Material Claimants will either resume existing
litigation or initiate suit--in either case against the Litigation
Facility. Claimants who are minors as of the Effective Date or who do
not have manifested injuries do not have to initiate suit until six
months after they turn 18, in the case of minors, or six months after
manifesting illness, provided all such "tolled" suits must be filed no
later than 15 years after the Effective Date. Children who hold Children
Direct Claims and who are 18 as of the Effective Date and have
manifested injuries must initiate suit within 60 days after the
Effective Date. Pursuant to the Case Management Order, the terms of
which have been negotiated and agreed to by the Debtor and the Tort
Committee, and which will be submitted to the District Court for
approval prior to or in connection with the confirmation hearing,
litigation will proceed first with pre-trial dispositive motion
practice. This dispositive motion practice may include a common issues
"Daubert" hearing to determine if there is sufficient admissible
evidence to permit a jury trial as to whether silicone causes systemic
diseases. The Manager of the Litigation Facility will seek such a common
issues hearing and the Debtor has reserved, on behalf of the Litigation
Facility, the right to seek adjudication of other common issues. The
Tort Committee has reserved the right of any individual Claimant to
oppose such common issue adjudications. The District Court will decide
whether common issue adjudications are appropriate. The Case Management
Order shall provide that the earliest time that the District Court can
consider such issues is 270 days after the deadline for electing to
litigate. The Manager of the Litigation Facility will aggressively
litigate the merits of the unresolved Claims.
At the conclusion of any common issues/dispositive motion practice,
individual cases that have not been settled or dismissed may be
certified for trial, upon the recommendation of the Special Master.
Individual cases will be certified for trial in the District Court or in
the federal district court where the underlying Claims arose. In
individual cases that (i) were originally filed in state court and (ii)
were not removed to federal court prior to the Petition Date, the cases
may be remanded to that state court for trial, subject to the consent of
all parties to the remand to that court. If remand occurs, the District
Court will retain jurisdiction over any issues common to all Breast
Implant Claims. The state court to which the case is remanded must agree
to be bound by the terms of the Case Management Order.
Following the outcome of any individual trial (and any appeals), the
resulting judgment (including interest, if recoverable under applicable
non-bankruptcy law), if adverse to the Litigation Facility, will be
forwarded to the Claims Administrator for payment, subject to the terms
of the Litigation Facility Agreement, the Settlement Facility Agreement
and the Funding Payment Agreement.
The litigation process for Foreign Personal Injury Claims is the same
as for Domestic Claims although the Litigation Facility will have the
option of seeking to have the Claim referred to the courts of the
Claimant's residence for adjudication pursuant to principles of forum
non conveniens. After the Claim is liquidated, any
Allowed amount of the Claim will be paid in U.S. dollars pursuant to the
terms of the Settlement Facility, the Litigation Facility Agreement and
the Funding Payment Agreement.
D. PAYMENT OF ALLOWED CLAIMS; FIRST PRIORITY AND SECOND PRIORITY
PAYMENTS. If your Claim is Allowed, you will be entitled to be paid the
amount of your Allowed Claim./5/ All Claimants who elect to settle will be
entitled to
- ----------------------
/5 /To be "Allowed" under the Plan, all objections to a Claim must be
resolved by Final Order of the Court. The Confirmation Order shall, among
other things, provide that the Debtor's Disease Objection (described in
section 5.3(L) of this Disclosure Statement) will be deemed resolved as to all
Settling Personal Injury Claimants. The Commercial Committee has also filed an
objection to Personal Injury Claims. The Proponents believe that confirmation
of the Plan will moot the Commercial Committee's objection as to Settling
Personal Injury Claimants and will seek such a determination by the Court.
Pursuant to the Litigation Facility Agreement, the Manager must assume
responsibility for handling all objections to the Claims of Non-Settling
Claimants, including (without limitation) the objection filed by the
Commercial Committee.
Page 9
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
be paid the maximum amount for which they qualify. If funds are
insufficient in a given year to pay all Allowed Claims in full, the Finance
Committee/6/ shall make installment payments on the Allowed Claims pending
receipt of further scheduled funding from the Reorganized Debtor. No
interest will be paid on installment payments. Such timing restrictions on
payments would be caused by the annual cap on payments by the Reorganized
Debtor under the Funding Payment Agreement.
The Disease Payment Option and the Rupture Payment Option for Breast
Implant Claimants and the Medical Condition Payment Option for certain
Other Products Claimants have two components, a "Base" and a "Premium"
payment. The Settlement Facility Agreement establishes a priority for
payment of Settling Personal Injury Claims. The "FIRST PRIORITY PAYMENTS"
will be for (i) Allowed Claims under the Expedited Release Payment Option,
(ii) Allowed Claims under the Explantation Payment Option, (iii) the "Base"
payment for Claims Allowed under the Disease Payment Option and the Rupture
Payment Option, (iv) Allowed Claims under the Expedited Release Payment
Option and the Medical Condition Payment Option for Other Products
Claimants; and (v) Allowed Claims for Silicone Material Claimants, along
with related administrative costs. Allowed Claims of settling Claimants in
Classes 4A, 6A, 6B, 6C, 6D, 14 and 15 are also defined as First Priority
Payments. Payments in respect of Claims of non-settling Claimants in
Classes 11, 13, 14, 14A and 17, which are called Settlement Fund Other
Payments, will be made at the time such Claims are Allowed. The "SECOND
PRIORITY PAYMENTS" include "Premium" payments under the Rupture Payment
Option and the Disease Payment Option for Breast Implant Claimants and the
Medical Payment Option for certain Other Products Claimants and any
"increased severity" payments for Breast Implant Claims. The "Premium"
payments entitle Breast Implant Claimants to receive additional
compensation, up to 20% of the "Base" payments under the Disease Payment
Option and 25% of the "Base" payment under the Rupture Payment Option. (See
chart at pp. 20-22.) If a "Premium" is paid to a Breast Implant Claimant
with a disease Claim, she will receive greater compensation than is
available under the RSP for a comparable disease claim that does not
include the rupture enhancement. The "Premium" payments provide Other
Products Claimants additional compensation that, when combined with amounts
received as "Base" payments, equal $36 million (NPV) in the aggregate.
A factor that may affect the amounts actually received by Claimants is
the competing rights of third parties, particularly those of hospitals,
health benefit plans, health insurers and governmental agencies, to
reimbursement from the settlement payment for prior expenditures. However,
most of these competing Claims will be extinguished as a result of a
settlement Dow Corning has proposed for the Domestic Health Insurers. This
settlement is similar to the settlement reached with health insurers in the
Revised Settlement Program. Dow Corning's settlement requires all
participating insurers to waive any Claims, including rights of
reimbursement, against Personal Injury Claimants. The settlement requires
that a sufficient number of insurers participate in the settlement so that
the vast majority of Personal Injury Claimants will not be subject to
Claims from their health insurers. The Debtor believes that substantially
all of the Domestic Health Insurers will accept the settlement and that the
participation level condition will be satisfied.
Some insurers may not participate in the settlement. The rights of those
third parties to recover from payments to be made to Claimants are governed
by the agreements between those third parties and the Claimants. The Plan
provides that payments to Claimants will not be held up by the non-settling
insurers or government agencies, but they remain free to assert their
rights, if any, against the Claimants.
E. FUNDING. Under the Funding Payment Agreement, the Reorganized Debtor
will pay up to the aggregate amount of $3.172 billion into the Depository
Trust, the recipient of funding for the Settlement Facility and Litigation
Facility, to resolve all Products Liability Claims. This amount is subject
to adjustment to maintain a Net Present Value as of the Effective Date of
$2.35 billion. This amount constitutes a "cap" on the funding to be
provided by Dow Corning; if the amount of Allowed Claims (and the related
expenses of the Facilities) exceeds the cap, the actual distributions to
Claimants will be reduced. In addition, if Claims are Allowed at a pace
that exceeds the funding schedule, payment of certain Allowed Claims will
be delayed. Priority will be given to "Base" payments to minimize the delay
in making those payments, with the likely result that "Premium" payments on
Allowed Claims will be delayed for several years. However, there can be no
guarantee that "Base" payments will not be delayed if Allowed Claims exceed
available funds in particular years. No interest or cost of living
increases will be paid on settlements. Additional discussion regarding the
potential for reduction or delay in payment appears in section 7.1 of this
Disclosure Statement, at pages 94 through 99.
- ----------------------
/6 /The members of the Finance Committee are the Claims Administrator, the
Special Master and the Appeals Judge.
Page 10
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Of the aggregate amount available, an amount up to the sum of $400
million (Net Present Value) is designated as the "LITIGATION FUND." The
Litigation Fund is reserved for payment of Allowed Claims of (i) Non-
Settling Personal Injury Claimants, (ii) Class 12 Claims, (iii) Assumed
Third Party Claims, (iv) all defense costs and (v) administrative
costs associated with the resolution and liquidation of all Claims resolved
by the Litigation Facility. Although funds designated as the Litigation
Fund are intended to be used, to the extent necessary, to resolve Non-
Settling Personal Injury Claims, Class 12 Claims and Assumed Third Party
Claims, beginning on the fourth anniversary of the Effective Date, the
assets comprising the Litigation Fund may be used for payment of First
Priority Payments of Settling Personal Injury Claimants, upon the
recommendation of the Finance Committee and order of the District Court. In
determining whether such an order should issue, the District Court will
determine whether (i) funds are needed for payment of First Priority
Claims, and (ii) the remaining assets of the Litigation Fund, after the
proposed payment of First Priority Payments, will be adequate to pay all
Claims subject to the Litigation Fund.
The remainder of the aggregate sum of $2.35 billion (Net Present Value)
is defined as the "SETTLEMENT FUND" and is reserved for the payment of (i)
Allowed Claims of Settling Personal Injury Claimants in Classes 5 through
10.2 (i.e., Personal Injury Claimants who elect to participate in the Dow
Corning Settlement Program), (ii) Allowed Claims of Claimants in Classes 4A
(if settled prior to resolution of pending appeals), 6A, 6B, 6C, 6D, 11,
13, 14, 14A, 15, 16 (to the extent provided in the Litigation Facility
Agreement) and 17, and (iii) costs associated with the operation and
administration of the Settlement Facility.
The Plan and the Funding Payment Agreement provide that Dow Corning will
make payments from insurance proceeds, certain escrowed funds and operating
cash. An initial payment, comprised of collected insurance proceeds and
cash on hand, will be made to the Settlement Facility in an amount of not
less than $985 million. (As provided in the Funding Payment Agreement, that
amount will be supplemented with interest earned through the Effective Date
on $905 million of the scheduled initial payment if the Effective Date is
delayed.) Insurance proceeds received following the Effective Date will be
paid to the Settlement Facility when received by Dow Corning. Additional
funds will be paid to the Settlement Facility on an "as needed" basis in
monthly payments, subject to annual funding caps.
The Shareholders have made a credit facility available to the
Reorganized Debtor. Dow Corning will be able to access the credit facility
during the first ten years of the Settlement Facility to make payments due
under the Funding Payment Agreement. For further discussion of the credit
facility, see section 6.6(I)(3), at p. 77.
F. RELEASE OF DOW CORNING, THE SHAREHOLDERS, THE SETTLING INSURERS AND
LIMITED RELEASE OF CERTAIN THIRD PARTIES. If the Plan is confirmed, DCC
will be discharged and released from liability on all Claims, including
Claims attributable to Breast Implants and Other Products, and other
Personal Injury Claims. Dow Corning's subsidiaries, the Shareholders, and
their respective directors, officers and employees, and those insurance
companies (the "SETTLING INSURERS") that have settled coverage disputes
with Dow Corning, will also be released from Claims attributable to such
products./7/ Personal Injury Claimants asserting such Claims will have the
rights provided under the Plan, including the right to settle their Claims
under the Settlement Facility or to litigate their Claims against the
Litigation Facility, as described more fully in section 6.6.J of this
Disclosure Statement.
The Plan gives all Personal Injury Claimants a choice to either settle
or litigate their Claims. Claimants who elect to settle and Claimants who
do not timely elect litigation will release all Claims (except for
Malpractice Claims, as defined in the Plan) that they may have against
those Physicians and Health Care Providers (such as hospitals) who have
released their Claims against Dow Corning. These releases are described in
more detail in section 8.3 of the Plan, which you should review carefully.
Personal Injury Claimants who elect the litigation option retain the
right to assert their Claims, if any, against the Settling Physicians and
the Settling Health Care Providers under the Plan's procedures. The Plan
provides that those Claims will be channeled to the Litigation Facility for
consolidated resolution with any corresponding Claims against DCC in the
same litigation proceedings. Any judgment that a litigating Claimant
receives against any Released Party imposing joint liability with the
Debtor or the Litigation Facility in any such proceeding will be paid by
the Litigation Facility. If, however, the Litigation Facility does not have
sufficient funds to pay such a judgment against the Physician or Health
Care Provider, the Claimant will be entitled to collect or enforce that
judgment directly against those parties in accordance with the terms of the
judgment. If these parties make a payment directly to Claimants, they have
a right to reimbursement from the Litigation Facility for any such payments
in those circumstances described in more detail in section 6.6(J)(4)(e), at
pp. 87-88 of this Disclosure Statement.
- ----------------------
/7 /The availability of releases of third parties in bankruptcy is a matter
of dispute, with the appropriateness of such releases to be determined
depending on the facts of each bankruptcy. The Proponents believe that the
releases are an essential part of this integrated, indivisible Plan that
consists of negotiated compromises for Claim resolution and should be approved
in this case.
Page 11
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
G. EFFECT ON NON-ELECTING CLAIMANTS. All Claimants who do not timely
elect litigation (including those Claimants who have Unmanifested Claims)
will be treated as Settling Personal Injury Claimants and will have their
Claims resolved in the Settlement Facility. Those Claimants will also be
bound by the provisions of the Plan that release Claims against the
Settling Physicians and Settling Health Care Providers.
H. SUMMARY IS NOT CONTROLLING. This Summary does not describe all of the
important conditions, terms and qualifications of the treatment of Personal
Injury Claims under the Plan. You should carefully review the details of
both the settlement options and the litigation procedures described in this
Disclosure Statement for a complete understanding of them. Any differences
between this Summary and the more detailed descriptions in the Plan and the
balance of this Disclosure Statement are controlled by the more detailed
descriptions below and, ultimately, by the Plan and the Plan Documents, and
not by this Summary.
1.2 SUMMARY OF HOW PHYSICIAN CLAIMS ARE TREATED UNDER THE PLAN.
A. DEFINITION OF PHYSICIAN CLAIMS. Physician Claims are defined under
the Plan to include all Claims asserted by Physician Claimants arising out
of (i) the implantation of silicone gel breast implants and other products
produced by Dow Corning and (ii) Dow Corning's marketing, sale and
provision of such silicone gel breast implants and other products to
Physicians. Physician Claims fall into two legal categories:
1. PHYSICIAN PRODUCTS LIABILITY REIMBURSEMENT CLAIMS. Physician
Products Liability Reimbursement Claims are Claims (a) arising in
connection with litigation or claims asserted by recipients of Breast
Implants or Other Products against both the Physician Claimant and Dow
Corning and (b) alleging that the Physician Claimant and Dow Corning are
both liable or potentially liable for injuries allegedly sustained by
the implant recipients. Physician Products Liability Reimbursement
Claims are claims asserted against Dow Corning by Physician Claimants
who, if they are found personally liable to the implant recipients for
the alleged injuries, want Dow Corning to reimburse or indemnify them
for any such losses.
2. PHYSICIAN TORTIOUS CONDUCT CLAIMS. Physician Tortious Conduct
Claims are claims arising from Dow Corning's marketing, sale and
provision of Breast Implants and Other Products directly to Physician
Claimants. Physician Tortious Conduct Claims include damage Claims
against Dow Corning for loss of profit or damage to reputation allegedly
caused by, among other things, Dow Corning's alleged misrepresentations
about the extent and results of Dow Corning's implant testing, and
Physician Claimants' reliance thereon in providing their patients
medical services involving Dow Corning's Breast Implants and Other
Products.
B. CLASSIFICATION OF PHYSICIAN CLAIMS UNDER THE PLAN. All Physician
Claims are classified in Class 12 under the Plan.
C. TREATMENT OF PHYSICIAN CLAIMS UNDER THE PLAN. The Plan treats
Physician Claims in an aggregated manner. Physician Claimants may elect to
settle ALL of their Claims or they may elect to litigate ALL of their
Claims. An individual physician may not selectively settle his or her
Physician Products Liability Reimbursement Claims and pursue litigation
over his or her Physician Tortious Conduct Claims. The Official Physicians'
Committee believes that a substantial legal issue exists as to whether this
provision provides for unequal treatment and makes the Plan unconfirmable.
1. THE SETTLEMENT OPTION.
A. RELEASES BY THE SETTLING PHYSICIAN. Physician Claimants
electing the settlement option will be required to "give up" or
release ALL Claims that they have against Dow Corning and ALL other
Released Parties relating to Products Liability Claims. Thus, a
Physician Claimant may not elect to give up certain claims and
litigate others. However, if a Physician Claimant holds a Class 4
Commercial Claim or other Claim unrelated to the Personal Injury
Claims, that Claim will not be released but will be entitled to
separate treatment under the Plan.
B. PROTECTIONS AFFORDED SETTLING PHYSICIANS. Settling Physicians
will receive no cash payment in exchange for their election to
settle, but will obtain the benefits of the release, injunction and
channeling provisions contained in sections 8.3 through 8.5 of the
Plan. Settling Physicians will receive certain protections under the
Plan, including:
(1) release from all Claims relating to Products Liability
Claims held against them by Dow Corning and all other Released
Parties;
Page 12
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
(2) A release from all Personal Injury Claims, EXCEPT
MALPRACTICE CLAIMS AS DEFINED IN THE PLAN, which Settling Personal
Injury Claimants hold, may hold or may have held against Settling
Physicians, either based upon tort, contract or otherwise
(MALPRACTICE CLAIMS ASSERTED BY PERSONAL INJURY CLAIMANTS WILL BE
RESOLVED IN THE COURTS WHERE SUCH CLAIMS HAVE BEEN OR MAY BE
FILED); and
(3) All parties who release Claims against the Settling
Physicians will also be permanently enjoined, i.e. prevented from,
among other things, (a) commencing or continuing any action or
other proceeding against a Settling Physician and (b) seeking to
enforce, attach, collect or recover against any Settling Physician
or the property of any Settling Physician at any time on or after
the Effective Date of the Plan. (The release and injunction does
not affect any Claims preserved under the Domestic Health Insurer
Settlement Agreement.)
C. SETTLING PHYSICIANS REMAIN EXPOSED TO CLAIMS BY NON-SETTLING
PERSONAL INJURY CLAIMANTS. Settling Physicians are not released or
protected from Claims (including Malpractice Claims) held by Non-
Settling Personal Injury Claimants. Claims held by Non-Settling
Personal Injury Claimants against Settling Physicians (other than
Malpractice Claims) may be transferred to the District Court in
Michigan. The Litigation Facility shall file a motion seeking to
transfer such Non-Settling Personal Injury Claims. The Claimants'
Advisory Committee shall support such motion to transfer. Settling
Physicians will be required to (i) join in the Litigation Facility's
motion to transfer such claims, and (ii) cooperate with the
Litigation Facility by providing non-confidential lists and other
information on the Claims asserted against them by the Non-Settling
Personal Injury Claimants. The Litigation Facility and the Settling
Physicians must each bear their own costs incurred in connection with
any motion for the transfer of claims.
If the transfer of Non-Settling Personal Injury Claims is
contested, the District Court will determine whether the Claims
asserted by Non-Settling Personal Injury Claimants against Settling
Physicians are within its "related to" jurisdiction, i.e. whether
such Claims could conceivably have an impact on the Debtor (such as
through contribution claims), and should therefore be transferred to
the District Court. If these Claims are not within the "related to"
jurisdiction of the District Court, the transfer will be denied and
litigation of such Claims will proceed in the courts where they have
been or may be brought and will be the responsibility of the
Physicians.
If the transfer is granted, then the transferred Claims of Non-
Settling Personal Injury Claimants ("ASSUMED THIRD PARTY CLAIMS")
will be subject to the following procedures established under the
Plan:
(1) The Assumed Third Party Claims will be resolved pursuant
to the Litigation Facility Agreement's claim resolution procedures
and will be consolidated with any corresponding claims against the
Debtor. Any settlement by the Litigation Facility shall include
Assumed Third Party Claims.
(2) The District Court will have the power and authority to
set trial venue for Non-Settling Personal Injury Claims against
Settling Physicians in the District Court, in the federal district
court for the district in which the Claim arose or, in some
circumstances, in the state court in which such Claim was
originally filed.
(3) Persons who have held, hold or may hold Assumed Third
Party Claims against Settling Physicians will be enjoined from (a)
commencing or continuing any action or other proceeding relating
to an Assumed Third Party Claim except as permitted under the Plan
provisions and Litigation Facility Agreement, and (b) asserting
any right or Claim or taking any act against a Settling Physician
in respect of an Assumed Third Party Claim which fails to conform
or comply with the Plan and Litigation Facility Agreement.
(4) If transfer is granted as described above, the only
Products Liability Claims against Settling Physicians that will be
permitted to go forward in courts other than those described in
subparagraph (2) above will be Malpractice Claims, as defined in
section 1.101 of the Plan. If alleged Malpractice Claims are
asserted in contravention of the Plan terms, the Proponents
anticipate that those Physicians will seek relief to enforce the
terms of sections 8.4 and 8.5 of the Plan.
2. THE LITIGATION OPTION.
A. LITIGATION PROCEDURE FOR CLAIMS OF NON-SETTLING
PHYSICIANS. All Claims of the Physician Claimant who timely elects
the litigation option will be resolved through the Litigation
Facility established under the Plan. NON-SETTLING PHYSICIAN
CLAIMANTS WILL NOT RECEIVE PROTECTION UNDER THE RELEASE,
INJUNCTION AND CHANNELING PROVISIONS OF THE PLAN.
Page 13
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
A PHYSICIAN CLAIMANT SEEKING TO REVIEW THE LITIGATION FACILITY
AGREEMENT, THE SETTLEMENT FACILITY AGREEMENT AND THE FUNDING PAYMENT
AGREEMENT IN ORDER TO DECIDE WHETHER TO SETTLE OR LITIGATE MUST
REQUEST COPIES OF THESE DOCUMENTS BY CALLING 1-800-651-7030 (DOMESTIC
CLAIMANTS) OR 1-202-332-5510 (FOREIGN CLAIMANTS), MAY DOWNLOAD COPIES
FROM DOW CORNING'S WEBSITE AT HTTP://WWW.IMPLANTCLAIMS.COM/PLANDOCS,
OR MAY CONTACT COUNSEL FOR THE OFFICIAL PHYSICIANS' COMMITTEE, H.
JEFFREY SCHWARTZ, BENESCH, FRIEDLANDER, COPLAN & ARONOFF, 2300 BP
AMERICA BUILDING, 200 PUBLIC SQUARE, CLEVELAND, OHIO 44114-2378,
(216) 363-4500.
The Proponents believe that most or all of the Physician Products
Liability Reimbursement Claims will be disallowed by the Court as
contingent; however, the Official Physicians' Committee takes the
position that such a disallowance would be inappropriate and, in any
event, would merely be temporary, such that once a Physician Products
Liability Reimbursement Claim became fixed, it would be entitled,
underlying non-bankruptcy law permitting, to allowance
notwithstanding any prior temporary disallowance. If such Claims are
finally disallowed by the Court, they will not be paid unless
subsequently Allowed on appeal. To date, this allowance/ disallowance
issue regarding such reimbursement Claims remains open.
All other Claims of Non-Settling Physician Claimants will be
aggressively contested by the Manager of the Litigation Facility.
Physicians should consult their individual counsel as to their
substantive rights with respect to such remaining Claims. Moreover,
the Litigation Facility will seek a common issue trial in the
District Court on the threshold question of whether silicone causes
systemic disease in humans. The Litigation Facility is expected to
argue that all of the Physician Claims require, as an element of such
Claims, that Dow Corning's products were defective and therefore that
adjudication of these Claims must await resolution of the common
issue litigation. In other words, until a determination on the common
issue litigation is rendered, Physician Tortious Conduct Claims may
not be adjudicated. Any Claims of Non-Settling Physicians that are
not resolved by any such common issue proceedings will be resolved
through further litigation by the Manager of the Litigation Facility
in the Court.
The Official Physicians' Committee asserts that proof of Physician
Tortious Conduct Claims does not require that plaintiff physicians
establish Breast Implant product defect and that adjudication of the
Physician Tortious Conduct Claims therefore should proceed
independently of any common issue trial. The District Court or the
Court will resolve this issue and determine the appropriate course
for the adjudication of the Non-Settling Physician Tortious Conduct
Claims once the Plan becomes effective.
B. PAYMENT OF ALLOWED PHYSICIAN CLAIMS. If any Claims of Non-
Settling Physicians become Allowed in the Litigation Facility, that
Allowed Claim will, subject to the terms of the Litigation Facility
Agreement, the Settlement Facility Agreement, and the Funding Payment
Agreement, be paid from the Litigation Fund in full, in cash,
including any pre- or post-petition interest as may be required by
law.
If sufficient funds are not then presently available to pay all
Allowed Claims in full, payments may be made in installments or
delayed until funds are available under the Funding Payment
Agreement. Because of the many variables described above, it is
impossible to predict when any Non-Settling Physicians will receive
payment on their Allowed Claims. It is possible that Allowed Claims
may not be paid in full if, upon a determination by the District
Court, it becomes necessary for "First Priority Payments" under the
Settlement Facility Agreement to be paid by the Litigation Fund.
Additional information regarding the Litigation Facility and the
procedures for Claim resolution and payment appears at pages 84
through 88 of this Disclosure Statement and in the Litigation
Facility Agreement.
C. TREATMENT OF PUNITIVE DAMAGE CLAIMS OF NON-SETTLING
PHYSICIANS. The Plan provides for the disallowance of all claims for
punitive damages against Dow Corning, including those held by
Physician Claimants in connection with Physician Tortious Conduct
Claims. The Proponents believe a sufficient legal basis exists for
doing so. The Official Physicians' Committee, on the other hand,
believes that disallowing punitive damages when Dow Corning is
solvent violates the "best interest of creditor" test by paying Non-
Settling Physicians potentially a lower amount than they would
receive in a liquidation, and that this provision may render the Plan
unconfirmable.
3. THE ELECTION PROCESS. Personal Injury Claimants will have six
months from the Effective Date of the Plan to elect whether to settle or
to "opt out" and litigate their claims. As soon as practicable after
this Personal Injury Claimant "opt-out" deadline, Physician Claimants
will be provided with a copy of the list of Non-Settling Personal Injury
Claimants to enable the Physicians Claimants to determine which of their
patients have elected to continue to litigate their Personal Injury
Claims.
Page 14
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
In addition to the list of Non-Settling Personal Injury Claimants,
each Physician Claimant will be provided with an election form setting
forth the process by which Physician Claimants may elect to settle or
litigate their Claims. Physician Claimants will have 45 days from the
date of service of the list of Non-Settling Personal Injury Claimants to
return the election form indicating whether they have conditionally
elected to settle, subject to the District Court's determination of the
motion to transfer the Non-Settling Personal Injury Claims, or have
elected to litigate their Claims. Physician Claimants who fail to return
the form will be deemed to have conditionally elected to settle. Within
30 days after the service of the District Court's order disposing of
such motion to transfer, Physicians must make their conditional election
to settle final. Any Physician who fails timely to revoke his or her
conditional election to settle shall be deemed to have made a final
election to settle. A Physician who is deemed to have made a final
election to settle agrees to settle ALL Claims related to Products
Liability Claims that the Physician Claimant has against Dow Corning and
the other Released Parties. A Physician Claimant who elects the
litigation option has decided by such election to litigate ALL Claims
that Physician Claimant has against Dow Corning related to Products
Liability Claims.
PHYSICIAN CLAIMANTS WHO DO NOT AFFIRMATIVELY ELECT TO LITIGATE SHALL
HAVE SETTLED ALL OF THEIR RESPECTIVE CLAIMS.
D. SUMMARY NOT CONTROLLING. This summary of the treatment of Physician
Claims is to assist Physician Claimants in evaluating how to vote on the
Plan. You are encouraged, however, to review the Plan and other Plan
documents carefully for further details of the treatment of Physician
Claims. Any discrepancy between the description of such treatment in those
documents and this summary is controlled by those documents and not by this
summary.
1.3 SUMMARY OF HOW UNSECURED CLAIMS ARE TREATED UNDER THE PLAN.
A. GENERAL. Unsecured Claims are classified in Class 4 under the Plan.
This class includes all unsecured Claims against DCC not classified in any
other class, including, without limitation, bank loans, public debt Claims,
trade payables, and pre-petition personal injury settlements. The value of
these Claims, including principal and interest accrued as of the Petition
Date, is approximately $1,010,000,000.
The Plan provides for Class 4 Claims to be paid in full at confirmation
in cash and Senior Notes. DCC will use its best efforts to obtain an
investment grade rating for the Notes, which will pay a rate of interest,
as or in a manner to be determined by the Court at confirmation, with the
objective that the Class 4 Claims will be paid in full. Upon the motion of
the Debtor or the Commercial Committee, and after notice and a hearing, the
Court may, prior to the Effective Date, approve a modification of the
formula for setting the interest rate for the Senior Notes if the Court
determines that the formula approved at the confirmation hearing is no
longer appropriate as a consequence of changes after the Confirmation Date
in market conditions affecting rates of interest.
The payments to Class 4 Claimants will include post-petition interest at
the Case Interest Rate of 6.28% (the federal judgment rate as of the
Petition Date), compounded annually on each anniversary of the Petition
Date. The total principal and interest to be distributed to Class 4
Claimants, assuming a June 30, 1999 Effective Date, will be approximately
$1,298,900,000.
The Commercial Committee has stated that it will recommend that holders
of Class 4 Claims vote against the Plan. The Commercial Committee believes,
among other things, that the treatment of holders of Class 4 Claims
proposed under the Plan does not provide such holders with "payment in
full" because the amount of post-petition interest proposed to be paid to
holders of Class 4 Claims under the Plan is substantially less than the
amount to which holders are legally entitled and the Senior Notes are
likely to have a value when issued of less than their principal amount
because, among other things, the terms of the Senior Notes do not assure
that the Senior Notes will be issued with a market rate of interest. If the
Court determines that the treatment of Class 4 does not satisfy the
requirements of either section 1129(a)(7) or 1129(b) (in the event
confirmation is sought pursuant to section 5.18 of the Plan) of the
Bankruptcy Code, the Proponents shall propose amendments to the Plan to
ensure its compliance with the applicable requirements of section 1129 of
the Bankruptcy Code, and thereafter request confirmation of the Plan, as
amended.
B. SUMMARY NOT CONTROLLING. This summary of the treatment of Unsecured
Claims is to assist Unsecured Claimants in evaluating how to vote on the
Plan. However, you should review the Plan carefully for the details of
treatment of Unsecured Claims. Any discrepancy between the detailed
descriptions of such treatment in the Plan and this summary is controlled
by the Plan and not by this summary.
Page 15
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
1.4 SUMMARY OF THE TREATMENT OF CLAIMS AGAINST, AND INTERESTS IN, THE
DEBTOR.
A. TREATMENT OF CLAIMS AND INTERESTS. The treatment of Claims and
Interests under the Plan is summarized in the tables set forth below, which
are qualified by reference to the more detailed and complete descriptions
set forth in Article VI of this Disclosure Statement and Articles Two
through Five of the Plan.
<TABLE>
<CAPTION>
SUMMARY OF TREATMENT OF CLASSES UNDER THE PLAN
- -----------------------------------------------------------------------------------------------------
ESTIMATED AMOUNT
OF ALLOWED CLAIMS
CLASS OR AMOUNTS TREATMENT UNDER PLAN
PROVIDED FOR
SETTLEMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Unclassified $2.4 million Paid in full on Effective Date.
-- Administrative
Claims
- -----------------------------------------------------------------------------------------------------
Unclassified $4.3 million Paid in full (subject to deferred payment
-- Priority Tax Claims arrangement).
- -----------------------------------------------------------------------------------------------------
1-- Other Priority $0 Paid in full on Effective Date.
Claims
- -----------------------------------------------------------------------------------------------------
2-- Secured Claims $760,000 Paid in full; at DCC's option, either the legal,
equitable and contractual rights will not be
altered by the Plan or such Claimant will be
treated in another manner that will result in its
Allowed Secured Claim being deemed unimpaired
under section 1124 of the Bankruptcy Code.
- -----------------------------------------------------------------------------------------------------
3-- Convenience Claims $6.0 million Paid in cash in full, including post-Petition Date
interest at the Case Interest Rate, as soon as
practicable after the Effective Date.
- -----------------------------------------------------------------------------------------------------
4-- Unsecured $1.299 billion Paid in full, including post-Petition Date
(Non-Tort) Claims interest at the Case Interest Rate, as follows:
(a) cash payment of the lesser of 24% of each
Allowed Class 4 Claim or a pro rata portion of
$315.6 million and (b) ten-year Senior Notes in
the amount of the balance of the Allowed Class 4
Claim bearing interest payable in semi-annual
installments at the Plan Interest Rate.
</TABLE>
Page 16
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
SUMMARY OF TREATMENT OF CLASSES UNDER THE PLAN
- -----------------------------------------------------------------------------------------------------
ESTIMATED AMOUNT
OF ALLOWED CLAIMS
CLASS OR AMOUNTS TREATMENT UNDER PLAN
PROVIDED FOR
SETTLEMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
4A-- Prepetition $7.0 million Post-confirmation injunction will be modified to
Judgment Claims allow prosecution of appeal of prepetition
judgments; amount surviving appeal to be treated
in the same manner as Class 4 Claims; if Claims
remanded for new trial as to liability or damages,
Claimants to elect to have Claims liquidated
through the Settlement Facility or the Litigation
Facility; if settled prior to decision on appeal,
settlement paid out of Settlement Fund.
- -----------------------------------------------------------------------------------------------------
4B-- DCC Guaranty Claims $82 million Unimpaired--Claims pass through Case unaffected.
- -----------------------------------------------------------------------------------------------------
5-- Domestic Breast Up to the maximum Qualified Settling Personal Injury Claimants will
Implant Personal amount of the receive payments pursuant to schedules in the
Injury Claims Settlement Fund and Settlement Facility Agreement; Non-Settling
Litigation Fund; Personal Injury Claimants will have Claims
amount of Allowed resolved through Litigation Facility procedures
Claims currently within $400 million (NPV) Litigation Fund.
unknown
- -----------------------------------------------------------------------------------------------------
6.1-- Category 1 and 2 See Class 5 Qualified Settling Personal Injury Claimants will
Foreign Breast description receive payments pursuant to schedules in the
Implant Settlement Facility Agreement; Non-Settling
Personal Injury Personal Injury Claimants will have Claims
Claims resolved through Litigation Facility procedures.
- -----------------------------------------------------------------------------------------------------
6.2-- Category 3 and 4 See Class 5 Qualified Settling Personal Injury Claimants will
Foreign Breast description receive payments pursuant to schedules in the
Implant Personal Settlement Facility Agreement; Non-Settling
Injury Claims Personal Injury Claimants will have Claims
resolved through Litigation Facility procedures.
- -----------------------------------------------------------------------------------------------------
6A-- Quebec Class Action $37.25 million Will receive payments in accordance with the
Claimants (nominal)--To be paid Quebec Breast Implant Settlement Agreement.
out of the Settlement
Fund
- -----------------------------------------------------------------------------------------------------
6B-- Ontario Class $17.9 million Will receive payments in accordance with the
Action Claimants (nominal)--To be paid Quebec Breast Implant Settlement Agreement.
out of the Settlement
Fund
- -----------------------------------------------------------------------------------------------------
6C-- B.C. Class Action $25.1 million Will receive payments in accordance with the B.C.
Settlement (nominal)--To be paid Class Action Settlement Agreement.
Claimants out of the Settlement
Fund
- -----------------------------------------------------------------------------------------------------
6D-- Australia Breast Up to $36.0 million Will receive payments in accordance with the
Implant Settlement (nominal)--To be paid Australia Breast Implant Settlement Option.
Claimants out of the Settlement
Fund
- -----------------------------------------------------------------------------------------------------
7-- Silicone Material $57.5 million (NPV)-- Qualified Silicone Material Claimants (i.e., Non-
Claims (Other than To be paid out of the Dow Corning Breast Implant Claimants whose
Claims in Classes Settlement Fund implants were made by a U.S.-based company using
6B, 6C and 6D) Dow Corning materials) will receive payments from
a $57.5 million (NPV) fund; Non-Settling Silicone
Material Claimants will have Claims resolved
through Litigation Facility procedures.
</TABLE>
Page 17
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
SUMMARY OF TREATMENT OF CLASSES UNDER THE PLAN
- -----------------------------------------------------------------------------------------------------
ESTIMATED AMOUNT
OF ALLOWED CLAIMS
CLASS OR AMOUNTS TREATMENT UNDER PLAN
PROVIDED FOR
SETTLEMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
8-- Miscellaneous Raw See Class 5 Miscellaneous Raw Material Claimants (i.e. Non-Dow
Material Claims description Corning Breast Implant Claimants whose implants
(Other than Claims were made by non-U.S. companies and Non-Dow
in Classes 6B, 6C, Corning Implant Claimants) will have Claims
6D and 7) resolved through Litigation Facility procedures.
- -----------------------------------------------------------------------------------------------------
9-- Domestic Other $36 million (NPV)--To Qualified Settling Domestic Other Product
Products Personal be paid out of Claimants with Claims related to Covered Other
Injury Claims Settlement Fund to Products will receive payments pursuant to
Settling Claimants in schedules in the Settlement Facility Agreement;
Classes 9, 10.1 and Non-Settling Claimants (including all Claims
10.2; Non-Settling related to non-Covered Other Products) will have
Claimants in Classes Claims resolved through Litigation Facility
9, 10.1 and 10.2 to procedures.
be paid out of
Litigation Fund
- -----------------------------------------------------------------------------------------------------
10.1-- Category 1 and 2 See Class 9 Qualified Settling Foreign Other Product Claimants
Foreign Other description with Claims related to Covered Other Products will
Products Personal receive payments pursuant to schedules in the
Injury Claims Settlement Facility Agreement; Non-Settling
Claimants (including all Claims related to non-
Covered Other Products) will have Claims resolved
through Litigation Facility procedures.
- -----------------------------------------------------------------------------------------------------
10.2 -- Category 3 and 4 See Class 9 Qualified Settling Foreign Other Product Claimants
Foreign Other description with Claims related to Covered Other Products will
Products Personal receive payments pursuant to schedules in the
Injury Claims Settlement Facility Agreement; Non-Settling
Claimants (including all Claims related to non-
Covered Other Products) will have Claims resolved
through Litigation Facility procedures.
- -----------------------------------------------------------------------------------------------------
11-- Co-Defendant Claims See Class 5 Settling Co-Defendants shall exchange mutual
description releases with the Debtor, the Debtor-Affiliated
Parties and the Shareholder-Affiliated Parties.
Each Non-Settling Co-Defendant Claim which is
Allowed or estimated for distribution as of the
Effective Date to be treated in the same manner as
a Class 4 Claim; Non-Settling Co-Defendant Claims
not Allowed or estimated for distribution before
the Effective Date to be channeled to the
Litigation Facility for liquidation and payment.
- -----------------------------------------------------------------------------------------------------
12-- Physician Claims See Class 5 Claims of Settling Physicians released; Settling
description Physicians receive protection (except for
Malpractice Claims) of release and injunction
under Plan; Non-Settling Class 12 Claims to be
channeled to the Litigation Facility for
liquidation and payment.
- -----------------------------------------------------------------------------------------------------
13-- Health Care See Class 5 Claims of Settling Health Care Providers released;
Provider Claims description Settling Health Care Providers receive protection
(except for Malpractice Claims) of release and
injunction under Plan; Non-Settling Class 13
Claims to be channeled to the Litigation Facility
for liquidation and payment.
</TABLE>
Page 18
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
SUMMARY OF TREATMENT OF CLASSES UNDER THE PLAN
- -----------------------------------------------------------------------------------------------------
ESTIMATED AMOUNT
OF ALLOWED CLAIMS
CLASS OR AMOUNTS TREATMENT UNDER PLAN
PROVIDED FOR
SETTLEMENT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
14-- Domestic Health $40 million--To be Class 14 Claimants who elect (or who are deemed to
Insurer Claims paid out of the elect) to settle pursuant to the terms of the
Settlement Fund Domestic Health Insurer Settlement Agreement will
share proportionately in distributions of cash
from a fund to be established pursuant to that
agreement. Class 14 Claimants who elect to
litigate their Claims will be deemed satisfied by
the treatment provided in section 6.05 of the
Litigation Facility Agreement.
- -----------------------------------------------------------------------------------------------------
14A-- Foreign Health See Class 5 Class 14A Claims will be deemed satisfied by the
Insurer Claims description treatment provided in section 6.05 of the
Litigation Facility Agreement.
- -----------------------------------------------------------------------------------------------------
15-- Government Payor See Class 5 Allowed amount paid in full--each Government Payor
Claims description Claim which is Allowed or estimated for
distribution as of the Confirmation Date to be
treated in the same manner as a Class 4 Claim;
Class 15 Claims not Allowed or estimated for
distribution before the Confirmation Date to be
channeled to the Litigation Facility for
liquidation and payment.
- -----------------------------------------------------------------------------------------------------
16-- Shareholder Claims See Class 5 Claims released as provided in section 6.16 of the
description Plan.
- -----------------------------------------------------------------------------------------------------
17-- General See Class 5 Allowed amount paid in full--each General
Contribution Claims description Contribution Claim which is Allowed or estimated
for distribution as of the Confirmation Date to be
treated in the same manner as a Class 4 Claim;
Class 17 Claims not Allowed or estimated for
distribution before the Confirmation Date to be
channeled to the Litigation Facility for
liquidation and payment.
- -----------------------------------------------------------------------------------------------------
18-- LTCI Personal Unknown LTCI Personal injury Claims will be channeled to
Injury Claims Litigation Facility and treated through
enforcement of indemnity agreements assigned by
the Debtor to the Litigation Facility.
- -----------------------------------------------------------------------------------------------------
19-- LTCI Other Claims Unknown LTCI Other Claims will be channeled to Litigation
Facility and treated through enforcement of
indemnity agreements assigned by the Debtor to the
Litigation Facility.
- -----------------------------------------------------------------------------------------------------
20-- Intercompany Claims $25.02 million Allowed Intercompany Claims, including post-
Petition Date interest at the Case Interest Rate,
will be paid by offset and/or product sales, in
the ordinary course of business.
- -----------------------------------------------------------------------------------------------------
21-- Subordinated Claims $0 Paid in full, including post-Petition Date
interest at the Case Interest Rate, in principal
amount of 10-year Subordinated Notes, bearing
interest at the Plan Interest Rate (payable in
semi-annual installments).
- -----------------------------------------------------------------------------------------------------
22-- Environmental N/A Unimpaired--Claims pass through Case unaffected.
Claims
- -----------------------------------------------------------------------------------------------------
23-- Retiree Benefit N/A Unimpaired--Union and/or employee benefit
Claims contracts deemed assumed on the Effective Date;
Claims pass through Case unaffected.
- -----------------------------------------------------------------------------------------------------
24-- Interests N/A Shareholders shall retain their Interests.
</TABLE>
Page 19
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
B. TREATMENT OF TORT CLAIMS. The settlements offered under the Plan for
Domestic Personal Injury Claims are summarized on the following chart. To
qualify under any settlement option, certain standards apply. Those
standards are set forth in the CRP, which is attached as Annex "A" to the
Settlement Facility Agreement. Additional information on the settlement
options is provided in section 6.6(J), at pages 78 through 84 of this
Disclosure Statement. You should review them carefully.
<TABLE>
<CAPTION>
SETTLEMENT GRID
DOMESTIC PERSONAL INJURY CLAIMS
(ALL AMOUNTS IN U.S. $)
- --------------------------------------------------------------------------------------------
ADDITIONAL
AMOUNT OF AMOUNT OF
SETTLEMENT OPTION COMPENSATION-- COMPENSATION--
"BASE" PAYMENT "PREMIUM"
PAYMENT
- --------------------------------------------------------------------------------------------
<S> <C> <C>
BREAST IMPLANT CLAIMS
- --------------------------------------------------------------------------------------------
EXPLANTATION PAYMENT (SEE P. 78)/8/ $5,000 N/A
- --------------------------------------------------------------------------------------------
RUPTURE PAYMENT (SEE PP. 78-79) 20,000 $5,000
- --------------------------------------------------------------------------------------------
(1) Multiple manufacturer reduction (applied 50% 50%
to compensation under the Disease Payment
Option, for silicone gel breast implants
manufactured by Bristol, Baxter, or 3M; (2)
Multiple manufacturer reduction applied to
rupture compensation if a "rupture enhancement
payment" has been made in the RSP to Claimants
who also qualify for the Disease Payment
Option) (see p. 80)
- --------------------------------------------------------------------------------------------
DISEASE PAYMENT (SEE PP. 79-80)
- --------------------------------------------------------------------------------------------
Disease Payment Option I: Level One C or D 10,000 2,000
- --------------------------------------------------------------------------------------------
Level One B 20,000 4,000
- --------------------------------------------------------------------------------------------
Level One A 50,000 10,000
- --------------------------------------------------------------------------------------------
Disease Payment Option II: Level Two--GCTS--B 75,000 15,000
- --------------------------------------------------------------------------------------------
Level Two--GCTS--A/PM/DM 110,000 22,000
- --------------------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus C 150,000 30,000
- --------------------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus B 200,000 40,000
- --------------------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus A 250,000 50,000
- --------------------------------------------------------------------------------------------
EXPEDITED RELEASE PAYMENT (SEE P. 80) 2,000 N/A
</TABLE>
- ----------------------
/8/Page and exhibit references in this table refer to pages in and exhibits
to this Disclosure Statement.
Page 20
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
SETTLEMENT GRID
DOMESTIC PERSONAL INJURY CLAIMS
(ALL AMOUNTS IN U.S. $)
- ------------------------------------------------------------------------------
ADDITIONAL
SETTLEMENT AMOUNT OF AMOUNT OF
OPTION COMPENSATION-- COMPENSATION--
"BASE" PAYMENT "PREMIUM"
PAYMENT
- ------------------------------------------------------------------------------
<S> <C> <C>
COVERED OTHER PRODUCTS CLAIMS (SEE P.
83)
- ------------------------------------------------------------------------------
EXPEDITED RELEASE PAYMENT 1,000
- ------------------------------------------------------------------------------
MEDICAL CONDITION PAYMENT
- ------------------------------------------------------------------------------
Level One--Base
- ------------------------------------------------------------------------------
Chins, Facial, Nasal Gel Implants 5,000 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
SJO 5,000 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
LJO--Knee 7,500 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
LJO--Hip 10,000 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
TMJ 5,000 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
Testicular, Penile 5,000 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
Level Two--TMJ Enhanced 10,000 Additional pay-
ments (including
any "premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- ------------------------------------------------------------------------------
Multiple manufacturer reduction 50% N/A
for TMJ Claimants who have both a
Dow Corning Covered Other Product
and a TMJ product made by any
other manufacturer
</TABLE>
Page 21
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
SETTLEMENT GRID
DOMESTIC PERSONAL INJURY CLAIMS
(ALL AMOUNTS IN U.S. $)
- ------------------------------------------------------------------------------
ADDITIONAL
SETTLEMENT AMOUNT OF AMOUNT OF
OPTION COMPENSATION-- COMPENSATION--
"BASE" PAYMENT "PREMIUM"
PAYMENT
- ------------------------------------------------------------------------------
<S> <C> <C>
SILICONE MATERIAL CLAIMS (SEE P. 83)
- --------------------------------------------------------------------------
Expedited Release Payment To be paid from To be paid from
a fixed fund of a fixed fund of
$57.5 million $57.5 million
(NPV); the (NPV); the
amount paid to amount paid to
each individual each individual
Claimant will be Claimant will be
determined after determined after
review and review and
evaluation by evaluation by
the Claims the Claims
Office Office
- --------------------------------------------------------------------------
Disease Option Payment To be paid from To be paid from
a fixed fund of a fixed fund of
$57.5 million $57.5 million
(NPV); the (NPV); the
amount paid to amount paid to
each individual each individual
Claimant (up to Claimant (up to
40% of the 40% of the
Allowed Amount Allowed Amount
for Domestic Dow for Domestic Dow
Corning Breast Corning Breast
Implant Implant
Claimants) Claimants)
determined after determined after
review and review and
evaluation by evaluation by
the Claims the Claims
Office Office
</TABLE>
Amounts payable to settle Foreign Claims are subject to reduction to 35%
or 60% of the above-listed amounts, depending on the country of residence.
The Debtor believes that this adjustment reflects the levels of
compensation for similar claims within the Foreign Claimants' respective
local jurisdictions as described in EXHIBIT "C" to this Disclosure
Statement. Included as part of Exhibit "C" are grids reflecting the amount
payable to Settling Claimants at the 60% and 35% levels.
The foregoing amounts and all other information set forth in the
schedule above must be read with the Settlement Facility Agreement and are
qualified in their entirety by reference to, and are subject to, all terms
and conditions of the Settlement Facility Agreement. COPIES OF THE
SETTLEMENT FACILITY AGREEMENT AND THE LITIGATION FACILITY AGREEMENT ARE
AVAILABLE, AT DOW CORNING'S EXPENSE, AND CAN BE OBTAINED BY CALLING 1-800-
651-7030 (DOMESTIC CLAIMANTS) OR 1-202-332-5510 (FOREIGN CLAIMANTS) OR CAN
BE DOWNLOADED FROM DOW CORNING'S WEBSITE at
http://www.implantclaims.com/plandocs.
1.5 ALTERNATIVES TO THE PLAN. If the Plan proposed herein is not accepted,
other alternatives are possible. First, the Debtor (or the Proponents) may
propose another plan. Second, the Court may allow other parties to submit a
plan. The Proponents believe that any proposed plan will, like the current
Plan, include a settlement mechanism and will also allow for ultimate jury
trial of the Personal Injury Claims for those who desire such a trial, which
is a right protected by statute. A new plan may provide different amounts for
compensation and different procedures and standards for qualification. No
assurance can be given as to the details or likelihood of approval of any
alternative plan, or when such alternative may become available.
Page 22
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE II
INTRODUCTION
2.1 PURPOSE OF DISCLOSURE STATEMENT. The purpose of this Disclosure
Statement is to provide sufficient information about the Debtor to enable the
holders of impaired Claims against the Debtor to make an informed decision
with respect to acceptance or rejection of the Plan. This Disclosure Statement
should be read in its entirety prior to voting on the Plan. (The voting
process is discussed in section 2.3(G) of this Disclosure Statement.) This
Disclosure Statement describes various transactions contemplated under the
Plan. Each Creditor, Interest Holder or other party in interest is urged to
carefully consider the Plan and this Disclosure Statement in their entirety
and, if legal or other counsel is available, to consult with such counsel, if
necessary, to understand the Plan and its effects, including possible tax
consequences, before voting.
2.2 EXPLANATION OF CHAPTER 11. Chapter 11 is the principal reorganization
chapter of the Bankruptcy Code. Upon the commencement of a chapter 11 case,
section 362 of the Bankruptcy Code provides for an automatic stay of all
attempts to collect upon claims against a debtor that arose prior to the
bankruptcy filing. Generally speaking, the automatic stay prohibits
interference with a debtor's property or business.
Under chapter 11, a debtor attempts to reorganize its business for the
benefit of the debtor, its creditors, and shareholders. Confirmation of a plan
of reorganization is the primary purpose of a reorganization case under
chapter 11 of the Bankruptcy Code. A plan of reorganization sets forth the
means for satisfying all claims against, and interests in, a debtor.
Generally, a claim against a debtor arises from a normal debtor/creditor
transaction, such as a promissory note or a trade credit relationship, but may
also arise from other contractual arrangements or from alleged torts. An
interest in the debtor is held by a party that owns the debtor, such as a
shareholder.
After a plan of reorganization has been filed with a bankruptcy court, it
must be accepted by holders of impaired claims against, or interests in, the
debtor. Section 1125 of the Bankruptcy Code requires that a plan proponent
fully disclose adequate information about the debtor, its assets and the plan
of reorganization to creditors and shareholders before acceptances of that
plan may be solicited. This Disclosure Statement is being provided to the
holders of Claims against, or Interests in, the Debtor to satisfy the
requirements of section 1125 of the Bankruptcy Code.
The Bankruptcy Code provides that creditors and shareholders are to be
grouped into "classes" under a plan and that they are to vote to accept or
reject a plan by class. While courts have disagreed on the proper method to be
used in classifying creditors and shareholders, a general rule of thumb is
that creditors with similar legal rights are placed together in the same class
and shareholders with similar legal rights are placed together in the same
class. For example, creditors entitled to similar priority under the
Bankruptcy Code should be grouped together.
The Bankruptcy Code does not require that each claimant or shareholder vote
in favor of a plan in order for the court to confirm the plan. Rather, the
plan must be accepted by each class of claimants and shareholders (subject to
an exception discussed below). A class of claimants accepts the plan if, of
the claimants in the class who actually vote on the Plan, such claimants
holding at least two-thirds in dollar amount and more than one-half in number
of allowed claims vote to accept the plan. For example, if a hypothetical
class has ten creditors that vote and the total dollar amount of those ten
creditors' claims is $1,000,000, then for such class to have accepted the
plan, six or more of those creditors must have voted to accept the plan (a
simple majority) and the claims of the creditors voting to accept the plan
must total at least $666,667 (a two-thirds majority).
Because all Personal Injury Claims are disputed and will not be liquidated
prior to the voting deadline, the Court must temporarily allow the Claims for
voting purposes. The Proponents have agreed to request that the Court
temporarily allow all Personal Injury Claims for voting purposes. The Court
has previously reserved its ruling on whether some method of "weighting" of
votes within classes of Personal Injury Claimants will be necessary to
determine whether the vote of Claimants has reached the requisite level of
two-thirds in dollar amount of Claims.
The Court may confirm the Plan even though fewer than all classes of Claims
and Interests vote to accept the Plan. In this instance, the Plan must be
accepted by at least one "impaired" class of Claims, without including any
acceptance of the Plan by an Insider. Section 1124 of the Bankruptcy Code
defines "impairment" and generally provides that a claim as to which legal,
equitable or contractual rights are altered under a plan is deemed to be
"impaired." Under the Plan, Classes 4 through 21 (other than class 4B) and
Class 24 are impaired.
If all impaired classes of Claims under the Plan do not vote to accept the
Plan and at least one impaired class of Claims votes to accept the Plan, the
Debtor is entitled to request, and has requested, that the Court confirm the
Plan pursuant to the "cramdown" provisions of section 1129(b) of the
Bankruptcy Code. These "cramdown" provisions permit the Plan to be
Page 23
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
confirmed over the dissenting votes of classes of Claims if the Court
determines that the Plan does not discriminate unfairly and is fair and
equitable with respect to each impaired, dissenting class of Claims.
Independent of the acceptance of the Plan as described above, in order to
confirm the Plan the Court must determine that the requirements of section
1129(a) of the Bankruptcy Code have been satisfied. See "Requirements for
Confirmation of the Plan," Article XIV, at pp. 112-113 of the Disclosure
Statement, for a discussion of the section 1129(a) requirements for
confirmation of a plan of reorganization.
The Proponents believe that the Plan satisfies the confirmation
requirements of the Bankruptcy Code. Confirmation of the Plan makes the Plan
binding upon the Debtor, the Reorganized Debtor, all creditors, Shareholders,
and other parties in interest irrespective of whether they have filed proofs
of claim or voted to accept the Plan.
2.3 PROCEDURE FOR FILING PROOFS OF CLAIM AND PROOFS OF INTEREST.
A. BAR DATE FOR FILING OF ALL PROOFS OF CLAIM (OTHER THAN ADMINISTRATIVE
CLAIMS) AND PROOFS OF INTEREST. In order to participate in the payments and
other distributions under the Plan, a Creditor must have an Allowed Claim
against, and an Interest Holder must have an Allowed Interest in, the
Debtor. The first step in obtaining an Allowed Claim or an Allowed Interest
is generally filing a proof of claim or proof of interest.
A proof of claim or proof of interest is deemed filed for any Claim or
Interest that appears in the Schedules which were filed in the Case, except
a Claim or Interest that is scheduled as disputed, contingent, unliquidated
or in an unknown amount. In other words, if a Creditor or Interest Holder
agrees with the amount of the Claim or Interest as scheduled by the Debtor,
and that Claim or Interest is not listed in the Schedules as being
disputed, contingent, or unliquidated, it is not necessary that a separate
proof of claim or proof of interest be filed.
Claims that are unscheduled, or that are scheduled as disputed,
contingent, or unliquidated will be recognized and allowed only if a proof
of claim or proof of interest is timely filed. If a Claim was scheduled in
a finite amount and the Claimant believed the Claim was understated, the
Claimant was required to file a proof of claim for the larger amount or be
forced to accept the amount for which it is scheduled. The Schedules are on
file with the Clerk of the Court and are available for inspection during
regular Court hours, subject to orders of the Court concerning
confidentiality of certain information in the Schedules.
On February 15, 1996, the Debtor filed a motion seeking approval of
certain notice procedures and the establishment of the Bar Date. On July
29, 1996, the Court, following its review of a stipulation among the Debtor
and other parties in interest regarding the notice procedures for the Case,
entered the Bar Order establishing January 15, 1997 (or February 14, 1997
with respect to Claims of Implant Claimants who continuously maintained
their residence outside of the United States, its territories and Puerto
Rico during the period from September 15, 1996 through November 15, 1996)
as the Bar Date for all Claims in the Case.
B. CONFIDENTIALITY REGARDING FILED PERSONAL INJURY CLAIMS. At the
request of the Tort Committee early in the Case, the Court entered an order
providing certain confidentiality protections for Claims filed by Personal
Injury Claimants. During the course of the Case, the Court has entered
further orders providing access for certain parties to Claims information
based on a demonstrated need for the information. The Proponents will use
their best efforts to preserve the confidentiality protections for Claims
filed by Settling Personal Injury Claimants, consistent with the rights of
certain third parties to obtain access to Claims information. Other parties
may seek broader access to Claim information of Settling Personal Injury
Claimants. The Proponents cannot assure Settling Personal Injury Claimants
that it will be possible to preserve such confidentiality protections. With
respect to Claims of Non-Settling Personal Injury Claimants, lawsuits must
be filed in the District Court as provided in the Litigation Facility
Agreement.
C. FILING OF CLAIMS ON BEHALF OF PERSONAL INJURY CLAIMANTS. Various
Entities, including many of the defendants in the breast implant
litigation, have filed proofs of claim against the Debtor pursuant to
section 501(b) of the Bankruptcy Code and Bankruptcy Rule 3005, which
permits an Entity that is or may be co-liable with the Debtor to file a
proof of claim on behalf of a Claimant who has not filed his or her own
proof of claim (referred to herein as the "RULE 3005 CLAIMS"). In general,
the Rule 3005 Claims were filed on behalf of Personal Injury Claimants (i)
who did not themselves timely file proofs of claim against the Debtor and
(ii) who have asserted or may assert Claims against the Entity filing the
Rule 3005 Claims (or their affiliates), based on the same or similar facts
and circumstances underlying their Claims against the Debtor. The Rule 3005
Claims may not include all Claims that could be asserted by a Claimant on
whose behalf they were filed. Interested parties may obtain a list of the
names of the more than 50 Entities
Page 24
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
that have filed Rule 3005 Claims and may request a copy of any proof of
claims filed on their behalf by calling the designated representative for
such inquiries at 1-800-651-7030 (for Domestic Claimants) or 1-202-332-5510
(for Foreign Claimants).
As a result of the Rule 3005 Claims, Claimants on whose behalf timely
Claims were filed (the "RULE 3005 CLAIMANTS") may have a further
opportunity to participate in the bankruptcy even though they did not
themselves file proofs of claim. Pursuant to Bankruptcy Rule 3005, if a
Rule 3005 Claimant files a "notice" of intention to act in the Claimant's
own behalf, as referred to in that rule (the "NOTICE OF INTENT"), with the
Court prior to the balloting deadline, the Claimant will (subject to
meeting all other Court requirements) be entitled to vote on the Plan.
However, the Rule 3005 Claimants' rights to receive payments under the Plan
are subject to the objections to the Rule 3005 Claims that have been filed
by certain parties, including the objections filed by the Commercial
Committee. In the event the Plan becomes effective, a Personal Injury
Claimant who files the Notice of Intent with the Court on or before 90 days
after the Plan becomes effective will thereby have all rights as specified
in the Rule 3005 Claim filed on her or his behalf and will be entitled to
assert such Rule 3005 Claim under the Claim resolution procedures
established pursuant to the Plan. The procedures applicable to filing a
Notice of Intent are specified in section 6.6(J)(4)(d) of this Disclosure
Statement. The Claims of Rule 3005 Claimants who do not timely file a
Notice of Intent shall be disallowed.
D. BAR DATE FOR ADMINISTRATIVE CLAIMS. Unless otherwise ordered by the
Court, the Confirmation Order will operate to set a bar date for
Administrative Claims (other than Claims arising in the ordinary course of
the Debtor's business operations), which bar date shall be 75 calendar days
after the Effective Date. Claimants holding such non-ordinary course
Administrative Claims not Allowed by the Confirmation Date may submit
proofs of claim on or before such bar date. The notice of confirmation to
be delivered pursuant to Bankruptcy Rules 3020(c) and 2002(f) will identify
such date and will constitute notice of the Administrative Claims bar date.
The Reorganized Debtor will have 180 calendar days after the Administrative
Claims bar date to review and object to any such Administrative Claims.
Unless otherwise resolved, a hearing to determine the allowability of such
Administrative Claims will be held by the Court. It is anticipated that the
Confirmation Order will specify the mechanics for final fee applications by
professionals retained in the Case.
E. EFFECT OF AMENDMENTS TO SCHEDULES. If, prior to the Confirmation
Date, the Debtor amends downward any Claim or Interest shown on the
Schedules, the affected Claimant or Interest Holder will be notified and
will be given 30 calendar days from the date of the mailing of the notice
in which to file a proof of claim or proof of interest, if the affected
Claimant or Interest Holder so desires. The Reorganized Debtor reserves the
right, consistent with section 11.1 of the Plan, to object to Claims.
F. EXECUTORY CONTRACTS AND UNEXPIRED LEASES. A Party to an executory
contract or lease that is rejected by the Debtor under the Plan (see
Article Nine of the Plan) must file any Claim for damages resulting from
such rejection within 30 calendar days after the Effective Date. If any
order providing for the rejection of an executory contract or unexpired
lease (other than rejection effected pursuant to Article Nine of the Plan)
did not provide a deadline for the filing of Claims arising from such
rejection, proofs of claim with respect thereto must be filed within 30
days after the later to occur of (i) the Effective Date or (ii) if the
order is entered after the Effective Date, the date of the entry of such
order, or such Claims shall be barred. The Debtor does not anticipate any
material liability to result from the rejection of executory contracts
under the Plan.
G. VOTING PROCEDURES AND REQUIREMENTS.
1. PERSONS ENTITLED TO VOTE. The Proponents are soliciting
acceptances of the Plan from the holders of Claims and Interests in
Classes 4 through 21 (other than Class 4B) and 24. Each of these classes
is impaired under the Plan and the holders of Claims in those classes
are entitled to vote on the Plan in accordance with the provisions of
the Bankruptcy Code. The holders of Claims classified in Classes 1, 2,
3, 4B, 22 and 23 are not entitled to vote under the Plan, as such
holders are either receiving their statutory treatment under the
Bankruptcy Code or are not impaired under the Plan.
Any Claim as to which an objection is filed before voting has
commenced is not entitled to vote, unless the Court, upon motion of the
holder whose Claim has been objected to or the motion of another party
in interest, temporarily allows the Claim in an amount that the Court
deems proper for the purpose of voting to accept or reject the Plan. The
Proponents have agreed that holders of Personal Injury Claims shall have
their Claims temporarily Allowed for purposes of voting. The Court
entered the order implementing that agreement on February 4, 1999. A
vote may be disregarded or disallowed if the Court determines that it
was not solicited or procured in good faith or in accordance with the
provisions of the Bankruptcy Code.
Page 25
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
2. VOTING INSTRUCTIONS.
A. CODED BALLOTS. IT IS IMPORTANT THAT CREDITORS EXERCISE THEIR
RIGHT TO VOTE TO ACCEPT OR REJECT THE PLAN. All known creditors
entitled to vote on the Plan have been sent a ballot, together with
instructions for voting, with this Disclosure Statement. Creditors
should read the ballot carefully and follow the instructions
contained therein. In voting for or against the Plan, use only the
coded ballot or ballots sent with this Disclosure Statement. If a
Creditor has Claims in more than one class with respect to the
Debtor, it will receive multiple ballots.
THE DETAILED INSTRUCTIONS FOR COMPLETION OF YOUR BALLOT ARE
INCLUDED WITH THE BALLOT AND SHOULD BE CAREFULLY REVIEWED. IF YOU
RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH BALLOT IS
FOR A SEPARATE CLAIM AND THAT YOU SHOULD COMPLETE AND RETURN ALL SUCH
BALLOTS AS INSTRUCTED BELOW. IF YOU ARE A MEMBER OF A CLASS WITH
RESPECT TO THE PLAN AND YOU DID NOT RECEIVE A BALLOT FOR SUCH CLASS,
OR IF YOUR BALLOT IS DAMAGED OR LOST, OR IF YOU BELIEVE YOU MAY BE
COVERED BY A RULE 3005 FILING AS DESCRIBED ABOVE AT PAGES 24-25, OR
IF YOU HAVE ANY QUESTIONS CONCERNING THE VOTING PROCEDURES, PLEASE
CALL 1-800-651-7030 (DOMESTIC CLAIMANTS) OR 1-202-332-5510 (FOREIGN
CLAIMANTS).
B. RETURNING BALLOTS. THE VOTING DEADLINE IS MAY 14, 1999, AT 5:00
PM, EASTERN TIME. IF YOU ARE THE BENEFICIAL OWNER OF ANY PUBLIC
SECURITY ISSUED BY THE DEBTOR HELD IN RECORD NAME BY A BANK OR
BROKER, YOU MUST RETURN YOUR BALLOT TO YOUR BANK OR BROKER, OR THE
AGENT OF SUCH PARTIES, IN SUFFICIENT TIME FOR THEM TO PROCESS IT AND
RETURN IT TO THE BALLOTING AGENT, CORPORATE ELECTION SERVICES, BY THE
VOTING DEADLINE. IF YOU ARE THE HOLDER OF ANY PUBLIC SECURITY ISSUED
BY THE DEBTOR WHICH IS HELD IN YOUR NAME, OR IF YOU ARE NOT THE
HOLDER OF A PUBLIC SECURITY ISSUED BY THE DEBTOR, YOU SHOULD COMPLETE
AND SIGN EACH ENCLOSED BALLOT AND RETURN IT IN THE ENCLOSED ENVELOPE
TO CORPORATE ELECTION SERVICES BY THE VOTING DEADLINE AT THE
FOLLOWING ADDRESS:
CORPORATE ELECTION SERVICES
P.O. BOX 2400
PITTSBURGH, PA 15230
OR:
CORPORATE ELECTION SERVICES
650 SMITHFIELD STREET, 5TH FLOOR
PITTSBURGH, PA 15222
(OVERNIGHT DELIVERY ADDRESS)
AGAIN, IN ORDER TO BE COUNTED, BALLOTS MUST BE ACTUALLY RECEIVED
BY CORPORATE ELECTION SERVICES ON OR BEFORE THE VOTING DEADLINE.
3. SPECIAL INSTRUCTIONS FOR HOLDERS OF PUBLIC DEBT CLAIMS. The
record date for determining which holders of Public Debt Claims are
entitled to vote on the Plan is February 9, 1999, the third business
day after the entry of the order approving the Disclosure Statement.
Persons who acquire Public Debt Claims after the record date will not
be entitled to vote on the Plan.
4. PUBLIC DEBT CLAIMS HELD IN NOMINEE NAME. Bank and broker
nominees will be requested to transmit a ballot and a copy of this
Disclosure Statement to each beneficial owner of Public Debt Claims
that are held in the name of nominees. Such nominees will also be
requested to transmit instructions for returning ballots to the
beneficial owners of such Claims. THE INDENTURE TRUSTEES FOR PUBLIC
DEBT CLAIMS WILL NOT VOTE ON BEHALF OF THE BENEFICIAL OWNERS OF SUCH
SECURITIES. THE BENEFICIAL OWNERS OF SUCH SECURITIES MUST SUBMIT
THEIR BALLOTS TO THEIR BANK OR BROKER IN ACCORDANCE WITH
THE PROCEDURES
Page 26
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
DESCRIBED ABOVE. DO NOT RETURN ANY INSTRUMENTS EVIDENCING YOUR
SECURITIES WITH YOUR BALLOT. ANY BENEFICIAL OWNER OF A PUBLIC DEBT
CLAIM WHO DOES NOT RECEIVE A BALLOT AND VOTING INSTRUCTIONS SHOULD
CONTACT EITHER THE INDENTURE TRUSTEE UNDER THE INDENTURE GOVERNING
SUCH PUBLIC SECURITY OR MORROW & CO., INC, AT (212) 754-8000 OR TOLL-
FREE AT (800) 566-9061.
5. INCOMPLETE OR IRREGULAR BALLOTS. The ballot will designate the
class in which each Claimant's ballot will be counted. If a Claimant
disagrees with the class designated on its ballot, the Claimant may
file an objection to its classification with the Court. Ballots that
are signed and returned but not expressly voted either to accept or
reject the Plan will not be counted.
6. BALLOT RETENTION. Original ballots of Claimants and
Shareholders will be retained by Corporate Election Services for six
months following the Confirmation Date.
7. APPROVAL OF DISCLOSURE STATEMENT. On February 4, 1999, the
Court approved this Disclosure Statement as containing adequate
information in accordance with section 1125 of the Bankruptcy Code. A
copy of the "Order Approving Disclosure Statement With Respect to
Plan of Reorganization of Dow Corning Corporation" is attached as
EXHIBIT "A" to this Disclosure Statement.
8. CONFIRMATION HEARING. The Court has set the Confirmation
Hearing for 9:30 A.M., Eastern Time on JUNE 28, 1999, before the
Honorable Arthur J. Spector, United States Bankruptcy Judge, at the
United States Bankruptcy Courthouse, 111 First Street, Bay City,
Michigan, or as relocated upon further notice. The Confirmation
Hearing may be adjourned by the Court from time to time and from
place to place without further notice except for an announcement made
in open court at the Confirmation Hearing or any continued hearing
thereon.
9. OBJECTIONS. Section 1128(b) of the Bankruptcy Code provides
that any party in interest may object, in writing, to confirmation of
a plan of reorganization. Written objections to confirmation of the
Plan, if any, must be filed with the Court and a copy of such written
objections must be actually received by counsel for the Debtor,
counsel for the Shareholders, counsel for each of the Official
Committees, and on the United States Trustee at the following
addresses on or before APRIL 19, 1999:
COUNSEL FOR THE DEBTOR: SHEINFELD, MALEY & KAY, P.C.
ATTENTION: BARBARA J. HOUSER, ESQ.
1700 PACIFIC AVENUE, SUITE 4400
DALLAS, TEXAS 75201-4618
(214) 953-0700
COUNSEL FOR DOW CHEMICAL: MAYER, BROWN & PLATT
ATTENTION: RICHARD BROUDE, ESQ.
1675 BROADWAY
NEW YORK, NEW YORK 10019-5820
COUNSEL FOR CORNING: SHEARMAN & STERLING
ATTENTION: DEBRA MCCULLOUGH, ESQ.
599 LEXINGTON AVENUE, ROOM 440
NEW YORK, NEW YORK 10022
COUNSEL FOR THE TORT KRAMER LEVIN NAFTALIS & FRANKEL LLP
COMMITTEE: ATTENTION: KENNETH H. ECKSTEIN, ESQ.
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3850
(212) 715-9100
Page 27
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
COUNSEL FOR THE COMMERCIAL
DAVIS POLK & WARDWELL
COMMITTEE: ATTENTION: DONALD S. BERNSTEIN, ESQ.
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
COUNSEL FOR THE PHYSICIANS
BENESCH, FRIEDLANDER, COPLAN & ARONOFF
COMMITTEE: ATTENTION: H. JEFFREY SCHWARTZ, ESQ.
2300 BP TOWER
200 PUBLIC SQUARE
CLEVELAND, OHIO 44114-2378
(216) 363-4500
UNITED STATES TRUSTEE: OFFICE OF THE UNITED STATES TRUSTEE
ATTENTION: LESLIE BERG, ESQ.
477 MICHIGAN AVENUE, SUITE 1760
DETROIT, MICHIGAN 48226
(313) 226-7999
Objections not timely filed and actually received by the above
parties will not be considered by the Court.
Page 28
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE III
GENERAL INFORMATION ABOUT THE DEBTOR
3.1 DOW CORNING CORPORATION.
A. FORMATION OF DCC. DCC was incorporated in 1943 by Corning Glass Works
(now "CORNING INCORPORATED") and The Dow Chemical Company ("DOW CHEMICAL")
for the purpose of developing and producing polymers and other materials
based on silicone chemistry. Corning Incorporated provided the basic
silicone technology to DCC, and Dow Chemical supplied the chemical
processing and manufacturing know-how. As of the Petition Date and
continuing throughout the Case, Corning Incorporated and Dow Holdings, Inc.
(a wholly owned subsidiary of Dow Chemical) have each owned 50% of DCC's
outstanding common stock.
1. DCC MANAGEMENT.
A. CURRENT DCC OFFICERS.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<C> <C> <S>
Richard A. Hazleton 56 Chairman and Chief Executive Officer
--------------------------------------------------------------------
Gary E. Anderson 53 President
--------------------------------------------------------------------
Siegfried Haberer 55 Executive Vice President
--------------------------------------------------------------------
John W. Churchfield 51 Vice President, Planning and Finance and
Chief Financial Officer
--------------------------------------------------------------------
James R. Jenkins 53 Vice President, Secretary and General
Counsel
--------------------------------------------------------------------
Barbara S. Carmichael 50 Vice President, Executive Director
Corporate Communications
--------------------------------------------------------------------
Gifford E. Brown 52 Vice President, Executive Director Human
Resources
--------------------------------------------------------------------
James V. Chittick 58 Vice President, Executive Director
Manufacturing and Engineering
--------------------------------------------------------------------
Leon D. Crossman 59 Vice President, Executive Director
Science and Technology
--------------------------------------------------------------------
Burnett S. Kelly 54 Vice President, President Dow Corning
Americas
--------------------------------------------------------------------
Robert P. Krasa 52 Vice President, General Manager Core
Products Business Group
--------------------------------------------------------------------
Richard H. Hoover 50 Vice President, President Dow Corning
Asia
--------------------------------------------------------------------
Jere D. Marciniak 51 Vice President, President Dow Corning
Europe
--------------------------------------------------------------------
Charles W. Lacefield 58 Vice President, Executive Director
Business Processes and Information
Technology
--------------------------------------------------------------------
Endvar Rossi 51 Vice President, Executive Director
Marketing and Sales
--------------------------------------------------------------------
Neville J. Whitfield 54 Vice President, General Manager Advanced
Materials Business Group
--------------------------------------------------------------------
</TABLE>
Page 29
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
B. CURRENT DCC DIRECTORS.
<TABLE>
<CAPTION>
NAME POSITION(S)
<C> <S>
Richard A. Hazleton Chairman of the Board of Directors, Chief Executive
Officer, DCC
-------------------------------------------------------------------------
Roger G. Ackerman Chairman and Chief Executive Officer, Corning
Incorporated
-------------------------------------------------------------------------
Gary E. Anderson President, DCC
-------------------------------------------------------------------------
David T. Buzelli Senior Consultant to Dow Chemical (Former Vice
President, Environment, Health & Safety, Public
Affairs and Information Systems, Dow Chemical)
-------------------------------------------------------------------------
Van C. Campbell Vice Chairman-Finance and Administration, Corning
Incorporated
-------------------------------------------------------------------------
Enrique C. Falla Senior Consultant to Dow Chemical (Former Executive
Vice President, Dow Chemical)
-------------------------------------------------------------------------
Norman E. Garrity President, Corning Technologies
-------------------------------------------------------------------------
W.S. Stavropoulos President and Chief Executive Officer, Dow Chemical
</TABLE>
-------------------------------------------------------------------------
Detailed biographies of the officers and directors listed above
are attached as EXHIBIT "D."
2. BUSINESS OF DCC AND ITS SUBSIDIARIES.
A. RAW MATERIALS USED BY DCC AND ITS SUBSIDIARIES TO MANUFACTURE
PRODUCTS. The principal raw material used in the production of DCC's
products is silicon. DCC purchases chemical grade silicon from
producers who manufacture the silicon from quartz that has been
reacted with carbon at high temperatures. The majority of DCC's
anticipated annual requirements are satisfied by its silicon supply
contracts. DCC believes that it has adequate sources of supply of
silicon and that adequate supplies of quartz are available to the
producers of silicon. DCC considers worldwide production capacity of
silicon to be adequate to meet expected demand and does not expect
shortages.
DCC also purchases substantial quantities, and believes it has
adequate sources of supply, of methanol, methyl chloride, and other
raw materials required for its manufacturing operations. Although
temporary shortages of particular raw materials may occur from time
to time, DCC believes that adequate sources of those raw materials
required to maintain its operations exist.
B. PRODUCTS MANUFACTURED BY DCC. DCC and its Subsidiaries develop,
manufacture and market over 10,000 silicon-based products serving a
wide variety of industries ranging, alphabetically, from the
aerospace to the textiles industries.
B. DISTRIBUTION AND SALE OF PRODUCTS. The bulk of DCC's products are
sold to purchasers for use in manufacturing or construction. DCC does not
expend substantial amounts for mass market advertising due to its limited
involvement in direct markets for consumer products. Rather, DCC focuses on
providing a high level of technical support to its customers. DCC seeks to
enhance sales by providing customers promptly with new formulations to meet
changing needs and assisting customers in using DCC products effectively.
Reflecting this fact, DCC has established a number of product market
planning and implementation teams organized around particular product
markets. These teams often work cooperatively with DCC's customers to
develop new products, which DCC then manufactures and sells as components
to be incorporated into customers' finished products.
DCC markets its products on a world-wide basis through both a direct
sales force and independent wholesale sales representatives. The Company
sells its products directly to its largest customers and utilizes wholesale
distributors to distribute DCC's product to end users who purchase smaller
quantities of DCC's products. DCC believes that its distribution network
for silicon-based products is one of the most extensive in the world.
C. RESEARCH AND DEVELOPMENT OPERATIONS. During the last five years, DCC
has consistently expended approximately 8% of net sales on research and
development, expenditures that it believes generally exceed the industry
average. Research and development expenditures totaled $210.4 million in
1997; $203.5 million in 1996; $194.5 million in 1995; $174 million in 1994;
and $163.9 million in 1993. As a result of DCC's focus on research and
development,
Page 30
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
DCC's sales of products that, within the past five years, were new,
modified or employed in new applications comprised in excess of 15% of DCC'
total sales for each of the last five years.
DCC and its subsidiaries operate four principal research and development
facilities located in the United States, Belgium, Japan and Wales. DCC and
its subsidiaries also operate technical service centers in the United
States, Australia, Belgium, Brazil, France, Germany, Japan, South Korea,
Taiwan and the United Kingdom.
D. CORPORATE ORGANIZATION OF DCC AND ITS OPERATING DIVISIONS. DCC is a
corporation incorporated under the laws of the State of Michigan. Its
corporate headquarters are located near Midland, Michigan. DCC maintains
manufacturing facilities in Midland and Hemlock, Michigan; Greensboro,
North Carolina; and Elizabethtown and Carrollton, Kentucky. DCC conducts a
major portion of its research and development program at its corporate
facility near Midland, Michigan. DCC conducts the sale of its products
through geographically based operating divisions: Dow Corning Europe, Dow
Corning Asia and Dow Corning Americas. Although segregated for accounting
and internal reporting purposes, these divisions are not separate entities
from DCC.
3.2 CORPORATE ORGANIZATION OF NON-DEBTOR JOINT VENTURES AND SUBSIDIARIES
OF DCC. Listed below are the Non-Debtor Joint Ventures and Subsidiaries of
DCC. Those entities which are indented are owned indirectly, i.e., by the
Subsidiary or Joint Venture of DCC listed immediately above such entries. For
a more detailed summary of the business activities of the Joint Ventures and
Subsidiaries, see EXHIBIT "E" to this Disclosure Statement.
<TABLE>
<CAPTION>
DCC
NAME GOVERNING OWNERSHIP OR
JURISDICTION INTEREST (IF LESS
THAN 100%)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
JOINT VENTURES:
- ----------------------------------------------------------------------------------------------------
Hemlock Semiconductor Corporation Michigan 63.25%
- ----------------------------------------------------------------------------------------------------
SDC Technologies, Inc./9/ Delaware 50%
SDC Coatings, Inc./10/ Delaware 50%
Applied Hardcoating Technologies, Inc. Delaware 50%
- ----------------------------------------------------------------------------------------------------
Dow Corning Toray Silicone Co., Ltd. Japan 65%
- ----------------------------------------------------------------------------------------------------
DOMESTIC SUBSIDIARIES:
- ----------------------------------------------------------------------------------------------------
Devonshire Underwriters Limited Bermuda
- ----------------------------------------------------------------------------------------------------
Dow Corning Foreign Sales Corporation U.S. Virgin Islands
- ----------------------------------------------------------------------------------------------------
Dow Corning STI, Inc. Delaware
- ----------------------------------------------------------------------------------------------------
Site Services, Inc. Delaware
- ----------------------------------------------------------------------------------------------------
DC Liquid System Technologies, Inc. Delaware
- ----------------------------------------------------------------------------------------------------
Bay Asset Funding Corporation Delaware
- ----------------------------------------------------------------------------------------------------
Dow Corning Silicon Energy Systems, Inc. Delaware
- ----------------------------------------------------------------------------------------------------
Wickhen Products of Delaware Delaware
Recon Associates Delaware
Wickhen Products, Inc. Wisconsin
Agron, Inc. Delaware
- ----------------------------------------------------------------------------------------------------
Dow Corning Enterprises Inc. Delaware
Universal Silicones and Lubricants Ltd. India 49.9%
Dow Corning Polska Sp. zo.o Poland
</TABLE>
- ----------------------
/9 /Interest held through subsidiary holding company, Dow Corning
Enterprises.
/10/Indented entities are owned by the DCC subsidiary named at the margin;
ownership interest is DCC's indirect ownership.
Page 31
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
DCC
NAME GOVERNING OWNERSHIP OR
JURISDICTION INTEREST (IF LESS
THAN 100%)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
DCC INTERAMERICAN SUBSIDIARIES:
- ----------------------------------------------------------------------------------------------------
Dow Corning de Argentina S.A.I.C. Argentina 95%
- ----------------------------------------------------------------------------------------------------
Dow Corning do Brazil LTDA Brazil
Sil Trade Brazil 49%
- ----------------------------------------------------------------------------------------------------
Dow Corning Canada, Inc. Canada
- ----------------------------------------------------------------------------------------------------
Dow Corning de Colombia, S.A. Colombia
- ----------------------------------------------------------------------------------------------------
Dow Corning de Mexico S.A. de C.V. Mexico
- ----------------------------------------------------------------------------------------------------
Dow Corning Puerto Rico, Inc. Puerto Rico
- ----------------------------------------------------------------------------------------------------
Dow Corning de Venezuela S.A. Venezuela
- ----------------------------------------------------------------------------------------------------
Dow Corning Chile S.A. Chile
- ----------------------------------------------------------------------------------------------------
DCC ASIAN SUBSIDIARIES:
- ----------------------------------------------------------------------------------------------------
Dow Corning Asia Ltd. Japan
- ----------------------------------------------------------------------------------------------------
Dow Corning Australia PTY, Ltd. Australia
- ----------------------------------------------------------------------------------------------------
Dow Corning China Limited Hong Kong
- ----------------------------------------------------------------------------------------------------
Dow Corning Korea Ltd. South Korea
- ----------------------------------------------------------------------------------------------------
Dow Corning New Zealand Ltd. New Zealand
- ----------------------------------------------------------------------------------------------------
Dow Corning Singapore PTE, Ltd. Singapore
- ----------------------------------------------------------------------------------------------------
Dow Corning Taiwan Inc. Taiwan
- ----------------------------------------------------------------------------------------------------
Dow Corning (Thailand) Ltd. Thailand
- ----------------------------------------------------------------------------------------------------
Dow Corning (Shanghai) Co. Ltd./11/ People's
Republic of
China
- ----------------------------------------------------------------------------------------------------
Dow Corning Malaysia Sdn. Bhd. Malaysia
</TABLE>
- --------------------------------------------------------------------------------
- ----------------------
/11/Interest held through subsidiary holding company, Dow Corning
Enterprises.
Page 32
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
<TABLE>
<CAPTION>
DCC
NAME GOVERNING OWNERSHIP OR
JURISDICTION INTEREST (IF LESS
THAN 100%)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
DCC EUROPEAN SUBSIDIARIES:
- ----------------------------------------------------------------------------------------------------
DC Belgian Pension Fund (ASBL) Belgium
- ----------------------------------------------------------------------------------------------------
Dow Corning Construction S.A. France
- ----------------------------------------------------------------------------------------------------
DC STI S.A. France
- ----------------------------------------------------------------------------------------------------
Dow Corning France S.A. France
- ----------------------------------------------------------------------------------------------------
Dow Corning GmbH (Weisbaden) Germany
- ----------------------------------------------------------------------------------------------------
Dow Corning GesmbH (Austria) Austria
- ----------------------------------------------------------------------------------------------------
Dow Corning Iberica S.A. Spain
- ----------------------------------------------------------------------------------------------------
Dow Corning Investment S.A. Belgium
Dow Corning Coordination Center S.A. Belgium
- ----------------------------------------------------------------------------------------------------
Dow Corning Limited United Kingdom
Dow Corning Hansil Limited England
Dow Corning STI Limited England
- ----------------------------------------------------------------------------------------------------
Dow Corning S.A. Belgium
- ----------------------------------------------------------------------------------------------------
Dow Corning S.p.A. Italy
- ----------------------------------------------------------------------------------------------------
DC Krafft S.A. Spain 65%
- ----------------------------------------------------------------------------------------------------
Dow Corning Nordic AB Sweden
</TABLE>
3.3 BREAST IMPLANT LITIGATION.
A. BACKGROUND. Prior to January 6, 1992, DCC, directly and through its
wholly owned subsidiary, Dow Corning Wright Corporation, was engaged in the
manufacture and sale of breast implants and the raw material components of
these products. (Dow Corning Wright Corporation was merged into DCC prior
to the Petition Date.) As part of a review process initiated in 1990 by the
United States Food and Drug Administration ("FDA") of Premarket Approval
Applications ("PMAA") for silicone gel breast implants, on January 6, 1992,
the FDA asked breast implant producers and medical practitioners
voluntarily to halt the sale and use of silicone gel breast implants
pending further review of the safety and effectiveness of such devices. DCC
complied with the FDA's request and suspended shipments of implants.
Subsequently, DCC announced that it would not resume the production or sale
of silicone gel breast implants and that it would withdraw its PMAA for
silicone gel breast implants from consideration by the FDA.
B. PROCEDURAL POSTURE OF SILICONE GEL BREAST IMPLANT
LITIGATION. Beginning in 1992, DCC experienced a substantial increase in
the number of lawsuits filed against it relating to breast implants. As of
the Petition Date, DCC had been named, often together with other
defendants, in more than 19,000 pending breast implant product liability
lawsuits filed by or on behalf of breast implant users. Many of these
lawsuits involve multiple plaintiffs.
In addition, there were 46 Breast Implant product liability class action
lawsuits filed against DCC as of the Petition Date. On June 25, 1992, the
Judicial Panel on Multi-District Litigation consolidated all federal Breast
Implant cases for discovery purposes in the MDL 926 Court under the Multi-
District Litigation rules "in order to avoid duplication of discovery,
prevent inconsistent pretrial rulings, preserve the resources of the
parties, their counsel and the judiciary." As of the Petition Date,
substantially all of the federal Breast Implant cases had been transferred
to the MDL 926 Court. As a result of the filing of the Case, all Breast
Implant litigation pending against DCC in the United States and its
territories has been stayed.
Page 33
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
In April 1995, United States District Court Judge Sam C. Pointer,
presiding in the MDL 926 Court, issued a ruling on motions filed by Dow
Corning asserting that various breast implant cases filed or pending in
federal courts in various jurisdictions by individuals from Australia, New
Zealand, Great Britain and Canada should be dismissed on the grounds of
forum non conveniens. Judge Pointer granted the motions with regard to
individual litigants from Australia, Canada and Great Britain, finding that
such cases should be dismissed, and directed that the claims of such
litigants should be resolved in tribunals outside the United States. With
respect to New Zealand litigants, Judge Pointer denied the motion based on
a determination that New Zealand claimants who had injuries arising during
the period 1974 to 1992 and who had failed to timely file an administrative
claim in New Zealand by October 1992 would not have an alternative forum in
New Zealand. The order expressly stated that the denial of the motion as to
New Zealand claimants was without prejudice to the submission of amended
motions upon a showing that most New Zealand claimants do have viable
claims in New Zealand.
C. SUBSTANTIVE ALLEGATIONS OF SILICONE GEL BREAST IMPLANT LITIGATION. In
the Breast Implant lawsuits pending against the Debtor, the plaintiffs
typically allege various theories of liability including, among other
things, products liability, conspiracy, fraud, and misrepresentation and
allege further that the Breast Implants caused specific ailments,
including, among other things, autoimmune disease, scleroderma, systemic
disorders, joint swelling and chronic fatigue. Plaintiffs also allege
injuries of chronic inflammation, pain, and disfigurement; and from rupture
of the implants. Some plaintiffs have also alleged that Breast Implants
have had an adverse impact on the children of Breast Implant recipients.
DCC is sometimes named as the manufacturer of the Breast Implants and at
other times is named as the supplier of silicone or other materials to
other Breast Implant manufacturers. Health care providers, including
doctors and hospitals, that have joined in such suits against DCC have
alleged similar theories of liability and have further alleged that DCC's
actions have resulted in a loss of business reputation to such health care
providers.
Plaintiffs in these lawsuits typically have sought relief in the form of
monetary damages, and have also asked for certain types of equitable relief
such as requiring DCC to fund the removal of the Claimants' Breast
Implants, to fund medical research into any ailments caused by Breast
Implants and to fund periodic medical checkups for the Claimants.
D. ATTEMPTED GLOBAL SETTLEMENT OF THE BREAST IMPLANT LITIGATION. On
March 24, 1994, DCC, along with other defendants and representatives of
breast implant litigation plaintiffs, entered into a settlement pursuant to
a Breast Implant Litigation Settlement Agreement (as amended by the MDL 926
Court, the "ORIGINAL GLOBAL SETTLEMENT AGREEMENT"). Under the Original
Global Settlement Agreement, certain industry participants (the "FUNDING
PARTICIPANTS") agreed to contribute up to approximately $4.2 billion
(nominal), of which DCC agreed to contribute up to approximately $2.02
billion (nominal), over a period of more than 30 years. Although the
Original Global Settlement Agreement covered claims of most breast implant
recipients and related Claimants brought in federal or state courts, at
least 5,000 U.S. claimants and 2,000 potential foreign Claimants with
Claims against DCC elected not to settle their claims in the Original
Global Settlement Agreement and elected to pursue their individual breast
implant litigation against DCC. Under the terms of the Original Global
Settlement Agreement, in certain circumstances, DCC had the option to
withdraw from participation in the settlement. The final approval of the
Original Global Settlement Agreement by the MDL 926 Court on September 1,
1994 was appealed to the U.S. Court of Appeals for the Eleventh Circuit
primarily by certain providers of health care indemnity payments or
services and by certain foreign Claimants. A number of the appellants have
since filed suggestions of mootness regarding their appeals.
On or about May 1, 1995, the MDL 926 Court advised the parties of its
conclusions that a study of a sample of the current disease compensation
settlement fund claims indicated that the total amount of current claims
likely to be approved for payment would substantially exceed the $1.2
billion then committed under the Original Global Settlement Agreement to
pay such current claims and that, accordingly, amounts payable under the
current disease compensation settlement fund would be less than the amounts
specified in the Original Global Settlement Agreement. In addition, the MDL
926 Court requested that the parties to the Original Global Settlement
Agreement commence negotiations relating to possible modifications of the
Original Global Settlement Agreement.
On October 9, 1995, the MDL 926 Court issued an order indicating its
conclusions that (a) the total amount of claims that would qualify for
payment from the settlement fund would exceed the amount set aside for such
claims, (b) very large numbers of potential Claimants participating in the
settlement would elect to opt out of the settlement, (c) the Funding
Participants would not be willing to make their respective contributions to
a settlement which would leave so many potential claims unresolved and the
defendants would, therefore, withdraw from the settlement, and (d)
negotiations relating to possible modifications of the Original Global
Settlement Agreement were not successful in eliminating the apparent need
for reductions in benefits under the Original Global Settlement Agreement.
For these reasons, the MDL 926 Court ordered that all members of the class
of potential Claimants who did not initially opt out of the settlement
would have the ability to opt out during another period of indefinite
duration commencing December 1, 1995.
Page 34
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Certain of the Funding Participants--namely, Baxter Healthcare
Corporation, Bristol-Myers Squibb Company, McGhan Medical Corporation,
Minnesota Mining & Manufacturing Company, Union Carbide Corporation, and
certain of their related corporations--negotiated the Revised Settlement
Program for U.S. claimants who received an implant manufactured by at least
one of those manufacturers. The MDL 926 Court approved the Revised
Settlement Program by order entered on December 22, 1995.
Certain of the manufacturers who participated in the Revised Settlement
Program--namely Bristol Myers Squibb, Medical Engineering, Baxter
Healthcare, Baxter International and Minnesota Mining Manufacturing--also
negotiated a Foreign Settlement Program ("FSP") for foreign claimants who
received a breast implant manufactured by at least one of these companies.
The MDL 926 Court approved the Statement of Principles for the FSP on
December 20, 1996, and approved the Notice of the FSP and its terms on June
26, 1998. Under those terms, eligible foreign "Current Claimants" who do
not opt-out may receive disease and disability benefits under the Fixed
Amount Benefit Schedule only (no Long Term Disease Benefits) but without
any compensation or supplement for rupture. They may also receive a one-
time payment of $3,000 if their eligible breast implant was explanted after
April 1, 1994 and by December 15, 2010. People who are defined as "Other
Registrants" under the FSP are not eligible to receive any disease or
explantation benefits but are eligible to receive a one-time payment of
$3,500. Dow Corning is not a party to the FSP and the FSP categories,
including the classification called "Other Registrants" do not apply under
the Dow Corning Settlement Program.
The FSP was not a basis or model for the proposed Dow Corning Settlement
Program. Under the proposed Dow Corning Settlement Program, all Foreign
Claimants are eligible for both of the disease compensation options,
rupture benefits and explantation and Foreign Claimants are provided the
same settlement options (but at lesser monetary values) as Domestic
Claimants. Under the proposed Dow Corning Settlement Program, qualified
Foreign Claimants are offered enhanced benefits and options over the FSP.
The Proponents believe that the Dow Corning Settlement Program will provide
some qualified Foreign Claimants with opportunities for greater
compensation than foreign claimants received under the FSP. Some Foreign
Claimants will receive less than they received under the FSP. Foreign
Claimants should therefore consider the description of their treatment
under the Plan rather than in any materials relating to the FSP.
3.4 OTHER CLAIMS, LITIGATION AND INVESTIGATIONS.
A. OTHER IMPLANT LITIGATION. As of the Petition Date, DCC was either
named as a defendant in litigation or had been notified of potential claims
regarding various of its medical products or products manufactured by
others using materials supplied by DCC. A summary of those matters follows.
1. TMJ CLAIMS. Temporomandibular Joint ("TMJ") Claims arise from a
variety of surgical procedures performed in the area of the skull near
the ear where the lower jaw connects to the skull. There are a number of
TMJ procedures, only some of which involve the use of DCC products. DCC
products employed by surgeons in TMJ procedures have included silicone
"sheeting," a formed piece of sheeting known as a "Wilkes implant," and
blocks of silicone, usually sold under the name SILASTIC(R) Block, which
was used as a "spacer" in the TMJ procedure.
The claims asserted by TMJ patients fall into three areas: (i) the
presence of "wear particles" of silicone from silicone sheeting that has
allegedly deteriorated over time, (ii) the occurrence of synovitis,
similar to arthritis, and (iii) autoimmune disease.
As of the Petition Date, approximately 215 lawsuits were pending
against DCC related to TMJ, involving approximately 860 Claimants.
According to information contained in proofs of claim filed in this
Case, the number of TMJ Claimants (including Claimants who asserted
Claims against other manufacturers) is approximately 7,850. DCC is
unable to verify the accuracy of this information at this time because
it has not yet received verification or other supporting medical records
from the TMJ Claimants who filed claims in the Case. Although no class
actions had been certified as of the Petition Date, the federal district
court in Minneapolis has been designated as the forum for multi-district
litigation for TMJ claims. Notwithstanding such designation, the proofs
of claim filed in the Case will be liquidated through the Settlement
Facility and the Litigation Facility, and not through the pending
Minneapolis proceeding.
2. SJO CLAIMS. Small joint orthopedic devices ("SJOS") are hard, but
in many cases flexible, silicone devices designed as a spacer for
removed, damaged or deteriorated small joints in the fingers, toe and
wrist. DCC manufactured dozens of SJO designs from the 1960's until it
exited the market in early 1993.
Page 35
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Most SJO claims have asserted injuries from the presence of wear
particles and bone resorption, although certain claims have included
autoimmune allegations.
As of the Petition Date, DCC was named as defendant in 23 pending
lawsuits relating to SJOs.
3. LJO CLAIMS. Large joint orthopedic devices ("LJOS") manufactured
by DCC were knee and hip joints, which were made of metal and do not
contain silicone. DCC ceased the manufacture and sale of LJOs in 1993.
LJO claims arise from alleged injuries from wear particles or device
breakage. As of the Petition Date, DCC was named as defendant in 18
pending lawsuits relating to LJOs.
4. LTCI CLAIMS. DCC has supplied certain silicone materials for use
in the development of long term contraceptive implants ("LTCI")
manufactured by Leiras Oy ("LEIRAS"), and has licensed certain
technology to Leiras in connection with that product development.
Leiras, in turn, contract manufactures its LTCI products for sale in the
United States by the Wyeth-Ayerst Laboratories Division of the American
Home Products Corporation ("AHP") pursuant to an agreement between
Leiras and AHP.
As a condition to the supply of silicone product to Leiras and for
the licensing agreement reached with them, DCC obtained from Leiras and
AHP indemnities on claims against DCC for product claims involving
LTCIs. Leiras's prior parent corporation, the Finnish corporation
Huhtamaki, guaranteed the performance of Leiras under its indemnity for
non-U.S. sales. Subsequently, Leiras was acquired by Schering AG.
Pending Schering's agreement to assume liabilities of Huhtamaki as
guarantor, Huhtamaki remains a guarantor of the Leiras/AHP indemnity
governing non-U.S. products. DCC is obligated pursuant to the indemnity
agreements to reimburse Lieras and AHP for certain exemplary or punitive
damages paid by Leiras and/or AHP. DCC will assume these indemnity
agreements which will result in DCC's continuing obligation to perform
its reimbursement obligations for exemplary or punitive damages under
the provisions of the indemnity agreements.
As of the Petition Date, DCC (or certain of its Subsidiaries) had
been named as defendants in approximately 60 lawsuits relating to LTCIs,
involving approximately 600 individual plaintiffs, who assert product
liability causes of action, alleging that a wide variety of physical and
mental maladies resulted from hormonal release levels and other
properties of the product, including prolonged menstrual bleeding,
irregular menstrual cycles, headaches, dizziness, weight gain, weight
loss, hair growth, hair loss, nervousness, moodiness, depression and
other conditions. Some plaintiffs also allege that pain and/or scarring
resulted from removal of the product from their inner arms. Defendants
deny causation and liability and assert that physicians (learned
intermediaries) were adequately warned of any complications associated
with the use of the product.
As claims and/or lawsuits are received, they are forwarded to AHP and
Leiras for handling pursuant to their indemnities. To date, Leiras and
AHP have acted pursuant to their indemnities to defend the lawsuits and
respond to the claims. Based upon the financial strength of AHP, Leiras,
Huhtamaki and, prospectively, Schering, as well as DCC's evaluation that
its retained exposure for exemplary or punitive damages is not likely to
result in any ultimate liability to DCC, it is not believed that the
claim exposure to DCC for LTCI products liability is material.
Pursuant to the Plan, DCC intends to assign those indemnities to the
Litigation Facility in satisfaction of its LTCI-related Claims (Classes
18 and 19).
B. INSURANCE COVERAGE FOR PRODUCTS LIABILITY CLAIMS.
1. GENERAL DISCUSSION OF COVERAGE. DCC historically has maintained
(usually as one of several co-insured affiliates) levels of insurance
coverage that it believed to be appropriate to its business and
operations. DCC maintains primary insurance coverage pursuant to which
the respective insurers (the "PRIMARY CARRIERS") have a duty, subject to
applicable policy limits and exclusions, (i) to defend DCC against
bodily injury and property damage claims, (ii) to pay defense costs,
regardless of the merits of the claims, and (iii) to pay all sums that
DCC is or becomes liable to pay by reason of liability for damages in
connection with bodily injury claims and property damage claims. DCC
further maintains excess insurance coverage pursuant to which the
respective insurers (the "EXCESS CARRIERS") are obligated, subject to
applicable policy limits and exclusions, to pay and/or reimburse DCC for
bodily injury and property damage claims.
Virtually all of DCC's relevant insurance policies include aggregate
limits of liability for products liability claims. Some of the Primary
Carriers' policies provide that amounts paid for defense costs are in
addition to the limits of liability. Some of the Excess Carriers'
policies also require the insurers to pay and/or reimburse DCC for
Page 36
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
defense costs, but many of such policies provide that defense costs paid
are included in the aggregate amount paid under the aggregate limits of
liability.
Most of the Primary Carriers and the Excess Carriers that issued
policies prior to 1986 issued "occurrence policies," policies that
provide coverage for claims resulting from injuries that occurred within
the policy periods. Most of the policies issued in and after 1986 are
"claims made policies," policies that provide coverage for claims
asserted within the policy period. The substantial majority of the
policies issued after 1992 specifically exclude coverage for claims
arising from breast implants.
DCC purchased the policies from its Primary Carriers and the post-
1985 claims made Excess Carriers for itself, its subsidiaries, and, in
some cases, its Shareholders. Many of the pre-1986 policies issued by
Excess Carriers jointly cover DCC, Dow Chemical, and their respective
subsidiaries. As discussed below, litigation currently is pending with
various Insurance Companies regarding coverage of the Breast Implant
Claims.
2. LITIGATION AGAINST INSURANCE CARRIERS. On June 30, 1993, DCC filed
a complaint, which was subsequently amended, in the Superior Court of
California against 99 insurance companies that issued occurrence-based
products liability policies to DCC from 1962 until 1985 (the
"INSURERS"). The complaint also named as defendants three state
insurance guaranty funds. This action (the "California Action") resulted
from a failure or refusal of the Insurers to honor their contractual
obligations to Dow Corning related to the Breast Implant Claims. The
California Action was filed to seek, among other things, judicial
enforcement of the obligations of the Insurers under the relevant
Insurance Policies.
On September 10, 1993, several of DCC's Insurers filed a complaint
against DCC and other insurers (including the claims made insurers) for
declaratory relief in Wayne County, Michigan Circuit Court (the
"MICHIGAN ACTION"). The Michigan Action raised issues substantially
similar to those raised in the California Action, as well as numerous
alleged defenses to coverage.
On September 13, 1993, the plaintiff Insurers in the Michigan Action
moved for a stay or dismissal of the California Action on the grounds
that California was an inconvenient forum. On October 1, 1993, the
California Court dismissed the California Action on such ground. With
the consent of DCC, litigation of coverage issues on Breast Implant
Claims in the Michigan Action continued after the Petition Date.
On March 11, 1994, the court in the Michigan Action ruled that
certain of DCC's primary insurers have a duty to defend DCC with respect
to Breast Implant products liability lawsuits. These insurers were also
directed to reimburse DCC for certain defense costs previously incurred.
On November 16, 1994, the court further ruled in favor of DCC on
allocation of defense costs. On August 11, 1995, the Michigan Court
granted DCC's motion for summary judgment ruling that DCC's Insurance
Policies are continuously triggered from the time of implant forward.
The court ruled that each primary occurrence insurer is obligated to pay
the defense costs for all cases alleging a date of implant either before
or during the insurers' policy period and for all cases involving
unknown implant dates. Trial of the Michigan Action commenced in late
1995 and a verdict was handed down on February 14, 1996, finding that
Insurance Coverage extended to the Breast Implant Claims. The court
further found, on February 28, 1996, that DCC was entitled to recover
substantially all defense, settlement, and judgment costs previously
incurred. On July 10, 1996, the court issued an omnibus final order and
judgment and other rulings relative to the Michigan Action. On October
18, 1996, the court denied the Insurers' motion for judgment NOV.
Several of the affected Insurers have appealed their loss of the
Michigan Action. Final determination of the issues raised in the
Michigan Action will be reached through the pending appeals in the
Michigan state courts.
DCC has also commenced arbitration proceedings against a number of
insurers whose policies require the arbitration of any disputes. Such
arbitrations raise essentially the same issues as were determined in Dow
Corning's favor in the Michigan Action.
Pending the final outcome of the Michigan Action and the various
arbitration proceedings, DCC has continued to negotiate and enter into
settlements with many of its insurers. Such settlements are discussed
infra at Article V, section 5.3(G).
C. OTHER POTENTIAL PRODUCT-RELATED CLAIMS. In May 1992, the Debtor
began communicating additional information and test results to the
owners of buildings which contain DOW CORNING FIRE STOP(R) Intumescent
Wrap Strip 2002, recommending that the owners conduct a review with a
qualified Fire Protection Engineer to determine whether remedial action
is warranted, including possible replacement of the product due to
uncertainty
Page 37
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
about its ability to perform consistently and predictably over time. DOW
CORNING FIRE STOP(R) Intumescent Wrap Strip 2002 is a non-silicone,
resin-based fire stop product which was installed in buildings as a
passive fire protection product. DCC ceased the sale of this product in
1992.
D. ENVIRONMENTAL MATTERS. DCC has been advised by the United States
Environmental Protection Agency ("EPA") or by similar state regulatory
agencies that DCC, together with others, is a Potentially Responsible
Party ("PRP") with respect to a portion of the cleanup costs and other
related matters involving a number of abandoned hazardous waste disposal
facilities. DCC believes that there are 14 sites at which it may have
some liability, although DCC currently expects to settle its liability
for a majority of these sites for de minimis amounts. Based upon
preliminary estimates by the EPA or the PRP groups formed with respect
to these sites, the aggregate liabilities for all PRP's at the sites at
which DCC currently believes that it may have more than a de minimis
liability is $15.5 million. DCC records accruals for environmental
matters when it is probable that a liability has been incurred and DCC's
costs can be reasonably estimated. Although DCC has accrued a $7.8
million liability for its estimated exposure with respect to these
sites, there can be no assurance that its actual exposure will not
exceed that amount. Because the actual amount of such exposure is not
expected to be material to the operations of DCC, the Debtor has elected
to allow its Environmental Claims, except to the extent they are
Disallowed Claims, to pass through this Case unimpaired to avoid what it
believes would be unnecessary litigation over Claims which (i) are
unascertainable as to amount in the near term and (ii) can be adequately
addressed as its liability, if any, for such Claims is actually
determined.
E. SECURITIES LAWS CLASS ACTION LAWSUITS. As of the Petition Date,
DCC and certain of its directors and officers were named as defendants,
along with others, in two securities fraud class action lawsuits filed
by purchasers of stock in Corning Incorporated and Dow Chemical. The
plaintiffs in these cases allege, among other things, misrepresentations
and omissions of material facts and breach of duty regarding the Breast
Implant issue to purchasers of Corning Incorporated stock and Dow
Chemical stock. The relief sought in these cases is monetary damages in
unspecified amounts. Motions to dismiss both cases have been filed by
all defendants, including DCC. The cases have been stayed as to DCC as a
result of the filing of this Case. Claims against DCC's officers and
directors asserted in these suits have been dismissed without prejudice.
ARTICLE IV
TRANSACTIONS WITH JOINT VENTURES AND SUBSIDIARIES
4.1 GENERAL. In the normal course of its business, the Debtor engages in
various business transactions with its Joint Ventures and Subsidiaries. The
following is a summary of significant transactions that have occurred during
the twelve-month period prior to the Petition Date.
4.2 INTERCOMPANY FINANCINGS AND GUARANTEES.
A. FINANCINGS.
1. As of the Petition Date, DCC had loans outstanding to the
following Subsidiaries:
A. DCC held a note receivable from Dow Corning Asia Ltd. in the
principal amount of $30,000,000. The note was repaid after the
Petition Date.
B. DCC was owed $17,083,453 of accrued interest on loans
previously made to Dow Corning Ltd. The principal of those loans was
repaid. The accrued interest was paid after the Petition Date.
C. DCC held a revolving credit note from Dow Corning Canada, Ltd.
in the principal amount of $869,217. Interest accrues at 1% over the
one-month Canadian Dollar LIBOR, payable monthly. The note was repaid
after the Petition Date.
D. DCC held a note receivable from Theratek International, Inc.
for advances under a line of credit in the principal amount of
$974,444. The note was repaid after the Petition Date.
E. DCC held a note receivable in the principal amount of
$21,197,230 from Bay Asset Funding Corporation ("BAFCO") related to
the sale of trade receivables from DCC, which receivables were then
resold by BAFCO. The note was paid after the Petition Date.
F. DCC held a note receivable from Dow Corning Iberica S.A. in the
principal amount of $1,314,990. The note bears interest at 1% over
the one-year Madrid Interbank Offer Rate. The note was paid after the
Petition Date.
Page 38
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
G. DCC holds a revolving loan with Dow Corning Singapore PTE Ltd.
in the principal amount of $2,213,334. The loan bears interest at 1%
over the one-month U.S. Dollar LIBOR, payable monthly.
H. DCC holds a revolving loan with Dow Corning Taiwan Inc. in the
principal amount of $5,991,267. The loan bears interest at the one-
month U.S. Dollar LIBOR, reset monthly.
I. DCC held a revolving loan with Dow Corning GmbH (Wiesbaden) in
the principal amount of $4,573,679. The loan bore interest at 0.75%
over the one-month Dem FIBOR, payable monthly. The loan was repaid
after the Petition Date.
J. DCC holds a note receivable from Dow Corning Thailand Inc. in
the amount of $2,431,984. The note bears interest at 1% over the one-
month U.S. Dollar LIBOR.
2. As of the Petition Date, DCC had borrowed funds from the following
of its Subsidiaries:
A. Dow Corning do Brazil LTDA has advanced three loans to DCC
aggregating $9,672,044. The loans provide for interest at 6%,
compounded quarterly. This obligation was repaid after the Petition
Date.
B. Dow Corning New Zealand Ltd. has made a loan to DCC in the
amount of $235,574.76. The loan provides for interest at 7.09%.
4.3 GUARANTEES. As of the Petition Date, DCC had guaranteed certain of the
obligations of its Subsidiaries as listed below.
<TABLE>
<CAPTION>
DOW CORNING CORPORATION
(GUARANTEED OBLIGATIONS)
- -------------------------------------------------------------------------------------
APPROXIMATE
PRIMARY OBLIGOR ENTITY HOLDING GUARANTY AMOUNT OF
GUARANTY
- -------------------------------------------------------------------------------------
<S> <C> <C>
Dow Corning Silicon Energy Royal Bank of Canada $ 500,000
Systems, Inc.
- -------------------------------------------------------------------------------------
Dow Corning Korea Ltd. Bank of America Trust $ 3,500,000
- -------------------------------------------------------------------------------------
Dow Corning Korea Ltd. The Korea Long-Term Credit Bank $ 5,000,000
- -------------------------------------------------------------------------------------
Dow Corning Korea Ltd The Bank of New York $21,000,000
- -------------------------------------------------------------------------------------
Dow Corning Korea Ltd First National Bank of Boston $ 6,000,000
- -------------------------------------------------------------------------------------
Dow Corning Singapore PTE. Ltd. Citibank $ 200,000
- -------------------------------------------------------------------------------------
Dow Corning Thailand Ltd. Citibank $ 363,070
- -------------------------------------------------------------------------------------
Dow Corning Thailand Ltd. Thai Farmers Bank $ 400,000
- -------------------------------------------------------------------------------------
Dow Corning ARA-Werk Dresdner Bank $ 7,300,000
- -------------------------------------------------------------------------------------
Dow Corning France S.A. Societe Generale $ 7,200,000
- -------------------------------------------------------------------------------------
Dow Corning France S.A. Credit Lyonnais $10,300,000
- -------------------------------------------------------------------------------------
Dow Corning de Venezuela S.A. Citibank $ 500,000
- -------------------------------------------------------------------------------------
Dow Corning New Zealand Ltd. ANZ Banking Group Ltd. $ 67,000
- -------------------------------------------------------------------------------------
Dow Corning Investment S.A. Societe Anonyme $20,000,000
</TABLE>
- -------------------------------------------------------------------------------
Page 39
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
4.4 PRODUCT SALES AND MISCELLANEOUS TRANSACTIONS BETWEEN THE DEBTOR AND
ITS JOINT VENTURES AND SUBSIDIARIES. As discussed previously, DCC sells
manufactured goods and raw materials to various of its Subsidiaries and Joint
Ventures in the ordinary course of business. DCC sells these products and raw
materials to its Subsidiaries and Joint Ventures for profit. Payments are made
by the Subsidiaries and Joint Ventures for such products and raw materials in
the ordinary course of business of each such entity. As part of this
relationship, DCC, on one hand, and a Subsidiary or Joint Venture, on the
other, would, as part of the netting process (prior to the Petition Date),
also advance funds to one another subject to monthly settlement of invoices
and advances.
DCC has licensing agreements with certain of its Subsidiaries under which
DCC earns royalty income or incurs royalty expenses. In addition, DCC receives
dividends from its Subsidiaries from time to time.
By order entered on November 25, 1996, the Court authorized the setoff of
Intercompany Claims for goods and services and/or advances of funds between
the Debtor and its Subsidiaries and Joint Ventures, resulting in payables
against and/or receivables in favor of the Debtor in the following amounts:
<TABLE>
<CAPTION>
INTERCOMPANY TRADE CLAIMS
- --------------------------------------------------------------
OWING BY PAYABLE TO
INTERCOMPANY PARTY DCC DCC
- --------------------------------------------------------------
<S> <C> <C>
Dow Corning de Argentina S.A.I.C. ($26,685)
- --------------------------------------------------------------
Dow Corning Australia PTY, Ltd. $1,080,722
- --------------------------------------------------------------
Dow Corning do Brazil LTDA ($465,574)
- --------------------------------------------------------------
Dow Corning S.A. $22,612,159
- --------------------------------------------------------------
Dow Corning de Venezuela S.A. ($520,928)
- --------------------------------------------------------------
Dow Corning Limited ($44,154,692)
- --------------------------------------------------------------
Dow Corning Korea Ltd. ($5,372,899)
- --------------------------------------------------------------
Dow Corning France S.A. ($120,468)
- --------------------------------------------------------------
Dow Corning Singapore PTE. Ltd. ($2,278,065)
- --------------------------------------------------------------
Dow Corning New Zealand Ltd. $82,980
- --------------------------------------------------------------
Dow Corning Taiwan Inc. ($5,863,934)
- --------------------------------------------------------------
Dow Corning GmbH (Wiesbaden) ($2,819,269)
- --------------------------------------------------------------
Korea Silicone Co., Ltd. $22,931
- --------------------------------------------------------------
Dow Corning GmbH (Austria) $282,572
- --------------------------------------------------------------
Dow Corning Coordination Center $940,806
- --------------------------------------------------------------
Dow Corning Thailand Ltd. ($2,438,304)
- --------------------------------------------------------------
Dow Corning de Colombia, S.A. ($121,693)
- --------------------------------------------------------------
TOTAL $25,022,170 ($64,187,781)
</TABLE>
- -------------------------------------------------------------------------------
Page 40
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE V
THE REORGANIZATION CASE
5.1 FACTORS PRECIPITATING THE FILING OF THE REORGANIZATION CASE.
A. BREAST IMPLANT LITIGATION. As of the Petition Date, approximately
19,000 lawsuits were pending against DCC by or on behalf of Breast Implant
Users. A number of these lawsuits were filed by or on behalf of multiple
plaintiffs. New Breast Implant Claims were being asserted against the
Debtor each month. The cost to and the logistics for the Debtor to defend
against the Breast Implant Claims were very substantial. This exposure was
further exacerbated by the reluctance or refusal on the part of its
Insurance Companies to provide or confirm Insurance Coverage for the
defense costs and/or the Breast Implant Claims. These factors were further
compounded by credit rating downgrades arising from the financial
community's concerns about the lack of a certain and predictable financial
resolution to the Breast Implant controversy.
While the Debtor believed that it was in all parties' best interests to
settle the Breast Implant Claims, it also believed that the failure of the
Global Settlement Agreement left it with only two alternatives: (i)
piecemeal litigation of the multitude of lawsuits at a very substantial
cost to the Debtor in defense costs alone or (ii) a chapter 11 filing and
confirmation of a plan of reorganization that would fairly and efficiently
resolve all Breast Implant Claims. The Debtor concluded that continued
piecemeal litigation was not in the best interests of either the Breast
Implant Claimants or the Debtor due to the significant sums being expended
by all parties that could be better utilized to satisfy Allowed Breast
Implant Claims. Moreover, the Debtor concluded that its chapter 11 filing
would provide it with the opportunity to propose a plan of reorganization
that would fairly and efficiently resolve all Breast Implant Claims.
The Debtor's chapter 11 filing has stayed the continued prosecution of
the Breast Implant Claims and lawsuits in the United States and its
territories. The Plan will resolve all Breast Implant Claims against the
Debtor and its Shareholders.
B. OTHER PENDING PRODUCTS LIABILITY LITIGATION AND POTENTIAL
LITIGATION. As of the Petition Date, approximately 470 lawsuits involving
Other Products Claims and 30 lawsuits arising out of the Other Products had
been asserted and/or filed against the Debtor. A number of the lawsuits
were filed by or on behalf of multiple plaintiffs.
The Debtor's chapter 11 filing has stayed the continued prosecution of
all of the Other Products Claims and/or lawsuits in the United States and
its territories. Moreover, the Plan will resolve all of the Other Products
Claims against the Debtor and the Shareholders.
5.2 DEBTOR'S ASSETS. Since the Petition Date, the Debtor has been
operating profitably, with net income for 1996 of $221.7 million and net
income for 1997 of $237.6 million. A description of the Debtor's principal
assets as of December 31, 1997 follows.
A. CASH AND CASH-EQUIVALENT ASSETS AND MARKETABLE SECURITIES. As of the
Petition Date, DCC had cash on hand or in its various bank accounts
totaling approximately $85 million. On December 31, 1997, the end of its
most recent fiscal year, DCC's cash totaled approximately $55.1 million.
(Not included in this amount is the cash deposit of $275 million made in
connection with the Global Settlement Agreement and approximately $501.1
million in restricted proceeds of the various insurance settlements to
date.) In addition, DCC reflected trade accounts receivable (other than
intercompany) on the Petition Date in the amount of approximately $30.8
million. On December 31, 1997, the trade accounts receivable (other than
intercompany) totaled approximately $143.2 million. Approximately 82% of
DCC's accounts receivable are current. DCC maintains a historical reserve
of 2% to 3% of its receivables for uncollectible accounts.
B. INVENTORY. As of the Petition Date, DCC had inventory of goods for
sale and materials in process having a book value totaling approximately
$145 million. On December 31, 1997, the book value of DCC inventory totaled
approximately $144.1 million.
C. FIXED ASSETS. The fixed assets of DCC consist principally of land,
buildings, furniture, fixtures and/or equipment utilized at its executive
and corporate facility near Midland, Michigan; its manufacturing facilities
located in Midland and Hemlock, Michigan; Greensboro, North Carolina; and
Elizabethtown and Carrollton, Kentucky; its research and development
facilities near Midland, Michigan; and its various sales offices. The book
value of those fixed assets, net of accumulated depreciation, as of the
Petition Date was approximately $590.5 million. As of December 31, 1997,
the book value, net of accumulated depreciation, was approximately $571.4
million.
Page 41
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
D. INTELLECTUAL PROPERTY RIGHTS. DCC consistently applies for United
States and foreign patents and owns, directly or indirectly, a substantial
number of such patents. DCC is a licensor under a number of patent licenses
and technology agreements. While DCC considers its patents and licenses to
be valuable assets, it does not regard its business as being materially
dependent on any single patent or license or any group of related patents
or licenses.
E. REAL PROPERTY LEASES. On the Petition Date, DCC was the tenant under
certain leases and, as of the date of this Disclosure Statement, remains in
possession of its leased domestic and foreign sales offices and related
facilities. DCC does not believe that these leases have a market value in
excess of that reflected in the rental rates paid by DCC under those
leases. The Debtor does not anticipate that any material liability will
result from the rejection, if any, of any unexpired leases in the Case.
F. INSURANCE. EXHIBIT "G" to this Disclosure Statement describes
settlements that have been completed between the Debtor and insurers and
that may provide proceeds available to pay Personal Injury Claims and also
describes remaining unsettled insurance coverages that may be available to
pay such claims. The exhibit describes the cash proceeds and the accrued
interest from settlements that resulted in cash payments. All of these cash
proceeds are held in escrow accounts subject to the Court's jurisdiction
and subject to the competing claims of other parties including Dow
Chemical, other insureds under the policies, and others. (As described in
section 6.6(B) of this Disclosure Statement, DCC and Dow Chemical have
entered into the Insurance Allocation Agreement to resolve issues
concerning the allocation of their shared insurance.) The exhibit also
describes remaining coverages that may be available either pursuant to
settlements that specify how claims related to Breast Implants will be
treated under the policies or pursuant to policies that have not been
settled. These remaining coverages are also subject to competing claims of
other parties as described above.
5.3 SIGNIFICANT CASE DEVELOPMENTS.
A. COMMENCEMENT OF THE CASE. On May 15, 1995, DCC filed the Case. DCC
continues to operate as a debtor in possession pursuant to sections 1107
and 1108 of the Bankruptcy Code.
B. APPOINTMENT OF COMMITTEES. Although individual creditors may be
represented in a bankruptcy case by their own attorneys, the interests of
creditors in Chapter 11 proceedings are collectively represented by a
committee or committees appointed by the United States Trustee. Section
1103(c) of the Bankruptcy Code sets forth the duties and powers of official
creditors' committees. Among other things, an official committee consults
with the Debtor, investigates the debtor's assets and resources,
participates in the plan of reorganization process, and advises its
constituency concerning any such plan.
On May 31, 1995, the United States Trustee appointed the Official
Committee of Unsecured Creditors, referred to in the Plan as the Commercial
Committee. The membership of that committee, which is composed of
representatives of a number of institutional lenders and trade creditors,
has changed from time to time, principally because of the transfer of the
Claims.
On June 1, 1995, the United States Trustee appointed the Official
Committee of Tort Claimants, referred to in the Plan as the Tort Committee
or TCC. The membership in that committee has not changed, and is composed
of eight attorneys who each represent numerous tort Claimants and one non-
lawyer implant recipient.
On July 23, 1996, the United States Trustee appointed the Official
Committee of Physician Creditors, referred to in the Plan as the
Physicians' Committee, to represent the interests of physician Claimants in
this Case. The membership in the Committee, which is composed of physicians
asserting Claims against Dow Corning and a professional liability insurer,
was reconstituted by Amended Notice of Appointment filed by the United
States Trustee on November 14, 1996.
C. DCC'S REQUEST TO TRANSFER BREAST IMPLANT CLAIMS. On June 12, 1995,
DCC filed a Motion to Transfer Certain Breast Implant Claims and Causes of
Action (the "OPT-OUT TRANSFER MOTION") in the District Court in Detroit,
requesting that all breast implant claims against DCC and Dow Chemical and
Corning Incorporated asserted by Claimants who opted-out of the Global
Settlement be transferred to the District Court under 28 U.S.C. (S)
157(b)(5). DCC sought the transfer to facilitate the consolidation of those
claims for purposes of a common trial on the issue of whether breast
implants manufactured by DCC, or for which DCC supplied raw materials to
other manufacturers, cause the diseases claimed by the tort plaintiffs.
On July 31, 1995, the District Court held a hearing on the Opt-Out
Transfer Motion. On August 10, 1995, DCC filed a Supplemental Motion to
Transfer Additional Breast Implant Claims and Causes of Action (the "OPT-IN
TRANSFER
Page 42
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
MOTION"), requesting that the District Court transfer all breast implant
claims against DCC and the Shareholders asserted by Claimants who opted to
participate in the Global Settlement Agreement to the District Court under
28 U.S.C. (S) 157(b)(5) for the same purpose, and on the same grounds, as
the transfer of the opt-out claims requested in the Opt-Out Transfer
Motion.
In an opinion dated September 12, 1995, the District Court granted DCC's
request to transfer the opt-out claims against DCC, but only for the
purpose of later determining, if necessary, the eventual trial venue of
those claims. The District Court viewed the common-issue causation trial or
determination requested by DCC as premature, and instead directed the
parties to proceed with Claim estimation in the Court. The District Court
reserved its authority to conduct a common-issues trial if later
appropriate. Finally, the District Court denied DCC's request to transfer
claims against DCC's Shareholders, concluding that it did not have "related
to" jurisdiction over those claims under 28 U.S.C. (S) 1334(b). On
September 14, 1995, the District Court entered its Supplemental Order to
the Court's September 12, 1995 Order, which provided for the transfer of
the opt-in claims against the Debtor.
DCC appealed various of the District Court's rulings to the United
States Court of Appeals for the Sixth Circuit. On April 9, 1996, the Sixth
Circuit reversed the District Court on the issue of the existence of
"related to" jurisdiction over claims against the Shareholders and other
third parties and remanded the matter for further consideration by the
District Court. On June 3, 1996, the Sixth Circuit issued an Amended
Opinion in the matter, intended to clarify the scope of its ruling and the
intended impact thereof. The prior reversal and remand of the matter to the
District Court was not affected by the Amended Opinion.
On remand, the District Court considered the request of the Tort
Committee and other individual tort Claimants to remand the cases against
the Shareholders and other defendants to the state or federal courts from
which they had been transferred by abstaining from exercising jurisdiction
over those Claims under 28 U.S.C. (S) 1334(c). On July 30, 1996, the
District Court issued its Memorandum Opinion and Order on Remand Regarding
Section 1334(c) Abstention, ruling that the cases against the Shareholders
and other non-Debtor defendants were subject to mandatory abstention and,
alternatively, that "in the interest of justice, comity and judicial
economy," it would exercise its discretion to abstain from those cases.
The Debtor, the Shareholders and other parties sought relief from the
District Court's ruling both by appeal and by application for writ of
mandamus. By order entered on May 8, 1997, the Sixth Circuit granted the
request for mandamus relief, ordering the District Court to transfer the
claims against the Shareholders to the Eastern District of Michigan,
subject to appropriate determinations with respect to mandatory abstention.
D. TRANSFER OF OTHER PRODUCTS CLAIMS. On September 22, 1995, DCC filed a
Motion requesting the District Court to transfer approximately 1,500
Personal Injury Claims against DCC and the Shareholders involving Other
Products to the District Court pursuant to 28 U.S.C. (S) 157(b)(5). On
March 13, 1996, the District Court issued an order denying that Motion.
Following DCC's appeal, on November 18, 1996, the Sixth Circuit reversed
the District Court's decision and ordered that the Other Products Claims
pending against DCC and the Shareholders be transferred to the District
Court.
E. PAYMENT OF WAGES, SALARIES, EXPENSES AND BENEFITS FOR EMPLOYEES AND
RETIREES. On May 17, 1995, the Court issued an Order authorizing DCC to pay
certain pre-petition items to or for the benefit of DCC's employees and
retirees, as well as employees of two of DCC's subsidiaries. The Court
allowed DCC to pay pre-petition wages, salaries, vacation and sick leave
pay, certain insurance and retirement benefit contributions, reimbursable
expenses, and medical and dental benefits, as more fully specified in that
May 17 Order.
On August 11, 1995, the Court also authorized DCC to assume and honor
various pre-petition contracts to continue providing certain severance,
incentive bonus, stock appreciation, and pension benefits to its employees
and certain retirees. The relief granted by these two orders is intended by
DCC to maintain competitive compensation levels and motivate its employees
to continue performing at their highest levels.
F. EXCLUSIVITY MATTERS; DCC'S PRIOR PROPOSED PLANS. The Bankruptcy Code
provides the Debtor with a period of exclusivity for the first 120 days of
the case in which to file its plan of reorganization and, if a plan is
timely filed, up to 180 days after the case is filed in which it has the
exclusive right to solicit acceptances of the plan. This period may, for
cause, be either shortened or extended by the Court.
On August 18, 1995, DCC filed its Motion to Extend Exclusive Periods for
Dow Corning Corporation to File Plan of Reorganization and Obtain
Acceptances Thereof (the "FIRST EXTENSION MOTION"). On September 7, 1995,
the Court held a hearing on the First Extension Motion, and on September
11, 1995, entered an order extending the period for
Page 43
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
filing a plan for an additional six months, to March 11, 1996, and extended
the exclusive period for solicitation of acceptances to May 10, 1996.
On February 15, 1996, DCC filed its Second Motion to Extend Exclusive
Periods for Dow Corning Corporation to File Plan of Reorganization and
Obtain Acceptances Thereof (the "SECOND EXTENSION MOTION"). On February 16,
1996, the Tort Committee filed a Motion for Leave to File Plan of
Reorganization and to Terminate the Debtor's Exclusive Periods to File and
Solicit Acceptances of a Plan of Reorganization (the "TERMINATION MOTION").
The Court conducted hearings on the Second Extension Motion and the
Termination Motion which concluded on March 7, 1996. The Court then entered
an order (the "SUSPENSION ORDER") deferring rulings on those motions and
suspending further action for up to 90 days thereafter on those motions and
related matters, including the bar date and estimation matters described
further herein. DCC's exclusivity period was continued pending termination
of the period of suspension and the Court's ruling on the exclusivity-
related motions.
On April 30, 1996, the Court vacated the Suspension Order and reconvened
hearings on, among other things, the pending exclusivity matters for May
16, 1996. On that date, the Court issued an Order (the "MAY 16 ORDER")
extending the term of the Debtor's exclusivity for a period of 21 days
following the entry of orders in the Court on pending motions requesting
the establishment of procedures for the estimation of certain Personal
Injury Claims, the fixing of bar dates for filing proofs of claim and the
notice procedure therefor, and the appointment of a scientific advisory
panel to assist in the estimation process, as discussed further herein. The
Court's May 16 Order further extended the Debtor's period of exclusivity
for solicitation of acceptances of its Plan for an indefinite period,
subject to further order.
On December 2, 1996, the Debtor filed its Plan of Reorganization and
related proposed form of Disclosure Statement.
On January 10, 1997, the Tort Committee and the Commercial Committee
jointly filed their Motion to Modify Exclusivity (the "MODIFICATION
MOTION"), seeking the termination of the Debtor's exclusivity which
remained in effect under the May 16 Order pending the Court's rulings on
the pending bar date and estimation-related issues, to allow the two
committees to file the joint plan of reorganization which they had
negotiated in the period following the entry of the May 16 Order. The Court
held a hearing on the Modification Motion on April 16-18, 1997, and on May
12, 1997, announced its ruling denying the Modification Motion. In its
ruling, the Court directed the Debtor to file an amended Plan of
Reorganization within 21 days after the issuance of its order regarding
estimation protocols, discussed further herein. The Tort Committee and the
Commercial Committee appealed the denial of the Modification Motion, which
appeal was argued before the District Court on October 28, 1997, and
remains pending.
On August 25, 1997, following the release of the Court's order on
estimation protocols, the Debtor filed its Amended Plan of Reorganization
and related [Proposed] Amended Disclosure Statement. Following notice to
creditors, a hearing to consider approval of the Amended Disclosure
Statement commenced on November 3, 1997. At the conclusion of the hearing
on November 20, 1997, the Court announced its findings that the Amended
Plan had deficiencies that, taken in the aggregate, rendered it
unconfirmable in a "cramdown" setting. As the Amended Disclosure Statement
indicated DCC's belief that the Plan would be confirmable in that event,
the Court declined to approve the Amended Disclosure Statement.
On March 10, 1998, the Tort Committee filed a new Motion to Terminate
Exclusivity (the "RENEWED MOTION") pursuant to which it again requested
that it be allowed to file a plan of reorganization. After hearings in
April and May, 1998 on that motion, the Court announced that it would
withhold its ruling pending the outcome of mediator-led negotiations, as
discussed below. As a result of the agreement reached between DCC and the
Tort Committee, it is anticipated that no ruling will be made on the
Renewed Motion.
G. INSURANCE SETTLEMENTS. DCC is an insured under a number of insurance
policies that DCC contends entitle it, inter alia, to reimbursement of
certain costs incurred in connection with the Products Liability Claims.
Among such policies are primary liability insurance policies ("PRIMARY
POLICIES") and excess insurance policies ("EXCESS POLICIES"). DCC and its
officers, directors, subsidiaries and its Shareholders (in limited
instances) are the insureds under the Primary Policies. The majority of the
Excess Policies insure these and other parties, including Dow Chemical and
various of its subsidiaries and related companies.
As described in section 3.4(B) herein, DCC was involved in pre-petition
litigation with many of the Insurance Companies related to insurance
coverage for Breast Implant Claims. Trial in the Michigan Action was
scheduled, prior to the Petition Date, to commence on September 18, 1995.
As the trial date approached, settlement discussions
Page 44
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
accelerated. Shortly after the Petition Date, DCC was able to conclude
settlements with Hartford Accident and Indemnity Company and various
related insurers (collectively, "HARTFORD") and Royal Indemnity Company
("ROYAL") based upon substantial settlement discussions with those parties
that had occurred before the Petition Date. In August, 1995, the Court
approved the compromises and settlements with Hartford and Royal. The Tort
Committee, Dow Chemical and Hoechst Marion Roussel, Inc. ("HMR"), a former
affiliate of Dow Chemical, and certain other parties objected to the
Hartford settlement. Dow Chemical and HMR objected to the Royal settlement.
The settlement with Hartford provides for cash payments by Hartford of
$107.5 million in exchange for releases of the majority of the products
liability limits of the Hartford policies, a so-called "buy-out"
settlement. The Royal settlement provides that Royal pay covered amounts
associated with Breast Implant Claims pursuant to agreed policy
interpretations and mechanisms, a so-called "coverage-in-place" settlement.
Before the trial in the Michigan Action started, DCC reached additional
agreements with some Insurance Companies for buy-out settlements that will
produce approximately $266.5 million in settlement proceeds. These
settlements include agreements with, among others, DCC's London Market
Insurers, TIG Insurance Company, North River Insurance Company and Federal
Insurance Company. These additional settlements were approved by the Court
in March and April, 1996. DCC also reached a coverage-in-place settlement
with American Guarantee and Liability Insurance Company, which was approved
by the Court in May 1996.
In the course of discussing objections to this second group of insurance
settlements, DCC reached settlements with HMR and Dow Chemical partially
resolving issues relating to those parties as co-insureds under some of the
policies involved in the settlements. The agreement with HMR provides that
DCC will pay HMR up to 2 1/2% of recoveries under insurance policies in
which HMR claimed an interest as a co-insured in exchange for HMR's
agreement not to compete with DCC for the shared product limits. The
agreements with Dow Chemical provide for the escrow of most of the proceeds
of the second group of insurance settlements under specified terms pending
final resolution of the interest of various Claimants in such proceeds. The
Court approved these settlements with HMR and Dow Chemical on January 25,
1996, over the objection of the Tort Committee.
During the course of trial in the Michigan Action and subsequent
thereto, DCC negotiated a number of additional settlements including a
coverage-in-place agreement with certain AIG insurers involving
approximately $400 million in product liability limits and additional buy-
out agreements in excess of $200 million with various insurers. The Court
has approved these settlements with AIG and these other insurers. The Plan
does not modify the terms of the settlement agreements reached with any of
the Settling Insurers.
As the Plan contemplates that the proceeds of insurance coverages
relating to Products Liability Claims will be used to fund obligations
under the Funding Payment Agreement for the satisfaction of Personal Injury
Claims, and that all such funds should be free and clear of all claims of
other Entities (except as provided in the Insurance Allocation Agreement),
Dow Corning will seek, as part of the Confirmation Order or pursuant to an
adversary proceeding to be heard concurrently with confirmation, a
determination that its claims and interests in amounts paid or to be paid
under settlements of its Primary Policies and Excess Policies are superior
to the rights or interests claimed by other entities including Insurance
Companies, Physicians, Health Care Providers and Government Payors. The
determination of interests in the insurance proceeds will be based upon the
contractual rights and obligations of the Settling Insurers and the non-
Settling Insurers under applicable non-bankruptcy law (except to the extent
bankruptcy law may grant the Court jurisdiction to make such a
determination). Although Dow Corning will seek a determination of rights in
the insurance settlement proceeds, Dow Corning does not intend to modify
the contractual or non-bankruptcy law rights of non-Settling Insurers
through the provisions of the Plan. Notwithstanding the foregoing, nothing
in the Plan or Confirmation Order will modify or eliminate the rights of
HMR pursuant to the settlement approved by the Court on January 25, 1996,
the rights of Dow Chemical pursuant to the Insurance Allocation Agreement,
or the rights of the Claims Administrator pursuant to the Funding Payment
Agreement and any insurance assignment executed in connection therewith.
H. BAR DATE MOTIONS. As part of the claims resolution process in chapter
11, it is necessary for the Court to provide a procedure and deadline for
the filing of proofs of claim. This is accomplished by the entry of an
order, called a "bar date order," directing Claimants to file their proofs
of claim by the specified deadline or have their Claims against the debtor
disallowed.
On December 1, 1995, DCC filed its Motion for Order (1) Setting Bar Date
for Filing Proofs of Claim; (2) Approving Alternative Proof of Claim Forms
for Filing Certain Proofs of Claim; (3) Modifying Local Rule 2.02; and (4)
Approving Notice Procedures (the "FIRST BAR DATE MOTION"). The Court
commenced a hearing on the First Bar
Page 45
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Date Motion on January 4, 1996. At the conclusion of the hearing, the Court
determined that it would not set a bar date at that time, denying the First
Bar Date Motion without prejudice, and indicated that it wished to have the
opportunity to consider the establishment of a bar date in conjunction with
its review of proposals for the estimation of Products Liability Claims.
On February 15, 1996, DCC filed, along with its Estimation Procedures
Motion and Scientific Advisory Panel Motion (discussed below) its Renewed
Motion for Order (1) Setting Bar Date for Filing Proofs of Claim; (2)
Approving Alternative Proof of Claim Forms for Filing Certain Proofs of
Claim; (3) Modifying Local Rule 2.02; and (4) Approving Notice Procedures
(the "SECOND BAR DATE MOTION"). Although a hearing on the Second Bar Date
Motion was set to commence on March 7, 1996, such hearing was continued
pursuant to the Suspension Order and commenced on June 12, 1996. At the
conclusion of that hearing, the Court announced its preliminary approval of
a stipulation between the Debtor and other parties in interest regarding
the notice procedures relating to a bar date and the filing of proofs of
claim; directed an expansion of the scope of notice to Foreign Claimants;
and instructed the parties to reach agreement on a bar date for filing
proofs of claim.
On July 29, 1996, the Court entered the Bar Order, setting January 15,
1997 as the Bar Date for Domestic Claims and setting February 14, 1997 as
the Bar Date for Claims held by Implant Claimants who continuously
maintained their residence outside of the United States, its territories
and Puerto Rico during the period from September 15, 1996 through November
15, 1996. Pursuant to the Bar Order, written notice of the Bar Date was
mailed to approximately 844,000 potential Claimants and other parties in
interest and an extensive domestic and foreign advertising campaign was
conducted.
I. ESTIMATION PROCEDURES/SCIENTIFIC ADVISORY PANEL MOTIONS. The
jurisdictional statutes relating to bankruptcy prohibit the Court from
conducting trials to allow or disallow Claims for personal injury for
purposes of receiving distributions in the Case, and vest such authority in
the District Court. Nevertheless, the Court may estimate those unliquidated
Claims for other purposes, such as for confirming a plan of reorganization.
This authority is provided to allow for the efficient administration of the
bankruptcy case, which usually cannot be delayed to provide for the final
liquidation and allowance of all Claims.
On February 15, 1996, DCC filed its Motion to Estimate Tort Claims and
to Establish Estimation Hearing Procedures (the "ESTIMATION PROCEDURES
MOTION") proposing, inter alia, a schedule for the filing of pleadings, the
designation of expert witnesses, and other discovery matters in connection
with proposed estimation hearings to commence in the fall of 1996. On March
5, 1996, the Tort Committee filed its Motion of Tort Claimants' Committee
for Order Approving and Establishing Procedures to Estimate Debtor's
Aggregate Tort Liability for Plan Feasibility Purposes (the "TCC ESTIMATION
MOTION"), proposing its own suggested structure for tort claims estimation.
DCC also filed on February 15, 1996, a Motion for the Appointment of an
Independent Panel of Scientific Experts Under Federal Rule of Evidence 706
(the "SCIENTIFIC ADVISORY PANEL MOTION"), seeking the appointment of an
independent panel of scientific experts, chosen by the Court alone, to
review the state of collected scientific information on the
interconnection, if any, of breast implants and various disease claims. The
proposed panel would provide the Court with a report to assist it in the
estimation process.
Although a hearing on the Estimation Procedures Motion and the
Scientific Advisory Panel Motion was set to commence on March 7, 1996, such
hearing was continued pursuant to the Suspension Order. Following the
termination of the Suspension Order, the Court conducted extensive pre-
trial hearings on the Estimation Procedure Motion, the TCC Estimation
Motion and the Science Advisory Panel Motion on May 16-17, 1996. The Court
held a hearing on the estimation motions on July 18-19, 1996, and announced
its intention to issue an opinion and order regarding both motions.
On May 12, 1997, the Court made available a draft order on estimation,
subject to a confidentiality order, which was reviewed by attorneys for the
Debtor, the Shareholders, the Committees, and several other parties in
interest. After reviewing the comments from those parties, on July 29,
1997, the Court issued an Order and a separate, extensive Opinion
(collectively, the "ESTIMATION RULING") on the Estimation Procedures
Motion, the TCC Estimation Motion, and the Scientific Advisory Panel
Motion.
In the Estimation Ruling, the Court indicated it would recommend to the
District Court that the Breast Implant Disease Claims should be liquidated
through one or more common-issue causation trials in the event either a
Consensual Plan is not possible or if the Court denies the pending Motion
for Summary Judgment filed by DCC with respect to the Disease Objection
(discussed below). The Court also indicated that it would recommend that
the District Court utilize a
Page 46
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
scientific advisory panel to assist in the liquidation of these Claims. The
Court further stated that if the plaintiffs won the Causation Trial, some
form of collective adjudication, rather than a lengthy series of individual
trials, should be employed to resolve the remaining aspects of the disease
Claims. The Court recommended that in these circumstances the District
Court decide individual causation and damages issues through extrapolation
from the results of jury trials of randomly selected implant Claims. The
Court observed that the careful and prudent design and implementation of a
collective adjudication method would protect the legitimate rights of all
parties. The Court noted in particular that Personal Injury Claimants would
likely be willing to give up their statutory right to individual jury
trials in order to participate in a sampling process that could resolve
their Claims much more quickly. The Court recognized that if these issues
were handled by the District Court, its decisions would be binding, whereas
if the Court handled the same issues via an estimation process, the results
would not necessarily be binding. Thus, to avoid possible duplication of
effort, e.g., trying the causation issue once in the Court and again in the
District Court, the Court denied the Scientific Advisory Panel Motion
(without prejudice to being renewed at another time), the Estimation
Procedures Motion, and the TCC Estimation Motion.
Subsequent to the entry of its Estimation Ruling, the Court forwarded it
to the District Court as a report and recommendation. The District Court
has made no rulings with respect to the recommendations contained therein.
J. MOTION TO WITHDRAW THE REFERENCE. On May 3, 1996, the Tort Committee
filed with the District Court its Motion for Withdrawal of Reference with
Respect to Proceedings Involving Estimation or Liquidation of Tort Claims
and Related Proceedings (the "WITHDRAWAL MOTION"). Pursuant to the
jurisdictional provisions of the Bankruptcy Code and the related provisions
of the United States Code, jurisdiction of bankruptcy matters is given to
the district courts, which are in turn authorized to "refer" that authority
to the bankruptcy courts. Those statutes further provide that a district
court, for "cause shown," may withdraw the reference of that authority as
to a specific matter or of the case in its entirety.
The Withdrawal Motion asserted that the interrelationship of the claims
estimation and liquidation processes, in light of the jurisdictional
limitation of the Court's power to conduct trials to liquidate personal
injury claims, militated in favor of withdrawing the reference as to the
claims estimation matters, which matters were set for hearing on May 16,
1996. The Withdrawal Motion was withdrawn prior to hearing after the Tort
Committee failed to obtain a stay of the commencement of the estimation and
related hearings pending a hearing of the Withdrawal Motion by the District
Court.
On August 19, 1997, the Tort Committee moved in the District Court to
transfer to that court all matters relating to valuing and liquidating tort
claims, including the matters relating to the plan process (the "NEW
WITHDRAWAL MOTION"). The New Withdrawal Motion was argued in September
1997, and has not yet been decided by the District Court.
K. MDL REGISTRATIONS AS PROOFS OF CLAIM. On June 20, 1996, the Tort
Committee filed its Motion Requesting "Jury View" of the MDL Claims
Facility in Connection With Proceedings by Dow Corning Corporation to
Establish a Bar Date and Bankruptcy Claims Facility (the "CLAIMS MOTION"),
seeking, among other things, to have the Court declare that the
registrations filed with the claims administrator for the MDL 926 Court
were sufficient to qualify as "claims" in the Case, thus obviating the need
for certain of the Personal Injury Claimants to file proofs of claim in the
Case. By its opinion dated July 16, 1996, the Court determined that the MDL
registrations, having been filed nearly two years prior to the Petition
Date, and further having in many cases not designated a responsible
manufacturer against which a claim was made, were insufficient to
constitute a proof of claim in the Case. The Tort Committee appealed the
Court's ruling to the District Court.
On January 17, 1997, the District Court entered its ruling reversing the
Court, finding that certain of the MDL registrations met the necessary
qualifications to constitute "informal" proofs of claim in the Case. DCC
disagreed with the District Court's ruling, and appealed to the Sixth
Circuit.
On April 6, 1998, the Sixth Circuit entered its opinion and order
reversing the District Court, finding that a "prepetition filing is not
converted to a proof of claim upon the declaration of bankruptcy," and
concluded that the registrations filed by the MDL Claimants did not
constitute formal or informal proofs of claim. The Sixth Circuit further
found that the transfer of claims which had been pending prepetition to the
Eastern District of Michigan did not convert the MDL registrations into
documents filed in bankruptcy.
L. OMNIBUS OBJECTION TO IMPLANT CLAIMS. On April 7, 1997, the Debtor
filed an Omnibus Disease Objection to Breast Implant Claims (the "DISEASE
OBJECTION"), together with an Omnibus Supplemental Objection to Implant
Page 47
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Claims, a motion regarding procedures relating to the objections, and a
motion for summary judgment with respect to the Disease Objection. The
Disease Objection and the related summary judgment motion assert that there
is no sufficient scientific evidence or expert opinion testimony admissible
under the standards established in Daubert v. Merrell Dow Pharmaceuticals,
509 U.S. 579 (1993), to support a finding, by a court or jury, that it is
more likely than not that silicone-gel breast implants cause any disease
asserted by Breast Implant Claimants. Certain limited pre-trial proceedings
were held before the Court with respect to the Disease Objection and the
related matters in September 1997.
On November 20, 1997, the Court entered its Opinion on Court's Authority
to Decide Dow Corning's Motion for Summary Judgment on its Omnibus Disease
Objection to Breast Implant Claims, in which the Court determined that the
prohibition against the Court's presiding over the liquidation of
individual Breast Implant Claims did not preclude its consideration of pre-
trial matters, including the legal sufficiency of evidence and the
potential disallowance of such Claims on summary judgment. Thus, the Court
determined that it could hear and determine Dow Corning's summary judgment
motion as it was within the Court's "core" jurisdiction.
On December 19, 1997, the Court entered its Supplemental Opinion on
Debtor's Motion for Summary Judgment on Omnibus Disease Claim Objection,
announcing its decision that it would not rule on the summary judgment
motion. The Court found that, notwithstanding its view that it had
jurisdiction to consider the motion, its ruling could potentially conflict
with the District Court's views on the related claims against the
Shareholders pending in the District Court and thus cause significant
inconsistent results that could not be harmonized by appeal. The Court
therefore issued its concurrent Report on Dow Corning Corporation's Motion
for Summary Judgment on Its Omnibus Disease Claim Objection, recommending
the District Court's withdrawal of the reference to the Court of both the
Disease Objection and the related Motion for Summary Judgment. On February
2, 1998, the District Court issued its Order partially withdrawing the
reference (leaving responsibility for certain administrative matters
relating to the Disease Objection with the Court), as recommended by the
Court.
M. APPOINTMENT OF JUDGE POINTER. On April 7, 1997, the Debtor filed its
Motion for a Certificate of Necessity Pursuant to 28 U.S.C. (S) 292(d) (the
"RULE 292 MOTION") with the Chief Judge of the Sixth Circuit, seeking the
temporary assignment of U.S. District Judge Sam C. Pointer, Chief Judge of
the Northern District of Alabama, to preside in breast implant-related
matters, and specifically, issues related to disease causation, in the
Case. Judge Pointer has presided over breast implant claims in the MDL 926
Court since those claims were consolidated in 1992.
On June 29, 1997, the Chief Justice of the United States, upon the
certification of necessity by the Chief Judge of the Sixth Circuit, entered
an order, styled Designation and Assignment of a Chief United States
District Judge for Service in Another Circuit (the "POINTER DESIGNATION"),
approving the requested relief and appointing Judge Pointer "for the
purpose of presiding over all breast implant and non-breast implant
personal injury claims arising out of the reorganization of the Dow Corning
Corporation and cases against the shareholders of the Dow Corning
Corporation that have been transferred to the Eastern District of
Michigan."
Subsequent to the entry of the Pointer Designation, Judge Denise Page
Hood, the district judge of the District Court before whom matters relating
to the Case are pending, and Judge Pointer have indicated to the parties
that they intend to work cooperatively in exercising jurisdiction over
Breast Implant related matters.
N. APPOINTMENT OF MEDIATOR AND AGREEMENT ON TERMS OF JOINT PLAN. On
November 5, 1997, the Court, citing the pendency of the Disease Objection,
and contested matters relating to the Plan and Disclosure Statement,
appointed Francis E. McGovern, professor of law at Duke University School
of Law and a recognized authority in the area of mass tort litigation and
mass claims resolution, as mediator "to assist the parties in resolving
their disputes, and to help bring the parties to agreement upon a plan of
reorganization." On November 11, 1997, the District Court, based on the
pendency of several matters, including matters on appeal from the Court,
and its jurisdiction over the related Claims against the Shareholders,
appointed Professor McGovern as mediator. Thereafter, Professor McGovern
commenced his meetings with the various parties in the Case. Over the next
several months, Professor McGovern continued to meet with the
representatives of DCC, the Shareholders and the Tort Committee in an
attempt to reach agreement on the terms of a proposed joint plan of
reorganization. Those efforts resulted in the execution on July 7, 1998 of
a term sheet binding the parties to an agreement for the treatment of
Personal Injury Claims in the Case and in the execution of subsequent
addenda to the term sheet in September and November, 1998 resolving issues
arising in the course of finalizing the agreements described in the term
sheet, all leading to the filing of the Plan.
O. APPOINTMENT OF RULE 706 PANEL IN THE MDL CASE. In a series of orders
entered in 1996, Judge Pointer appointed in the MDL a national scientific
panel (the "706 PANEL") to address, pursuant to Federal Rule of Evidence
Page 48
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
706, whether existing studies, research and reported observations provide a
reliable scientific basis to support the conclusion that silicone gel
breast implants cause or exacerbate a variety of alleged classical or
atypical diseases, syndromes or conditions. The 706 Panel conducted two
public hearings and heard testimony and argument presented by parties to
the MDL, and has heard commentary and input from selected experts.
On November 30, 1998, the 706 Panel released its report. The 706 Panel
concluded that scientific studies completed to date do not provide
consistent evidence that silicone breast implants cause systemic illness in
humans. Dow Corning believes that this report will make it significantly
more difficult in the future for women to win in court on claims that
breast implants caused a systemic illness and will lead most courts to
dismiss such claims before trial. The Tort Committee believes that the
report ignores substantial scientific evidence of disease causation and
that any impact the 706 Panel's scientific views will have on breast
implant lawsuits is impossible to predict until the testimony of the 706
Panel members is taken later this year. Until that process is completed,
the report cannot be used in court proceedings.
The Debtor has not participated in the proceedings before the 706 Panel.
At a joint status conference held by the Court and the District Court, the
parties agreed that the report of the 706 Panel could have a material
effect on the Case. The Court therefore entered its order on February 2,
1998, modifying the automatic stay to allow the parties in this Case,
including the Debtor, to participate in proceedings before the 706 Panel,
including requiring the Debtor to provide information to the 706 Panel,
allowing the parties to participate by submission of written inquiries to
the 706 Panel through its counsel, and allowing the parties to participate
in discovery of the 706 Panel after its report is issued.
ARTICLE VI
DESCRIPTION OF THE PLAN
THE FOLLOWING DESCRIPTION OF THE PLAN IS QUALIFIED BY THE ACTUAL PROVISIONS
OF THE PLAN AND THE PLAN DOCUMENTS. TO THE EXTENT THE PROVISIONS OF THE PLAN
OR THE PLAN DOCUMENTS DIFFER FROM THE DESCRIPTION SET OUT BELOW, THE
PROVISIONS OF THE PLAN AND THE PLAN DOCUMENTS SHALL CONTROL.
6.1 CLASSIFICATION OF CLAIMS AND INTERESTS.
A. GENERAL. The Bankruptcy Code requires DCC to classify Claims asserted
against its estate. The Bankruptcy Code prohibits dissimilar creditors from
being placed within the same class. Except for such prohibition, the
Bankruptcy Code is silent as to other guidelines to be used in
classification. Generally, every secured creditor is classified within a
separate class. This is necessary because a secured creditor's rights
against unique collateral are generally considered to be sufficiently
dissimilar from any other creditor's rights to allow for joint
classification. Priority claims, except for Bankruptcy Code section
507(a)(1), (2) and (8) claims, are generally classified within the same
class. Except with respect to Class 3 (Convenience Class) Claims, which
shall not be aggregated, if a Claimant or an Interest Holder has more than
one Claim or Interest in the same class, such Claims or Interests shall be
aggregated and treated as a single Claim or a single Interest, but if a
Claimant and/or Interest Holder has Claims and/or Interests in different
classes, such Claims and/or Interests shall only be aggregated within the
same class and not between classes. Additionally, if a Claim has been
acquired or transferred, the Claim shall be placed in the class in which it
would have been placed if it were owned by the original holder of such
Claim.
B. UNCLASSIFIED CLAIMS. As provided in the Bankruptcy Code, certain
groups of Claims (or potential Claims) are not classified for treatment
under the Plan. Those Claims are listed herein.
1. ADMINISTRATIVE CLAIMS. This group consists of all Administrative
Claims allowed under section 507(a)(1) of the Bankruptcy Code. Most of
the Claims in this category consist of the "hold-back" portions of
Claims for professional fees for various professionals (attorneys,
accountants, financial advisors, etc.) retained by permission of the
Court. It is estimated that the amount owing to this group of Claims
will total $2.4 million as of the Effective Date. Also within this group
of potential Claims, but not quantified, are obligations generally
incurred in the ordinary course of the operations of DCC, which claims
shall be paid according to the agreed terms with those parties.
2. PRIORITY TAX CLAIMS. This group consists of all Claims for taxes
allowable under section 507(a)(8) of the Bankruptcy Code. DCC estimates
this group of Claims to aggregate $4.3 million.
Page 49
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
C. CLASSES. For the purposes of the Plan, those Claimants holding Claims
against, or Shareholders holding Interests in, the Debtor are grouped in
the following classes in accordance with section 1122(a) of the Bankruptcy
Code.
1. CLASS 1--OTHER PRIORITY CLAIMS. Class 1 consists of all Priority
Claims against DCC arising under section 507(a)(2) through (7) of the
Bankruptcy Code. DCC is not aware of any Claims that may fall into this
class.
2. CLASS 2--SECURED CLAIMS. Class 2 consists of all Secured Claims
against DCC. The Class 2 Claims consist of potential setoff rights held
by vendors to DCC, which claims are believed to be nominal, and the
mechanics lien claims asserted against the Debtor's corporate center,
Midland, Michigan plant and Hemlock, Michigan facilities, in the
aggregate approximate amount of $760,000. Although their treatment is
summarized within a single class in the Plan, to conform to the
requirements of the Bankruptcy Code, each holder of a Secured Claim will
be considered to be classified within a separate subclass of Class 2,
i.e., Class 2A, Class 2B, etc.
3. CLASS 3--CONVENIENCE CLAIMS. Class 3 consists of all Unsecured
Claims (other than Public Debt Claims) against DCC of $10,000.00 or
less, provided, that, if the holder of an Unsecured Claim in an amount
greater than $10,000.00 shall make an election to reduce such Claim to
$10,000.00, such Claim shall be treated as a Convenience Claim for all
purposes. The election shall be made on the ballot for accepting or
rejecting the Plan, completed and returned within the time fixed by
order of the Court. Making this election shall be deemed to be a waiver
by such electing holder of any right to participate in Class 4 as to any
and all Claims held by such holder. This class is estimated to be
comprised of approximately 3,000 Claimants having Claims aggregating (in
principal amount) approximately $4.65 million.
4. CLASS 4--UNSECURED CLAIMS. Class 4 consists of all Unsecured
Claims against DCC not classified in any other Class. As part of the
Plan, interest will accrue on these Claims from the Petition Date to the
Effective Date, at the Case Interest Rate of 6.28%, compounded annually
on each anniversary of the Petition Date. The Class 4 Claims are
estimated by DCC to be comprised of the following amounts of principal
and interest, assuming an Effective Date of June 30, 1999:
Page 50
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
CLASS 4 CLAIM SUMMARY/12/
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST TOTAL
AND ACCRUAL AT PRINCIPAL
INTEREST ON 6.28% AND
PETITION (THROUGH INTEREST
DATE 6/30/99) (6/30/99)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM LOANS/REVOLVER
- -------------------------------------------------------------------------------
Revolver-BofA $100.8 $28.9 $129.7
- -------------------------------------------------------------------------------
Revolver-BofA 50.1 14.3 64.4
- -------------------------------------------------------------------------------
Revolver-BofA 110.6 31.7 142.3
- -------------------------------------------------------------------------------
Revolver-BofA 115.6 33.1 148.7
LOANS AND PUBLIC DEBT CLAIMS
1995 Medium Term Notes $5.0 $1.4 $6.5
- -------------------------------------------------------------------------------
1996 Medium Term Notes 10.0 2.9 12.9
- -------------------------------------------------------------------------------
1998 Medium Term Notes 10.0 2.9 12.9
- -------------------------------------------------------------------------------
2001 Medium Term Notes 9.5 2.7 12.3
- -------------------------------------------------------------------------------
9.375% Debentures (due 2008) 77.0 22.0 99.0
- -------------------------------------------------------------------------------
8.15% Debentures (due 2029) 50.3 14.4 64.7
- -------------------------------------------------------------------------------
Nippon Life (3.0B Yen-payable in Yen) 23.0 6.6 29.6
- -------------------------------------------------------------------------------
Credit Lyonnais 25.4 7.2 32.5
- -------------------------------------------------------------------------------
First National Bank of Chicago 7.2 2.0 9.2
- -------------------------------------------------------------------------------
Bank of New York 20.2 5.7 25.9
- -------------------------------------------------------------------------------
Comerica 10.0 2.9 12.9
- -------------------------------------------------------------------------------
Bank of Tokyo Term 20.3 5.7 26.0
- -------------------------------------------------------------------------------
OTHER DEBT
Trade Payables/13/ 61.6 17.6 79.1
- -------------------------------------------------------------------------------
Forward Contracts 24.3 6.9 31.2
- -------------------------------------------------------------------------------
Swaps 47.9 13.7 61.6
- -------------------------------------------------------------------------------
Pre-Petition Personal Injury Settlements 31.3 8.9 40.2
- -------------------------------------------------------------------------------
Miscellaneous Claims 200.0 57.2 257.2
TOTAL $1,010.1 $288.8 $1,298.9
</TABLE>
- ----------------------
/12/Amounts in this table are in millions of dollars.
/13/The aggregate amount of Trade Payables is undisputed; the Debtor is
reviewing its records to determine whether disputes remain as to individual
Claims.
Page 51
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
5. CLASS 4A--PREPETITION JUDGMENT CLAIMS. Class 4A consists of the
Claims of certain Personal Injury Claimants whose Claims were resolved
by judgments entered prior to the Petition Date, which judgments were
either on appeal or as to which the time for taking an appeal had not
expired as of the Petition Date and were consequently stayed by the
filing of the Case. Four Claimants in this Class obtained judgments
against the Debtor: Rebecca and Robert Stabile, who obtained a judgment
in the aggregate amount of $1,745,000 entered on February 16, 1995, and
Gladys and Robert Laas, who obtained a judgment in the aggregate amount
of $5,230,000 entered on April 25, 1995. Dow Corning obtained judgment
in its favor with respect to the other Class 4A Claimants, Jennifer
Ladner, Tammy Turner and Harla Jean Gossett.
6. CLASS 4B--DCC GUARANTY CLAIMS. Class 4B consists of the holders of
guaranty agreements executed by the Debtor with respect to the
operations of certain of its Subsidiaries. There are 12 holders of
Claims in Class 4B, which entities are listed in section 4.3 of this
Disclosure Statement. The total of such contingent Claims is
approximately $82 million. All the underlying obligations of the
Subsidiaries are current, and no defaults are anticipated with respect
to these Claims.
7. CLASS 5--DOMESTIC BREAST IMPLANT PERSONAL INJURY CLAIMS. Class 5
consists of the Breast Implant Personal Injury Claims against DCC held
by Claimants who are not defined below as "Foreign." (Claimants not
meeting the criteria to be classified as "FOREIGN" are referred to
herein and in the Plan as "DOMESTIC" Claimants). This class is estimated
to include approximately 135,000 Breast Implant Users, not including
Rule 3005 Claimants or supplemental Claims. Dow Corning disputes its
liability to substantially all of these Claimants.
8. CLASSES 6.1 AND 6.2--FOREIGN BREAST IMPLANT PERSONAL INJURY
CLAIMS. Classes 6.1 and 6.2 consist of the Breast Implant Personal
Injury Claims against DCC held by Claimants who are not citizens of the
United States, are not resident aliens within the United States, Puerto
Rico, the territories and possessions of the United States, or a United
States military facility (such geographic areas being referred to herein
as the "GREATER U.S."), or who reside outside the Greater U.S., and
whose implant procedures occurred outside the Greater U.S. (Claimants
meeting these criteria are referred to herein and in the Plan as
"FOREIGN" Claimants.) Class 6.1 includes Foreign Claimants in Category 1
and 2 countries (see EXHIBIT "C") and is estimated to include
approximately 11,500 to 13,500 Breast Implant Users, not including Rule
3005 Claimants. Class 6.2 includes Foreign Claimants in Category 3 and 4
countries (see EXHIBIT "C") and is estimated to include approximately
8,000 Breast Implant Users, not including Rule 3005 Claimants. Dow
Corning disputes its liability to substantially all of these Claimants.
9. CLASS 6A--QUEBEC CLASS ACTION SETTLEMENT CLAIMANTS. Class 6A
consists of the settling members of the class of plaintiffs in a class
action filed in the province of Quebec against DCC and its subsidiary,
DC Canada, asserting Claims relating to Breast Implants. There are
approximately 7,500 members of the class action in Quebec. Although DCC
disputes its liability to the Class 6A Claimants, the Claims are to be
resolved pursuant to the Quebec Breast Implant Settlement Agreement.
10. CLASS 6B--ONTARIO CLASS ACTION SETTLEMENT CLAIMANTS. Class 6B
consists of the settling members of the class of plaintiffs in class
action filed in the province of Ontario against DCC and its subsidiary,
DC Canada, asserting Claims relating to Breast Implants. There are
approximately 2,500 Breast Implant Users who are members of the class
action in Ontario. Although DCC disputes its liability to the Class 6B
Claimants, the Claims are to be resolved pursuant to the Ontario Breast
Implant Settlement Agreement.
11. CLASS 6C--B.C. CLASS ACTION SETTLEMENT CLAIMANTS. Class 6C
consists of the settling members of the class of plaintiffs in a class
action filed in the province of British Columbia against DCC and its
subsidiary, DC Canada, asserting Claims relating to Breast Implants. The
affected plaintiffs include those resident Claimants in British Columbia
who do not opt out of the class action or those Claimants who are
resident of any province of Canada other than British Columbia, Quebec
and Ontario who timely elect to be bound by the class action. There are
approximately 4,100 Breast Implant Claimants who are members of the
class action in British Columbia. Although DCC disputes its liability to
the Class 6C Claimants, the Claims are to be resolved pursuant to the
B.C. Class Action Settlement Agreement.
12. CLASS 6D--ELECTING AUSTRALIA BREAST IMPLANT SETTLEMENT
CLAIMANTS. Class 6D consists of the Breast Implant Claimants who are
residents of Australia or who received their implants in Australia and
who timely elect to participate under the Australia Breast Implant
Settlement Option by indicating their election on their ballot on the
Plan. Breast Implant Claimants eligible to participate in Class 6D have
asserted Claims against DCC or its subsidiary, Dow Corning Australia
PTY, Ltd. There are approximately 4,500 Breast Implant Users eligible to
participate in Class 6D, not including Rule 3005 Claimants who will have
only limited options to participate and
Page 52
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Raw Material Claimants who will be entitled to receive a limited fixed
payment amount. Although DCC disputes its liability to the Class 6D
Claimants, the Claims of Claimants who elect to participate will be
resolved pursuant to the Australia Breast Implant Settlement Option.
13. CLASS 7--SILICONE MATERIAL CLAIMS. Class 7 consists of the
Silicone Material Claims against DCC (other than those held by
Claimants in Classes 6B, 6C and 6D). These Claims arise from
implantation of a Non-Dow Corning Breast Implant manufactured by a
United States-based manufacturer using a medical grade gel system
purchased from Dow Corning. This class is estimated to include
approximately 100,000 Claimants who claim to have been implanted, not
including Rule 3005 Claimants. Dow Corning disputes its liability to
these Claimants.
14. CLASS 8--MISCELLANEOUS RAW MATERIAL PERSONAL INJURY
CLAIMS. Class 8 consists of the Miscellaneous Raw Material Personal
Injury Claims against DCC other than those held by Claimants in Classes
6B, 6C, 6D and 7. This class is estimated to include up to 50,000
Claimants who claim to have been implanted, not including Rule 3005
Claimants. Dow Corning disputes its liability to these Claimants.
15. CLASS 9--DOMESTIC OTHER PRODUCTS PERSONAL INJURY CLAIMS. Class
9 consists of the Other Products Personal Injury Claims against DCC
held by Domestic Claimants. This class is estimated to include
approximately 17,000 Other Products Personal Injury Claimants who
assert they have or had a Dow Corning Covered Other Product, not
including Rule 3005 Claimants. Dow Corning disputes its liability to
substantially all of these Claimants.
16. CLASSES 10.1 AND 10.2--FOREIGN OTHER PRODUCTS PERSONAL INJURY
CLAIMS. Class 10.1 consists of the Other Products Personal Injury
Claims against DCC held by Foreign Claimants in Category 1 and 2
countries (see EXHIBIT "C"). This class is estimated to include
approximately 2,300 Other Products Personal Injury Claimants who assert
they have or had a Covered Other Product. Class 10.2 consists of the
Other Products Personal Injury Claims against DCC held by Foreign
Claimants in Category 3 and 4 countries (see EXHIBIT "C"). This class
is estimated to include approximately 100 Covered Other Products
Personal Injury Claimants who assert they have or had a Dow Corning
Other Product. Dow Corning disputes its liability to substantially all
of these Claimants.
17. CLASS 11--CO-DEFENDANT CLAIMS. Class 11 consists of the parties
who have been named or have been aligned as co-defendants with the
Debtor in litigation with respect to Personal Injury Claims that are
not otherwise classified. These Claimants include, without limitation,
Baxter Healthcare Corp., Baxter International, Inc., Minnesota Mining &
Manufacturing Co., and Bristol-Myers Squibb Company. The amount and
allowability of these Claims are disputed.
18. CLASS 12--PHYSICIAN CLAIMS. Class 12 consists of the Claims of
Physicians with respect to Personal Injury Claims involving Breast
Implants, Non-Dow Corning Breast Implants and Other Products. These
Claims include Physician Tortious Conduct Claims such as for loss of
profit or damage to reputation allegedly caused by, among other things,
Dow Corning's alleged misrepresentation about the extent and results of
Dow Corning's implant testing, and Physician Claimants' reliance
thereon in providing their patients medical services involving Dow
Corning's Breast Implants and Other Products. They also include
Physician Products Liability Reimbursement Claims (a) arising in
connection with litigation or Claims asserted by implant recipients
against both the Physician Claimant and Dow Corning and (b) alleging
that the Physician Claimant and Dow Corning are both liable or
potentially liable for injuries allegedly sustained by the implant
recipients. The amount and allowability of these Claims are disputed.
19. CLASS 13--HEALTH CARE PROVIDER CLAIMS. Class 13 consists of the
Claims of Health Care Providers with respect to Personal Injury Claims
involving Breast Implants, Non-Dow Breast Implants and Other Products.
The amount and allowability of these Claims are disputed.
Page 53
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
20. CLASS 14--DOMESTIC HEALTH INSURER CLAIMS. Class 14 consists of
the Claims of Domestic Health Insurers for payments made or to be made
on behalf of Personal Injury Claimants. The amount and allowability of
these Claims are disputed.
21. CLASS 14A--FOREIGN HEALTH INSURER CLAIMS. Class 14A consists of
the Claims of Foreign Health Insurers for payments made or to be made on
behalf of Personal Injury Claimants. The amount and allowability of
these Claims are disputed.
22. CLASS 15--GOVERNMENT PAYOR CLAIMS. Class 15 consists of the
Claims of Government Payors with respect to their Other Claims against
DCC. The amount and allowability of these Claims are disputed.
23. CLASS 16--SHAREHOLDER CLAIMS. Class 16 consists of the Claims of
the Shareholders arising with respect to liabilities for Personal Injury
Claims. The amount and allowability of these Claims are disputed.
24. CLASS 17--GENERAL CONTRIBUTION CLAIMS. Class 17 consists of all
Claims for indemnity, contribution, subrogation or the like which are
not treated within classes 11 through 16. The amount and allowability of
these Claims are disputed.
25. CLASS 18--LTCI PERSONAL INJURY CLAIMS. Class 18 consists of the
LTCI Personal Injury Claims against DCC. This Class is estimated to be
comprised of approximately 5,900 Claimants. The amount and allowability
of these Claims are disputed.
26. CLASS 19--LTCI OTHER CLAIMS. Class 19 consists of the LTCI Other
Claims against DCC. The amount and allowability of these Claims are
disputed.
27. CLASS 20--INTERCOMPANY CLAIMS. Class 20 consists of the
Intercompany Claims against DCC. The Class 20 Claims, net of offsets
previously authorized, aggregate approximately $25.02 million.
28. CLASS 21--SUBORDINATED CLAIMS. Class 21 consists of Subordinated
Claims against DCC. DCC is not aware of any Claims that would be
allowable in Class 21. If Claims are Allowed with respect to the pending
securities law or shareholder derivative actions, see section 3.4(E)
above, the Debtor will seek to have such Claims subordinated pursuant to
section 510 of the Bankruptcy Code.
29. CLASS 22--ENVIRONMENTAL CLAIMS. Class 22 consists of the
Environmental Claims against DCC. DCC maintains an accrued reserve for
accounting purposes for Class 22 Claims in the aggregate amount of $7.8
million.
30. CLASS 23--RETIREE BENEFIT CLAIMS. Class 23 consists of the
Claims for payments to any entity or person for the purpose of providing
or reimbursing payments for retired employees of Dow Corning and their
spouses and dependents, for medical, surgical, or hospital care
benefits, or benefits in the event of sickness, accident, disability or
death under any plan, fund, or program established by Dow Corning prior
to the Petition Date.
31. CLASS 24--INTERESTS. Class 24 consists of the Shareholders of
DCC: Dow Chemical (which holds its Interest through a wholly-owned
subsidiary, Dow Holdings, Inc.) and Corning.
6.2 IMPAIRED CLASSES. Classes 4 through 21 (excepting Class 4B) and 24 are
impaired under the Plan. The Proponents are seeking acceptances of the Plan by
Claimants in these classes.
6.3 NON-VOTING AND UNIMPAIRED CLASSES. Claimants holding Claims classified
in Class 1 shall receive the treatment prescribed for their Claims under the
Bankruptcy Code. Therefore, such Claimants are not entitled to vote on the
Plan, and the Debtor will not solicit acceptances of the Plan from such
Claimants. Claimants holding Claims classified in Classes 2, 3, 4B, 22 and 23
are unimpaired and are conclusively presumed to have accepted the Plan under
the provisions of section 1126(f) of the Bankruptcy Code, and the Proponents
will not solicit acceptances of the Plan from the Claimants holding such
Claims.
6.4 TREATMENT OF CLAIMS AND INTERESTS.
A. GENERAL. The Claims and Interests, as classified in section 6.1
above, shall be satisfied in the manner set forth in this section 6.4.
B. OTHER PRIORITY CLAIMS--CLASS 1. All Allowed Other Priority Claims
shall be paid by the Reorganized Debtor either (a) in full, in cash, as
soon as practicable after the Effective Date (or, if later, the Allowance
Date) or (b) upon such terms as may be agreed to in writing by such
Claimant and the Reorganized Debtor.
Page 54
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
C. SECURED CLAIMS--CLASS 2. Class 2 shall consist of separate subclasses
for each Claim secured by a Security Interest in or Lien upon property in
which the Debtor has an interest, as appropriate. Each subclass is deemed
to be a separate class for all purposes under the Bankruptcy Code. The
legal, equitable and contractual rights of Persons holding Allowed Secured
Claims in any subclass of Class 2 will either (a) not be altered by the
Plan or (b) at the option of the Debtor, will be treated in any other
manner that will result in such Allowed Secured Claims being deemed
unimpaired under section 1124 of the Bankruptcy Code.
D. CONVENIENCE CLAIMS--CLASS 3. Any person holding an Allowed
Convenience Claim shall be entitled to receive as soon as practicable after
the Effective Date, or, if later, the Allowance Date, payment of its
Allowed Claim in cash.
E. UNSECURED CLAIMS--CLASS 4. Each Allowed Unsecured Claims in Class 4
shall include interest thereon from the Petition Date through the Effective
Date at the Case Interest Rate, and such fees, costs and expenses
(including liquidated damages or prepayment penalties), but only to the
extent such fees, costs and expenses are allowable under applicable law.
The Case Interest Rate is the Federal judgment rate in effect on the
Petition Date (6.28%), which amount is compounded annually on each
anniversary of the Petition Date.
Each Claimant holding an Allowed Unsecured Claim will receive, as
payment in full, as soon as practicable following the Effective Date (or,
if later, the Allowance Date), the sum of (a) a cash payment equal to the
lesser of 24% of the holder's Allowed Unsecured Claim or a pro rata share
of $315.6 million and (b) Senior Notes in a principal amount equal to the
balance of the Allowed Unsecured Claim. In the event the Court determines
that the treatment of Class 4 does not satisfy the requirements of either
section 1129(a)(7) or, in the event confirmation is sought pursuant to
section 5.18 of the Plan, section 1129(b) of the Bankruptcy Code, the
Proponents shall propose amendments to the Plan to ensure its compliance
with the requirements of section 1129 of the Bankruptcy Code, and
thereafter request confirmation of the Plan, as amended.
To the extent distributions in respect of any Allowed Class 4 Claims are
not made on the Effective Date, interest shall accrue on the unsatisfied
portion of such Allowed Class 4 Claim from the Effective Date until the
date on which distribution is actually made in respect thereof at the rate
set for the initial issuance of Senior Notes under the Plan, compounded on
each interest payment date under the Senior Notes so issued. All such
interest shall be paid in cash at the time distributions in respect of such
Claim are made.
The Senior Notes will mature on the tenth anniversary of the Effective
Date, on which date the entire principal balance will be paid as a single
balloon payment, with interest, which shall accrue from and after the
Effective Date, payable in semi-annual installments at the Plan Interest
Rate.
The interest rate on the Senior Notes shall be computed based upon a
formula or procedure (a "Rate Setting Procedure") that is determined by the
Court at the confirmation hearing to result in the Senior Notes having a
value, as of the effective date of the Plan (within the meaning of section
1129 of the Bankruptcy Code), that is equal to the principal amount of the
Senior Notes. Prior to the confirmation hearing, the Proponents shall
attempt to reach agreement with the Commercial Committee regarding the Rate
Setting Procedure. Absent agreement between the Proponents and the
Commercial Committee, the Proponents will request a Rate Setting Procedure
providing that the interest rate be set by establishing a financial
reference point, such as the interest rate on 10-year U.S. Treasury
securities as of the Effective Date, and providing for a certain basis
point spread above such reference rate, resulting in automatic adjustments
to account for changes in market conditions between the Confirmation Date
and the Effective Date. Upon the motion of the Debtor or the Commercial
Committee, and after notice and a hearing prior to the Effective Date, the
Court shall approve a modification of the Rate Setting Procedure if the
Court determines, prior to the Effective Date, that due to changed
circumstances the Rate Setting Procedure approved at the confirmation
hearing is no longer adequate to cause the Senior Notes to have a value, as
of the effective date of the Plan, that is equal to their principal amount.
The terms of the Senior Notes indenture governing covenants and events
of default are described in Exhibit "D" to the Plan.
The Debtor shall use its commercially reasonable best efforts to obtain
a preliminary indication from the rating agencies of a rating for the
Senior Notes prior to the confirmation hearing and will use its reasonable
best efforts to obtain an investment grade rating for the Senior Notes
prior to the Effective Date from at least two of the following credit
rating agencies: Standard & Poor's, Moody's, Fitch, and Duff & Phelps, with
at least one of the ratings to be from Standard & Poor's or Moody's. The
Debtor cannot, however, state with certainty what rating will be obtained,
or
Page 55
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
indeed, whether a rating will be obtained at all. The Debtor shall prepare
and file an application to list the Senior Notes on the New York Stock
Exchange and shall use its reasonable best efforts to cause the Senior
Notes to become so listed no later than the Effective Date.
The Debtor shall file a registration statement with the Securities and
Exchange Commission prior to the Effective Date to effect the registration
of the Senior Notes under the Securities Exchange Act of 1934, and shall
use its reasonable best efforts to cause the Registration Statement to
become effective no later that than the Effective Date (or as soon
thereafter as possible). On the Effective Date, the Debtor shall enter into
a registration rights agreement providing certain demand and piggyback
registration rights for certain of the holders of the Senior Notes.
F. PREPETITION JUDGMENT CLAIMS--CLASS 4A. On the Effective Date, the
post-confirmation injunction provided in the Confirmation Order will be
modified to the limited extent required to allow the exhaustion of any
post-judgment appeals in connection with any pre-petition judgment Claims.
The Litigation Facility will be substituted for the Debtor as party to the
appeals; the appeals will be prosecuted in the appellate courts of the
jurisdictions in which the written judgments were obtained. If the final
resolution of the appeal is in favor of the Prepetition Judgment Claimant,
the amount of the judgment, as finally determined on appeal (whether by
settlement, remittitur or affirmance), shall be treated and paid in the
same manner as Class 4 Claims under the Plan. If the appeal results in an
order remanding the matter for new trial as to liability and/or damages,
the holder of the Prepetition Judgment Claim shall have the Claim resolved
through litigation in the Litigation Facility. The limited modification of
the post-confirmation injunction provided above shall not otherwise affect
or limit the effect of the release and injunction provisions of sections
8.3 through 8.5 of the Plan.
G. DCC GUARANTY CLAIMS--CLASS 4B. The holders of DCC Guaranty Claims
shall retain their Claims, if any, against DCC, and the Plan leaves
unaltered the legal, equitable and contractual rights to which such Claims
entitle the holders thereof.
H. DOMESTIC AND FOREIGN PERSONAL INJURY CLAIMS--CLASSES 5 THROUGH 10.2
(OTHER THAN CLAIMS IN CLASSES 6A, 6B, 6C AND 6D)/14/. Dow Corning proposes
to resolve the Personal Injury Claims in Classes 5 through 10.2 by either
settling Claims pursuant to the terms of the Settlement Facility Agreement
or litigating Claims pursuant to the terms of the Litigation Facility
Agreement. To this end, the Plan is designed to compensate Settling
Personal Injury Claimants through the settlement options provided under the
Settlement Facility.
All holders of Personal Injury Claims (other than (i) Miscellaneous Raw
Material Claimants and (ii) Other Products Claimants whose Claims do not
arise from a Covered Other Product, whose Claims will be processed in the
Litigation Facility) who timely return Participation Forms and elect to
settle their Claims, and those that do not timely return Participation
Forms, shall become Settling Personal Injury Claimants and their Claims
shall be resolved in the Settlement Facility. All Personal Injury Claimants
who timely return Participation Forms and elect to litigate their Claims
shall be treated as Non-Settling Personal Injury Claimants and their Claims
shall be resolved by the Litigation Facility.
To maximize the recovery to Settling Personal Injury Claimants, section
5.10 of the Plan proposes, to the extent the Court deems it allowed by law,
to limit the amounts to be paid to attorneys for Settling Personal Injury
Claimants to a range of between 10% and 30% of the Claimants' recovery,
depending on the level of compensation to be paid to the Settling Personal
Injury Claimant under the Settlement Facility Agreement. Payments under
either the Expedited Release Payment Option or the Explantation Payment
Option of the Settlement Facility are excluded from the computation of any
payment to be made to attorneys for the individual Claimants, and no fee
payments may be made with respect to these payments. If the Court does not
approve the proposed fee limitation, the rights of the Claimants and their
counsel will be governed by the existing arrangements between them or as
the Court shall otherwise determine.
Non-Settling Personal Injury Claimants, parties asserting Assumed Third
Party Claims, Miscellaneous Raw Material Claimants and Other Products
Claimants whose Claims do not arise from use of a Covered Other Product
will have their Claims resolved through the procedures established by the
Litigation Facility Agreement and the Case Management Order. The terms of
the Case Management Order have been negotiated and agreed to by Dow Corning
and the Tort Committee, and will be submitted to the District Court for
approval prior to the Confirmation Date.
- ----------------------
/14/All discussion in this section 6.4(H) will not apply to the Claimants
in Classes 6A, 6B, 6C and 6D, whose treatment is discussed in sections 6.4(I)
through (L), which follow.
Page 56
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Under the Case Management Order, the Non-Settling Claimants will either
resume existing litigation or initiate suit--in either case against the
Litigation Facility. The litigation will proceed first with pre-trial
dispositive motion practice. This dispositive motion practice may include a
"Daubert" hearing to determine if there is sufficient admissible evidence
to permit a jury trial as to whether silicone causes systemic diseases. The
Manager of the Litigation Facility will seek such a common issues hearing
and the Debtor has reserved, on behalf of the Litigation Facility, the
right to seek adjudication of other common issues. The Tort Committee has
reserved the right on behalf of all individual Personal Injury Claimants to
oppose such common issue adjudications. The District Court will decide
whether common issue adjudications are appropriate. The Debtor and the Tort
Committee have agreed in the Case Management Order that the earliest time
the District Court can consider such issues is 270 days after the deadline
for opt-out elections. The Litigation Manager will aggressively litigate
the merits of the unresolved Claims.
At the conclusion of the pre-trial settlement procedures and/or the
common issues/dispositive motion practice, individual cases may be
certified for trial, upon the recommendation of the Special Master. The
Proponents shall request that, under the Case Management Order, in
certifying cases for trial, the District Court shall take into account (i)
the status of any appeals regarding Daubert or other common issues rulings,
(ii) the litigation burdens on the Litigation Facility and the other
defendants of multiple trials (including the availability of witnesses and
counsel and the manageability of simultaneous trials), (iii) the interest
of Claimants in a prompt and fair resolution of their Claims, (iv) the need
to assure the integrity of the $400 million Litigation Fund cap and the
fair distribution of funds to Claimants, (v) the readiness of the case for
trial, and (vi) overall judicial efficiency.
Individual cases will be certified for trial in the federal district
court for the Eastern District of Michigan or in the district where the
Claims arose. In individual cases that (i) were originally filed in state
court and (ii) were not removed to federal court prior to the Petition
Date, the cases may be remanded to that state court for trial, subject to
the consent of all parties to each individual case to the remand to that
court. If remand occurs, the District Court will retain jurisdiction over
any issues common to all Breast Implant Claims. The state court to which
the case is remanded must agree to be bound by the terms of the Case
Management Order.
I. QUEBEC CLASS ACTION CLAIMS--CLASS 6A. Claims in Class 6A are to be
resolved pursuant to the terms of the Quebec Breast Implant Settlement
Agreement, provided such agreement is approved by the Court as part of
confirmation of the Plan. That agreement provides, in pertinent part, for
the treatment described below.
1. ELIGIBLE CLASS 6A CLAIMANTS. Eligible Quebec Class Action
Settlement Claimants (defined in the Quebec Breast Implant Settlement
Agreement as "SETTLING CLAIMANTS") shall include (i) those Breast
Implant Personal Injury Claimants who are among the parties certified as
members of the class of claimants in the class action against DCC and
its subsidiary, Dow Corning Canada, Inc., and who have not timely
elected to opt out of treatment as a member of such class and (ii) those
Breast Implant Personal Injury Claimants who elect to opt to participate
as Settlement Class Members under the terms of the Quebec Breast Implant
Settlement Agreement.
2. FUNDING. The Reorganized Debtor will provide funding, in the
aggregate amount of $37.25 million (nominal), over a seven-year period,
to fund the Quebec Class Action Fund.
3. CLAIM LIQUIDATION. Claims will be processed and paid by
administrators under the supervision of the court in Quebec. The claims
administrators shall provide information to the Reorganized Debtor and
the Court to allow for the coordination of resolution of related claims
and to assist the Reorganized Debtor in obtaining reimbursement under
available insurance coverage.
4. PAYMENT GRID. Claims shall be processed pursuant to a settlement
grid, to be approved by the Quebec court, that adopts the basic
eligibility criteria and definitions of compensable conditions of the
Plan and provides compensation comparable to the amounts offered (after
taking into account the adjustment for foreign domicile) for similar
Claims under the Settlement Facility, as well as for Claims in Classes
6B, 6C and 6D.
5. CLAIMS OF FAMILY MEMBERS. Immediate family members of a Quebec
Class Action Settlement Claimant who have themselves timely filed proofs
of claim in the Case will be resolved and paid under the terms of the
Litigation Facility Agreement.
6. EFFECT OF OPT-OUT ELECTIONS/FAILURE TO OBTAIN COURT
APPROVAL. Class 6A Claimants who timely opted out of the class action in
Quebec and who do not timely elect to participate as Settling Claimants
shall be treated as Class 6.1 Claimants under the Plan. The time period
for opting out of the class action in Quebec has expired. Dow Corning
believes that three individuals opted out. If the Court should fail to
approve the Quebec Breast Implant Settlement Agreement, Class 6A
Claimants shall be treated as Class 6.1 Claimants.
Page 57
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
J. ONTARIO CLASS ACTION CLAIMS--CLASS 6B. Claims in Class 6B are to be
resolved pursuant to the terms of the Ontario Breast Implant Settlement
Agreement, provided such agreement is approved by the Court as part of
confirmation of the Plan. That agreement provides, in pertinent part, for
the treatment described below.
1. ELIGIBLE CLASS 6B CLAIMANTS. Eligible Ontario Class Action
Settlement Claimants (defined in the Ontario Breast Implant Settlement
Agreement as "SETTLING CLAIMANTS") shall include (i) those Breast
Implant Personal Injury Claimants who are among the parties certified as
members of the class of claimants in the class action against DCC and
its subsidiary, Dow Corning Canada, Inc., and who have not timely
elected to opt out of treatment as a member of such class and (ii) those
Breast Implant Personal Injury Claimants, Silicone Material Claimants
and Miscellaneous Raw Material Claimants who are not members of the
certified class but who timely elect to opt to participate as Settlement
Class Members under the terms of the Ontario Breast Implant Settlement
Agreement.
2. FUNDING. The Reorganized Debtor will provide funding, in the
aggregate amount of $17.9 million (nominal), over a seven-year period,
to fund the Ontario Class Action Fund.
3. CLAIM LIQUIDATION. Claims will be processed and paid by
administrators under the supervision of the court in Ontario. The claims
administrators shall provide information to the Reorganized Debtor and
the Court to allow for the coordination of resolution of related claims
and to assist the Reorganized Debtor in obtaining reimbursement under
available insurance coverage.
4. PAYMENT GRID. Claims shall be processed pursuant to a settlement
grid, to be approved by the Ontario court, that adopts the basic
eligibility criteria and definitions of compensable conditions of the
Plan and provides compensation comparable to the amounts offered (after
taking into account the adjustment for foreign domicile) for similar
Claims under the Settlement Facility, as well as for Claims in Classes
6A, 6C and 6D.
5. CLAIMS OF FAMILY MEMBERS. The Ontario Breast Implant Settlement
Agreement provides for resolution of the Claims of Family Members of
such Claimants. Such Family Member Claims shall be resolved out of the
payments of the Reorganized Debtor to the Ontario Class Action Fund.
6. EFFECT OF OPT-OUT ELECTIONS/FAILURE TO OBTAIN COURT
APPROVAL. Class 6B Claimants who opted out of the class action in
Ontario and who do not timely elect to participate as Settlement Class
Members shall be treated as Class 6.1, Class 7 or Class 8 Claimants
under the Plan. The time period for electing to opt out of the Ontario
class action has expired. Dow Corning believes that 15 members opted
out. If the Court should fail to approve the Ontario Breast Implant
Settlement Agreement, Class 6B Claimants shall be treated as Class 6.1,
7 or 8 Claimants, as appropriate.
K. B.C. CLASS ACTION CLAIMS--CLASS 6C. Claims in Class 6C are to be
resolved pursuant to the terms of the B.C. Class Action Settlement
Agreement, provided such agreement is approved by the Court as part of
confirmation of the Plan. That agreement provides, in pertinent part, for
the treatment described below.
1. ELIGIBLE CLASS 6C CLAIMANTS. Eligible B.C. Class Action Settlement
Claimants (defined in the B.C. Class Action Settlement Agreement as
"SETTLING CLAIMANTS") shall include (i) those Breast Implant Personal
Injury Claimants, Silicone Material Claimants and Miscellaneous Raw
Material Claimants who are residents of British Columbia having Claims
against DCC and its subsidiary, DCC Canada, Inc., and who have not
timely elected to opt out of treatment as a member of such class and
(ii) those Breast Implant Personal Injury Claimants, Silicone Material
Claimants and Miscellaneous Raw Material Claimants who are resident of
any Canadian province other than British Columbia, Quebec and Ontario
who elect to participate as Settlement Class Members under the terms of
the B.C. Class Action Settlement Agreement.
2. FUNDING. The Reorganized Debtor will provide funding, in the
aggregate amount of $25.1 million (nominal), over a seven-year period,
to fund the B.C. Class Action Fund.
3. CLAIM LIQUIDATION. Claims will be processed and paid by
administrators under the supervision of the court in British Columbia.
The claims administrators shall provide information to the Reorganized
Debtor and the Court to allow for the coordination of resolution of
related claims and to assist the Reorganized Debtor in obtaining
reimbursement under available insurance coverage.
4. PAYMENT GRID. Claims shall be processed pursuant to a settlement
grid, to be approved by the British Columbia court, that adopts the
basic eligibility criteria and definitions of compensable conditions of
the Plan and
Page 58
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
provides compensation comparable to the amounts offered (after taking
into account the adjustment for foreign domicile) for similar Claims
under the Settlement Facility, as well as for Claims in Classes 6A, 6B
and 6D.
5. CLAIMS OF FAMILY MEMBERS. The treatment afforded the Class Members
in Class 6C shall be cumulative of the Claims of Family Members of such
Claimants, and such Family Member Claims shall be deemed released in
consideration of the payments of the Reorganized Debtor to the B.C.
Class Action Fund.
6. EFFECT OF OPT-OUT AND OPT-IN ELECTIONS/FAILURE TO OBTAIN COURT
APPROVAL. Class 6C Claimants who reside in British Columbia and who
timely opt out of the class action in British Columbia and the potential
Class 6C Claimants who reside in Canadian provinces other than British
Columbia, Quebec and Ontario and who do not timely elect to become
Settlement Class Members in the class action in British Columbia shall
become (or shall remain) Class 6.1, 7 or 8 Claimants under the Plan. The
time period for electing to opt either in or out, as applicable, of the
class action has not commenced. Following receipt of information
regarding the results of the opt-in/opt-out elections in British
Columbia, Dow Corning will have 45 days to review and consider the
effect of the elections. If, in the view of Dow Corning, the number of
opt-outs is excessive or the number of opt-ins is insufficient, it may
withdraw from the settlement. Similarly, if materially more than 4,100
"Primary Claimants" elect to become Class 6C Claimants, or if the
Confirmation Date is delayed beyond December 31, 1999, the Settlement
Claimants may withdraw from the settlement. If Dow Corning or the
Settlement Claimants withdraw from the settlement or if either the Court
or the British Columbia court fails to approve the settlement, Class 6C
Claimants shall be treated as Class 6.1, Class 7 or Class 8 Claimants,
as appropriate.
L. AUSTRALIA BREAST IMPLANT CLAIMS--CLASS 6D. Claims in Class 6D are to
be resolved pursuant to the terms of the Australia Breast Implant
Settlement Option, provided such proposed settlement option is approved by
the Court as part of confirmation of the Plan. That settlement option
provides, in pertinent part, for the treatment described below.
1. ELIGIBLE CLASS 6D CLAIMANTS. Eligible Australia Breast Implant
Settlement Claimants (defined in the Australia Breast Implant Settlement
Option as "SETTLING AUSTRALIAN CLAIMANTS") shall include those Breast
Implant Personal Injury Claimants, Silicone Material Claimants and
Miscellaneous Raw Material Claimants who reside in Australia or who
received their Breast Implants in Australia and who timely register to
participate as Settling Australian Claimants under the terms of the
Australia Breast Implant Settlement Option.
Claimants may not participate in the Australia Breast Implant
Settlement Option if they (i) have accepted compensation from Dow
Corning and/or the Released Parties related to any Dow Corning Breast
Implant Claim other than under the program operated by Dow Corning
Australia PTY Ltd. from 1992 through 1996 that provided reimbursement
for certain removal expenses; (ii) have released Dow Corning and/or the
Released Parties with respect to any Dow Corning Breast Implant Claim;
or (iii) have had dismissed with prejudice any action against Dow
Corning and/or the Released Parties with respect to any Dow Corning
Breast Implant Claim. Eligible Australian Breast Implant Settlement
Claimants release all options to pursue remedies other than under the
Australia Breast Implant Settlement Option upon registration and should
therefore carefully consider their options before making an election to
participate.
2. FUNDING. The Reorganized Debtor will provide funding, in the
aggregate amount of up to $36 million (nominal), over a seven-year
period, to fund the Australia Breast Implant Optional Settlement Fund.
The actual amount of the funding provided by the Reorganized Debtor will
depend upon the number of Australian Breast Implant Users who filed a
timely proof of claim and who elect to participate in Class 6D. The
Australia Breast Implant Settlement Option permits the Trustees
appointed to manage the Australia Breast Implant Optional Settlement
Fund to assign the right to receive the scheduled payments from the
Reorganized Debtor to a third-party financial institution in exchange
for a single lump-sum payment. Such an assignment might allow
acceleration of payments to Settling Australian Claimants but would
reduce somewhat the total nominal amount available for distribution to
such Settling Australian Claimants.
The aggregate nominal funding for the Australia Breast Implant
Optional Settlement Fund will be determined by the number of eligible
Australian Breast Implant Users who elect to participate in the
following manner: If 2,400 eligible Australian Breast Implant Users who
filed a timely proof of claim elect to participate, including
substantially all of those Australian Breast Implant Users and Raw
Material Breast Implant Claimants who are represented by the firms of
Slater & Gordon and Reilly Basheer Downs & Humphries, then Dow Corning
will pay to the Trust to be established in Australia the sum of $21
million over a period of seven years. The funding will be increased by
$35,500 for each group of five additional eligible Australian Breast
Implant Users above 2,400 who timely filed proofs of claim and timely
elected to participate up to a maximum funding of $36 million.
Page 59
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
3. CLAIM LIQUIDATION. Claims will be processed and paid in Australian
dollars by a claims administrator supervised by a Trustee designated
under the Australia Breast Implant Settlement Option. The initial
Trustee will be selected by the Court at confirmation from those
nominated by the Debtor, Slater & Gordon, Reilly Basheer Downs &
Humphries, and/or Settling Australian Claimants. The Trustee and the
claims administrator will act under the supervision of the Supreme Court
of Victoria. The Trustee will be independent of Dow Corning, the
Released Parties and any Australian Claimant or counsel. The Trustee
will invest the funds paid by Dow Corning to the Trust and will oversee
the activities of the claims administrator. The Trustee is required to
appoint a firm of independent accountants as auditors of the Trust.
The claims administrator will be independent of both Dow Corning and
the Released Parties and of any Australian Claimants or counsel. The
claims administrator will be directed to adopt procedures to maintain
the confidentiality of Claimant files. The claims administrator shall
provide information to the Reorganized Debtor and the Court to allow for
the coordination of resolution of related claims and to assist the
Reorganized Debtor in obtaining reimbursement under available insurance
coverage.
4. PAYMENT GRID. Claims shall be processed by the claims
administrator pursuant to a settlement grid that generally adopts the
basic eligibility criteria and definitions of compensable conditions of
the Plan, with certain variations in compensation structure, amounts,
and/or eligibility criteria appropriate under circumstances applicable
to Claims in Australia. Dow Corning believes that the Australia Breast
Implant Settlement Option will generally provide compensation comparable
to the amounts offered (after taking into account the adjustment for
foreign domicile) under the settlement Grid structure employed in the
Settlement Facility, as well as for claims in Classes 6A, 6B and 6C. The
recovery by individual Claimants in Class 6D in some cases could be
greater than and in other cases could be less than the recovery
available under Class 6.1.
Breast Implant Users who elect to participate in the Australia Breast
Implant Settlement Option will be entitled to choose among several
settlement options each of which is summarized below:
A. EXPEDITED OPTION. Expedited Option. Australian Breast Implant
Users will receive $A 2000/15/ upon proof of implantation with a Dow
Corning Breast Implant. To qualify for this expedited payment, the
Claimant must provide documentation of "Level I" proof of product
identification which generally adopts the product identification
requirements established under the Plan for Class 6.1 Claimants.
Claimants who cannot establish product identification under these
standards may receive an expedited payment of $A 500 if they present
documentation of "Level II" proof of product identification. A
Claimant who elects the expedited payment option may also obtain
benefits for a qualified rupture, as described below.
B. MEDICAL CONDITIONS OPTION. Under this Option, Australian Breast
Implant Users are entitled to obtain payments for certain
disease/medical conditions and rupture. The compensable medical
conditions include some, but not all, of the medical conditions
compensable under the Plan for Class 6.1 Claimants. Specifically, the
compensable medical conditions consist of all conditions defined as
Disease Option I in the Plan (equivalent to the conditions
compensable under the Original Global Settlement). The diagnostic
criteria for those medical conditions compensable under the Australia
Breast Implant Settlement Option are the same as the criteria
applicable to Class 6.1 Claimants. In addition to compensation for a
medical condition, Breast Implant Users are also eligible to receive
compensation for rupture. The criteria for defining a qualified
rupture are the same as for Class 6.1 Claimants. Claims for
compensation under the medical condition option will be evaluated and
placed in the highest compensation category for which the Claimant
qualifies based both on the Claimant's medical condition and on the
medical condition documentation.
To qualify for this option, the Claimant must submit:
documentation demonstrating that she qualifies as a Class 6D
Claimant, a completed Claim form, product identification
documentation and medical condition documentation. Medical condition
documentation consists of appropriate medical records or evaluations
or a medical report of a medical practitioner who is a fellow with
the Royal Australian College of Physicians with advanced training in
internal medicine, rheumatology, immunology, neurology, neurosurgery
and/or general surgery or equivalent qualification.
- ----------------------
/15/As of January 27, 1999, an Australian dollar ($A) had an exchange rate
equivalent to $US .63.
Page 60
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Claimants will be entitled to appeal the categorization of their
Claim on the medical condition compensation schedule by submitting an
appeal to a claims review panel. The members of the claims review
panel will be appointed by the Trust.
C. LOCALIZED INJURY. As an alternative to the medical condition
option for disease/medical conditions or rupture, Breast Implant
Users may instead receive compensation for certain localized
injuries. Specifically, Australian Breast Implant Users may receive
compensation if they document that they suffered from "contracture,"
or if they document surgical removal of breast tissue as a result of
the need to remove silicone gel masses, or if they had their Dow
Corning Breast Implant removed. The benefits for localized injury
related to contracture and surgical removal of breast tissue are not
offered to Class 6.1 Claimants under the Plan.
D. RAW MATERIAL CLAIMANTS. Raw Material Claimants (Claimants who
do not have a Dow Corning Breast Implant but who have an implant made
by Baxter, Bristol, Cox Uphoff, Mentor or Bioplasty) who elect to
participate will be entitled to receive a payment of $A 500 upon
proof of product identification and proof of eligibility to
participate in Class 6D. Claimants who have received compensation
from other manufacturers may not be eligible to receive a payment. In
general, the raw material payment option covers the same categories
of Claimants as does Class 7 of the Plan; however, the raw material
Option under the Australia Breast Implant Settlement Option does not
offer separate payments for Claims based on disease or medical
conditions.
The documentation standards and criteria for compensation under the
Australia Breast Implant Settlement Option may result in the payment of
compensation to some Claimants who would not be eligible for
compensation as Class 6.1 Claimants. For example, to receive
compensation under the Australia Breast Implant Settlement Option,
Breast Implant Users will be required to provide proof of implantation
with a Dow Corning Breast Implant and documentation of the particular
compensable condition. The Agreement adopts two levels of product
identification standards: "Level I" proof, which generally adopts the
product identification standards applicable to Class 6.1 Claimants and
"Level II" proof, which permits proof of implantation based on criteria
not available to Class 6.1 Claimants. This means that Claimants who may
not be eligible to receive any compensation under the settlement program
for Class 6.1 Claimants because they are unable to present adequate
proof of product identification may be eligible to receive compensation
under the Australia Breast Implant Settlement Option if they can
establish Level II proof of product identification. Claimants who
present Level I proof of product identification will receive higher
compensation than Claimants who present Level II proof.
To obtain compensation under the Australia Breast Implant Settlement
Option for a medical condition, the Claimant must submit certain
documentation establishing the presence of the compensable condition.
The documentation requirements differ in some respects from the
documentation requirements applicable to Class 6.1 Claimants by
permitting those Claimants who cannot obtain their medical records to
instead submit a medical report. The deadlines for submitting
documentation under the Australia Breast Implant Settlement Option are
shorter and more rigid than some of the similar deadlines under the
Settlement Facility for Class 6.1 Claimants.
The mechanism for determining the applicable compensation level for
certain settlement options is somewhat different than the procedures
applicable to Class 6.1 Claimants. The Australia Breast Implant
Settlement Option allocates the aggregate Australia Breast Implant
Optional Settlement Fund for different categories of payment as follows:
(1) An amount not to exceed 10 percent of the aggregate (up to
$US 3.6 million) is to be allocated for administration. This "Costs
of Settlement and Administration Fund" is to be used to pay all costs
of maintaining the trust, claims administration, any payments to be
made to the Health Insurance Commission of Australia ("HIC"), and the
fees and expenses of Slater & Gordon, Reilly Basheer Downs &
Humphries, and other counsel who qualify under the Australia Breast
Implant Settlement Option related to the negotiation and
implementation of the settlement option in accordance with standards
of the Supreme Court of Victoria, subject to approval by the Supreme
Court of Victoria, and certain taxes assessed against the Trust.
Payment will be made to the HIC only for the purpose of resolving any
Claims that the HIC may have as to Class 6D members to reimburse the
HIC for medical treatment relating to Dow Corning Breast Implants. If
an agreement is reached with the HIC, the agreement would be designed
to extinguish and settle any such Claims against Class 6D Claimants.
(2) An amount equal to 1.27% of the aggregate nominal funding is
to be allocated for payment of any Claimants (including Rule 3005
Claimants) who did not file a proof of claim in the Case on or before
March
Page 61
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
1, 1997. Subject to available funds, such Claimants may receive up to
$A 1,500 depending on proof of product identification.
(3) Eligible Raw Material Claimants will receive a payment of $A
500.
(4) The remainder of the aggregate amount will be used to pay
eligible Breast Implant User Claimants under the various settlement
options. Claimants who elect the expedited option will receive $A
2,000 or $A 500 depending on whether they submit Level I or Level II
proof of product identification. Claimants electing any of the other
settlement options (medical condition/rupture) will receive their pro
rata shares of the remaining Australia Breast Implant Optional
Settlement Fund distributed in proportion to the base compensation
ratio for the condition documented by the Claimant. The ratios and
the projected compensation for each (non-Advanced) category (with
Level I proof), and based on the current Australian exchange rate,
are as follows:
<TABLE>
<CAPTION>
PROJECTED
APPROXIMATE
COMPENSATION BASE
CONDITION RATIO COMPENSATION
--------- ------------ ------------
<S> <C> <C>
Disability Level A 0.60 $A 47,650
Disability Level B 0.24 $A 19,060
Disability Level C 0.12 $A 9,530
SS/SLE 1.0 $A 79,400
Localized Injury 0.11 $A 8,740
Rupture 0.25 $A 19,850
</TABLE>
The compensation amount may vary based on the number and nature of
the participants, and an individual's Claim may be increased or
decreased based on various factors. For example, Claimants who have
implants made by multiple manufacturers (i.e., a Dow Corning Breast
Implant and an implant made by Baxter, Bristol or 3M) will have their
compensation reduced by one-half. The claims administrator has
discretion to adjust this reduction based on the particular facts of
the Claim. The compensation amount will also be reduced if the
Claimant has only Level II proof of product identification or if the
Claimant has technical deficiencies in the Claim. The compensation
amount will be increased if the Claimant is an "Advanced Claimant,"
as described below. DCC and the Australian counsel that negotiated
the Australia Breast Implant Settlement Option believe that up to
1,250 Australian Breast Implant Users may qualify as Advanced
Claimants.
5. TREATMENT OF ADVANCED CLAIMS. The Australia Breast Implant
Settlement Option provides that class members who meet certain
requirements are treated as Advanced Claimants. Advanced Claimants who
submit Level I proof will receive one-third higher compensation than
non-Advanced Claimants. Advanced Claimants are those who filed lawsuits,
other than as members of a class action, against Dow Corning in a state
court of any state of the United States before May 15, 1995 and whose
claim as of that date (i) remained within, or had been returned to, the
jurisdiction of that state court, (ii) was not bound by the decision of
the U.S. District Court Judge Pointer in In re Silicone Gel Breast
Implant Products Liability Litigation, Case No. CV 92-P-10000-S (N.D.
Ala. Apr 25, 1995), and (iii) was pending in a state court which would
not dismiss foreign claimants suits in favor of litigation in their home
courts. Dow Corning and certain Australian counsel disagree as to the
effect on both liability or the assessment of damages of the procedural
status of the Claims held by Advanced Claimants. The distinction
provided to Advanced Claimants is provided solely for purposes of
compromising the disputes with the Advanced Claimants who elect to
participate and does not constitute any waiver by Dow Corning of the
position that federal law rather than state law governs the issue of
forum non conveniens of cases properly removed to federal court; nor
does it constitute a waiver of any arguments as to the applicability of
choice of law rules or the right to assert that such claims should be
removed to federal court. Some representatives of Australian Claimants
have expressed concern that this treatment of Advanced Claims favors
clients of one of the attorneys who negotiated the settlement option to
the disadvantage of other eligible Claimants. Dow Corning believes that
the definition of Advanced Claim is based on a procedural distinction
among Claims and will apply to a number of Claimants who are not
represented by the counsel principally responsible for negotiation of
the Australia Breast Settlement Option.
6. CLAIMS OF FAMILY MEMBERS. The treatment afforded the class members
in Class 6D shall be cumulative of the Claims of Family Members of such
Claimants, and such Family Member Claims shall be deemed
Page 62
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
released in consideration of the payments of the Reorganized Debtor to
the Australia Breast Implant Optional Settlement Fund.
7. COUNSEL'S FEES. Slater & Gordon, Reilly Basheer Downs & Humphries,
and other counsel who facilitate the implementation of the Australia
Breast Implant Settlement Option may be entitled to fees paid out of the
Costs of Settlement and Administration Fund for negotiating the
settlement option and implementing the Claims processing structure, in
accordance with existing general standards for costs and fees published
by the Supreme Court of Victoria and subject to the approval of the
Supreme Court of Victoria. The scale of costs and fees prescribes
specific charges for specific tasks and services. The settlement option
also provides for the establishment of uniform fees for counsel for
Settling Australian Claimants consistent with the terms of the Plan
applicable to all Claims in Classes 5 and 6.1. Fees paid to counsel for
individual Settlement Claimants will reduce the amounts otherwise
payable to Settling Australian Claimants.
8. EFFECT OF REGISTRATION ELECTIONS/FAILURE TO OBTAIN COURT
APPROVAL. Potential Class 6D Claimants who reside in Australia or who
received their Breast Implants in Australia and who do not timely
register to participate in the settlement option shall be treated as
Class 6.1, 7 or 8 Claimants under the Plan, as appropriate. Elections to
participate will be made on the ballot for accepting or rejecting the
Plan by indicating the Claimant's election to be treated in Class 6D.
Claimants who elect to participate will release all Claims against Dow
Corning and the Released Parties and are required to indemnify Dow
Corning in the event Dow Corning incurs costs to third parties in
connection with the Claimant's Breast Implants. This indemnification
should not be triggered unless a Claimant's family members pursue Claims
against one of the Released Parties or the Claimant pursues Claims
against a third party (i.e., a doctor, hospital or other manufacturer)
who then seeks reimbursement from Dow Corning. If the Court should fail
to approve the Australia Breast Implant Settlement Option or if the
minimum participation by eligible Claimants is not met, Class 6D
Claimants shall be treated as Class 6.1, 7 or 8 Claimants, as
appropriate.
In addition to the aforementioned risks, Settling Australian
Claimants are also required to indemnify the Debtor and certain other
Released Parties for any liability incurred to third parties such as the
HIC or any private health insurance companies related to the Electing
Claimant's breast implants. No such indemnification is required under
the treatment afforded to Class 6.1 Claimants.
9. RISKS RELATED TO TREATMENT OF CLASS 6D. The payment to Class 6D
Claimants is capped in an aggregate amount to be determined based on the
number of Australian Breast Implant Users who elect to participate in
Class 6D. While some categories of settlement payments are fixed under
the terms of the option (such as the payment for expedited Claimants),
other categories of settlement payments will be determined after all
Claims are evaluated and the actual amount payable will depend on the
number and types of Claims asserted by the eligible Claimants. All
payments made to Claimants in Class 6D from the Australia Breast Implant
Optional Settlement Fund will be in Australian Dollars while all
payments made to Claimants in Class 6.1 will be made in U.S. dollars. As
reflected in footnote 15, as of January 27, 1999, $A 1 had an exchange
rate value of $US .63. Exchange rates, however, may vary from time to
time and may affect the relative recoveries between Classes 6D and 6.1
depending on when the Claims are ultimately paid.
M. OTHER CLAIMS RELATED TO IMPLANTS--CLASSES 11 THROUGH 17. The Debtor
has objected to the allowance of many of the Claims in Classes 11 through
15 and 17 ("OTHER CLAIMS") and, except as herein described, intends to
object to substantially all of such claims.
1. CLAIMS IN CLASS 11. Claimants in Class 11 shall have the option to
elect to settle their Claims against the Debtor or to litigate the
allowability of such Claims. Settling Co-Defendant Claimants shall
release all Claims (including but not limited to contribution Claims,
but excluding Claims filed under Bankruptcy Rule 3005) against the
Debtor-Affiliated Parties and the Shareholder-Affiliated Parties arising
from or relating to Products Liability Claims and, in exchange, the
Debtor-Affiliated Parties and the Shareholder-Affiliated Parties shall
release all Claims (including but not limited to contribution Claims)
the Debtor-Affiliated Parties and/or the Shareholder-Affiliated Parties
may have against a Settling Co-Defendant Claimant: (i) arising from or
relating to any Claims that are discharged, released and/or enjoined
pursuant to the Plan; and (ii) for any amount that was paid by any of
the Debtor-Affiliated Parties or Shareholder-Affiliated Parties that if
not so paid would have been a Products Liability Claim or would have
been a Claim arising from or relating to a Products Liability Claim. The
parties
Page 63
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
shall exchange the releases on the Effective Date or as soon thereafter
as may be practicable. To the extent a Personal Injury Claimant asserts
a Product Liability Claim against a Debtor-Affiliated Party and/or
Shareholder-Affiliated Party and a Claim against a Settling Co-Defendant
Claimant in a single action that has been or will be transferred to the
District Court, the Claims against the Debtor-Affiliated Party and/or
the Shareholder-Affiliated Party shall be severed from the Claim against
the Settling Co-Defendant Claimant and the Claim against the Settling
Co-Defendant Claimant shall be tried in the court from which such Claim
was transferred. Co-Defendant Claimants who do not elect to settle by
the deadline for voting on the Plan shall have their Claims estimated
for distribution on or before the Effective Date. The Estimated Amount
of any such Claims will be paid (subject to the terms of the Settlement
Facility Agreement and the Funding Payment Agreement) by the Claims
Administrator on, or as soon as practicable after, the Effective Date.
If not estimated for distribution on or before the Effective Date, such
Claims will be channeled to the Litigation Facility for purposes of
Claim liquidation and paid (subject to the terms of the Settlement
Facility Agreement and the Funding Payment Agreement) when Allowed.
References to a "Claim" against a non-Debtor party in section 5.13.1 of
the Plan shall have the same meaning as that contained in 11 U.S.C. (S)
101(5).
2. CLAIMS IN CLASS 12. Claimants in Class 12 (Physician Claims) who
settle their claims against the Debtor (the "SETTLING PHYSICIANS") will
receive the protection of the release and injunctive provisions of
sections 8.3, 8.4 and 8.5 of the Plan. The release and injunctive
protection in sections 8.3 and 8.4 of the Plan will be effective as to
all Claims against the Settling Physicians, other than Malpractice
Claims, that could be asserted by Personal Injury Claimants who elect or
are deemed to have elected to become Settling Personal Injury Claimants.
Additional protection is conditionally afforded in section 8.5 of the
Plan, which provides for the channeling of Claims held by Non-Settling
Personal Injury Claimants against Settling Physicians to the Litigation
Facility, where the Claims will be resolved in tandem with the related
Claims, if any, against the Litigation Facility, as successor to Dow
Corning with respect to Personal Injury Claims of Non-Settling Personal
Injury Claimants. This additional protection is conditional upon the
Claims against the Settling Physicians being transferred, as Claims
"related to" the Case, to the District Court for resolution.
The Claims held by Claimants in Class 12 who timely elect to litigate
their Claims against the Debtor will be channeled to and assumed by the
Litigation Facility. Claims in Class 12 that become Allowed Claims will
be paid in accordance with the Settlement Facility Agreement, the
Litigation Facility Agreement and the Funding Payment Agreement.
Additional details regarding treatment of Class 12 Claimants can be
found in section 1.2, at pages 12 through 15 of this Disclosure
Statement.
3. CLAIMS IN CLASS 13. Class 13 includes hospitals and other Health
Care Providers with Claims generally (a) arising in connection with
litigation or claims asserted by Personal Injury Claimants against both
the Health Care Providers and Dow Corning and (b) alleging that the
Health Care Providers and Dow Corning are both liable or potentially
liable for injuries allegedly sustained by the Personal Injury
Claimants. Health Care Providers generally allege that if they are found
liable to the Personal Injury Claimants for the alleged injuries, Dow
Corning should reimburse or indemnify them for any such losses.
A. SETTLEMENT OPTION FOR HEALTH CARE PROVIDERS. The Plan treats
Health Care Provider Claims in an aggregated manner. Health Care
Providers may elect to settle ALL of their Claims relating to
Products Liability Claims or they may elect to litigate ALL such
Claims. Health Care Providers electing the settlement option will be
required to "give up" or release ALL such Claims that they have
against Dow Corning and all other Released Parties. Thus, a Health
Care Provider may not elect to give up certain claims and litigate
others. However, if a Health Care Provider holds a Class 4 Commercial
Claim or other Claim unrelated to the Personal Injury Claims, that
Claim will not be released but will be entitled to separate treatment
under the Plan.
Settling Health Care Providers will receive no cash payment in
exchange for their election to settle, but will obtain the benefits
of the release, injunction and channeling provisions as provided in
sections 8.3 through 8.5 of the Plan. Settling Health Care Providers
will receive certain protections under the Plan, including:
(1) A release from all Claims relating to Products Liability
Claims held against them by Dow Corning and all other Released
Parties;
Page 64
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
(2) A release from all Personal Injury Claims, EXCEPT
MALPRACTICE CLAIMS AS DEFINED IN THE PLAN, which Settling Personal
Injury Claimants hold, may hold or may have held against Settling
Health Care Providers, either based upon tort, contract or
otherwise (MALPRACTICE CLAIMS ASSERTED BY PERSONAL INJURY
CLAIMANTS WILL BE RESOLVED IN THE COURTS WHERE SUCH CLAIMS HAVE
BEEN OR MAY BE FILED); and
(3) All parties who release Products Liability Claims against
the Settling Health Care Providers will also be permanently
enjoined, i.e. prevented from, among other things, (a) commencing
or continuing any action or other proceeding against a Settling
Health Care Provider and (b) seeking to enforce, attach, collect
or recover against any Settling Health Care Provider or the
property of any Settling Health Care Provider at any time on or
after the Effective Date of the Plan. (The release and injunction
shall not affect Claims preserved under the Domestic Health
Insurer Settlement Agreement.)
Settling Health Care Providers are not released or protected from
Claims (including Malpractice Claims) held by Non-Settling Personal
Injury Claimants. Claims held by Non-Settling Personal Injury
Claimants against Settling Health Care Providers (other than
Malpractice Claims) may be transferred to the District Court in
Michigan. The Litigation Facility shall file a motion seeking to
transfer such Non-Settling Personal Injury Claims. The Claimants'
Advisory Committee shall support such motion to transfer. Settling
Health Care Providers will be required to (i) join in the Litigation
Facility's motion to transfer such claims, and (ii) cooperate with
the Litigation Facility by providing non-confidential lists and other
information on the Claims asserted against them by the Non-Settling
Personal Injury Claimants.
If the transfer of Non-Settling Personal Injury Claims is
contested, the District Court will determine whether the Claims
asserted by Non-Settling Personal Injury Claimants against Settling
Health Care Providers are within its "related to" jurisdiction, i.e.
whether such Claims could conceivably have an impact on the Debtor
(such as through contribution claims), and should therefore be
transferred to the District Court. If these Claims are not within the
"related to" jurisdiction of the District Court, the transfer will be
denied and litigation of such Claims will proceed in the courts where
they have been or may be brought and will be the responsibility of
the Health Care Providers. If the transfer is granted, then the
transferred Claims of Non-Settling Personal Injury Claimants
("ASSUMED THIRD PARTY CLAIMS") will be subject to the following
procedures established under the Plan:
(1) The Assumed Third Party Claims will be resolved pursuant
to the Litigation Facility Agreement's claim resolution procedures
and will be consolidated with any corresponding claims against the
Debtor. Any settlement by the Litigation Facility shall include
Assumed Third Party Claims.
(2) The District Court will have the power and authority to
set trial venue for Non-Settling Personal Injury Claims against
Settling Health Care Providers in the District Court, in the
federal district court for the federal district in which the Claim
arose, or, in some circumstances, the state court in which such
Claim was originally filed.
(3) Persons who have held, hold or may hold Assumed Third
Party Claims against Settling Health Care Providers will be
enjoined from (a) commencing or continuing any action or other
proceeding relating to an Assumed Third Party Claim except as
permitted under the Plan provisions and Litigation Facility
Agreement, and (b) asserting any right or Claim or taking any act
against a Settling Health Care Provider in respect to an Assumed
Third Party Claim which fails to conform or comply with the Plan
and Litigation Facility Agreement.
(4) If transfer is granted as described above, the only Claims
against Settling Health Care Providers that will be permitted to
go forward in courts other than those described in subparagraph
(2) above will be Malpractice Claims, as defined in the Plan.
(This prohibition does not affect any Claims preserved under the
Domestic Health Insurer Settlement Agreement.) If alleged
Malpractice Claims are asserted in contravention of the Plan
terms, the Proponents anticipate that the Health Care Providers
will seek relief to enforce the terms of sections 8.4 and 8.5 of
the Plan.
B. THE LITIGATION OPTION. All Claims of Health Care Providers who
timely elect the litigation option will be resolved through the
Litigation Facility established under the Plan. NON-SETTLING HEALTH
CARE PROVIDERS WILL RECEIVE NO PROTECTION UNDER THE RELEASE,
INJUNCTION AND CHANNELING PROVISIONS OF THE PLAN.
A Health Care Provider seeking to review the Litigation Facility
Agreement, the Settlement Facility Agreement and the Funding Payment
Agreement in order to decide whether to settle or litigate must
request
Page 65
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
copies of these documents by calling 1-800-651-7030 (Domestic
Claimants) or 1-202-332-5510 (Foreign Claimants) or may download
copies from Dow Corning's website at http://www.implantclaims.com/
plandocs.
The Proponents believe that most or all of the Health Care
Provider Claims for contribution and indemnity will be disallowed by
the Court as contingent. However, certain Health Care Providers take
the position that such a disallowance would be inappropriate and, in
any event, would merely be temporary, as once the contribution or
indemnity Claim became fixed, it would be entitled, underlying non-
bankruptcy law permitting, to allowance notwithstanding any prior
temporary disallowance. If such Claims are finally disallowed by the
Court, they will not be paid unless subsequently Allowed on appeal.
To date this allowance/disallowance issue regarding such
reimbursement Claims remains open. All remaining Claims of Non-
Settling Health Care Providers will be aggressively contested by the
Manager of the Litigation Facility. If any Claims of Non-Settling
Health Care Providers become Allowed in the Litigation Facility,
those Allowed Claims will, subject to the terms of the Litigation
Facility Agreement, the Settlement Facility Agreement, and the
Funding Payment Agreement, be paid as a Settlement Fund Other Payment
in full, in cash, including any interest as required by law.
If sufficient funds are not then presently available to pay all
Allowed Claims in full, payments may be made in installments or
delayed until funds are available under the Funding Payment
Agreement. Because of the many variables described above, it is
impossible to predict when any Non-Settling Health Care Providers
will receive payment on their Allowed Claims. Additional information
regarding the Litigation Facility and the procedures for Claim
resolution and payment appears at pages 84 through 88 of this
Disclosure Statement and in the Litigation Facility Agreement.
C. THE ELECTION PROCESS. Personal Injury Claimants will have six
months from the Effective Date of the Plan to elect whether to settle
or to "opt out" and litigate their Claims. As soon as practicable
after this Personal Injury Claimant "opt-out" deadline, Health Care
Providers will be provided with a copy of the list of Non-Settling
Personal Injury Claimants to enable the Health Care Providers to
determine which of their patients have elected to continue to
litigate their Personal Injury Claims.
In addition to the list of Non-Settling Personal Injury Claimants,
each Health Care Provider will be provided with an election form
setting forth the process by which Health Care Providers may elect to
settle or litigate their Claims. Health Care Providers will have 45
days from the date of service of the list of Non-Settling Personal
Injury Claimants to return the election form indicating whether they
have conditionally elected to settle, subject to the District Court's
determination of the motion to transfer the Non-Settling Personal
Injury Claims, or have elected to litigate their Claims. Health Care
Providers who fail to return the form will be deemed to have
conditionally elected to settle. Within 30 days after the service of
the District Court's order disposing of such motion to transfer,
Health Care Providers must make their conditional election to settle
final. Any Health Care Provider who fails timely to revoke its
conditional election to settle shall be deemed to have made a final
election to settle. A Health Care Provider who is deemed to have made
a final election to settle agrees to settle ALL Claims related to
Products Liability Claims that such Health Care Provider has against
Dow Corning and the other Released Parties. A Health Care Provider
who elects the litigation option has decided by such election to
litigate ALL Claims that the Health Care Provider has against Dow
Corning relating to Products Liability Claims.
HEALTH CARE PROVIDERS WHO DO NOT AFFIRMATIVELY ELECT TO LITIGATE
SHALL HAVE SETTLED ALL OF THEIR RESPECTIVE CLAIMS.
D. RECOMMENDATION REGARDING PLAN. Counsel for various of the
Health Care Providers have reviewed the terms of the Plan and its
treatment of Health Care Providers. Based upon such review, counsel
is recommending acceptance of the Plan by their respective clients.
4. CLAIMS IN CLASSES 14 AND 14A. Domestic Health Insurers have the
option to settle their Claims pursuant to the Domestic Health Insurer
Settlement Agreement and receive payments in cash on the Effective Date
or to litigate their Claims and receive the treatment provided in
section 6.05 of the Litigation Facility Agreement. All Class 14
Claimants who do not elect to litigate will be deemed to have elected to
settle their Claims pursuant to the Domestic Health Insurer Settlement
Agreement which will provide, in pertinent part, for the treatment
provided below.
Page 66
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
A. SETTLEMENT FUND. The settling Domestic Health Insurers will
receive payments from a cash fund. The aggregate amount of the fund
will be determined by multiplying the Participant Fraction (as
described below) times the Class 14 Settlement Amount (as described
below). The Participant Fraction is a fraction whose numerator is the
aggregate number of insured lives represented by the settling
Domestic Health Insurers who timely filed proofs of claim in the Case
and whose denominator is the aggregate number of insured lives
represented by all the Domestic Health Insurers who timely filed
proofs of claim in the Case. The Class 14 Settlement Amount will be
$40 million.
B. PROPORTIONATE SHARES OF SETTLEMENT FUND. Each settling Domestic
Health Insurer will receive its proportionate share of the settlement
fund based upon the proportionate number of "insured lives" it
represents as compared to the aggregate number of "insured lives" of
all the aggregate settling Domestic Health Insurers.
C. MINIMUM PARTICIPATION. For the Domestic Health Insurer
Settlement Agreement to be effective, the settling Domestic Health
Insurers must demonstrate that they represent both:
(I) at least two-thirds ( 2/3) of the aggregate number of
"insured lives" within the commercially insured domestic market;
and
(II) at least three-fourths ( 3/4) of the aggregate number of
"insured lives" represented by all Domestic Health Insurers who
timely filed proofs of claim in the Case.
D. RELEASE OF REIMBURSEMENT CLAIMS. Generally, the settling
Domestic Health Insurers will be required to release any claims for
reimbursement or subrogation against any Personal Injury Claimant.
Class 14 Claimants who elect to litigate their Claims and the holders
of Foreign Health Insurer Claims in Class 14A will be treated
pursuant to the provisions of section 6.05 of the Litigation Facility
Agreement.
E. IF SETTLEMENT NOT EFFECTIVE. In the event that no Domestic
Health Insurer Settlement Agreement becomes effective, all Class 14
Claims will be treated as Class 14 Claimants who have elected to
litigate their Claims and will be treated pursuant to the provisions
of section 6.05 of the Litigation Facility Agreement. Allowed Claims
of non-settling Class 14 Claimants will be paid from the Settlement
Fund as Settlement Fund Other Payments as provided in the Settlement
Facility Agreement.
F. TREATMENT OF CLASS 14A CLAIMANTS. All Class 14A Claims will be
treated as having elected to litigate their Claims and will be
treated pursuant to the provisions of section 6.05 of the Litigation
Facility Agreement. Allowed Claims of Class 14A Claimants will be
paid from the Settlement Fund as Settlement Fund Other Payments as
provided in the Settlement Facility Agreement.
G. NOTICE OF CLAIM RESOLUTION OF SETTLING PERSONAL INJURY
CLAIMS. Non-Settling Claimants in Classes 14 and 14A ("DERIVATIVE
CLAIMANTS") may submit to the Claims Administrator a request for
notification regarding the resolution of the Claims of any individual
Settling Personal Injury Claimant for which the Derivative Claimant
asserts a contractual or statutory reimbursement claim. The Claims
Administrator shall--in writing--notify the Derivative Claimant of
the approval for payment of such Settling Personal Injury Claimant's
Claim provided:
(1) the Derivative Claimant has identified the Settling
Personal Injury Claimant with sufficient particularity to enable
the Claims Administrator to identify the relevant Claimant, and
(2) the Derivative Claimant provides to the Claims
Administrator a written request identifying the Settling Personal
Injury Claimant and the name and address of the person
representing the Derivative Claimant to be notified.
The Claims Administrator shall not, as a result of this
notification procedure, delay payment to the Settling Personal Injury
Claimant. Nothing in the notice provision of the Settlement Facility
Agreement grants or shall be deemed to grant to the Class 14 or 14A
Claimants any right to interfere with, delay or stop payment to any
Settling Personal Injury Claimant or establish or shall be deemed to
establish any entitlement by the Derivative Claimant to any portion
of the payment to the Settling Personal Injury Claimant.
Nothing in the Settlement Facility Agreement affects the rights
under applicable law, if any, of the Derivative Claimants to commence
any separate proceeding to recover directly from the Settling
Personal Injury Claimant payment received from the Settlement
Facility.
Page 67
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
H. CUTOFF OF RIGHTS TO RECOVER AGAINST THE SETTLEMENT
FACILITY. Certain Claimants in Classes 14 and 14A have asserted
rights under section 509 of the Bankruptcy Code or otherwise to
recover from the Settlement Facility if the Settlement Facility pays
Allowed Claims of Settling Personal Injury Claimants without notice
to or an adjudication of competing rights of such Class 14 and 14A
Claimants to such settlement amounts. Dow Corning will seek, as part
of the Confirmation Order or pursuant to an adversary proceeding to
be heard concurrently with confirmation, a determination that any
such right to recover against the Settlement Facility shall be cut
off by the payment of an Allowed Claim of a Settling Personal Injury
Claimant and that the sole remedy available to such Class 14 or 14A
Claimant shall be to pursue a recovery directly from the Settling
Personal Injury Claimant.
I. NOTICE OF CLAIM RESOLUTION OF NON-SETTLING PERSONAL INJURY
CLAIMS. In accordance with section 7.03 of the Litigation Facility
Agreement, no Claim of a Non-Settling Personal Injury Claimant will
be paid until notice is given to non-settling Health Insurers who
have actually filed subrogation or reimbursement Claims in the
Claimant's case.
5. CLAIMS IN CLASSES 15 AND 17. Unless a different treatment is
agreed to by the Proponents and the affected Claimants, the Proponents
shall seek to have the Claims in Classes 15 and 17 estimated for
distribution on or before the Confirmation Date. The Estimated Amount of
any such Claims will be paid (subject to the terms of the Settlement
Facility Agreement and the Funding Payment Agreement) by the Claims
Administrator on, or as soon as practicable after, the Effective Date.
If not estimated for distribution on or before the Confirmation Date,
such Claims will be channeled to the Litigation Facility for purposes of
Claim liquidation and when Allowed will be paid by the Claims
Administrator from the Settlement Funds.
In addition to the above treatment, Class 15 Claimants shall have the
right to request the notification of pending Claim resolution by the
Settlement Facility described in the preceding section 6.4(M)(4)(g), and
will be made parties to the determination to be sought by Dow Corning
regarding the extinguishment of recourse of all Derivative Claimants to
the Settlement Facility, as described in the preceding section
6.4(M)(4)(h).
6. CLASS 16 CLAIMS. Except as provided in the Litigation Facility
Agreement and in section 6.16 of the Plan regarding the Mahlum Claims
and the Spitzfaden Claims, the Shareholder Claims in Class 16 will be
released and discharged upon the Effective Date. Shareholder Claims
relating to the Mahlum Claims and the Spitzfaden Claims will receive the
following treatment:
First, in the event the Mahlum Claims and/or the Spitzfaden Claims
are settled prior to the Effective Date, all amounts paid by a
Shareholder Affiliated Party to Mahlum Claimants and/or Spitzfaden
Claimants to settle such Claims shall constitute Allowed Class 16
Claims, and the Shareholder Affiliated Party will be reimbursed such
amounts in full, together with interest at the same rate as the Senior
Notes. Payment of such amounts will be made by the Claims Administrator
from the Settlement Fund on the same basis and with the same priority as
"Premium" Payments under the Settlement Facility Agreement.
Second, in the event a Shareholder Affiliated Party pays a judgment
on account of Mahlum Claims or Spitzfaden Claims prior to the channeling
of those Claims to the Litigation Facility, all Class 16 Claims of the
Shareholder Affiliated Party arising out of the payment of the judgment
shall be channeled to the Litigation Facility for resolution and the
Shareholder Affiliated Party will be entitled to assert against the
Reorganized Debtor all Claims, based on contribution, indemnity or
otherwise, available to the Shareholder Affiliated Party under
applicable law. Any such Class 16 Claims that become Allowed Claims
pursuant to the procedures of the Litigation Facility will be paid by
the Reorganized Debtor, and not from the Settlement Fund or the
Litigation Fund.
7. BASIS FOR DISALLOWANCE OF OTHER CLAIMS. The Proponents believe
that, unless earlier settled, most of the Claims in Classes 11 through
15 and 17 will be disallowed. The Claimants in those Classes disagree
with the Proponents' belief. The Other Claims are derivative in nature
and necessarily dependent on the validity of the underlying Personal
Injury Claims (such underlying Claims herein called "DIRECT CLAIMS"),
which the Debtor and/or the Litigation Facility will strongly contest.
Further, section 502(e) of the Bankruptcy Code operates to disallow many
of these Derivative Claims as contingent. These Claims should be
disallowed as contingent because (i) the Other Claimants have not
actually paid the Direct Claimants and/or (ii) the Debtor's liability to
the Direct Claimant for the amounts paid by the Other Claimant has not
been determined. Certain Physician and Health Care Provider Claimants in
Classes 12 and 13 vigorously dispute the application of section
502(e)(1) to their Claims and do not believe such Claims are subject to
dismissal on the basis provided by such section. For example, the Claim
of a Commercial Health Insurer, which asserts a Claim related to its
obligation to pay medical costs
Page 68
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
associated with a Direct Claimant's explant procedure, would be
disallowable as contingent until such Commercial Health Insurer paid the
explant procedure costs and until there was a determination that the
Debtor is or was liable to the Direct Claimant for such costs (i.e.,
because it was determined that the costs were reasonably required as a
result of the use of a defective product manufactured by the Debtor).
Further, section 509(c) of the Bankruptcy Code should limit the payment
of many Allowed Other Claims. Finally, applicable state law may further
limit the ripeness and enforceability of these Other Claims.
N. LTCI-RELATED CLAIMS--CLASSES 18 AND 19. At Closing, the Reorganized
Debtor will, in full release, satisfaction and discharge of all Claims in
Classes 18 and 19 cause the execution and delivery of the Litigation
Facility Agreement and the assignment of the LTCI Indemnities to the
Litigation Facility. The Litigation Facility will assume full
responsibility for resolving Claims in Classes 18 and 19 pursuant to the
Litigation Facility Agreement.
O. ALLOWED INTERCOMPANY CLAIMS--CLASS 20. Each Joint Venture or
Subsidiary of the Debtor holding an Allowed Claim in Class 20 will retain
its right to payment from the Debtor; provided, however, that the
Reorganized Debtor will make no cash payment on account of such Allowed
Claim. On the Effective Date, all Allowed Claims in Class 20 will be set
off against amounts owing to the Debtor by the holders of such Claims. To
the extent that any Class 20 Claim remains unpaid after giving effect to
such setoff, such unpaid amount will be satisfied by credits for future
royalty obligations owing to the Reorganized Debtor or for future sales of
product and/or services by the Reorganized Debtor in the ordinary course of
the post-Effective Date business of the Reorganized Debtor and the
applicable Joint Venture or Subsidiary.
P. ALLOWED SUBORDINATED CLAIMS--CLASS 21. Each Claimant holding an
Allowed Subordinated Claim will receive, as soon as practicable following
the Effective Date (or, if later, the Allowance Date), a Subordinated Note
in a principal amount equal to the amount of the Allowed Subordinated
Claim.
The Subordinated Notes will mature on the tenth anniversary of the
Effective Date, with interest payable in semi-annual installments at the
Plan Interest Rate.
Q. ENVIRONMENTAL CLAIMS--CLASS 22. The holders of Claims, other than
Disallowed Claims, arising under Environmental Laws shall retain their
Claims, if any, against DCC, and the Plan leaves unaltered (a) the legal,
equitable and contractual rights to which such Claims entitle the holders
thereof, and (b) the rights and obligations of the Debtor, and any other
holder of such Claims during the Case, pursuant to any settlement approved
by a Final Order of the Court entered before the Confirmation Date.
R. RETIREE BENEFIT CLAIMS--CLASS 23. The holders of Allowed Retiree
Benefit Claims shall retain their Claims, if any, against DCC, and the Plan
leaves unaltered the legal, equitable and contractual rights to which such
Claims entitle the holders thereof. Retiree Benefit Claims shall be deemed
to be Allowed Claims and shall be paid, performed and honored by the
Reorganized Debtor in full when due in accordance with their terms
notwithstanding any other contrary provision of the Plan or the
Confirmation Order; provided, however, that the rights of retirees shall be
subject to modification or termination as provided by the terms of the
existing benefit plans and the terms of the collective bargaining
agreements, consistent with applicable law.
S. INTERESTS--CLASS 24. The Shareholders shall retain their Interests in
the Debtor.
6.5 CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE.
A. CONDITIONS PRECEDENT TO CONFIRMATION. Confirmation of the Plan shall
not occur unless and until each of the following conditions shall have been
satisfied or have been waived in accordance with section 7.3 of the Plan.
1. The Court or the District Court, as appropriate, shall have
entered an Estimation Order(s) with respect to any Estimated Amount(s)
that are necessary for confirmation of the Plan.
2. The District Court shall have entered the Case Management Order.
3. The Confirmation Order shall provide that the settlement
provisions provided in section 5.4.1 of the Plan are binding on all
Settling Personal Injury Claimants.
4. The Confirmation Order shall approve and provide for the
implementation of the Insurance Allocation Agreement.
5. The Confirmation Order shall approve and provide for the
implementation of the Domestic Health Insurer Settlement Agreement.
Page 69
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
6. The Confirmation Order shall approve and provide for the
implementation of the other Plan Documents.
7. The Confirmation Order shall effect the release of certain Claims
and the injunction against the prosecution of the Released Claims
against those third parties, including the Shareholder-Affiliated
Parties, as described in sections 8.3 and 8.4 of the Plan, and shall
provide for the channeling injunction with respect to Assumed Third
Party Claims described in section 8.5 of the Plan.
8. The Confirmation Order shall be in form and substance reasonably
acceptable to the Proponents and the Shareholders.
B. CONDITIONS TO THE EFFECTIVE DATE. Notwithstanding any other provision
of the Plan or the Confirmation Order, the Effective Date shall not occur
unless and until each of the following conditions shall have been satisfied
or waived in accordance with section 7.3 of the Plan.
1. No timely-filed appeal shall have been taken from the Confirmation
Order challenging, directly or indirectly, the validity and
enforceability of the releases and injunctions described in sections 8.3
and 8.4 of the Plan and/or the limits of required funding as set forth
in the Funding Payment Agreement for the release, satisfaction and
discharge of all claims in Classes 5 through 19 of the Plan
(collectively, the "RELEASE/FUNDING ISSUES"), or, if such an appeal
regarding any Release/Funding Issue shall have been filed, such appeal
shall have been denied or dismissed and such releases and injunctions
and such limits of required funding shall have been affirmed in all
respects pursuant to a Final Order.
2. The Debtor shall have received from the Internal Revenue Service
("IRS") a ruling reasonably satisfactory to Dow Corning and its tax
counsel regarding the following matters: (i) the Depository Trust will
be treated as a qualified settlement fund within the meaning of section
468B of the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder; (ii) the payments to be made with
respect to Claims Allowed through the procedures therefor in the
Litigation Facility will be fully deductible by the Reorganized Debtor
at the time of (or before) each such disbursement; and (iii) such other
matters as tax counsel for Dow Corning may reasonably require.
3. The Indenture shall have been qualified under the Trust Indenture
Act of 1939, as amended, by the Securities and Exchange Commission.
C. WAIVER OF CONDITIONS. Pursuant to section 7.3 of the Plan, any
condition to either confirmation or the Effective Date set forth above may
be waived by the Proponents and the Shareholders.
6.6 MEANS FOR IMPLEMENTATION OF THE PLAN.
A. LITIGATION PROCESS. Claims of Non-Settling Personal Injury Claimants,
Assumed Third Party Claims, Miscellaneous Raw Material Claims and those
Other Claims (including Non-Settling Physician Claims) to be liquidated in
the Litigation Facility will be processed for Allowance and payment under
the jurisdiction of the District Court (with respect to Non-Settling
Personal Injury Claims, Assumed Third Party Claims and Miscellaneous Raw
Material Claims) or the Court (with respect to Non-Settling Other Claims
and Non-Settling Physician Claims). The Claims of Non-Settling Personal
Injury Claimants, Assumed Third Party Claims, Miscellaneous Raw Material
Claims and those Other Claims (including Non-Settling Physician Claims)
will be resolved under the terms of the Litigation Facility Agreement and a
Case Management Order negotiated and agreed to by the Debtor and the Tort
Committee and approved by the District Court.
B. SETTLEMENT REGARDING ALLOCATION OF INSURANCE PROCEEDS AND
COVERAGE. The Plan includes an Insurance Allocation Agreement which
resolves a complex and hotly contested series of disputes between Dow
Corning and Dow Chemical over rights to certain shared insurance and
provides Dow Corning with immediate access to substantial insurance
necessary to the funding of the Plan.
Dow Corning has entered into a series of cash buy-out settlements that
released substantial, although disputed, coverage available under insurance
policies that insure both Dow Corning and Dow Chemical, in exchange for
present and future payments. Subject to the escrow agreements, Dow Chemical
acquiesced in Dow Corning's decision to liquidate these policies in an
effort to facilitate its reorganization.
To facilitate funding of the Plan and in partial consideration of the
releases and injunctive protections provided under the Plan, Dow Corning
and Dow Chemical have agreed to an allocation of the remaining shared
insurance upon confirmation of the Plan. The Insurance Allocation Agreement
settles disputes with respect to approximately $416
Page 70
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
million in cash escrows and settlement funds (plus $61 million in future
payments and additional future interest) established in connection with
certain settlements approved by the Court, proceeds from over $470 million
in shared product insurance limits available under coverage in place
settlements, and proceeds from approximately $290 million in unsettled
shared product insurance limits all as more particularly described in the
Insurance Allocation Agreement. The Insurance Allocation Agreement
generally provides that 75% of the Shared Insurance Assets (as defined in
the Insurance Allocation Agreement) including Dow Chemical recoveries of
certain claims unrelated to Dow Corning shall be paid to Dow Corning for
use in funding the Settlement Facility pursuant to the terms of the Funding
Payment Agreement, and 25% of the Shared Insurance Assets, not to exceed
$285 million, shall be made available to Dow Chemical under the terms
outlined in the Insurance Allocation Agreement for its potential use in
paying excess insurance products liability claims. This allocation will
apply to recoveries from the Shared Insurance Assets by Dow Chemical as
well as Dow Corning.
Dow Chemical will be required to account for all amounts received under
the Insurance Allocation Agreement. The amounts made available to Dow
Chemical, net of any allowed debits for its products claims, will be deemed
to accrue interest at an agreed rate specified in the Insurance Allocation
Agreement. Dow Chemical will debit the Account (a) for amounts that, after
exhaustion of other products liability insurance, Dow Chemical has actually
paid to defend, settle or pay any judgment arising from (i) claims relating
to exposure to or use of, prior to December 1, 1987, products allegedly
manufactured, sold or distributed by Dow Chemical, and (ii) silicone
implant or injection claims against it, to the extent there is a
determination that any silicone implant or injection claim against Dow
Chemical is not covered by Dow Chemical's general liability insurance and
other available product liability insurance is exhausted; and (b) for
amounts Dow Chemical is unable to recover from Shared Insurance Assets due
to any asserted failure to exhaust underlying coverage that is not
available to it because of Dow Corning's prior cash settlements. In the
event the funds made available to Dow Chemical are not utilized to pay
claims in accordance with the Insurance Allocation Agreement, after 17 1/2
years, the funds will revert, with interest, to the Reorganized Debtor. The
amount of any reversion will be paid by the Reorganized Debtor to the
Settlement Facility if required by the Funding Payment Agreement.
Dow Corning believes that the Insurance Allocation Agreement provides
significant benefits to the estate. Initially, it eliminates uncertainty as
to the availability of insurance assets for use in the Plan by obviating
the legal dispute between Dow Corning and Dow Chemical based on the
potential application of the decision In re UNR Indus. Inc., 942 F.2d 1101
(7th Cir. 1991). As a result, the Insurance Allocation Agreement gives the
Reorganized Debtor immediate access upon confirmation of the Plan to
hundreds of millions of dollars in proceeds from the shared insurance
settlement and escrow funds for use in funding the Depository Trust and is
likely to expedite access to substantial additional funds from coverage in
place and unsettled policies. It also eliminates the risk that Dow
Chemical's product liability claims could supersede rights the Reorganized
Debtor might have to some or all of the Shared Insurance Assets. Dow
Corning therefore believes that the Insurance Allocation Agreement provides
certainty as to its ability to access insurance proceeds to meet its
funding obligations under the Plan.
In sum, the Debtor believes that the Insurance Allocation Agreement
creates an identity of interests between Dow Chemical and the Reorganized
Debtor to maximize recoveries from specified Shared Insurance Assets for
the benefit of the Reorganized Debtor. In particular, it helps to minimize
controversies regarding which claims should be attributable to particular
insurance policy years. The Debtor believes that the Insurance Allocation
Agreement will facilitate the cash flow needed to enable the Reorganized
Debtor to successfully implement the Plan, while eliminating the specter of
protracted litigation.
This description is subject to the actual terms of the Insurance
Allocation Agreement which shall control. The Insurance Allocation
Agreement becomes binding on the Reorganized Debtor and Dow Chemical only
on the Effective Date of the Plan.
C. FILING AND PAYMENT OF ALLOWED ADMINISTRATIVE CLAIMS. All requests for
the payment of administrative expenses (other than Claims arising in the
ordinary course of business operations of the Debtor) pursuant to section
503(b)(1) of the Bankruptcy Code shall be filed with the Court no later
than 75 days after the Effective Date or at such time as the Court may
otherwise order. The Reorganized Debtor shall cause all Allowed
Administrative Claims to be paid in cash in full on the Effective Date, or,
if later, the Allowance Date, in accordance with section 2.1 of the Plan.
Additional information regarding the Administrative Claims is provided in
Article VI, section 6.1(B)(1) of this Disclosure Statement.
D. PAYMENT OF ALLOWED OTHER PRIORITY CLAIMS. The Reorganized Debtor
shall cause all of the Allowed Other Priority Claims asserted against it to
be paid in accordance with section 4.1 of the Plan. Section 4.1 relating to
the payment of Allowed Other Priority Claims is described in Article VI,
section 6.4(B) of this Disclosure Statement.
Page 71
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
E. PAYMENT TO UNITED STATES TRUSTEE. All fees due to the United States
Trustee pursuant to 28 U.S.C. (S) 1930(a) shall be paid by the Reorganized
Debtor as and when they become due and shall be based on the Reorganized
Debtor's total disbursements, including ordinary course of business
disbursements as well as disbursements made under the Plan, but
disbursements shall not include distributions by the Settlement Facility or
the Litigation Facility to the ultimate recipients. Such fee obligations
shall not terminate until the Case is converted or dismissed, or until the
Case is no longer pending upon entry of a final decree closing the Case,
whichever shall first occur.
F. CLOSING. One or more closings (each, a "CLOSING" and collectively,
the "CLOSINGS") shall be conducted in the offices of DCC, or at such other
location(s) designated by the Proponents, at 10:00 o'clock a.m., Eastern
Time, on one or more Business Days selected by the Proponents on, or as
soon as practicable after, the Effective Date (each, a "CLOSING DATE" and
collectively, the "CLOSING DATES") for the purpose of making the
distributions to holders of Allowed Claims provided for in the Plan. As
soon as practicable after the conditions to the Effective Date in section
7.2 of the Plan have been satisfied or waived in accordance with section
7.3 of the Plan, the Proponents shall give written notice of the applicable
Closing Date to the other Official Committees and any Claimant that will be
directly involved in a Closing. Separate Closing Dates may be scheduled for
different Classes of creditors or Shareholders treated under the Plan to
the extent necessary in the sole discretion of DCC. All references in the
Plan to a Closing Date shall refer to the Closing Date designated for the
transaction involved. (Although the Plan provision allowing multiple
Closings is intended to afford all parties-in-interest the flexibility to
efficiently conclude the transactions contemplated by the Plan, the
Proponents intend, if at all possible, to conduct a single Closing.)
G. DEBTOR'S OBLIGATIONS AT CLOSING. The following shall occur at the
Closing:
1. PAYMENT, CURE AND REINSTATEMENT OR SETOFF OF ALLOWED SECURED
CLAIMS. The Reorganized Debtor shall pay or make provision for the
prompt payment to the holders of Allowed Secured Claims either, with
respect to Allowed Secured Claims evidenced by a valid mechanics and
materialmen's lien, the full amount of such Claim or, with respect to
Allowed Secured Claims payable in installments, an amount equal to all
overdue principal installments and accrued and unpaid interest, if any,
as of the Closing Date. The Allowed Secured Claims shall thereby be paid
or reinstated, without premium or penalty. Alternatively, if an Allowed
Secured Claim consists of an amount subject to setoff under section 553
of the Bankruptcy Code, the holders of such Allowed Secured Claims shall
effect such setoffs on the Effective Date or, if later, the Allowance
Date.
2. SATISFACTION OF ALLOWED UNSECURED CLAIMS. The Reorganized Debtor
shall cause the distribution of cash (to Class 3) and cash and Senior
Notes (to Class 4 and, if applicable, Class 4A) to be made as provided
in sections 4.3, 5.1 and 5.2 of the Plan.
3. SATISFACTION OF PERSONAL INJURY CLAIMS AND LTCI CLAIMS. Unless the
Settlement Facility and the Litigation Facility have been earlier
established, the Reorganized Debtor shall cause the Settlement Facility
and the Litigation Facility to be established and shall execute the
Funding Payment Agreement and shall deliver any payment(s) then due
thereunder to the Depository Trust/16/, in full satisfaction of the
Personal Injury Claims and the LTCI Claims. Pertinent terms of the
Settlement Facility Agreement and the Litigation Facility Agreement are
described in sections 6.6(H) through (J) which follow.
4. SATISFACTION OF ALLOWED OTHER CLAIMS RELATED TO IMPLANTS. The
Claims Administrator shall cause the distribution of cash and Senior
Notes with respect to Claims in Classes 11, 15 and 17 which have been
Allowed or estimated for distribution as of the Closing Date, as
provided in sections 5.13.1, 5.13.5 and 6.11.8 of the Plan. Other Claims
liquidated through the Litigation Facility will be paid (subject to the
terms of the Litigation Facility Agreement and the Funding Payment
Agreement) from the Settlement Facility in cash, with interest, if
required by law, with funds provided pursuant to the Settlement Facility
Agreement and the Funding Payment Agreement, when Claims in Classes 11
through 17 are Allowed.
5. SATISFACTION OF SETTLING DOMESTIC HEALTH INSURER CLAIMS. Provided
the Domestic Health Insurer Settlement Agreement has become effective,
the Reorganized Debtor shall consummate the terms of that agreement.
6. SATISFACTION OF ALLOWED SUBORDINATED CLAIMS. The Reorganized
Debtor shall cause all Allowed Subordinated Claims to be satisfied in
accordance with section 5.16 of the Plan.
- ----------------------
/16/The Depository Trust is a trust established pursuant to the Settlement
Facility Agreement to hold, invest and disburse funds paid pursuant to the
Funding Payment Agreement.
Page 72
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
H. MATERIAL PROVISIONS OF THE SETTLEMENT FACILITY AND LITIGATION
FACILITY AGREEMENTS. THE FOLLOWING IS A SUMMARY OF CERTAIN SIGNIFICANT
PROVISIONS OF THE SETTLEMENT FACILITY AGREEMENT AND THE LITIGATION FACILITY
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
COMPLETE TEXT OF THE APPLICABLE AGREEMENT.
1. PURPOSES, ORGANIZATION AND OPERATION. The Settlement Facility and
the Litigation Facility will provide an orderly way to resolve and
liquidate the various Claims and Assumed Third Party Claims assumed by
or otherwise processed under each entity under guidelines established
for their respective operations.
The Settlement Facility will be governed by New York law. The
Litigation Facility will be governed by Michigan law and will maintain
its principal offices in the Eastern District of Michigan.
2. TRANSFER OF CONSIDERATION. At Closing, the Reorganized Debtor will
deliver the Funding Payment Agreement to the Claims Administrator of the
Settlement Facility. Any payment due thereunder shall be delivered to
the Depository Trust. The Funding Payment Agreement evidences the
obligation of the Reorganized Debtor to make payments to or on behalf of
the Settlement Facility and the Litigation Facility after the Effective
Date and is more fully discussed below.
3. GOVERNANCE OF THE SETTLEMENT FACILITY. The Persons or Entities
responsible for operation of the Settlement Facility and their
respective functions and duties are the following:
A. MDL 926 COURT. The MDL 926 Court will supervise and oversee the
operations of the Claims Office. In connection with this activity,
the MDL 926 Court will review and approve salaries, expenses and
budgets for the Claims Office.
B. CLAIMS ADMINISTRATOR. The initial Claims Administrator will be
designated by the Proponents, subject to approval of the MDL 926
Court. The Claims Administrator will be responsible for conducting
and supervising the claims-processing functions of the Claims Office.
The Claims Administrator will be responsible to assure that Claims
are reviewed and evaluated in accordance with the eligibility
criteria outlined in the Plan. The Claims Administrator will
determine the timing of distributions of funds for payment of Claims.
As a member of the Finance Committee, the Claims Administrator will
also make recommendations to the District Court regarding the
availability of funds for payment of "Premium" Payments, as well as
the availability of Litigation Fund assets for payment of First
Priority Payments. The Claims Administrator will develop and maintain
procedures for the detection of potentially fraudulent Claims.
The Claims Administrator will be independent of the Reorganized
Debtor and other Released Parties based on qualification standards
described in the Settlement Facility Agreement. The Claims
Administrator will serve for the duration of the Settlement Program.
If the Claims Administrator dies or resigns or becomes unable to
perform his or her duties, the Debtor's Representatives and the
Claimants' Advisory Committee (described below), will designate a
replacement, subject to the approval of the MDL 926 Court.
C. FINANCIAL ADVISOR. The Financial Advisor, who will be selected
by the Finance Committee (described below), will have the primary
responsibility, along with the Finance Committee, for overseeing the
investment of all funds paid to the Settlement Facility and held by
the Depository Trust, for providing investment instructions to the
Depository Trust, and for overseeing the preparation of financial
statements and reports required by the Settlement Facility Agreement.
D. MDL CLAIMS ADMINISTRATOR. The MDL Claims Administrator may,
with the approval of the MDL 926 Court, serve as consultant to the
Dow Corning Settlement Program Claims Administrator to assist in the
efficient and accurate operation of the Claims Office. The MDL Claims
Administrator may provide substantive guidance, information and
training to the Claims Administrator and the Operations Manager of
the Claims Office so that they, in turn, will implement claims-
processing guidelines, protocols and interpretation of criteria of
the Dow Corning Settlement Program that are consistent with the
guidelines and protocols of the MDL 926 Claims Office.
E. APPEALS JUDGE. The Appeals Judge will determine all appeals
from Claims decisions made by the Claims Administrator. The Appeals
Judge will be the same individual who decides appeals from the
decisions of the MDL Claims Administrator. The Appeals Judge will
serve as a member of the Finance Committee, which is described below.
Page 73
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
The initial Appeals Judge will be Frank Andrews, the current
appeals officer for the MDL 926 Court. Any successor Appeals Judge
will be jointly selected by the Debtor's Representatives and the
Claimants' Advisory Committee, subject to the approval of the MDL 926
Court.
F. QUALITY CONTROL SUPERVISOR. The Claims Administrator will
appoint a Quality Control Supervisor. The Quality Control Supervisor
will, under the direction of the Claims Administrator, establish
review systems that will assure that the procedures and Claim
processing protocols applied by the MDL 926 Claims Office are applied
to the Dow Corning Settlement Program Claims Office with respect to
Breast Implant Claims except as modified by the Plan and the Plan
Documents. The Quality Control Supervisor will also review and
monitor Claims Office processing to assure that the Claims Office
staff accurately and consistently apply the eligibility criteria and
protocols in the evaluation of Claims.
G. OPERATIONS MANAGER. The Operations Manager will be selected by
the Claims Administrator with input from the Finance Committee and
the Proponents and subject to the approval of the MDL 926 Court. The
Operations Manager will be responsible for the daily supervision of
the staff of the Claims Office.
H. CLAIMS OFFICE STAFF. The Claims Office will operate using the
staff, facilities and equipment used by the MDL 926 Claims Office.
4. GOVERNANCE OF THE LITIGATION FACILITY. The Litigation Facility
will be operated through a corporate entity, DCC Litigation Facility,
Inc. (the "LF CORPORATION"). The sole stockholder in LF Corporation will
be the Reorganized Debtor, which shall appoint the board of directors
for the corporation. The Persons or Entities responsible for operation
of the Litigation Facility and their respective functions and duties are
the following.
A. MANAGER. The Litigation Facility will be operated by the LF
Corporation Officer, called the "MANAGER" or the "LITIGATION MANAGER"
in this Disclosure Statement, who is also designated as the Manager
of the Litigation Facility. The Manager will be designated by the
Reorganized Debtor, subject to approval by the Court. The Manager
will implement the procedures for reviewing, resolving and litigating
Claims under the terms of the Litigation Facility Agreement.
Specifically, the Manager will litigate and settle Claims as
appropriate. All settlements must be approved by Dow Corning and are
subject to review by the Special Master (who shall consult with the
Finance Committee) to assure that the settlements represent a fair
distribution of the Litigation Fund. The Manager will have the
authority to hire necessary counsel, auditors and staff; will prepare
and provide reports; and will develop budgets for the operation of
the Litigation Facility.
The Manager will, unless earlier removed by Dow Corning or the
District Court, serve for the duration of the Litigation Facility or
until his or her earlier death or resignation. The Manager will owe
fiduciary obligations to LF Corporation, to the Reorganized Debtor
and to the Shareholders. If the Manager dies or resigns or becomes
unable to perform his or her duties, the Reorganized Debtor will
designate a replacement.
B. SPECIAL MASTER. The Special Master shall be appointed by the
District Court to assist the District Court in the administration of
the Claims transferred to the Litigation Facility in order to resolve
such Claims efficiently and within the capped Litigation Fund. The
initial Special Master will be Professor Francis McGovern. In this
capacity, the Special Master shall be responsible for the
implementation of the provisions of the Case Management Order which
will govern the pre-trial procedures, the procedure for certifying
cases for trial, the trial venue and any settlement procedures. The
Special Master will review all proposed settlements of Claims in the
Litigation Facility. In evaluating proposed settlements, the Special
Master shall consult with the other members of the Finance Committee.
5. COMMON GOVERNANCE ENTITIES. The Settlement Facility and the
Litigation Facility will share certain common governance Entities. Those
common Entities are the following:
A. FINANCE COMMITTEE. The Finance Committee will be comprised of
the Claims Administrator, the Special Master and the Appeals Judge
(all described above). Subject to the approval and supervision of the
District Court, the Finance Committee will be responsible for the
following: (1) selecting the Financial Advisor to oversee the
investment of the Settlement Fund and the Litigation Fund; (2)
conducting the analysis and preparing the projections needed to
determine the availability of funds for payment of all categories of
Claims, (3) making recommendations to the District Court regarding
the release of funds from the Settlement Fund and the Litigation
Fund, (4) developing recommendations for submission to the District
Court regarding
Page 74
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
the necessity of deferrals or reductions in Claims payments; (5)
reviewing proposed settlements of Non-Settling Personal Injury Claims
to determine the adequacy of funds for payment thereof; (6) directing
the paying agent to disburse payments for Allowed Claims and expenses
in accordance with the Settlement Facility Agreement; and (7)
recommending and establishing salaries, benefits, fees and expenses
of the Settlement Facility and Litigation Facility.
B. CLAIMANTS' ADVISORY COMMITTEE. The Special Master will appoint
a three person Claimants' Advisory Committee. If the Special Master
reasonably concludes that additional members of the Claimant's
Advisory Committee are necessary in order for the Claimants' Advisory
Committee to fulfill its duties under the Settlement Facility
Agreement, the Special Master has discretion to appoint up to a total
of five members. No member of the Claimants' Advisory Committee may
be a bankruptcy lawyer. The Claimants' Advisory Committee will
consult with the Claims Administrator, the Special Master, and the
Finance Committee, and shall attend and participate in meetings of
the Finance Committee. The Claimants' Advisory Committee may take
actions as appropriate to enforce the obligations in the Plan, the
Funding Payment Agreement and the Settlement Facility Agreement.
C. DEBTOR'S REPRESENTATIVES. The Reorganized Debtor will designate
"Debtor's Representatives." The Debtor's Representatives will consult
with the Claims Administrator, the Special Master, and the Finance
Committee, and shall attend and participate in meetings of the
Finance Committee. The Debtor's Representatives may take actions as
appropriate to enforce the obligations in the Plan, the Funding
Payment Agreement and the Settlement Facility Agreement.
6. LIABILITY OF FACILITIES' ADMINISTRATORS; INDEMNITY. The Claims
Administrator, the Special Master and the Manager will not be liable to
either the Settlement Facility or the Litigation Facility or to any
party whose Claim is administered therein unless they acted with gross
negligence, willful misconduct or breach of fiduciary duty.
The Settlement Facility and the Litigation Facility will indemnify
the Claims Administrator, the Special Master and the Manager,
respectively, to the fullest extent permitted by applicable law.
7. DUTIES OF THE CLAIMS OFFICE AND THE LITIGATION MANAGER. The Claims
Office and the Litigation Facility Manager will, respectively, resolve
and liquidate the Claims assumed by the Settlement Facility and the
Assumed and Surviving Third Party Claims channeled to the Litigation
Facility according to the terms of the Settlement Facility Agreement,
the Litigation Facility Agreement and the Plan, as applicable. Both
Facilities have accounting and reporting duties to the Court,
Reorganized Dow Corning, Debtor's Representatives, the Claimants'
Advisory Committee and the Shareholders under the Settlement Facility
Agreement and the Litigation Facility Agreement. Those duties generally
include the preparation of periodic reports of Claims filed, processed
and paid.
8. ACCOUNTING. In operating the business and affairs of the
Settlement Facility and the Litigation Facility, the Finance Committee
and the Litigation Manager will prepare budgets, project cash flow as
necessary or appropriate, and cause quarterly unaudited and annual
audited financial statements to be prepared for their respective
entities. The financial statements will include balance sheets,
statements of receipts and disbursements, statements of profit and loss,
and supplementary schedules of investments and assets, listing both
principal and income.
9. REPORTING DUTIES. The Trustee of the Depository Trust and the
Litigation Manager will file tax returns for their respective entities
and pay any reported liabilities. The Trustee will also perform all acts
necessary to maintain qualification of the Depository Trust as a
Qualified Settlement Fund under federal tax law. The Finance Committee
and the Litigation Manager will file the annual and quarterly financial
statements described in section 6.6(H)(8) of this Disclosure Statement
with the Court, the Reorganized Debtor and the Shareholders. At the time
of filing each financial statement, the Finance Committee and the
Litigation Manager will also file with the District Court, the
Reorganized Debtor, the Claimants' Advisory Committee, the Shareholders
and the MDL 926 Court a report containing a summary of the number of
resolved Claims and the total amount paid as to Claims (in the
aggregate, not individually) liquidated by their respective Entities
from the Effective Date to the end of the period covered by the
accounting. The Claims Administrator and the Litigation Manager will
maintain (but need not file with the Court) separate records of all
individual payments, arbitration awards, judgments and settlements
concerning Claims liquidated by their respective entities.
Page 75
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
10. LIABILITY FOR ASSUMED CLAIMS AND EXPENSES OF SETTLEMENT FACILITY
AND LITIGATION FACILITY. All Settlement Facility expenses and payments
in respect of Claims assumed by the Settlement Facility will, except in
the limited circumstances where the Litigation Fund may be used for
payment of certain Claims in the Settlement Facility (described further
below), be payable solely from the funds provided to the Settlement
Facility for payment of Claims of Settling Personal Injury Claimants and
the earnings thereof, as discussed in section 6.6(I) below. All
Litigation Facility expenses and payments in respect of Non-Settling
Personal Injury Claims, Class 12 Claims and Assumed Third Party Claims
will be payable solely from the Litigation Fund to be designated
pursuant to the Funding Payment Agreement. The Claims Administrator, the
Litigation Manager, Dow Corning, the Reorganized Debtor, the Released
Parties and their respective officers, directors, agents and employees
will not be liable for any expense or payment in respect of any Claim
assumed by the Settlement Facility or the Litigation Facility.
11. IRREVOCABILITY; AMENDMENTS. The Settlement Facility Agreement
and the Litigation Facility Agreement will be irrevocable. The
Settlement Facility Agreement and the Litigation Facility Agreement may
be amended to resolve ambiguities or to correct obvious errors by an
instrument signed by the Reorganized Debtor and the Claimants' Advisory
Committee. All other amendments, supplements and modifications require
approval of the District Court or the Court after notice to the
Reorganized Debtor, the Shareholders, the Claimants' Advisory Committee,
and such other notice and hearing as the Court may direct. Nevertheless,
without the consent of the Reorganized Debtor and the Claimants'
Advisory Committee, no amendment may be made that would, directly or
indirectly: (i) affect the validity, requirement for, or effectiveness
of any release of the Released Parties, (ii) increase the amount or
change the due date of any payment to be made by the Reorganized Debtor
to the Settlement Facility pursuant to the Funding Payment Agreement,
(iii) in the case of the Settlement Facility, (a) increase the
liquidation value or settlement value of any Claim administered by the
Facility, or the amount or value of any payment, award or other form of
consideration payable to a Claimant from the Facility, (b) materially
change the qualification criteria that are part of the Disease Payment
Option, the Rupture Payment Option, or the Medical Condition Payment
Option for Other Products Claimants, (c) affect the rights of the
Settlement Facility (or the Depository Trust) to receive payments
pursuant to the Insurance Allocation Agreement, or (d) cause the
Depository Trust to no longer qualify as a Qualified Settlement Fund
under federal tax law.
12. TERMINATION. The Settlement Facility and Litigation Facility
shall terminate as soon as practicable after the Reorganized Debtor's
funding obligations under the Funding Payment Agreement have been
satisfied. The Claims Administrator and the Manager will endeavor to
conclude the activities of the Settlement Facility and Litigation
Facility, respectively, within sixty days thereafter, and shall seek an
order from the District Court confirming the termination of Facilities.
The Reorganized Debtor's funding obligations terminate on the earlier
of:
A. the date when all Allowed Claims in each of Classes 5 through
19 and all other obligations of the Settlement Facility and
Litigation Facility have been paid, all Claims filed have been
liquidated and paid or otherwise finally resolved, and no new Claims
have been timely made against the Settlement Facility or the
Litigation Facility for two consecutive Funding Periods (as defined
in the Funding Payment Agreement); or
B. the date when all payment of all amounts required by the
Funding Payment Agreement have been made.
Upon such termination, the Claims Administrator and the Manager
shall remain authorized to wind up the affairs of the Settlement
Facility, the Depository Trust and the Litigation Facility.
13. DISPOSITION OF EXCESS FUNDS FROM THE SETTLEMENT FACILITY. If,
upon termination of the Settlement Facility, any funds which the
Reorganized Debtor was required to pay under the Funding Payment
Agreement remain in the Settlement Facility after payment of or adequate
provision for any remaining Settlement Facility expenses, the excess
funds will be distributed, if cost effective, pro rata to the holders of
Allowed Claims previously paid by the Settlement Facility, or, if such
distribution would not be cost effective, to a neutral medical research
institute or university selected by the Finance Committee, after
consulting with the Claimants' Advisory Committee.
I. MATERIAL PROVISIONS OF THE FUNDING PAYMENT AGREEMENT.
1. UNIFIED FUNDING OF SETTLEMENT FACILITY AND LITIGATION
FACILITY. Except as otherwise provided in the Plan, all funding pursuant
to the Funding Payment Agreement will be made to the Depository Trust
for the account of the Settlement Facility, where those funds will be
under the management of the Finance Committee and the Financial Advisor.
Page 76
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
The Depository Trust will be funded in three ways. First, on the
Effective Date, the Reorganized Debtor will provide funding in the
amount of $985 million (plus interest to the extent required by the
Funding Payment Agreement). Second, the Reorganized Debtor is required
by the Funding Payment Agreement to pay proceeds of products liability
insurance recoveries to the Settlement Facility. In addition, Dow
Corning shall assign its rights to those insurance proceeds (but not the
policies themselves) to the Settlement Facility pursuant to the
Assignment and Security Agreement. If the amount paid by the Reorganized
Debtor from such insurance recoveries exceeds that year's funding cap,
the excess paid shall be credited against the Reorganized Debtor's
future funding obligations as provided in the Funding Payment Agreement.
Third, additional funding will be made on an "as needed" basis, upon
request from the Claims Administrator. Such requests can be made
monthly, subject to annual caps on the amount of required funding under
the Funding Payment Agreement.
2. FUNDS ADMINISTRATION; ESTABLISHMENT OF DEDICATED FUNDS. The
Finance Committee, subject to court approval and oversight, shall be
responsible for the investment of funds provided to the Depository Trust
and for the disbursement of funds in payment of Claims and expenses of
the Facilities.
Of the funding committed by Dow Corning, the sum of up to $400
million (Net Present Value as of the Effective Date) will be designated
as the "LITIGATION FUND" and made available for payment of certain
Claims, as specified in the Settlement Facility Agreement, including the
Allowed Non-Settling Personal Injury Claims, Allowed Class 12 Claims,
Allowed Assumed Third Party Claims and the expenses of the operation of
the Litigation Facility, including the legal costs of defense of Claims
against the Facility. The remaining funds will be designated as the
"SETTLEMENT FUND." The Settlement Fund includes several dedicated
"subfunds" for payment of Claims of certain classes of settling Personal
Injury Claims. Those subfunds include (i) the "SILICONE MATERIAL
CLAIMANTS FUND" in the aggregate amount of $57.5 million (NPV) for
payment of Claims of the Allowed Claims of settling Silicone Material
Claims in Class 7, (ii) the "OTHER PRODUCTS FUND" in the aggregate
amount of $36 million (NPV) for payment of the Allowed Claims of
settling Other Products Claimants in Classes 9, 10.1 and 10.2 and (iii)
the "INCREASED SEVERITY FUND" in the aggregate amount of $15 million
(NPV) for payment of the certain "increased severity" Claims of Breast
Implant Claimants whose Claims are resolved under Disease Payment Option
I of the Grid.
Although funds designated as the Litigation Fund are intended to be
used solely for payment of Non-Settling Personal Injury Claims, Class 12
Claims and Assumed Third Party Claims, beginning on or after the fourth
anniversary of the Effective Date, funds designated as the Litigation
Fund may be used for payment of First Priority Claims, upon the
recommendation of the Finance Committee, but only upon order of the
District Court. In determining whether such an order should be entered,
the District Court will determine whether (i) funds are needed for
payment of First Priority Claims, and (ii) the remaining assets of the
Litigation Fund, after accounting for the proposed payment of First
Priority Payment, will be adequate to pay all Claims that may be paid
from the Litigation Fund.
3. THE SHAREHOLDER CREDIT FACILITY. The Shareholders shall establish
a credit facility in the amount of $300 million which may be drawn upon
by the Reorganized Debtor to make payments due under the Funding Payment
Agreement. Advances will be available for a period of ten years
following the Effective Date, the years during which the highest level
of funding obligations will occur. Advances from the credit facility are
to be repaid with interest; however, repayment of such advances will be
subordinated to the Debtor's other obligations under the Funding Payment
Agreement and the Senior Notes in the event of a default by the
Reorganized Debtor in respect of such obligations. The amount of
availability under the credit facility will, consistent with the
projected level of funding requirements for the Settlement Facility,
decrease by the amount of $50 million per year beginning in the sixth
year following the Effective Date. Upon the expiration of the credit
facility, all remaining unpaid advances are to be paid by Dow Corning;
the Settlement Facility will have no obligation for repayment of any
advances from the credit facility.
4. COVENANTS; REPORTING OBLIGATIONS. The Funding Payment Agreement
requires the Reorganized Debtor to observe certain covenants including
to (i) make timely payment of all amounts due under the Funding Payment
Agreement, (ii) maintain its properties, (iii) maintain its corporate
existence, (iv) limit its ability to engage in consolidations or
mergers, (v) not pledge, assign, transfer, or grant a lien in its
Insurance Proceeds except for the benefit of the Trust; (vi) not take
actions that would have a material adverse effect on its ability to
satisfy its funding obligations under the Funding Payment Agreement. The
Reorganized Debtor is also required to provide the Finance Committee and
the Claimants' Advisory Committee with (i) copies of all publicly-filed
financial
Page 77
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
reports and its annual audited financial statements for a period of
eight years following the Effective Date (and for later periods if
determined appropriate by the Finance Committee), (ii) unaudited
quarterly financial statements, and (iii) a quarterly statement by an
officer that there has been no default under the agreement or the
occurrence of an event that has a material adverse effect on its ability
to perform under the agreement.
5. EFFECT OF DEFAULT UNDER THE FUNDING PAYMENT AGREEMENT. In the
event of a payment default under the Funding Payment Agreement, interest
shall accrue on the unpaid payment (or portion thereof) at the prime
rate of interest plus 1 1/2%. This interest is not included within the
$2.35 billion (NPV) funding cap. In the event of two or more payment
defaults and/or a breach of any covenant under the Agreement, the Claims
Administrator and the Claimants' Advisory Committee shall have the right
to seek the imposition of any and all remedies from the District Court.
The District Court may impose such remedies as it determines to be
necessary and appropriate to fully protect the rights of the Settlement
Facility to payment in full, to protect against future defaults, and to
maintain the Settlement Facility's rights vis a vis other creditors of
the Reorganized Debtor.
J. CLAIMS RESOLUTION PROCEDURES UNDER THE SETTLEMENT FACILITY AND THE
LITIGATION FACILITY. As their names suggest, the Settlement Facility and
the Litigation Facility will use different approaches to resolve Claims.
The Settlement Facility will offer Settling Personal Injury Claimants a
variety of options to settle their Claims. Claimants who elect not to
settle must risk litigating the merits of their Claims and Surviving Third
Party Claims against the Litigation Facility. Claimants whose Claims are
processed in the Settlement Facility must resolve their Claims under the
Settlement Facility and may not pursue their Claims in any other manner,
including litigation. The Plan further provides for the transfer of certain
Claims related to Personal Injury Claims to the Litigation Facility for
resolution. Non-settling Claimants whose Claims are processed in the
Litigation Facility must resolve their Claims under the Litigation Facility
and may not take advantage of the settlement options offered by the
Settlement Facility. Following is a summary of the basic resolution
procedures used by the Settlement Facility and the Litigation Facility. THE
FOLLOWING SUMMARY, HOWEVER, IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE COMPLETE TEXTS OF THE SETTLEMENT FACILITY AGREEMENT AND THE LITIGATION
FACILITY AGREEMENT.
1. RESOLVING BREAST IMPLANT PERSONAL INJURY CLAIMS UNDER THE
SETTLEMENT FACILITY: THE PHILOSOPHY OF SETTLEMENT. The methods for
resolving Breast Implant Claims under the Settlement Facility encourage
Claimants to settle their Claims without facing the uncertainty of
litigation. The Proponents believe that the settlement options under the
Settlement Facility offer Claimants reasonable compensation for Claims
based on objective proof evaluated by independent and neutral parties.
Claimants whose Breast Implant Claims are processed under the Settlement
Facility have the opportunity to participate in three settlement
options.
A. EXPLANTATION PAYMENT OPTION. Claimants can receive a one-time
payment in the amount of $5,000 if they have a Dow Corning Breast
Implant removed during the period after December 31, 1990 and ending
on the tenth anniversary of the Effective Date. That payment would be
made upon the Claimant's providing proof that she had a Dow Corning
breast implant (or breast implants) and, by contemporaneous surgical
record or hospital record, that the breast implant(s) had been
removed. (If, however, the Breast Implant was removed in 1991 and was
replaced with another silicone gel breast implant in that same
procedure, the Claimant is not eligible to receive payment under this
option. If the Breast Implant for which explantation benefits are
sought was removed after January 1, 1992, and was replaced with
another silicone gel breast implant either in the same procedure or
any subsequent procedure, the Claimant is not eligible to receive
payment under this option.)
If a Claimant wishes to have her implant(s) removed and does not
have the funds to pay for the procedure, the Claims Office can
arrange for the direct payment of up to $5,000 to the selected
provider for the procedure. (If the cost of the explantation
procedure is less than $5,000, the difference between the actual cost
of the procedure and the $5,000 explantation benefit will be paid to
the Claimant.)
All applications for payment under this option must be received on
or before the tenth anniversary of the Effective Date. Any
deficiencies in the application must be cured within six months of
notification of such deficiencies.
B. RUPTURE PAYMENT OPTION. Under this option, any Claimant who can
demonstrate that, prior to the second anniversary of the Effective
Date, she had a Dow Corning Breast Implant that ruptured after
implantation and prior to the explantation procedure will receive a
one-time payment of $20,000, and will be qualified, if funds are
available, for a "Premium" payment of up to $5,000. ("Rupture" is
defined to mean
Page 78
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
the failure of the elastomer envelope(s) surrounding a silicone-gel
implant to contain the gel, resulting in contact of the gel with the
body, not solely as a result of "gel bleed," but due to a tear or
other opening in the envelope occurring after implantation and prior
to the explantation procedure.) An eligible claimant will be entitled
to receive only one payment, regardless of the number of qualified
ruptures.
In limited circumstances where a documented serious chronic
medical condition precludes the surgical removal of the Breast
Implant, and qualifying proof of Rupture through MRI examination is
provided, the Claimant shall be eligible to receive benefits under
this option without undergoing explantation.
In certain circumstances, a Claimant whose Rupture Claim
documentation is classified as unacceptable by the Claims Office may
submit the Rupture Claim to the Reorganized Debtor through an
"individual review process." Claimants whose medical documentation
demonstrates visual confirmation of a breach in the envelope or
migration of silicone from a Dow Corning Breast Implant may authorize
the submission of those records, redacted to preserve the Claimant's
confidentiality, for review by the Reorganized Debtor. The
Reorganized Debtor will have sixty days to review the Claimant's
submission to either accept or reject the Rupture Claim. The
Reorganized Debtor shall consider and not unreasonably deny a Claim
that includes:
(1) Medical documentation, created before explantation surgery
or within a reasonable time after explantation, demonstrating
visual confirmation of a breach in the elastomer envelope found
upon or prior to removal of a silicone gel Breast Implant; or
(2) Medical documentation demonstrating migration along tissue
planes distant from the implant of a substantial mass of material
confirmed by biopsy to be silicone from a ruptured Dow Corning
single or double-lumen silicone gel Breast Implant.
In connection with this individual review process, the Reorganized
Debtor shall be entitled, at its expense, to review, test and examine
any explant materials and/or pathology slides that have been
preserved.
If the Reorganized Debtor denies the Rupture Claim, the Claimant
can appeal to the MDL 926 Court (or its designee for such appeals).
The decision of the MDL 926 Court or its designee is final and
binding on both the Claimant and the Reorganized Debtor.
To be eligible for the Rupture Payment Option, the Claimant must
submit her Claim therefor, together with all supporting
documentation, to the Claims Office on or before the second
anniversary of the Effective Date. If a Claimant is explanted within
ninety days prior to this deadline, the Claimant may have up to
thirty days after the deadline to submit the required application and
documentation. In the event of any deficiency in the Claim form or
supporting documentation, the Claimant shall have six months
following notification thereof to cure the deficiency.
C. DISEASE PAYMENT OPTION OR THE EXPEDITED RELEASE PAYMENT
OPTION. In addition to requesting compensation for an explant or
rupture of a Breast Implant, a Breast Implant Claimant may obtain
compensation under either the Disease Payment Option or the Expedited
Release Payment Option.
(1) DISEASE PAYMENT OPTION. Under this settlement option,
settling Breast Implant Claimants who have certain defined
symptoms or medical conditions will be eligible to receive a
payment from the Settlement Facility. The CRP, attached as Annex
"A" to the Settlement Facility Agreement, defines the particular
medical conditions that will qualify for payment and describes the
different payment categories. There are eight different
compensation levels for which Breast Implant Claimants might
qualify based on specified diseases or medical conditions. In
general, the amount that the Claimant receives will depend on the
nature of the medical condition and the type of documentation
submitted to support the Claim. The amounts for which the Claimant
qualifies will be paid in the form of a "Base" payment, which will
be paid as a First Priority Payment, and a "Premium" payment, to
be paid, if funds remain available, as a Second Priority Payment.
Claimants may seek recovery under one of two different sets of
disease criteria. Disease Payment Option I provides compensation
based on the disease definitions and severity/disability
categories in the Original Global Settlement Disease Schedule
(Exhibit D to the Breast Implant Settlement Agreement Notice.)
This option is equivalent to Option One--Fixed Benefit Option of
the Revised Settlement Program. Breast Implant Claimants who meet
the definitions and criteria specified for the disease
compensation program in the Original Global Settlement Agreement
will qualify for Compensation Level One--A, B or C of the
compensation levels in the Settlement Facility.
Page 79
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Disease Payment Option II provides compensation based on
disease definitions and criteria set forth in the guidelines of
the Revised Settlement Program Long Term Benefit Schedule. Those
who qualify under Disease Payment Option II will be eligible for
one of five compensation levels under the Grid.
The Claims Office will be responsible for determining whether
the documentation submitted satisfies the definitions and criteria
specified. If the Claims Office determines that the documentation
is deficient, the Claimant will be notified of such deficiency and
the procedures to cure such deficiency. The Claims Office will be
authorized to accept documents and records previously submitted to
and acceptable under the procedures of the MDL 926 Claims Office
by Breast Implant Claimants under the Global Settlement Agreement
or RSP in the MDL 926 Court.
The process for evaluating Claims under this settlement option
and for determining the appropriate compensation level consists of
three (3) steps. First, the Claims Office will review each Claim
to determine whether it is subject to certain threshold
disqualifications. For example, a Claimant who has previously
settled her Claim with Dow Corning would not be eligible to
participate in the settlement option. Second, the Claims Office
will determine whether the Claim meets the specific qualification
criteria that describe the nature of the eligible medical
conditions and the documentation required to support the Claim.
These qualification criteria include various symptoms, diseases
and medical findings, as well as disability. Third, if the Claims
Office confirms the existence of an eligible medical condition for
which the Claimant applied, then it will determine the applicable
compensation level on the Grid. Each Claimant will be entitled to
payment for one Covered Condition, subject to the right to receive
payment for Increased Severity, and shall be placed in the highest
compensation level applicable based upon the Claims submission.
(The ability of a Claimant to apply for additional compensation
due to Increased Severity does not impair or otherwise affect the
terms or scope of the release and discharge provisions of the Plan
and the Confirmation Order.)
If the Claimant disputes the evaluation of her Claim, she may
have the decision of the Claims Office reviewed by the Claims
Administrator and, if not satisfied by the determination of the
Claims Administrator, by the Appeals Judge. The review process is
more fully described in subsection (h), which follows.
The Allowed amounts payable to a qualifying Claimant under the
Disease Payment Option is subject to adjustment if the Claimant
has received both a Dow Corning Breast Implant(s) and a silicone
gel breast implant(s) made by any of the Participating Co-
Defendants. In that event, the Allowed amount(s) payable under the
Disease Option to such Claimant shall be reduced by 50%. In the
event that such a Claimant has a Rupture Claim and has previously
received or receives an "enhanced rupture payment" under the
Revised Settlement Program, her compensation under the Rupture
Payment Option (discussed in subsection (b) above) will also be
reduced by 50%.
(2) EXPEDITED RELEASE PAYMENT OPTION. This option consists of
an expedited payment to Claimants who are Breast Implant Users.
Claims processed under this option can qualify for payment without
proof of a qualifying medical condition and without the potential
delays of processing a disease claim. Breast Implant Claimants who
do not presently assert a qualifying medical condition may choose
to accept the Expedited Release Payment in full satisfaction of
potential disease claims or may forgo any immediate payment and
preserve their right to seek compensation if they manifest such a
condition before the fifteenth anniversary of the Effective Date.
Under the Expedited Release Payment Option, Claimants must
provide the Settlement Facility with acceptable evidence that the
Breast Implant is a Dow Corning product. Acceptable evidence
includes hospital or surgical operative records from the implant
or explant procedure specifying that the Claimant was implanted
with a Breast Implant, or a copy of the Claimant's medical records
containing the Breast Implant package label. The compensation
under this option is fixed at $2,000 per Claimant, regardless of
the number of Breast Implants (and, if applicable, the number
and/or types of Other Products) associated with a Claim(s)
asserted by the Claimant.
The Expedited Release Payment Option will be available, unless
extended or renewed by the Claims Administrator, for three years
after the Effective Date.
Page 80
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
D. CLAIMS OF FAMILY MEMBERS. Certain Claims have been asserted by
the spouses, parents and children of Personal Injury Claimants. These
Claims, referred to as "FAMILY MEMBER CLAIMS," are comprised of (i)
"CONSORTIUM CLAIMS," and (ii) "CHILDREN DIRECT CLAIMS."
I. CONSORTIUM CLAIMS are Claims that derive from the
relationship of a spouse, parent, child or other individual
related to or claiming some personal relationship to a Breast
Implant User, Other Product User, or a Non-Dow Corning Breast
Implant User to the extent those claims are recognized under
applicable non-bankruptcy law. The option to settle Consortium
Claims shall be controlled by and be subject to the election of
the Breast Implant Claimant, the Other Products Claimant or the
Non-Dow Corning Breast Implant Claimant (the "PRIMARY CLAIMANT").
If the Primary Claimant elects the settlement option described in
Section 5.4 of the Plan or is deemed to be a Settling Claimant
because of a failure to timely elect to litigate, then any and all
Consortium Claims related to that Primary Claimant shall be deemed
settled and discharged for no additional compensation regardless
of whether the Family Member elects or would have elected to
litigate his or her Consortium Claim separately. Thus, the
settlement Grid amount specified for such Primary Claimant is
intended to cover both the Primary Claimant and the related
Consortium Claims, and, accordingly, the Primary Claimant's
election to take the settlement option shall operate as a release
of both her Claims and all related Consortium Claims.
If the Primary Claimant elects to litigate, any Consortium
Claims that could be brought under applicable non-bankruptcy law
must be brought against the Litigation Facility pursuant to
Section 5.4.2 of the Plan, which provides for liquidation of all
Non-Settling Personal Injury Claims pursuant to the Litigation
Facility Agreement.
II. CHILDREN DIRECT CLAIMS are Claims asserted by children
born to a Breast Implant User or Non-Dow Corning Breast Implant
User arising from the alleged exposure to the Breast Implant,
Other Product or the component parts of those products in utero,
through breast feeding or otherwise.
Any Children Direct Claims made will be resolved through the
procedures established by the Litigation Facility. For these
purposes, such "CHILDREN DIRECT CLAIMANTS" shall be deemed to be
"Non-Settling Personal Injury Claimants." There is no settlement
option available to Children Direct Claimants.
E. HOW CLAIMS ARE PROCESSED. The Settlement Facility is instructed
to process Claims and pay Allowed Claims as promptly as possible
consistent with the need to assure appropriate review of Claim
submissions. The settlement program is designed to resemble, to the
greatest extent possible, the claims process in the Revised
Settlement Program. Accordingly, the Claims Office shall use the
settlement protocols of the MDL 926 Claims Office and shall use the
personnel of the MDL 926 Claims Office to process Claims for payment.
The Settlement Facility will observe the following guidelines in
ordering the Claims for review and payment:
(1) The Claims Office shall adopt procedures to maintain the
confidentiality of all Claim files and Claimants' identities.
Every Claimant is entitled to a copy of his/her Claim file.
(2) Claims will generally be processed within each payment
option elected in the order in which completed submissions are
received.
(3) Review of Proof of Manufacturer, and Claims for
explantation and rupture may begin as soon as Claimants submit the
appropriate form(s) and documentation. Breast Implant Claims for
disease will not be allowed or processed until the Claimant has
acceptable proof (or only a minor deficiency) in her Proof of
Manufacturer.
(4) All Claimants may supplement their prior submissions to
the MDL 926 Claims Office to support a Claim in this Settlement
Program.
The ordering process just described will quickly provide value to
a significant number of Claimants.
Page 81
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
F. PAYMENT OF CLAIMS--GENERALLY. Upon Allowance/17/, Claims will
be paid based upon the determination of the Finance Committee
regarding available funding under the Funding Payment Agreement. On
the Effective Date, the Settlement Facility will receive initial
funding of at least $985 million, which, in the Proponents' view,
should be adequate to distribute payments to Claimants in the early
stages of the operations of the Settlement Facility. Following the
Effective Date, the Settlement Facility (with the exception of the
payment of recoveries of insurance proceeds), will be funded on an
"as needed" basis, and the Claims Administrator will be authorized to
make monthly requests for funding, based on the results of actual
Claims resolution.
Provided that the caps on annual funding are not exceeded, the
"Base" amount of Claims should be paid promptly after Allowance.
(Payments under any settlement option will be reduced by any amount
previously paid to the Claimant or her physician or other health care
provider (a) under the Dow Corning Removal Assistance Program or (b)
in prior partial settlements between Dow Corning and the Claimant
that did not result in a full or general release of claims.) Dow
Corning is responsible for providing the Claims Administrator with
adequate information to determine whether such setoffs apply.
If, on the other hand, the Finance Committee determines that there
will be insufficient funds to pay the scheduled payments on all
Allowed Claims in full immediately, the Settlement Facility shall,
upon the recommendation of the Finance Committee and with the
permission of the District Court, make proportional and/or
installment distributions, with further payments to be made when
additional funds become available to the Settlement Facility.
Finally, in the event it is determined, on or after the fourth
anniversary of the Effective Date, that the level of required funding
from Dow Corning will be insufficient to pay all Allowed First
Priority Payments in the Settlement Facility from the Settlement
Fund, the Finance Committee shall have the authority to seek an order
authorizing the payment of First Priority Payments out of the
Litigation Fund. The Finance Committee may recommend and seek an
order of the District Court authorizing access the Litigation Fund
for payment of the Allowed First Priority Payments. Such order shall
be based on a finding (i) that funds are needed for payment of First
Priority Payments, and (ii) that the remaining assets in the
Litigation Fund, after accounting for the proposed payment of First
Priority Payments, will be adequate to pay all Claims that may be
paid from the Litigation Fund.
G. RELEASE. By accepting payment from the Settlement Facility, a
Claimant will release all Claims against the Facilities and provide
additional documentation (by endorsement of the settlement check) of
the release under the Plan of the Released Parties and their
property.
H. REVIEW. If a Claimant disputes the Claims Office's evaluation
or characterization of the Claimant's Claim under the compensation
structure of the Claims Resolution Procedures of the Settlement
Facility, the Claimant may have the Claims Office's decision reviewed
by Claims Administrator. That review will be initiated by written
request to the Claims Administrator requesting review of the action
of the Claims Office. The review of the Claims Administrator will be
a de novo review, i.e., the review will be made independently of the
prior findings of the Claims Office and based on a fresh review of
the Claim file of the Claimant.
If the Claimant is dissatisfied by the decision of the Claims
Administrator, the matter may be further appealed to the Appeals
Judge. That request is initiated by a written request addressed to
the Appeals Judge. In this appeal, as with the first appeal, the
burden of proof will be on the Claimant. The review by the Appeals
Judge is restricted to a review of the appeal record and the Claim
file, and may not result in a modification of substantive eligibility
criteria. The decision of the Appeals Judge will be final and binding
on the Claimant and the Settlement Facility.
2. RESOLVING OTHER PRODUCTS PERSONAL INJURY CLAIMS AND SILICONE
MATERIAL CLAIMS UNDER THE SETTLEMENT FACILITY. The philosophy underlying
the resolution of Other Products Personal Injury Claims and Silicone
Material Personal Injury Claims under the Settlement Facility is the
same as that for the resolution of Breast Implant Claims. However, due
to the limited range of conditions presented by the Other Products
Claims and Silicone Material Claims, the options for resolution of such
Claims are more limited, as described herein.
- ----------------------
/17/See footnote 5 regarding the effect, if any, of objections to Personal
Injury Claims filed by the Commercial Committee.
Page 82
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
A. OTHER PRODUCTS SETTLEMENT OPTIONS. The settlement options under
the Settlement Facility for Covered Other Products Users are the
Expedited Release Payment Option and the Medical Condition Payment
Option. To be eligible to receive compensation under this option a
Covered Other Products User must submit the appropriate forms on or
before the second anniversary of the Effective Date. Similar to the
treatment provided to Breast Implant Claimants described in section
6.6(J)(1)(c)(2) above, the first option consists of an Expedited
Release Payment of $1,000 to Covered Other Products Users based on
proof that their implant is a Dow Corning Product. Acceptable
evidence includes hospital or surgical operative records from the
implant or explant procedure specifying that the Claimant was
implanted with an Implant, or a copy of the Claimant's medical
records containing the Implant package label. If the proof just
described is unavailable, the Settlement Facility will accept a
statement from the medical doctor who performed the implantation or
from a responsible person at the treating facility, attesting that
the Claimant was implanted with an implant and providing the basis
for that conclusion. The compensation Allowed under this option is
determined per Claimant, regardless of the number and/or types of
Other Products (and, if applicable, the number of Breast Implants)
associated with a Claim(s) asserted by the Claimant.
The other option available to Covered Other Products Users is the
Medical Condition Payment Option. This option consists of a payment
to Covered Other Products Users who have specified symptoms or
medical conditions, and requires a higher level of proof from the
Claimant and more detailed evaluation by the Claims Office. The
Claims Office will evaluate and categorize Claims according to the
guidelines and criteria set forth in the Claims Resolution Procedures
document attached to the Settlement Facility Agreement. Generally,
the process for determining the compensation of Claims consists of
these steps: First, the Claims Office will review each Claim to
determine if it is subject to certain threshold disqualifications. If
the Claim is disqualified, the Claims Office will reject the Claim
and so notify the Claimant. Next, if no threshold disqualification is
found, the Claims Office will determine whether the Claim meets the
stated criteria for a qualified medical condition. Last, if the
Claims Office confirms the existence of a qualified medical
condition, then the Claimant will be notified of the Allowed
compensation level.
The amount to be paid to settling Other Products Claimants is
subject to a number of variables. The Claims are to be paid from a
fixed fund (the "OTHER PRODUCTS FUND") in the amount of $36 million
(NPV) (including $6 million (NPV) designated as a "Premium" payment).
In distributing the Other Products Fund, the Claims Administrator has
the authority to reduce payments to Other Products Claimants whose
Implants were in place for more than five years. Conversely, if funds
remain available from the aggregate $36 million (NPV) cap after
paying all Allowed Other Products Claims held by settling Other
Products Claimants, the remaining amount shall be disbursed, using
guidelines developed by the Claimants' Advisory Committee and the
Claims Administrator, to Other Products Claimants (including implant
Claimants with TMJ devices, knee, hip, large or small orthopedic
devices, and chin or facial implants) who have demonstrated the most
serious injuries or conditions.
B. SILICONE MATERIAL CLAIMS. All Silicone Material Claimants are
required to submit the supporting documentation for their Claims by
the second anniversary of the Effective Date. Thereafter, the Claims
Administrator shall determine, based on the settlement option elected
by and approved for each Claimant and the number of Silicone Material
Claimants, the amount payable for each Claim from the Silicone
Material Claimants Fund of $57.5 million (NPV). The Claims
Administrator is to allocate the Silicone Material Claimants Fund
such that all Silicone Material Claimants who elect the Expedited
Payment Option will receive the same amount and Silicone Material
Claims under the Disease Payment Option shall receive no more than
40% of the amount paid to Breast Implant Claimants under the
equivalent level of the Grid.
The payments to be made to Silicone Material Claimants are further
subject to dollar-for-dollar reduction or "marshaling" for any
payment that the Claimant has received or is eligible to receive from
any other breast implant manufacturer, except that Silicone Material
Claimants whose breast implants were made by CUI, Mentor or Bioplasty
will be deemed to have marshaled all of the assets of those Entities
and will be subject to no reduction.
In the event funds from the Silicone Material Claimants Fund
remain after payment for Allowed Claims as calculated by the Claims
Administrator, the Claims Administrator has the discretion to make a
supplemental pro rata distribution to holders of Allowed Silicone
Material Claims.
C. OTHER SETTLEMENT PROVISIONS. Other elements of the settlement
procedures of the Settlement Facility, including those for the
release of Claims of Family Members, for the processing and payment
of Claims, and for the requirement of a release as a condition of
settlement are essentially the same as for the
Page 83
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
resolution of Breast Implant Personal Injury Claims, and are
discussed in more detail in the foregoing section 6.6(J)(1)(c)
through (h).
3. PAYMENT OF FOREIGN CLAIMS.
A. PAYMENT ADJUSTMENT. The amounts payable for Foreign Breast
Implant and Other Product Claims shall be 60% (for Category 1 and 2
countries) or 35% (for Category 3 and 4 countries) of the amounts
payable to Domestic Claimants, depending on country of residence (see
EXHIBIT "C"). The proposed reduced settlement payments reflect Dow
Corning's belief that the recoveries for product liability claims in
foreign countries are substantially less than those available in
domestic courts under applicable domestic law, based on differences
between foreign and United States substantive law and legal systems,
and various procedural, cultural and economic factors (which vary
from country to country), which, in Dow Corning's belief, support the
separate classification of Foreign Claims, and the reduced settlement
payments offered to their holders, under the Plan. Some parties
disagree with Dow Corning's belief in this regard.
The schedule describing the adjustment to be made for payment of
Foreign Claims is included as EXHIBIT "C" to this Disclosure
Statement. The Debtor has entered into several settlement agreements
with Foreign Claimants in Quebec, Ontario, and British Columbia, and
is providing Australian Claimants with the Australia Breast Implant
Settlement Option. While those arrangements, which are to be approved
at the time of confirmation, provide for the creation of separate
settlement funds and the establishment of their own grids for Claim
resolution, the criteria for Claim Allowance and the compensation
therefor are comparable to the treatment of Foreign Claims under the
Grid (as adjusted).
B. CATEGORIZATION OF FOREIGN CLAIMS. Foreign Claimants are
classified into categories based on their country of residence for
purposes of calculating the appropriate settlement payment. The
categorization of countries is determined generally based on the per
capita GDP of each country as compared to the per capita GDP of the
United States, as well as certain additional factors. Specifically,
Category 1 countries include countries with a purely common law legal
system. Category 2 is comprised of countries with a per capita GDP
greater than 60 percent of the GDP of the United States and all
countries in the European Union. Category 3 is comprised of countries
with a per capita GDP of between 30 percent and 60 percent of that of
the United States. Category 4 is comprised of countries with a per
capita GDP of less than 30 percent of that of the United States. The
determination of the per capita GDP is determined using The World
Factbook, published by the Central Intelligence Agency.
C. PROCEDURE FOR ADJUSTMENT TO CATEGORIZATION. The categorization
of countries for purposes of computing the compensation amount for
Foreign Claimants was computed based on data available as of January
29, 1999. If, due to changed economic conditions, the application of
the formula for categorization of countries described at 6.6(J)(3)(b)
above would result in the placement of any country in a category
different than that specified on EXHIBIT "C," the Claims
Administrator, with the agreement of the Debtor's Representatives and
the Claimants' Advisory Committee may amend EXHIBIT "C" to place such
country in the appropriate category. Such adjustments shall be
permitted no more than once in any calendar year, and any
recategorization shall apply to all Claimants from the affected
country whose claims are paid in the year of the recategorization or
in subsequent years. Foreign Claimants who believe that due to
changed economic conditions their country is not correctly
categorized based on the formula and data source set forth at
6.6(J)(3)(b) above may submit to the Claims Administrator a request
for recategorization. In the absence of consent of the parties, the
Foreign Claimant may bring a motion before the MDL 926 Court to
recategorize the country.
4. RESOLVING CLAIMS UNDER THE LITIGATION FACILITY. The procedures
under the Litigation Facility allow Non-Settling Personal Injury
Claimants to resolve their Claims by trial if those Claims are not
earlier settled. These procedures will provide an orderly process for
resolving such Claims. The litigation process will be governed by the
Litigation Facility Agreement and the Case Management Orders. The terms
of an initial Case Management Order have been agreed to by Dow Corning
and the Tort Committee and are to be approved by the District Court at
the time of the hearing to approve the Plan. The Case Management Order
provides that the District Court will oversee the resolution of Claims
through the Litigation Facility Agreement, assisted by a Special Master.
The manner by which Claims other than LTCI Claims and Claims in Classes
11 through 17 will be processed are described below.
Page 84
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
A. ELECTION TO LITIGATE. Claimants will have 180 days following
the earlier of (i) the Effective Date and (ii) the mailing of the
notice of the election deadline pending an appeal of the Confirmation
Order within which to decide whether they wish to resolve their
Claims through the Litigation Facility. To elect litigation,
Claimants must (i) sign and return a Participation Form to the Claims
Administrator indicating their desire to bypass the Settlement
Facility and have their Claim processed in the Litigation Facility
and (ii) file a copy of the Participation Form reflecting the opt-out
election in the Master Docket maintained by the District Court within
thirty days of so electing. Claimants who do not timely return and
file the Participation Form will have their Claims processed in the
Settlement Facility.
If a Claimant timely returns and files a Participation Form, but
does not already have a lawsuit pending, the Claimant must then file
a complaint in the District Court setting forth her Claims and must
do so within sixty days of the date on which her Participation Form
is filed. This requirement is tolled for minor Claimants until six
months after their 18th birthday and for Unmanifested Claimants until
six months after manifestation of illness or symptoms of sufficient
severity to support a disease payment, provided, however, that any
such tolled Claims must be filed prior to the 15th year after the
Effective Date. Claimants who already have a lawsuit pending (whether
in the MDL proceeding or otherwise) will have their individual files
established in the Master Docket created pursuant to the terms of the
Case Management Order. In addition to the individual case filings,
the Master Complaint, as amended, filed in the MDL proceeding by the
Plaintiffs' National Steering Committee shall also be filed in the
Master Docket created pursuant to the Case Management Order in the
Litigation Facility.
Claims channeled to the Litigation Facility shall be asserted
solely against the Litigation Facility. All Claims in the Litigation
Facility will be consolidated for pretrial handling in the District
Court.
B. PRE-TRIAL SETTLEMENT PROCEDURES. During the pre-trial stage,
the District Court, acting with the assistance of the Special Master,
will develop and implement procedures for the efficient and fair
resolution and trial of the cases in the Litigation Facility.
Specifically, they will:
(1) establish and implement procedures for organizing and
presenting cases in the Litigation Facility;
(2) finalize and implement the Case Management Orders, which
will establish specific procedures for the processing of Claims;
(3) establish guidelines for and coordinate all pretrial
discovery;
(4) conduct any common issue or consolidated motion practice,
including, if applicable, any consolidated "Daubert" procedure;
(5) finalize and implement pretrial settlement procedures;
(6) establish guidelines for and coordinate the certification
of cases for trial.
To assist the Litigation Facility's evaluation of Claims, each
Claimant shall prepare and file with the Litigation Facility Manager
answers to a questionnaire which shall describe the nature and
support for the Claimant's Claim and damages. The questionnaire shall
be filed within 120 days after the later of the end of the 180-day
Election Period or the date on which the Claimant's complaint is
filed in the Master Docket. Claimants who have previously answered a
substantially similar questionnaire or interrogatories in the MDL 926
Court shall be permitted to update and then file such answers.
The documents and depositions in the MDL Depository in Cincinnati
shall be available for use in individual trials, subject to the Rules
of Evidence. Any report by the 706 Panel appointed by the MDL 926
Court shall be available to all parties for use in the Litigation
Facility, subject to applicable Rules of Evidence and the orders of
the MDL 926 Court.
The Manager will ask the District Court to hear a common issue
"Daubert" motion to determine certain issues that may be common to
all or most of the cases in the Litigation Facility. Such a
dispositive motion may include a "Daubert hearing" to assess if there
is sufficient admissible evidence to permit a jury trial as
Page 85
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
to whether silicone causes systemic diseases. The Manager may also
seek adjudication of other "common issues" affecting a large number
of cases. The Tort Committee has reserved the right on behalf of all
individual Personal Injury Claimants to argue that such common issue
adjudication is not appropriate or is inconsistent with existing law.
The District Court has not ruled on whether such a motion would be
appropriate. However, the Debtor and the Tort Committee have agreed
that a hearing on any such common issued "Daubert" motion would not
commence prior to 270 days after the expiration of the six-month
Election Period.
C. TRIAL. After the conclusion of the pre-trial procedures
applicable to a specific individual case, the Special Master may
recommend to the District Court whether individual cases should be
certified for trial. Such recommendation shall take into account, at
a minimum, the following factors:
(1) allowance for the determination of any appeals with
respect to "Daubert" or other significant common issues;
(2) the need to insure that all Litigation Facility
obligations and expenses can be paid within the Litigation Fund;
(3) the available resources of the Litigation Facility,
including availability of witnesses, defense counsel and experts,
and the overall burden on the defense effort. The Special Master
and the District Court shall specifically preserve the ability of
the Facility to prepare for and effectively try each case
certified for trial;
(4) the settlement history, both of opt-out cases as a whole
and individual cases in particular;
(5) the date of the filing of the case at issue;
(6) the merits of the case at issue;
(7) the readiness of the case for trial;
(8) judicial efficiency; and
(9) hardship (severity of ailment, etc.).
In general, cases will be tried in the United States District
Court for the Eastern District of Michigan, or in the federal
district court where the Claim arose. However, for selected cases
originally filed in state court and not removed prior to the Petition
Date, the District Court may order such case to be remanded to and
tried in that state court recommended by the Special Master and
approved by counsel for all parties to the case (including the
Litigation Facility).
In cases certified for trial, the Litigation Facility may (i)
conduct a medical examination of the Claimant and (ii) take limited
depositions of the Claimant, the Claimant's spouse and his or her
experts and physicians pursuant to guidelines set forth in the Case
Management Order. Additional discovery may also be taken with
permission of the District Court.
All Non-Settling Claimants who proceed to litigation will have the
right to trial by jury.
D. PARTICIPATION UNDER THE PLAN BY RULE 3005 CLAIMANTS. As
described above, as a result of the filing of Rule 3005 Claims by
various Entities, persons covered by the filings may have a further
opportunity to participate in the bankruptcy even though they did not
themselves timely file proofs of claim. (See section 2.3(C) of this
Disclosure Statement.) Claimants who did not timely file a proof of
claim against Dow Corning by the bar date but on whose behalf a Rule
3005 Claim has been timely filed (called "RULE 3005 CLAIMANTS" in
this Disclosure Statement") may file a notice of intent with the
Court as provided in Bankruptcy Rule 3005 to act on her or his behalf
with respect to such Claim. Notwithstanding Bankruptcy Rule 3005, a
Personal Injury Claimant on whose behalf a Rule 3005 Claim has been
timely filed will be entitled to file the Notice of Intent on or
before 90 days after the Effective Date. Personal Injury Claimants
who timely file a Notice of Intent will be considered registered with
the Claims Office and will thereby have all rights as specified in
the Rule 3005 filing and will be subject to all deadlines applicable
to all Personal Injury Claimants. The Claims of Rule 3005 Claimants
who do not timely file a Notice of Intent shall be disallowed.
If the Rule 3005 Claimant timely files a Notice of Intent with the
Court and returns a signed Participation Form to the Claims Office on
or before the six-month anniversary of the Effective Date, such
Claimant will
Page 86
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
have the right to elect whether to settle or litigate. Rule 3005
Claimants who do not timely elect litigation or who do not return a
signed Participation Form to the Claims Office on or before the six-
month anniversary of the Effective Date shall be deemed Settling
Personal Injury Claimants.
As described earlier in the Disclosure Statement, the Debtor
undertook an extensive notice campaign designed to provide actual
and/or constructive notice of the Bar Date in this Case. The Bar Date
notification program, which was both a foreign and domestic notice
program, in turn followed a significant global notification program
undertaken in connection with the Original Global Settlement. As a
result of these two global notification programs, the Proponents
believe it unlikely that a material number of Breast Implant
Claimants will utilize the Rule 3005 mechanism to assert a Claim when
they did not do so in response to earlier notification programs.
Further, the Proponents believe that most Claimants who have or
believe they have significant injuries would have filed their own
Claims. Thus, neither the number of Rule 3005 Claimants expected to
come forward nor the magnitude and severity of their Claims is
expected to be material.
E. PAYMENT OF CLAIMS. Claims will be Allowed in the amount at
which they have been settled or liquidated through trial (following
appeals). Upon Allowance, Claims will be paid in whole or in part
based on the amount then available under the Litigation Facility
Agreement, the Settlement Facility Agreement and the Funding Payment
Agreement. The Allowed Claims shall be presented by the Manager to
the Claims Administrator and the Claims Administrator and the Finance
Committee shall arrange for distribution of payments. If the Finance
Committee determines that currently available funds are inadequate to
pay all Allowed Claims of Non-Settling Personal Injury Claimants, the
liquidated Surviving Third Party Claims, the Allowed Miscellaneous
Raw Material Claims and the Allowed Claims of Other Products
Claimants whose Claims did not arise from a Covered Other Product in
full immediately out of the Litigation Fund, the Finance Committee,
with the approval of the District Court, may pay such Claims in
installments (based upon the principle of treating all similar Claims
in substantially the same manner), with further payments to be made
when additional funds become available to the Litigation Facility.
The Mahlum Claims and the Spitzfaden Claims shall be transferred
to the Litigation Facility for resolution in certain circumstances as
described in section 6.16.5 of the Plan and section 6.7(D) of this
Disclosure Statement, which also describe the treatment of these
claims absent transfer. If these Claims are so transferred, they
shall be paid on the following basis:
The amount of any settlement of the Mahlum Claims and the
Spitzfaden Claims entered into after the Effective Date, and approved
by the Debtor and the Shareholders, will be paid by the Reorganized
Debtor and/or the applicable Shareholder up to certain limits
specified in the Litigation Facility Agreement and, unless otherwise
agreed by the Claimants Advisory Committee, not from the Settlement
Fund or the Litigation Fund. Any portion of a settlement in excess of
those limits will be paid from the Settlement Fund, but only if
approved by the Claimants' Advisory Committee. The amount of any
judgment obtained by the eight named Spitzfaden Claimants that is
entered after those Claims are transferred to the Litigation Facility
will be paid by the Reorganized Debtor and not from the Settlement
Fund or the Litigation Fund.
The amount of any judgment obtained by the Mahlum Claimants or the
absent class members holding Spitzfaden Claims that is entered after
those Claims are transferred to the Litigation Facility will be paid
on the same basis as payments are made on Allowed Claims of Non-
Settling Claimants, as described in this section of the Disclosure
Statement.
The Litigation Facility shall have no liability for and shall not
pay any judgment or arbitration award to the extent it imposes
several liability against or allocates comparative fault to a
Settling Physician or Settling Health Care Provider. Payment for such
awards shall be made by the Settling Physician or Settling Health
Care Provider.
To the extent the Settling Physician or Settling Health Care
Provider, however, pays (i) a judgment or award, (ii) a cost in
connection with the posting of a supersedeas bond, or (iii) other
amounts, for any of which the Litigation Facility is also liable, the
paying defendant shall have a claim for reimbursement, with interest,
from the Litigation Facility. Such claim shall be subordinate to the
obligation of the Litigation Facility to make payments to Personal
Injury Claimants. If, however, the Claims Administrator or the
affected defendant believe that the Litigation Facility has become
adequately funded to timely meet its obligations to Claimants and pay
the reimbursement claim, either may seek permission from the District
Court to accelerate payment of the reimbursement claim to the
affected defendant.
Page 87
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
The Litigation Facility will remain in existence until Dow
Corning's funding obligations have terminated in accordance with (S)
2.01(d) of the Funding Payment Agreement. The Funding Payment
Agreement obligates Dow Corning to continue payments for up to 16
years following the Effective Date of the Plan, unless all Allowed
Claims have been liquidated and paid before such time. The Litigation
Facility will remain in existence at least until these payment
obligations have ceased. Thereafter, the Manager of the Litigation
Facility must seek Court permission to terminate after making
adequate provisions to wind-up the affairs of the Litigation
Facility.
5. LTCI CLAIMS. LTCI Claims will be liquidated by tendering the
defense thereof to (and enforcing the indemnity obligations of) the
party or parties obligated to indemnify the Litigation Facility (as the
Reorganized Debtor's assignee) for LTCI Claims under the applicable LTCI
Indemnities relating thereto.
6. PUNITIVE DAMAGES. All Claims for punitive or exemplary damages
shall not be Allowed Claims.
7. CLAIMS IN CLASSES 11 THROUGH 15 AND 17. Each Claimant in Classes
11 through 15 and 17 (which includes Claims held by Claimants in Class
14 that elect to litigate their Claims) whose Claim is to be liquidated
in the Litigation Facility (i) shall not receive any payment from the
Debtor and/or the Settlement Facility if (and to the extent) their Claim
is disallowed pursuant to any common issue litigation procedures, and
(ii) shall retain the right to adjudicate their Claim through
litigation, subject to the provisions of the Plan and the Litigation
Facility Agreement.
The Debtor believes that non-disease Claims previously paid by Other
Claimants are still unliquidated as to the Debtor because no
determination of the Debtor's liability has yet occurred, and thus, are
not automatically payable by the Debtor. Through procedures to be
developed and implemented by the Litigation Manager, and further subject
to the docket controls and other procedures implemented by the Court,
resolution of an Other Claim held by a Claimant in Classes 11 through 15
and 17 may be effected in conjunction with the resolution of the related
underlying Personal Injury Claim. (Please refer to section 6.6(J)(4) of
this Disclosure Statement for a more detailed description of the
procedures to be implemented by the Litigation Manager in connection
with the Other Claims described in this paragraph.) Payment of such
Claims, if Allowed and qualified for payment, shall be made subject to
the terms of the Litigation Facility Agreement, the Settlement Facility
Agreement and the Funding Payment Agreement.
8. CLAIMS IN CLASS 16. Except as provided in the Litigation Facility
Agreement and in section 6.16 of the Plan with respect to the Mahlum and
Spitzfaden Claims, the Shareholder Claims in Class 16 shall be released
and discharged upon the Effective Date. The treatment of the Shareholder
Claims relating to the Mahlum Claims and the Spitzfaden Claims is
described in section 6.4(M)(6) of the Disclosure Statement.
K. OTHER OBLIGATIONS OF THE REORGANIZED DEBTOR. The Reorganized Debtor
will (i) review all Claims filed against the estate (other than Personal
Injury Claims and Other Claims assumed by the Litigation Facility) and, if
advisable, object to such Claims; and (ii) investigate, prosecute, settle,
or dismiss all Debtor Actions and its retained interest in Insurance Debtor
Actions for the benefit of the Reorganized Debtor. The Reorganized Debtor
shall be entitled to receive all Debtor Action Recoveries and any retained
interest in Insurance Debtor Action Recoveries.
6.7 EFFECTS OF PLAN CONFIRMATION.
A. DISCHARGE. Except as otherwise expressly provided in the Plan or the
Confirmation Order, confirmation of the Plan shall discharge the Debtor as
of the Effective Date from and completely extinguish the Debtor's liability
for any Claim and Debt, whether reduced to judgment or not, liquidated or
unliquidated, contingent or noncontingent, asserted or unasserted, fixed or
not, matured or unmatured, disputed or undisputed, legal or equitable,
known or unknown, that arose from any agreement of the Debtor entered into
or obligation of the Debtor incurred before the Confirmation Date, or from
any conduct of the Debtor prior to the Confirmation Date, or that otherwise
arose before the Confirmation Date, including, without limitation, all
interest, if any, on any such Debts, whether such interest accrued before
or after the date of commencement of the Case, and including, without
limitation, all Claims and Debt based upon or arising out of Products
Liability Claims, and from any liability of the kind specified in sections
502(g), 502(h), and 502(i) of the Bankruptcy Code, whether or not a Proof
of Claim is filed or is deemed filed under section 501 of the Bankruptcy
Code, such Claim is allowed under section 502 of the Bankruptcy Code, or
the holder of such Claim has accepted or rejected the Plan.
B. VESTING. Except as expressly provided in the Plan, on the Effective
Date the Reorganized Debtor will be vested with all of the property of the
estate free and clear of all Claims, Liens, encumbrances, charges and other
interests
Page 88
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
of Creditors and Shareholders, and may operate its business free and clear
of any restrictions imposed by the Bankruptcy Code or the Court.
C. RELEASE.
1. DESCRIPTION OF RELEASE. As set forth more fully in section 8.3 of
the Plan, all Debtor-Affiliated Parties, the Shareholders, all
Shareholder-Affiliated Parties, and the insurance companies who have
settled with Dow Corning (and their Representatives) will be released
from any and all Products Liability Claims, whether known or unknown,
except for the obligations of those parties pursuant to the Plan and the
related agreements. This means that anyone with a Claim relating to a
Breast Implant or any of the other Claims being released will not be
able to sue any of the Released Parties, including Dow Corning, Dow
Chemical, Corning and the Settling Insurers. However, section 8.3 will
not affect contribution, indemnity, subrogation, or other claims of non-
settling Insurance Companies against Settling Insurers to the extent
that such claims were not released by the orders approving the
settlement agreements with the Settling Insurers. Additionally, section
8.3 of the Plan provides that the Settling Physicians, the Settling
Health Care Providers, and their respective Representatives will be
released by all Persons from any and all Personal Injury Claims, except
for the following claims, which are not released by section 8.3: (i)
Malpractice Claims/18/ against Settling Physicians or Settling Health
Care Providers; (ii) Claims against the Settling Physicians or Settling
Health Care Providers held by non-Settling Personal Injury Claimants,
and (iii) Products Liability Claims against the Settling Physicians or
the Settling Health Care Providers that are held by Claimants in Classes
11 through 15 and 17 of the Plan whose Claims are liquidated by the
Litigation Facility. All Claims against the Settling Physicians and
Settling Health Care Providers that are not released by section 8.3 of
the Plan (other than Malpractice Claims), provided that jurisdiction
over such Claims is transferred to the District Court for resolution,
will be subject to a channeling injunction and will be resolved,
together with any corresponding Claim against DCC, through the
Litigation Facility, as described in section 6.7(D) of this Disclosure
Statement, which follows.
The effect of this release will be that any holder of a Claim being
released will not be permitted to sue DCC, the Debtor-Affiliated
Parties, the Shareholders, the Shareholder-Affiliated Parties, the
Settling Insurers, or any Settling Physicians or Settling Health Care
Providers with respect to the Released Claims. Any Person with such a
Claim will be treated in accordance with the Plan and will receive the
payment, if any, to which he or she may be entitled under the Plan, and
this treatment will be the complete and sole compensation for their
Claims (except Malpractice Claims, which are not released).
Finally, the release of Released Parties under section 8.3 of the
Plan shall (i) operate, as between all Released Parties, as a mutual
release of all Products Liability Claims, and (ii) effect a release of
any contribution or indemnity Claims held against any of them by DCC.
2. HISTORY OF LITIGATION AGAINST DOW CHEMICAL. The Breast Implant
Claims against Dow Chemical are based principally on its alleged role in
testing silicone manufactured by DCC for use in implantable medical
products. Dow Chemical denies that it ever tested silicone to determine
its suitability for use in medical implants, or that it ever advised DCC
on the suitability of silicone for use in medical implants. Courts
overseeing breast implant litigation in New York, California and
Michigan have granted summary judgment to Dow Chemical on all cases
within those states, based on their determinations as a matter of law
that Dow Chemical's involvement in the testing an development of
silicones was too remote for Dow Chemical to be liable to Personal
Injury Claimants. The New York decision has been affirmed on appeal and
is now final. The California decision has been upheld by the California
Supreme Court and is now final. The Michigan decision is currently being
appealed to the intermediate appellate court in Michigan. In addition,
the federal district court overseeing consolidated jaw implant
litigation in Minneapolis, Minnesota, ruled on similar grounds that Dow
Chemical could not be held liable under the law of any state for alleged
dangers or defects of silicone jaw implants manufactured by DCC. This
ruling has been affirmed on appeal and is now final.
- ----------------------
/18/The effect of the definition of Malpractice Claims in the Plan is to
determine what Claims will be released by Settling Personal Injury Claimants
against Physicians and Health Care Providers. Such definition will not be
applicable to, or otherwise affect, any Surviving Claims.
Page 89
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Other courts have reached different decisions. The MDL 926 Court in
Birmingham, Alabama originally granted summary judgment to Dow Chemical,
but subsequently vacated that ruling, finding that some claimants may be
able to assert valid claims against Dow Chemical under the law of some
states. The MDL 926 Court did not identify any states in which claims
against Dow Chemical would be valid. Dow Chemical has filed a motion
seeking appellate review of the MDL 926 Court's order by the United
States Court of Appeals for the Sixth Circuit. The court overseeing
breast implant litigation in New Jersey ruled that claimants in that
state had no valid claims against Dow Chemical for fraud, conspiracy or
aiding and abetting, but could pursue their claims that Dow Chemical
voluntarily undertook on behalf of DCC to determine the safety of
silicone for use in medical implants and negligently performed that
undertaking. Two different Texas courts, overseeing consolidated breast
implant litigation in Harris County and Dallas County, ruled that
claimants could pursue some, but not all, of their claims against Dow
Chemical. The courts of most states have not ruled one way or the other
on whether Dow Chemical can be liable under the law of their states.
However, Texas, Michigan, California and New York are the states in
which the largest numbers of claims have been filed against Dow
Chemical.
In addition, there have been three jury trials of silicone implant
claims against Dow Chemical. In a 1994 case brought by two women against
DCC and Dow Chemical in Houston, Texas, the jury found in favor of the
defendants for one woman and awarded approximately $5 million in damages
to the other woman. The jury also determined that Dow Chemical should be
20% responsible for this verdict. The court later determined that the
jury's verdict against Dow Chemical was legally defective and awarded
judgment to Dow Chemical notwithstanding the verdict. In 1995, a jury in
Reno, Nevada awarded $14.1 million to one couple against Dow Chemical in
a case (the Mahlum case) related to Breast Implants. In 1997, a jury in
New Orleans, Louisiana found in the first phase of a multi-phase breast
implant liability trial (the Spitzfaden case) that Dow Chemical could be
liable for negligence, fraud and conspiracy, depending on the outcome of
further proceeding regarding causation and damages in individual cases.
That decision is on appeal.
On December 31, 1998, the Nevada Supreme Court issued a ruling
reversing in part and affirming in part the judgment against Dow
Chemical in the Mahlum case. By a 4 to 1 vote, the Nevada court reversed
all of the claims in intentional tort and the $10 million punitive
damages award, holding that Dow Chemical could not be liable to
plaintiffs on those claims as a matter of law. The Nevada court
affirmed, by a 3 to 2 vote, the trial court's judgment holding Dow
Chemical liable for negligent performance of an undertaking and the $4.1
million compensatory damages award. Dow Chemical has filed a petition
for rehearing of the Nevada court's affirmance of the judgment as to the
negligent performance claim.
3. HISTORY OF LITIGATION AGAINST CORNING. Except as described below,
Corning has won an unbroken string of summary judgment decisions in
federal and state courts dismissing claims against it. In the MDL, Judge
Pointer granted final summary judgment in favor of Corning in April
1995. The plaintiffs' appeal from that ruling was voluntarily dismissed
with prejudice in March 1996 while pending in the Eleventh Circuit. In
all federal cases involving silicone jaw implants, Corning was granted
final summary judgment in March 1995; the plaintiffs did not appeal from
this judgment. Corning has also been granted summary judgment in all
state cases in New York (where the plaintiffs' appeal against Corning
was dismissed for lack of prosecution), California (where plaintiffs'
appeal was rejected by the Court of Appeal and the plaintiffs thereafter
stipulated to the dismissal of Corning from any further appeal),
Connecticut, Michigan, New Jersey, Illinois, in Harris, Travis and
Dallas Counties in Texas, in Hines County, Mississippi, and in the
Western Grand Division of Tennessee. Most recently, in the Spitzfaden
class action in Louisiana, Corning was granted complete summary judgment
by the trial court in February 1997, which was vacated and remanded as
premature by the intermediate Louisiana appellate court in February
1998. After the Louisiana Supreme Court declined to hear Corning's
appeal, Corning transferred the remaining Louisiana cases against it to
the District Court in Michigan pursuant to that Court's prior orders and
those orders of the Sixth Circuit. Corning also has filed a separate
motion in the District Court, seeking its dismissal from the remaining
implant cases against it, and that motion was argued on February 27,
1998. Every trial court that has ruled on plaintiffs' claims against
Corning has held that no viable direct or indirect claim exists against
Corning under any legal theory and has granted Corning summary judgment
as a matter of law.
4. CONSIDERATION GIVEN BY THE SHAREHOLDERS TO SUPPORT THE PLAN. In
return for the release of their liability in respect of Products
Liability Claims as provided in section 8.3 of the Plan (and the
protections of the injunction described in the next section), Dow
Chemical and Corning have agreed to support the Plan in several
important ways.
Page 90
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
First, Dow Chemical has agreed with Dow Corning to a settlement of
disputes between them concerning their shared products liability
insurance. As described in more detail in section 6.6(B) of this
Disclosure Statement, Dow Chemical purchased substantial excess products
liability insurance coverage for itself and DCC. Although Dow Chemical
paid 90% of the premiums for that coverage, most of the insurance is
being contributed to the Plan and will not be available to Dow Chemical.
Second, the Shareholders have agreed to provide a $300 million credit
facility to the Reorganized Debtor. At any time during the ten-year term
of the credit facility, the Reorganized Debtor will be able to access
the facility to make the payments due under the Funding Payment
Agreement. These funds would be paid back by Reorganized DCC.
Third, the Shareholders have agreed to allow the Settlement Facility
to make substantial payments for the disease Claims of Settling Personal
Injury Claimants without requiring the Settling Personal Injury
Claimants to prove causation--that is, without proof that the Claimants'
diseases were, in fact, caused by a Dow Corning silicone implant. The
Shareholders believe that epidemiological evidence establishes that
there is no increased risk of disease in women with implants as compared
with the general population. Thus, in the view of the Shareholders,
their agreement to support a Plan that provides for the payment--
ultimately from their equity in DCC--of hotly-disputed Claims that they
believe would not be Allowable if tested through litigation, constitutes
additional, and substantial, consideration for the proposed release.
Fourth, the Shareholders have agreed to limit their Class 16 Claims
as provided in the Plan and the Litigation Facility Agreement. Among
other things, the Shareholders will not be entitled to seek recovery of
costs and expenses incurred by them related to litigation involving the
Debtor's Breast Implants and Other Products.
The Debtor believes that the Shareholders' contribution to the Plan
is substantial, since the issues resolved by the Plan have been hotly
contested for many years, and that the Plan represents the best effort
of the Debtor and the Tort Committee to resolve these disputed issues in
a fair way that will bring closure to all parties.
5. TORT COMMITTEE SUPPORT OF RELEASE. The Tort Committee supports the
release of the Shareholders as part of the overall terms of this Plan.
The Tort Committee recognizes that the issues resolved by the Plan have
been hotly contested for many years and that the Plan itself is the
product of intensive negotiations between the Debtor, the Shareholders,
and the Tort Committee over an extended period of time. In the judgment
of the Tort Committee, the Plan, including the release of the
Shareholders, is the best available way to resolve the disputed issues,
thereby allowing Personal Injury Claimants to receive reasonable
compensation without the additional delay of a plan process contested by
the Debtor and the Shareholders.
D. INJUNCTIVE RELIEF. As set forth more fully in section 8.4 of the
Plan, in order to enforce the release described above, all persons with
Claims that are released under the Plan will also be enjoined from
asserting any Released Claims against any of the Released Parties. In the
event any Person takes any action that is prohibited by, or is otherwise
inconsistent with the provisions of sections 8.3 or 8.4 of the Plan, (i)
such Person may be held in contempt of Court and shall be subject to such
other sanctions as the Court deems appropriate, and (ii) upon notice to the
Court by an affected Released Party, the action or proceeding in which the
Claim of such Person is asserted shall automatically be transferred to the
Court (or, as applicable, the District Court) for enforcement of the
provisions of sections 8.3 and 8.4 of the Plan.
As described in section 6.7(C)(1) of this Disclosure Statement, section
8.3 of the Plan does not release the Settling Physicians or the Settling
Health Care Providers from (i) Claims of Non-Settling Personal Injury
Claimants, (ii) Claims held by Claimants in Classes 11 through 15 and 17 of
the Plan whose Claims have been assumed by the Litigation Facility, or
(iii) Malpractice Claims, as defined in the Plan. As more particularly set
forth in the Plan, those Claims that are not released are collectively
referred to as "SURVIVING CLAIMS." As provided in sections 8.5 of the Plan,
all Persons who have Surviving Claims (other than Malpractice Claims) will
conditionally be entitled to pursue liquidation of their Surviving Claims
against a Settling Physician and/or a Settling Health Care Provider in the
District Court. (Surviving Malpractice Claims shall not be channeled and
shall be liquidated in the courts where such claims have been or may be
filed.) Section 8.5 of the Plan calls for a "channeling injunction"
providing for the consolidation of the channeled Surviving Claims for
resolution and litigation with the Claims against the Litigation Facility.
The channeled Surviving Claims will be processed, settled, tried and
otherwise resolved under the same steps as Claims against the Litigation
Facility, as described in section 6.6(J)(4) of this Disclosure Statement
with respect to Personal Injury Claims and, as described in section
6.6(J)(7) of this Disclosure Statement, with respect to Claims of the type
that are classified in Classes 11 through 15 and 17. The channeling effect
of the injunction as to the Surviving Claims against Settling
Page 91
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Physicians and Settling Health Care Providers is conditioned on such Claims
becoming "ASSUMED THIRD PARTY CLAIMS" (i.e. such Claims being transferred
as Claims "related to" the bankruptcy Case, to the District Court). As of
the date of this Disclosure Statement, no such transfer has occurred.
The Mahlum Claims and the Spitzfaden Claims (if not earlier resolved)
will also be subject to the channeling injunction and shall be transferred
to the Litigation Facility for resolution, but such transfer shall not
occur (i) in the case of the Mahlum Claims, unless the existing judgment is
reversed and the case is remanded for retrial, and (ii) in the case of the
Spitzfaden Claims, until the existing judgment entered in Phase I
proceedings is resolved by Final Order, and then only to the extent the
judgment is affirmed as against Dow Chemical. The Claims will be resolved
through the Claim resolution procedures contained in the Litigation
Facility Agreement and the Case Management Orders. The provisions for
payment of any such Claims that become Allowed are described in section
6.6(J)(4)(e).
Allowed Assumed Third Party Claims for which the Litigation Facility is
liable will be paid from the Litigation Fund, provided that there is
adequate funding to do so. If the Claims Administrator determines that
currently available funds are inadequate to pay all Claims that are to be
paid from the Litigation Fund, the Claims Administrator may pay Claims
proportionally, with further payment to be made when additional funds
become available to the Litigation Fund as provided in the Funding Payment
Agreement.
In the event Settling Physician or Settling Health Care Provider pays a
judgment or award in respect of a Claim for which the Litigation Facility
is liable, or pays other amounts for which the Litigation Facility is
liable, that party will have a claim for reimbursement, with interest, from
the Litigation Facility. The right to reimbursement, however, will be
subordinate to the obligation of the Litigation Facility to pay Allowed
Personal Injury Claims and the liquidated amount of Surviving Claims, as
provided in the Litigation Facility Agreement.
Notwithstanding the foregoing discussion, the Litigation Facility shall
have no liability for and shall not pay any judgment or arbitration award
to the extent it imposes several liability against or allocates comparative
fault to a Settling Physician or Settling Health Care Provider. Payment for
such awards shall be made by the Settling Physician or Settling Health Care
Provider.
E. SUPPLEMENTAL RELEASE AND INJUNCTION FOR CERTAIN SETTLING
INSURERS. The release and injunction provided in sections 8.3 and 8.4 of
the Plan shall, with respect to the London Market Insurers and TIG
Insurance, include, without limitation, the prohibition against the
commencement, continuation and/or enforcement of claims against (i) the
London Market Insurers with respect to all Claims arising from or related
to the development, manufacture and/or sale of any products by DCC, as well
as certain environmental claims, all as described in the Order Authorizing
and Approving Compromise and Settlement With the London Market Insurers
entered on March 25, 1996, and (ii) TIG Insurance with respect to pollution
claims under the Excess Policy, as defined and released in the Settlement
Agreement attached as Exhibit "1" to the Order Authorizing and Approving
Compromise and Settlement with TIG Insurance Company and Other Insurers,
both of which were entered on March 25, 1996.
F. RETENTION OF JURISDICTION. Notwithstanding entry of the Confirmation
Order or the Effective Date having occurred, the Court and, as necessary,
the District Court, will retain exclusive jurisdiction (a) to determine any
Disputed Claims (other than Personal Injury Claims and, if elected by DCC,
the remaining Products Liability Claims), (b) to determine requests for
payment of Claims entitled to priority under section 507(a)(1) of the
Bankruptcy Code, including compensation of and reimbursement of expenses of
parties entitled thereto, (c) to resolve controversies and disputes
regarding interpretation and implementation of the Plan and the Plan
Documents, (d) to enter orders in aid of the Plan and the Plan Documents
including, without limitation, appropriate orders (which may include
contempt or other sanctions) to protect the Debtor, the Reorganized Debtor,
the Released Parties, the Parties, the Tort Committee and any of the
Affiliates from actions prohibited under the Plan and to enforce the terms
of the Funding Payment Agreement, (e) to resolve all actions involving the
Depository Trust in accordance with the Settlement Facility Agreement, (f)
to modify the Plan pursuant to section 11.4 of the Plan, (g) to determine
any and all applications, Claims, adversary proceedings, and contested or
litigated matters pending on the Effective Date, (h) to allow, disallow,
reconsider, estimate, liquidate or determine any Claim against the Debtor
and to enter or enforce any order requiring the filing of any such Claim
before a particular date, (i) to determine any and all pending applications
for the rejection or disaffirmance of executory contracts or leases, and to
hear and determine, and if need be to liquidate, any and all Claims arising
therefrom, (j) over actions either to enforce or to challenge the validity
and enforceability of the releases and injunctions referred to in sections
8.3 through 8.5 of the Plan, and (k) to enter a final decree closing the
Case; provided, however, that nothing contained in section 8.7 of the Plan
is intended to confer jurisdiction upon the Court over, or grant authority
to monitor, the day to day operations of the Settlement Facility or the
Litigation Facility. Nothing within
Page 92
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
section 8.7 of the Plan shall preclude the Reorganized Debtor from seeking
the entry of an Order closing the Case, upon motion and notice to the
Finance Committee and the Claimants' Advisory Committee. Any order closing
the Case shall provide that the Court (i) shall retain jurisdiction to
enforce by injunctive relief or otherwise the Confirmation Order, any other
orders entered in the Case and the contractual obligations created by the
Plan and the Plan Documents and (ii) shall retain all other jurisdiction
and authority granted to it under the Plan and the Plan Documents. Nothing
within section 8.7 of the Plan shall impair or alter the Reorganized
Debtor's power to act without Court authority after the Effective Date.
6.8 TREATMENT OF EXECUTORY CONTRACTS, UNEXPIRED LEASES AND
EMPLOYEE/RETIREE BENEFITS UNDER THE PLAN.
A. GENERAL. The Bankruptcy Code gives the Debtor the power, subject to
the approval of the Court, to assume, assume and assign, or reject
"executory contracts" and "unexpired leases" to which the Debtor is a
party. The Bankruptcy Code does not define "executory contracts" and
"unexpired leases." However, numerous courts have published opinions on the
meaning of these terms. The term "unexpired leases" is generally construed
to have its ordinary, plain meaning; specifically, a lease that has not yet
expired by its own terms. The most widely accepted definition of an
"executory contract" is a contract to which both parties to the contract
still have material obligations to perform or execute.
Rejection or assumption may be effected either pursuant to a plan of
reorganization or by order of the Court entered upon application of a
debtor after notice and a hearing. If an executory contract or unexpired
lease is rejected, the other party to the agreement may file a claim for
damages incurred by reason of the rejection within such time as the Court
may allow. Even though the rejection occurs after the Petition Date, the
Bankruptcy Code provides that the rejection will be deemed to have occurred
pre-petition, thus relegating any damage claim asserted by the other party
to the contract or lease to the status of a pre-petition general unsecured
claim, rather than a post-petition claim entitled to priority status. In
the case of rejection of employment agreements and leases of real property,
damage claims arising from such rejection are limited under the Bankruptcy
Code.
In the case of assumption of an executory contract or unexpired lease,
the Bankruptcy Code requires that a debtor promptly cure or provide
adequate assurances that it will promptly cure any existing defaults (other
than certain types of defaults based upon bankruptcy or the debtor's
financial condition) and provide adequate assurance of future performance
under such executory contracts or unexpired leases.
B. SPECIFIC PLAN PROVISIONS. All executory contracts that have not been
rejected by order of the Court or are not the subject of a motion to reject
pending on the Confirmation Date shall be deemed assumed by the Debtor on
the Effective Date. The contracts assumed shall specifically include (i)
obligations of the Debtor under the Assumed Warranties, (ii) all
obligations of the Debtor to unions, including the United Steelworkers of
America, AFL-CIO-CIC, and Local 12934 of the United Steelworkers of
America, AFL-CIO-CIC, and all benefit plans related to such collective
bargaining agreements, and (iii) all obligations of the Debtor to employees
and retirees under any plans in effect as of the Petition Date. If any
party to an executory contract or unexpired lease which is being assumed
objects to that assumption, the Court shall conduct a hearing on such
objection. All payments to cure defaults that may be required under section
365(b)(1) of the Bankruptcy Code shall be made by the Debtor. In the event
of a dispute as to the amount of any payments or the ability of the Debtor
to provide adequate assurance of future performance, the Debtor will make
any payment required by section 365(b)(1) after the entry of a Final Order
resolving such dispute.
C. CONTINUATION OF PENSION PLAN. Dow Corning sponsors the Dow Corning
Employees Retirement Plan (the "PENSION PLAN"), which is a tax-qualified
defined benefit pension plan covered by Title IV of the Employee Retirement
Security Act ("ERISA") of 1974, as amended. Pursuant to the Court's order
dated August 11, 1995, granting Dow Corning's Motion to Assume and/or Honor
Severance, Bonus, Stock Appreciation, and Pension Contracts with Employees
and Retirees, Dow Corning has continued to fund and administer the Pension
Plan in compliance with applicable laws.
Under ERISA, Dow Corning and the members of its controlled group are
jointly and severally liable to the Pension Benefit Guaranty Corporation
("PBGC") for unfunded benefit liabilities, as defined in ERISA (S)
4001(a)(18), 29 U.S.C. (S) 1301(a)(18), if the Pension Plan terminates. In
addition, Dow Corning and members of its controlled group are jointly and
severally liable for the contribution amounts necessary to satisfy ERISA's
minimum funding standards. See ERISA (S)(S) 302, 4062(c), 29 U.S.C. (S)(S)
1082 and 1362(c); I.R.C. (S) 412, 26 U.S.C. (S) 412. Also, Dow Corning and
members of its controlled group are jointly and severally liable for
premiums, interest, and penalties imposed by ERISA for plans covered by
Title IV of ERISA, ERISA (S) 4007(a), (b), (e), 29 U.S.C. (S) 1307(a), (b),
(e); 29 C.F.R. (S) 4007.12(a).
Page 93
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Dow Corning intends to continue the Pension Plan, fund the Pension Plan
in accordance with the minimum funding standards under the Internal Revenue
Code and ERISA, pay all required PBGC insurance premiums, and continue to
administer and operate the Pension Plan in accordance with the terms of the
Pension Plan and provisions of ERISA. Dow Corning's reorganization
proceedings, and, in particular, the Plan, shall not be in any way
construed as discharging, releasing, or relieving Dow Corning, the
Reorganized Debtor, or any party, in any capacity, from any liability with
respect to the Pension Plan. PBGC and the Pension Plan shall not be
enjoined or precluded from enforcing such liability as a result of any of
the provisions of the Plan or the Plan's confirmation.
6.9 OTHER PROVISIONS OF THE PLAN.
A. SURVIVAL OF CERTAIN CORPORATE INDEMNIFICATION OBLIGATIONS. Any
obligations, agreements or rights of the Debtor to indemnify its past and
present officers, directors, and employees pursuant to its Articles of
Incorporation, bylaws, resolutions of its board of directors, and
applicable statutes in respect of any Claims, demands, suits, causes of
actions or proceedings based upon any act or omission related to service
with or for or on behalf of the Debtor at any time prior to the
Confirmation Date will not be discharged or impaired by confirmation or
consummation of the Plan, but will be deemed assumed by DCC on the
Effective Date, will survive unaffected by the reorganization contemplated
by the Plan, and will be performed and honored by the Reorganized Debtor.
B. MODIFICATION OF THE PLAN. The Proponents reserve the right, in
accordance with the Bankruptcy Code, to jointly amend, modify or withdraw
the Plan prior to the entry of the Confirmation Order. After the entry of
the Confirmation Order, the Proponents may, upon order of the Court, amend
or modify the Plan in accordance with section 1127(b) of the Bankruptcy
Code, or remedy any defect or omission or reconcile any inconsistency in
the Plan in such manner as may be necessary to carry out the purpose and
intent of the Plan. If Dow Corning proposes to modify the Plan in any
respect that does not adversely affect Claimants in Classes 5 through 10.2,
the Tort Committee will not unreasonably withhold its consent to such
modification.
C. COMMITTEES; REPRESENTATIVES. The duties of the Official Committees
will terminate on the Effective Date except with respect to any appeal of
an order in the Case, fee applications, and any matters related to any
proposed post-confirmation modification of the Plan.
THE PLAN CONTAINS OTHER TERMS AND PROVISIONS. WHILE THE PROPONENTS HAVE
ATTEMPTED TO SUMMARIZE THE MORE SIGNIFICANT PLAN TERMS WITHIN THIS
DISCLOSURE STATEMENT, YOU ARE URGED TO READ THE PLAN CAREFULLY AND IN ITS
ENTIRETY.
ARTICLE VII
CERTAIN RISK FACTORS
The Plan, the securities to be issued pursuant to the Plan, the Settlement
Facility and the Litigation Facility, and the payments thereunder, are subject
to a number of material risks, including risks that might affect when payments
will be issued and the amount that will be paid for individual Personal Injury
Claims. In deciding how to vote on the Plan, each holder of an Impaired Claim
should carefully consider all of the information contained in this Disclosure
Statement, and the description of the risks described in this section.
7.1 LIMITATIONS ON AGGREGATE FUNDING/TIMING OF DISTRIBUTIONS BY SETTLEMENT
FACILITY/POTENTIAL FOR REDUCTION IN PAYMENTS AND DELAY.
A. LIMITED FUNDING/POTENTIAL FOR LIMITATION OR REDUCTION IN PAYMENTS. As
described earlier, the Plan provides that the Reorganized Dow Corning will
make payments totaling up to $2.35 billion (NPV) for the resolution of
product liability-related Claims, including Claims related to Breast
Implants and Other Products. Of that aggregate sum, the total funding
available and reserved for the resolution of Non-Settling Personal Injury
Claims (those who chose to litigate) along with Assumed Third-Party Claims
and Class 12 Claims, and all expenses associated with the resolution of
litigated Claims, is limited to the sum of $400 million (NPV). This amount
is called the "Litigation Fund." The remainder of the $2.35 billion (NPV)--
$1.95 billion (NPV) plus any earnings--is reserved to pay settlements and
administrative costs to resolve Settling Personal Injury Claims. (The Plan
provides that the Litigation Fund may in some circumstances also be used to
make First Priority Payments to Settling Personal Injury Claimants but only
after the District Court evaluates the sufficiency of funds to pay Claims
subject to the Litigation Fund.)
1. SETTLING CLAIMANTS. Because the aggregate amount available for
Settling Claims is capped, the Plan does not guarantee each individual
Claimant's payment. This means that if the value of all Settling Claims
(as
Page 94
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
defined by the Settlement Grid) exceeds the aggregate funds available,
payment amounts under the Settlement Grid would have to be reduced to
assure a fair distribution among all Settling Claimants. As described
earlier, under the Plan the types of payments that can be provided to
Settling Personal Injury Claimants are divided into two categories:
"Base" payments and "Premium" payments. The "Base" payments--which
include the following payments for Breast Implant Claims: Explantation,
Expedited Release, the "Base" compensation for Disease Payment Option
Claims, and "Base" payments for Rupture Claims, as well as the bulk of
payments for Other Products Claimants and all payments for Silicone
Material Claimants--are given the highest priority and are called First
Priority Payments. "Premium" payments--consisting primarily of an
additional amount equal to 20% of the "Base" payments under the Breast
Implant Disease Payment Option and an amount equal to 25% of the "Base"
payment under the Rupture Payment Option as well as payments for
Increased Severity of Disease with respect to Settling Breast Implant
Claims B are lower priority payments. "Premium" payments can be deferred
and will not be paid unless all First Priority Payments are assured. The
Proponents believe that the amount of funding provided in the aggregate
for Claims payable from the Settlement Fund will be sufficient to pay
qualifying Settling Personal Injury Claimants at the amounts specified
on the Grid for both the "Base" and "Premium" payments and that, to the
extent there is any risk of a reduction in payments, it is most probable
that the reduction would apply to the "Premium" payments available under
the Plan for Settling Breast Implant Claimants.
To assist Claimants in evaluating their Settlement Payment Options
under the Plan, the following discussion outlines the basic data and
assumptions considered by the Proponents in reaching the conclusions
stated above. The analyses as to the anticipated numbers of Claims and
the types of settlements for which they might qualify were developed
using available information about the number of Claimants who have filed
Proofs of Claim in the Case and, with respect to Breast Implant Claims,
data available as a result of the Original Global Settlement (including
data from the Revised Settlement Program) implemented by the MDL 926
Court, as well as medical data from published studies.
The Proponents have relied on the information provided on the Proofs
of Claim filed by Claimants to determine the total number of Claims
alleging a current or potential future injury due to an implant product
manufactured by the Debtor. (A modest number of additional Claims might
be asserted as a result of Proofs of Claim filed under Rule 3005 of the
Code, and these potential Claims have also been considered.) The Proof
of Claim statistics are necessarily based on the information provided by
individual Claimants and reflect the Claimants' views of the nature of
their Claims. In estimating the number of Claimants asserting different
types of Claims, the Proponents have accepted the representations made
on the Proofs of Claims as correct and accurate. Thus, in estimating the
number of potentially eligible Claimants, the Proponents have classified
Claims in accordance with the products and manufacturers identified by
the Claimants on the Proof of Claim forms. In classifying Claims based
on the identification of the manufacturer, the Proponents have also
assumed that a portion of individuals who filed Claims but were unable
to identify the manufacturer of their product will later conclude and be
able to document that the Debtor was, in fact, the manufacturer of the
product. Where a Claimant has asserted on the Proof of Claim form a
Claim based on both a Breast Implant and an Other Product, the analysis
assumes that such Claimant may be eligible to pursue separate Claims
based on each product.
A. BREAST IMPLANT CLAIMANTS. With respect to the Breast Implant
Claims (i.e., Claimants with Dow Corning Breast Implants), the Global
Settlement and Revised Settlement Program data provide reasonable
bases on which to evaluate the potential Claims experience under the
Plan. The Plan adopts, for Breast Implant Claims, the qualifying
criteria and claims-processing protocols of the Revised Settlement
Program and also provides payments that are equal to or greater than
the Revised Settlement Program. Because the Plan follows the Revised
Settlement Program with respect to Breast Implant Claims, and in
certain cases provides previously unavailable options and higher
payment levels, the Proponents believe that it is reasonable to
expect that the percentage of Breast Implant Claimants electing
settlement will be similar to or greater than the percentage electing
to settle under the Revised Settlement Program and that the percent
of Breast Implant Claimants who will elect and qualify for each
Settlement Payment Option will generally be similar to the experience
in the Revised Settlement Program. Application of these data to the
Claimant population in the Case indicates that the funds provided for
Settling Personal Injury Claimants will be sufficient to provide full
payment for all Settlement Payment Options under the Plan's
compensation schedule.
Both the Proof of Claim data and the experience under the Original
Global Settlement Agreement and the Revised Settlement Program
represent concrete and highly relevant data from which to analyze the
likely Claims experience under the Plan. While it is impossible to
predict the exact number of individuals
Page 95
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
who might seek to resolve their Claims under each of the available
options, and who might further satisfy the criteria for payment under
each Settlement Payment Option, evaluations based on these data and
considering alternative assumptions suggest that all Settling Breast
Implant Claims will be paid the full scheduled amount, including the
"Premium" payments.
B. SILICONE MATERIAL CLAIMS. The Plan provides that all Settling
Silicone Material Claims will be resolved within a fixed fund of
$57.5 million Net Present Value. This Silicone Material Claimants'
Fund is a subfund within the aggregate Settlement Fund described
earlier in this Disclosure Statement. Silicone Material Claimants are
eligible to apply for compensation under either the Expedited Release
Payment Option or the Disease Payment Option. The Plan provides that
all Silicone Material Claimants who elect the Expedited Release
Payment Option be paid the same amount as determined by the Claims
Administrator. The Silicone Material Claimants who qualify for the
Disease Payment Option will be entitled to receive up to 40% of the
amounts listed on the Disease Payment Option Grid for Breast Implant
Claimants. Expedited Release and Disease Payments to Silicone
Material Claimants will be offset by amounts those Claimants have
received or will receive from certain other breast implant
manufacturers as described at section 1.1(B)(3) of this Disclosure
Statement. These offset provisions do not apply to Silicone Material
Claimants with only Mentor, Bioplasty, or Cox-Uphoff breast implants
or "other registrants" in the Revised Settlement Program with
implants made by these manufacturers and who also have a post-August
1984 McGhan breast implant. The Plan requires that, before
distributing payments from the Silicone Material Claimants' Fund, the
Claims Administrator will review and evaluate all Silicone Material
Claims, taking into account the possible requirement to reduce
payments and will then determine the amount payable to each Claimant.
Thus, under the Plan, the Silicone Material Claimants who select the
Disease Payment Option could receive but are not guaranteed a payment
equal to 40% of the amounts specified on the Grid. Rather, the amount
payable will depend on a variety of factors--including the number of
qualifying Silicone Material Claimants, the amounts such Claimants
are entitled to receive from other manufacturers, the time period of
distribution of payments and the particular disease categories for
which the Claimants qualify.
The Proponents believe that the Proof of Claim data in the Case
(which includes the identity of the manufacturers of implants) and
the Revised Settlement Program data obtained from the MDL 926 Court
provide relevant data upon which to evaluate the amount that may be
paid to individual settling Silicone Material Claimants from the
Silicone Material Claimants' Fund. Based on a review of these data,
the Proponents believe that once the amount of the Expedited Release
Payment is established, eligible Silicone Material Claimants with
Disease Payment Option Claims may receive payments in a nominal
amount of up to 40% although it is possible that payments could range
between 20% and 40% of the amounts specified on the Disease Payment
Option Grid. The Proponents believe that while it is impossible to
provide an exact estimate of the likely amounts payable--because such
amounts necessarily depend on the percentage of individuals who might
choose the Disease Payment Option, the particular Covered Condition
for which the Claimants might qualify and the amount of the offset
that might be applicable--the available data provides a reasonable
basis to conclude that the amounts payable will fall within the range
cited above.
C. OTHER PRODUCTS CLAIMANTS. Settling Other Products Claimants
will be paid from a $36 million (NPV) subfund within the aggregate
Settlement Fund.
The Proponents have assumed, based on the data obtained from the
Proof of Claim forms filed in the Case, that there will be a
relatively small number of individuals implanted with Other Products
who have filed Proofs of Claim and who will pursue Claims in the
Settlement Facility.
The Proponents believe, based on the Proof of Claim data, which
indicates both the identity of the manufacturer and dates of removal
of the Covered Products, and in light of the two-year deadline on
applications for settlement payments for Other Products Claimants,
that the aggregate amount of $36 million Net Present Value will be
sufficient to pay Eligible Other Products Claimants the amounts
specified on the compensation schedule specified in the Plan and that
there will likely be sufficient additional funds in the Other
Products Fund to permit a further distribution to eligible Other
Products Claimants (including implant Claimants with TMJ devices,
knee, hip, large or small orthopedic devices, and chin or facial
implants).
2. NON-SETTLING PERSONAL INJURY CLAIMANTS. As described above, the
Litigation Fund is limited to the aggregate sum of $400 million (NPV).
The nominal amount payable for Claimants electing litigation will depend
on the time period of resolution and payment of the such Claims.
The Proponents believe, based on the available data and the
provisions of the Litigation Facility Agreement outlining the mechanism
for the review, resolution and certification for trial of Claims
electing litigation, that the
Page 96
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
aggregate amount of the Litigation Fund will be sufficient to resolve
all anticipated Claims subject to the Litigation Fund as Allowed. All
Non-Settling Personal Injury Claimants face the ordinary risks of
litigation applicable to any complex products liability case as well as
procedures specified under the Plan (described earlier) regarding the
certification of individual cases for trial. Under the Plan, litigation
of individual cases would not likely commence until after the first
anniversary of the Effective Date, and the District Court and the
Special Master appointed to assist the District Court shall develop
procedures to encourage settlement and other cost-efficient resolution
of Non-Settling Personal Injury Claims within the available funds. The
Proponents believe that assumptions regarding the resolution of Non-
Breast Implant Claimants electing to litigate can be informed by the
opt-out rate and other experience in the Revised Settlement Program and
that these data provide a reasonable basis to conclude that the
available Litigation Fund will be adequate to pay anticipated Allowed
Non-Settling Claims. It is reasonable, given the structure of the
Settlement Program and the Litigation Facility, to anticipate that the
percentage of Breast Implant Claimants electing to litigate may be
similar to or (more likely) less than the percentage of "opt outs" from
the Revised Settlement Program. The Proponents further believe that most
of the Claimants electing litigation will be Breast Implant Claimants
and that a limited number of Other Products or Silicone Material
Claimants will elect to litigate.
B. TIMING/POTENTIAL FOR DELAY.
1. SETTLING CLAIMANTS. The Proponents believe that the Plan provides
efficient processes for resolving settling Claims as quickly as
possible. Settling Personal Injury Claims will be processed through a
Claims Office using the personnel, facilities and, in substantial part,
the protocols of the existing MDL 926 Claims Office. By adopting the
existing personnel, facilities and procedures, the Plan Proponents
expect to avoid the inherent delay and expense associated with
establishing a new claims processing facility. Accordingly, the
Proponents anticipate that Claims processing operations will begin
promptly after the Effective Date.
A. TIMING OF PAYMENT FOR SETTLING BREAST IMPLANT CLAIMANTS. The
Plan calls for the Settlement Facility to begin making First Priority
Payments, as soon as Claimants qualify, within the first year after
the Plan becomes effective. The Proponents believe that during the
first several years the timing of payments will be affected by two
factors: the speed with which Claimants prepare and submit Claim
Forms and documents and the rate at which the Claims Office can
review and evaluate Claims. Since the Facility will apply the
criteria and protocols of the Revised Settlement Program, the
Proponents believe that the Claims Office should be able to process
and pay Settling Breast Implant Claims at least as quickly as the
Revised Settlement Program. The Proponents expect that up to half of
the First Priority Payments could be made within the first three
years and approximately two-thirds of the First Priority Payments
could be made within the first four years.
Because of their lower priority under the Plan and because of the
Annual Payment Ceilings specified in the Funding Payment Agreement,
the Second Priority Payments ("Premium" payments) for most Claimants
will likely be paid later--so that Breast Implant Claimants will
first receive their "Base" Payments and then, at a later date,
receive the "Premium" payments. The Proponents expect that Claimants
will likely begin to receive "Premium" payments some years after the
Effective Date. This means that those Claimants who receive the
earliest First Priority Payments may receive their "Premium" payments
several years after distribution of First Priority Payments.
B. TIMING OF PAYMENT FOR SETTLING SILICONE MATERIAL
CLAIMANTS. Under the Plan the Claims Office must first receive and
evaluate every Silicone Material Claim before distributing any
payments to such Claimants. Because there is a two-year deadline for
submitting such Claims, the Proponents assume that all Silicone
Material Claims will be evaluated and distributions may commence
beginning in the third year after the Effective Date. The Proponents
expect that there will then be two distributions: the first for
payments of the calculated amount of Allowed Claims under the
Expedited Release Payment Option or Disease Payment Option to
eligible Claimants and a second distribution consisting of Pro Rata
payments of any excess amount available from the Silicone Material
Claimants' Fund to all Eligible Silicone Material Claimants.
C. TIMING OF PAYMENT FOR SETTLING OTHER PRODUCTS CLAIMANTS. The
Claims Office must first receive and evaluate every Settling Other
Products Claim before distributing any payments to such Claimants.
The Other Products Claimants are required to submit their Claims by
the second anniversary of the Effective Date. Other Products Claims
will be processed under procedures and qualification requirements
that are specific for each type of implant. Because the MDL 926
Claims Office has had no previous experience with
Page 97
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
processing such Claims, the Proponents expect that the Claims Office
will require a longer time to create a process for reviewing these
Claims than for review of Breast Implant or Silicone Material Claims.
The Plan provides for revision and simplification of this Claims
process if a study by the Claims Administrator indicates that
administrative costs would exceed 10% of the Other Products Fund.
Such simplification might reduce the time required to process and pay
Other Products Claims. Based on these factors, the Proponents
anticipate that all Other Products Claims will be evaluated by
approximately the fourth year after the Effective Date and that
distribution of Allowed payments will commence thereafter. The
Proponents expect that there will then be two distributions: the
first distribution for payment of the Allowed amount as calculated
based on the compensation schedule and the second distribution of any
amount remaining in the Other Products Fund (which will be
distributed as determined by the Claims Administrator and the
Claimants' Advisory Committee).
2. TIMING OF PAYMENT FOR NON-SETTLING PERSONAL INJURY CLAIMANTS. The
timing of payments for Claimants who elect litigation will depend on
several factors--none of which can be predicted with certainty. First,
the Plan provides that the District Court will preside over all pre-
trial and common issues procedures. Common issue proceedings will not
occur before 270 days after the Election Deadline (the deadline for
opting out). Second, the District Court will institute pre-trial
procedures and guidelines for the certification of individual cases for
trial, and these procedures will take into account--among other things--
the resources of the Litigation Facility (so that the flow of cases does
not compromise the ability of the Litigation Facility to resolve cases),
the date of filing and readiness for trial. These factors mean that the
timing of resolution of any Non-Settling Personal Injury Claim will
depend on its individual circumstances. The Plan does not impose
specific limitations on annual funding for Non-Settling Personal Injury
Claims, and thus, subject to the overall Annual Payment Ceilings, Non-
Settling Personal Injury Claims may be payable as they are resolved.
3. TEMPORARY DELAYS IN PAYMENT. Because the Funding Payment Agreement
provides annual limits on the amounts payable, it is possible that
payments of Allowed amounts to individual Claimants might be delayed for
a period until additional funding is provided. The Proponents believe
that the initial payment required at the time the Plan becomes effective
along with earnings and subsequent payments anticipated in the first few
years are sufficient to permit the payment in full of First Priority and
Litigation Payments expected to be Allowed in the first several years
after the Effective Date. There is a possibility that during some
years--at approximately the sixth through ninth years after the
Effective Date--some delays in First Priority Payments might be
expected. In the event that funds available during any given year are
not sufficient to pay the amount of Claims Allowed during that period,
the Finance Committee will institute an installment payment system, and
Claims will be paid the full Allowed amount as additional funding
becomes available.
4. PAYMENT DELAYS ATTRIBUTABLE TO DELAYS IN THE EFFECTIVE DATE. In
general, the obligation of the Reorganized Debtor to make payments to
the Settlement Facility pursuant to the Funding Payment Agreement occurs
when the Plan becomes effective. The Effective Date is described in
section 6.5 of the Disclosure Statement. The Plan will not become
effective, and thus the Effective Date will not occur, until the
conditions to the Effective Date set forth in section 6.5(B) have
occurred. One of the events that might delay the occurrence of the
Effective Date is an appeal from the provisions of the Plan providing
for the releases and injunctions described in sections 8.3 and 8.4 of
the Plan and/or the funding limitations contained in the Funding Payment
Agreement. If such an appeal occurs, the funding by the Debtor will be
delayed until the appeal is resolved and the release and funding payment
limitation provisions have been affirmed by a Final Order that is itself
no longer subject to further appeals. The Proponents cannot reasonably
estimate the likelihood or timing of an appeal, but Claimants should be
aware of the potential for delay that could result from an appeal on
these release/funding limitation issues.
Pursuant to section 7.4 of the Plan, in the event of an appeal that
raises a release/funding limitation issue, the Proponents would
cooperate in seeking an expedited appeal. If the Confirmation Order is
not stayed pending appeal, the Debtor will nonetheless pay funds to the
Settlement Facility as provided in section 7.4 of the Plan. This will
have the effect of allowing the Settlement Facility to prepare to handle
Claims such that it can commence operations promptly after the Effective
Date.
Similarly, the Effective Date will not occur unless the Debtor and
Litigation Facility receive a favorable ruling from the IRS about
certain tax matters relating to the Depository Trust and the Litigation
Facility. While the Debtor will act expeditiously to seek such ruling,
it cannot predict the speed with which the ruling will be forthcoming,
as discussed in section 6.5(B) of the Disclosure Statement.
Page 98
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Each of the conditions to the effectiveness of the Plan can be waived
by the joint action of the Proponents and the Shareholders.
If the Effective Date is delayed beyond the Interest Accrual Date (as
defined in the Funding Payment Agreement), Dow Corning is required to
pay interest on $905 million of the Initial Payment.
7.2 BUSINESS AND COMPETITION. The Debtor is engaged in highly competitive
businesses, and the Debtor's products compete with both other silicone-based
products and non-silicone based products in various specific applications. The
Debtor's principal competitors, both within and outside of the United States,
are other manufacturers of silicone-based products, as well as manufacturers
of competing non-silicone based products. Although the Debtor is a leading
worldwide provider of silicone-based products, there can be no assurance that
the Debtor's existing or future competitors will not have the benefit of
greater capital or other resources or other competitive advantages.
7.3 CERTAIN RISKS OF NON-CONFIRMATION. There can be no assurance that the
requisite acceptances to confirm the Plan will be received. Even if the
requisite acceptances are received, there can be no assurance that the Court
will confirm the Plan. Section 1129 of the Bankruptcy Code sets forth the
requirements for confirmation and requires, among other things, a finding by
the Court that the confirmation of the Plan is not likely to be followed by a
liquidation or a need for further financial reorganization and that the value
of the distributions to non-accepting creditors and interest holders will not
be less than the value of the distributions that such creditors and interest
holders would receive if the Debtor were liquidated under Chapter 7 of the
Bankruptcy Code. Although the Proponents believe that these requirements will
be satisfied, there can be no assurance that the Court will concur. The
confirmation and consummation of the Plan are also subject to certain
conditions, which are described in section 6.5 of this Disclosure Statement.
If the Plan were not to be confirmed and consummated, it is unclear whether
a reorganization comparable to the reorganization contemplated thereby could
be implemented in a timely manner and, if so, what distributions holders of
Claims and Interests ultimately would receive with respect to their Claims and
Interests. Moreover, if an alternative reorganization could not be implemented
in a timely manner, it is possible that the Debtor would have to liquidate its
assets, in which case there is a risk that the holders of Claims and Interests
would receive less than they would have received pursuant to the Plan. See
Article IX of this Disclosure Statement.
7.4 POTENTIAL EFFECTS OF A PROLONGED CHAPTER 11 PROCEEDING. A prolonged
chapter 11 proceeding could adversely affect the Debtor's relationships with
its customers, suppliers and employees, which in turn could adversely affect
the Debtor's competitive position, financial condition and results of
operations. A weakening of the Debtor's financial condition and results of
operations could adversely affect the Debtor's ability to implement the Plan.
7.5 RISKS RELATING TO THE PROJECTIONS. The management of the Debtor has
prepared the projected financial information contained in EXHIBIT "F" to this
Disclosure Statement (the "PROJECTIONS") in connection with the development of
the Plan to present the projected effects of the Plan and the transactions
contemplated thereby. The Projections assume that the Plan and the
transactions contemplated thereby will be implemented in accordance with their
terms, and are based upon numerous other assumptions and estimates. The
assumptions and estimates underlying the Projections are inherently uncertain
and are subject to significant business, economic and competitive risks and
uncertainties that could cause actual results to differ materially from those
projected. Accordingly, the Projections are not necessarily indicative of the
future financial condition or results of operations of the Reorganized Debtor,
which may vary significantly from those set forth in the Projections.
Consequently, the projected financial information contained in this Disclosure
Statement should not be regarded as a representation by the Debtor, the
Debtor's advisors, or any other person that the Projections can or will be
achieved.
7.6 PARTIAL HOLDING COMPANY STRUCTURE. A significant portion of the
Reorganized Debtor's operations will continue to be conducted through
subsidiaries. Consequently, it is likely that the Reorganized Debtor will
continue to rely on dividends or other payments from its subsidiaries as a
source of funds necessary for, among other things, the payment of principal of
and interest on the Notes and the other indebtedness of the Company. The
ability of such subsidiaries to pay dividends may be subject to applicable
local law and certain other restrictions. Also, the subsidiaries are subject
to normal business risks in the marketplace. Any right of the holders of the
Notes to participate in the assets of any of the subsidiaries in the event of
such subsidiary's liquidation or recapitalization will likely be subordinated
to the claims of such subsidiary's creditors and preferred stockholders (if
any), except to the extent that the Reorganized Debtor is itself recognized as
a creditor of such subsidiary.
7.7 SUBORDINATION OF SUBORDINATED NOTES. The payment of principal of and
interest on, and any other amounts that may become owing in respect of, the
Subordinated Notes will be subordinated to the prior payment in full of all
existing and
Page 99
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
future senior debt of the Reorganized Debtor and all indebtedness of the
Reorganized Debtor's subsidiaries. As of an assumed Effective Date of June 30,
1999, as adjusted to give effect to the Plan and the transactions contemplated
thereby, the senior debt of the Reorganized Debtor (other than obligations
under the Settlement Facility Agreement and the Litigation Facility Agreement)
and the aggregate indebtedness of its subsidiaries, on a consolidated basis,
are projected in the Projections to total approximately $1.120 billion,
excluding accrued interest. In the event of any subsequent bankruptcy,
liquidation, dissolution, reorganization, or similar proceeding with respect
to the Reorganized Debtor, assets of the Reorganized Debtor will be available
to pay obligations on the Subordinated Notes only after all senior debt has
been paid in full, and there can be no assurance that there will be sufficient
assets to pay all or any portion of the amounts owing in respect of the
Subordinated Notes.
7.8 ABSENCE OF TRADING MARKET FOR THE NOTES. There is no established
trading market for the Senior Notes or the Subordinated Notes (collectively,
the "NOTES") and there can be no assurance that an active and liquid trading
market for such securities will develop or be sustained.
7.9 RISKS ASSOCIATED WITH THE SETTLEMENT FACILITY AND THE LITIGATION
FACILITY. The Claims resolution process to be administered by the Claims
Office of the Settlement Facility and the Manager of the Litigation Facility
will constitute the sole means of seeking compensation or other relief in
respect of all Claims subject thereto. There can be no assurance that the
selection by the holder of such a Claim of a particular option for the
resolution thereof will result in the maximization of the amount of
compensation or other relief provided to such holder (or, in the case of
litigation, in any compensation or other relief being provided to such
holder.) Moreover, the amount of time that may be required to resolve a
particular Claim may be substantial, particularly if such Claim is to be
resolved by means of litigation. Additionally, notification may be required to
be given to Health Insurers or to certain governmental Claimants of a Personal
Injury Claimant's settlement and of any action taken in connection with the
litigation of a Personal Injury Claim. Payment on a Personal Injury Claimant's
Allowed Claim may be subject to the competing rights of such Personal Injury
Claimant's Commercial Health Insurer or to certain governmental Claimants.
ARTICLE VIII
FINANCIAL INFORMATION AND FEASIBILITY
8.1 The ability of the Debtor to successfully reorganize depends, in part,
upon the Reorganized Debtor's ability to successfully implement the business
plan. The Debtor has prepared a detailed business plan for its future
operations which underlies the Projections attached to this Disclosure
Statement as EXHIBIT "F." EXHIBIT "F" also includes certain historical
consolidated financial statements of the Debtor, together with the Debtor's
management's analysis and discussion of the Debtor's financial condition and
results of operations as of and for certain historical dates and periods. The
Tort Committee and its professionals did not participate in the preparation of
the Debtor's business plan, projections and financial statements and analyses
relied upon or referred to in connection with this Disclosure Statement and
assume no responsibility for the contents thereof.
THE DEBTOR'S PROJECTED FINANCIAL INFORMATION AND OTHER FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE BASED ON VARIOUS
ASSUMPTIONS AND ESTIMATES AND WILL NOT BE UPDATED TO REFLECT EVENTS OCCURRING
AFTER THE DATE HEREOF. SUCH INFORMATION AND STATEMENTS ARE SUBJECT TO INHERENT
UNCERTAINTIES AND TO A WIDE VARIETY OF SIGNIFICANT BUSINESS, ECONOMIC AND
COMPETITIVE RISKS INCLUDING, AMONG OTHERS, THOSE DESCRIBED HEREIN. SEE
"ARTICLE VII--CERTAIN RISK FACTORS." CONSEQUENTLY, ACTUAL EVENTS,
CIRCUMSTANCES, EFFECTS AND RESULTS MAY VARY SIGNIFICANTLY FROM THOSE INCLUDED
IN OR CONTEMPLATED BY SUCH PROJECTED FINANCIAL INFORMATION AND SUCH OTHER
FORWARD-LOOKING STATEMENTS.
ARTICLE IX
LIQUIDATION ANALYSIS
9.1 EFFECTS OF LIQUIDATION ON CLAIMS GENERALLY. Section 1129(a)(7) of the
Bankruptcy Code requires that every creditor in an impaired class who has not
accepted a proposed plan of reorganization receive at least as much under the
plan as that creditor would receive in a hypothetical liquidation of the
debtor under chapter 7 of the Bankruptcy Code. That is, each creditor who
votes to reject the plan is entitled to be certain that he or she is no worse
off than he or she would be if the debtor were liquidated and the proceeds of
that liquidation distributed among all the debtor's creditors in accordance
Page 100
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
with the priorities established by the Bankruptcy Code. This requirement is
colloquially referred to as the "best interests of creditors test."
Attached to this Disclosure Statement as EXHIBIT "H" is the liquidation
analysis prepared by Dow Corning with the assistance of its financial
professionals. Reference is made to the liquidation analysis for valuation
amounts and for a description of the procedures followed, the factors
considered and the assumptions made in preparing the analysis. Because of the
dispute over the value of the Claims of implant recipients, and the concerns
any prospective purchaser would have over potential successor liability for
such Claims, Dow Corning believes that any liquidation analysis is highly
speculative. To the extent that confirmation of the Plan requires the
establishment of hypothetical amounts for the value of Dow Corning and funds
available to pay Allowed Claims, the Court will make those rulings at
confirmation. In considering the liquidation analysis, creditors should
consider the following factors:
A. COMMERCIAL CLAIMS AND OTHER CLAIMS. Under the Plan, the holders of
Allowed Claims in the impaired classes of commercial Claims (Class 4) and
Other Claims (Classes 11 through 15 and 17) are being paid in full
including post-petition interest (to the extent required by law). Because
that is the most that holders of such Allowed Claims could receive in a
chapter 7 case, the best interests test is satisfied as to them.
B. PERSONAL INJURY CLAIMS. Personal Injury Claimants, regardless of
their vote on the Plan itself, are given two basic options under a
confirmed Plan--they may settle their Claims on the terms described in the
Settlement Facility or they may elect to litigate their Claims.
1. THE TREATMENT OF PERSONAL INJURY CLAIMS UNDER THE PLAN. The Plan
creates a procedure by which Debtor is obligated to make periodic
contributions to the Settlement Facility, up to the scheduled amount of
$3.172 billion (subject to adjustment to maintain the capped NPV of
$2.35 billion), for payment of all Allowed Claims of Personal Injury
Claimants. A portion of the funding for payment of Personal Injury
Claims, in the amount of $400 million (Net Present Value), is designated
as the Litigation Fund for payment of the Claims of Non-Settling
Personal Injury Claimants and the Assumed Third Party Claims.
Those Personal Injury Claimants who do not elect to litigate the
value of their Claims will receive the value thereof based either on the
acceptance of an expedited payment or on an amount determined by a
schedule of symptoms and conditions. By the decision to accept treatment
on the "settlement side," the Settling Personal Injury Claimants have
agreed to a value for their Claims, and payment of the Claims will
therefore be payment in full, which is all they are entitled to.
Those Personal Injury Claimants who timely elect to litigate the
value of their Claims will be afforded the opportunity to proceed
through a litigation process that is substantially similar to the
litigation process outside bankruptcy. The Plan and the related
litigation process documents provide that those Claims, if reduced to
judgment (if not earlier settled) will be paid in full.
Thus, the principal issue presented by the liquidation analysis,
given the capped nature of the funding for payment of Personal Injury
Claims, is whether the funding will be adequate to provide payment in
full of the Claims as Allowed. While there are procedures in place in
the various funding documents for the deferral or even the reduction of
payments, the Proponents are of the belief that the proposed funding
will be sufficient to pay all Allowed Personal Injury Claims in full. To
this end, among the procedures to be undertaken at the confirmation
hearing (if not before) will be a Claims estimation procedure to provide
the Court with evidence supporting the position of the Proponents. Thus,
assuming the Court does find that the funding for payment of Allowed
Personal Injury Claims is adequate to provide the "advertised" payments,
the Personal Injury Claimants will be receiving payment in full
regardless of which Claim resolution path is chosen, which is all that
those Claimants would receive in a hypothetical chapter 7 case.
2. THE TREATMENT OF PERSONAL INJURY CLAIMS IN A CHAPTER 7
LIQUIDATION. The Proponents believe that a Trustee appointed in any
chapter 7 liquidation proceeding would attempt, as does the Plan, to
settle Claims under some type of a grid structure similar in concept and
amount to the Revised Settlement Program, just as the Proponents have
provided in the Plan. Settling Personal Injury Claimants could not, as a
group, reasonably anticipate receiving more under a chapter 7
liquidation than under the Plan.
The treatment of Non-Settling Personal Injury Claimants under the
Plan should be contrasted to the treatment which they would receive in a
hypothetical chapter 7 case. A chapter 7 Trustee would be appointed to
sell the assets and determine liabilities. (This sale, in addition to
generating the funds for payment of Claims, would eliminate the
immediacy of any need to quickly resolve Non-Settling Claims.) The
Trustee might seek to determine
Page 101
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
the value of disease Claims by a common issue causation trial./19/ If
the Trustee were to prevail, all disease Claims would be disallowed and
the holders of such Claims who had not settled would receive nothing in
the chapter 7 distribution. In that event, non-disease Personal Injury
Claims that were not eliminated as a result of the causation trial, such
as Claims for rupture, local complications or mechanical failure of
Other Products, would be paid in full.
Four factors principally determine the amount that Non-Settling
Personal Injury Claimants would receive on their Claims in a chapter 7
proceeding. These factors are: (1) the number of Claimants; (2) the cost
of resolving the Claims (whether globally through a common causation
trial or through subsequent individual trials); (3) the amount of the
judgments resulting from such trials or the amount at which settlements
could be achieved; and (4) the total assets available to pay the Claims.
These four factors are equally applicable to a determination of what
Non-Settling Personal Injury Claimants would receive under the Debtor's
Plan.
Under both a chapter 7 liquidation and the Plan, the number of Non-
Settling Personal Injury Claimants should not vary materially. To the
extent a creditor chooses to litigate under the Plan, it is reasonable
to assume the same creditor would make the same decision under a chapter
7 liquidation.
Under both a chapter 7 liquidation and the Plan, the cost of
liquidating the Claims should be substantially similar. That is, the
Proponents know of no reason that a chapter 7 Trustee could litigate the
same issues against the same Claimants with the same structure as that
proposed by the Proponents and achieve any material savings on the cost
of the litigation.
Under both a chapter 7 and the Plan, the amount of resulting
judgments (or possible settlements) should be substantially the same.
That is, no reason is known by the Proponents to anticipate that a judge
or jury would render a different judgment or verdict just because the
defendant was a chapter 7 Trustee instead of the Litigation Facility.
Therefore, if the aggregate amount of Allowed Claims to be fixed by
litigation would be substantially similar under both the Plan and in a
hypothetical chapter 7 case, the Court's determination of the adequacy
of the proposed funding for the Litigation Fund will demonstrate that
the Non-Settling Personal Injury Claimants are receiving at least as
much as they would receive in chapter 7.
Because each of the four factors are substantially the same (if not
more favorable for Claimants) in the Plan as compared to a chapter 7
liquidation, the Proponents believe that a Non-Settling Personal Injury
Claimant would receive under the Plan at least as much as would be
received under a hypothetical chapter 7 liquidation.
9.2 OTHER LIQUIDATION FACTORS. A liquidation under chapter 7 might also
lead to selling conditions that would substantially reduce the total value
available to the estate, thus potentially impairing the amounts available for
distribution in such a hypothetical chapter 7 case. The following are some,
but not all, of the deleterious consequences that might result from a chapter
7 liquidation:
A. The sale of the Debtor's assets and businesses under the time
pressure and adverse publicity attendant to a chapter 7 liquidation would
create a difficult selling environment and could result in a transaction
consummated at a substantial discount to going-concern value. In the
Debtor's circumstances, these effects would be particularly acute because
(i) the concerns of a purchaser over successor liability and (ii) the
scale, technology and experience required in the silicone-based products
industry limits the number of strategic buyers.
B. Conversion of the Case to a chapter 7 liquidation would adversely
affect (i) morale, productivity and retention of the Debtor's employees;
(ii) the willingness of the Debtor's vendors to provide goods and services
and extend credit; (iii) the business relationships between the Debtor and
its customers; and (iv) the ability of the Debtor to attract new customers
and to exploit various business opportunities otherwise available to it.
Given that the Debtor's profitability is heavily dependent on the
maintenance of market share and sustained research and development efforts,
any prolonged delay which results in loss of customers or loss of key
personnel would cause a significant decline in projected cash flows and,
therefore, value to a potential acquirer.
- ----------------------
/19/In the Estimation Ruling, the Court has indicated that, absent a
consensual resolution of this Case through a plan of reorganization, a
resolution of the causation issue through an aggregate trial would be
appropriate.
Page 102
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE X
POST-CONFIRMATION MANAGEMENT
10.1 DIRECTORS OF REORGANIZED DEBTOR.
A. APPOINTMENT. If the Plan is confirmed, the board of directors of DCC
as then constituted shall continue to serve as the initial board of
directors of the Reorganized Debtor. Those directors are listed in Article
III, section 3.1(A)(1) of this Disclosure Statement.
B. TENURE. The initial board of directors of the Reorganized Debtor will
serve until the next annual meeting of shareholders, at which time such
board members are subject to re-election or replacement by vote of the
shareholders in accordance with applicable corporate law, the Reorganized
Debtor's bylaws.
C. COMPENSATION. If the Plan is confirmed, the existing directors will
not be compensated by DCC for their services.
10.2 CORPORATE GOVERNANCE OF THE REORGANIZED DEBTOR. If the Plan is
confirmed, the corporate affairs will be conducted by the Reorganized Debtor
pursuant to its existing corporate charter and bylaws.
10.3 OFFICERS OF THE REORGANIZED DEBTOR.
A. APPOINTMENT. On the Effective Date, the then existing officers of DCC
will continue to serve as the initial officers of the Reorganized Debtor.
Those officers are listed in Article III, section 3.1(A)(1) of this
Disclosure Statement.
B. TENURE. The officers shall serve at the pleasure of the Board of
Directors of Reorganized DCC.
C. COMPENSATION.
1. SALARY. The officers' salaries will be set by the Board of
Directors of Reorganized DCC. The annual salaries of these officers as
of the date of approval of this Disclosure Statement are as follows:
<TABLE>
<CAPTION>
OFFICER SALARY
----------------------------
<S> <C>
Richard A. Hazleton $625,000.00
----------------------------
Gary E. Anderson $430,000.00
----------------------------
Siegfried Haberer $257,000.00
----------------------------
John W. Churchfield $244,000.00
----------------------------
James R. Jenkins $291,000.00
----------------------------
Barbara S. Carmichael $195,000.00
----------------------------
Gifford E. Brown $177,000.00
----------------------------
James V. Chittick $189,500.00
----------------------------
Leon D. Crossman $227,500.00
----------------------------
Burnett S. Kelly $236,000.00
----------------------------
Robert P. Krasa $246,000.00
----------------------------
Richard H. Hoover $209,500.00
----------------------------
Jere D. Marciniak $214,000.00
----------------------------
Charles W. Lacefield $220,000.00
----------------------------
Endvar Rossi $191,000.00
----------------------------
Neville J. Whitfield $237,000.00
</TABLE>
In addition to the above, all officers participate in various
compensation and benefit plans, which have been approved by the Court
(see section 5.3(E) herein).
Page 103
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
2. EMPLOYEE BENEFIT PLANS. Reorganized DCC has assumed all employee
benefit plans applicable to their officers and continue to perform their
obligations under such plans post-confirmation.
ARTICLE XI
DISTRIBUTIONS/CLAIM RESOLUTION
WITH RESPECT TO ALL CLAIMS OTHER
THAN PRODUCT LIABILITY CLAIMS
11.1 GENERAL. The distribution and Claims resolution process set forth in
Article Ten and in sections 11.1 and 11.3 of the Plan and described in the
following paragraphs applies to all Claims, other than Personal Injury Claims
and Other Claims assumed by the Litigation Facility. Personal Injury Claims
and Other Claims assumed by the Litigation Facility will be determined in
accordance with the provisions of the Settlement Facility Agreement and the
Litigation Facility Agreement.
The Reorganized Debtor, or such third-party disbursing agents as the
Reorganized Debtor may employ in its sole discretion, will make all
distributions of cash, Senior Notes and Subordinated Notes required under the
Plan, except for distributions made by agent banks or indenture trustees
pursuant to sections 10.2 and 10.3, respectively, of the Plan as described
below. The Reorganized Debtor and any such third-party disbursing agent will
serve as disbursing agents under the Plan without bond, and the Reorganized
Debtor and any such third-party disbursing agent may employ or contract with
other entities to assist in or make the distributions required by the Plan.
Distributions on account of Allowed Bank Loan Claims shall be made either
(i) if such agency relationship exists, to the agent bank for holders of Bank
Loan Claims for further distribution to such holders, or (ii) there is no
agent bank, directly to the holders of the Bank Loan Claims. Any such
distribution made by an agent bank will be made pursuant to the applicable
credit agreement. The delivery to an agent bank of the consideration to be
distributed under the Plan to holders of Allowed Bank Loan Claims arising
pursuant to the credit agreement under which such agent bank serves in such
capacity will fully satisfy and discharge the Reorganized Debtor's obligations
to distribute such consideration to such holders.
Distributions on account of Allowed Public Debt Claims shall be made to the
indenture trustee for holders of Public Debt Claims for further distribution
to such holders. Any such distribution made by an indenture trustee will be
made pursuant to the applicable indenture. The delivery to an indenture
trustee of the consideration to be distributed under the Plan to holders of
Allowed Public Debt Claims arising pursuant to the indenture under which such
indenture trustee serves in such capacity will fully satisfy and discharge the
Reorganized Debtor's obligations to distribute such consideration to such
holders.
As of the Distribution Record Date (i.e., the close of business on the
Effective Date), the transfer registers maintained by the Debtor or its agents
(including agent banks and indenture trustees) for all Existing Debt
Instruments will be closed. The Reorganized Debtor and any third-party
disbursing agent (including agent banks and indenture trustees) shall have no
obligation to recognize the transfer of any Existing Debt Instruments
occurring after the Distribution Record Date, and will be entitled to
recognize and deal only with holders of record of Existing Debt Instruments as
of the Distribution Record Date.
11.2 DISTRIBUTION SHALL BE MADE ONLY TO HOLDERS OF ALLOWED
CLAIMS. Distributions under the Plan shall be made only to the holders of
Allowed Claims. Until a Disputed Claim becomes an Allowed Claim, the holder of
that Disputed Claim shall not receive the consideration otherwise provided to
the Claimants under the Plan. If necessary, in determining the amount of a Pro
Rata distribution due to the holders of Allowed Unsecured Claims, the
Reorganized Debtor shall make the Pro Rata calculation as if all Disputed
Claims were Allowed Claims in the full amount claimed or in the Estimated
Amount. When a Disputed Claim becomes an Allowed Claim, the Reorganized Debtor
shall make the distributions with respect to such Allowed Unsecured Claim,
together with the interest accrued on the amount of each such distribution,
net of any applicable federal and state taxes. If the Court disallows or
allows in a reduced amount any Disputed Claims, any cash and accrued interest
thereon otherwise distributable with respect to the disallowed Claim (or
disallowed portion thereof) will become the property of the Reorganized
Debtor, and the affected Claimant shall have no further rights against the
Debtor or the Reorganized Debtor with respect to such disallowed Claim or
portion of such disallowed Claim.
As a condition precedent to receiving any distribution pursuant to the Plan
on account of an Allowed Bank Loan Claim or Allowed Public Debt Claim
evidenced by an Existing Debt Instrument, the holder of such Claim shall
surrender the applicable Existing Debt Instrument to the Reorganized Debtor
pursuant to a letter of transmittal to be furnished by the Reorganized Debtor
(either directly or through an agent bank or an indenture trustee). Such
letter of transmittal shall specify that delivery of such Existing Debt
Instrument will be effected, and risk of loss and title thereto will pass,
only upon the
Page 104
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
proper delivery of such Existing Debt Instrument with the letter of
transmittal. Such letter of transmittal shall also include, among other
provisions, customary provisions with respect to the authority of the holder
of the applicable Existing Debt Instrument to act and the authenticity of any
signatures required on the letter of transmittal.
In addition to any requirements under the applicable credit agreement or
indenture, any holder of an Allowed Claim evidenced by an Existing Debt
Instrument that has been lost, stolen, mutilated or destroyed shall, in lieu
of surrendering such Existing Debt Instrument, deliver to the Debtor or the
Reorganized Debtor (a) evidence satisfactory to the Debtor or the Reorganized
Debtor of the loss, theft, mutilation or destruction and (b) such security or
indemnity as may be required by the Debtor or the Reorganized Debtor to hold
it and its agents harmless from any damages, liabilities or costs incurred in
treating such individual as a holder of such Existing Debt Instrument. Such
holder shall thereupon be deemed to have surrendered such Existing Debt
Instrument in accordance with the provisions of the Plan requiring such
surrender.
Any holder of an Existing Debt Instrument that fails to surrender or to be
deemed to have surrendered such Existing Debt Instrument within one year after
the Effective Date shall have its claim for a distribution pursuant to the
Plan on account of the Claim evidenced thereby discharged and shall be forever
barred from asserting any such claim against the Reorganized Debtor or its
property.
11.3 OBJECTION PROCESS. Unless otherwise provided by order of the Court,
no further objections will be required with respect to any Claims that are to
be resolved and paid through the Settlement Facility or the Litigation
Facility. Any objections to other Claims that have not been filed by the
Confirmation Date may be filed solely by the Debtor or the Reorganized Debtor.
11.4 NO DISTRIBUTION PENDING RESOLUTION. No distributions shall be made
with respect to the holder of a Claim while an objection thereto is pending.
11.5 INITIAL/FINAL DISTRIBUTIONS. Each holder of an Allowed Claim
entitled to Pro Rata distributions shall, upon the later to occur of the
Effective Date or the Allowance Date, receive an initial distribution of its
Pro Rata entitlement under the Plan. Distributions reserved with respect to
Claims undergoing objection shall be either distributed to the Claimant upon
Allowance or, if the Claim is disallowed, retained by the Reorganized Debtor
as its property.
11.6 UNCLAIMED DISTRIBUTIONS OF CERTAIN CLAIMANTS. Unless otherwise
provided for in the Plan, the Plan Documents, or a Final Order of the Court,
distributions to be made under the Plan to Claimants holding Allowed Claims
(other than Products Liability Claims) shall be made by the Reorganized Debtor
by first class, United States mail, postage prepaid to (a) the latest mailing
address set forth in a Proof of Claim filed with the Court by or on behalf of
such Claimant or (b) if no such Proof of Claim has been timely filed, the
mailing address set forth in the Schedules filed by the Debtor in the Case, as
such Schedules may be amended. The Reorganized Debtor shall not be required to
make any other effort to locate or ascertain the address of the holder of any
Claim.
The Debtor will seek the inclusion in the Confirmation Order of a provision
requiring any third-party paying agent charged with making distributions to
holders of the Debtor's public debt instruments (including, if applicable, the
indenture trustees therefor) to advise the Reorganized Debtor from time to
time as to the identity of the persons who are entitled to unclaimed
distributions in respect thereof. Based upon such advice, the Reorganized
Debtor will file with the Bankruptcy Court, on the second, third and fourth
anniversaries of the Effective Date, listings of persons, including holders of
Public Debt Claims, who are entitled to unclaimed distributions in respect
thereof.
If any Person entitled to receive a distribution directly from the
Reorganized Debtor under the Plan does not come forward to collect such
distribution, such distributions will be retained by the Reorganized Debtor
for the benefit of such Person. Subject to section 10.6 of the Plan (which
requires delivery of Existing Debt Instruments within one year after the
Effective Date), if such Person communicates with the Reorganized Debtor
within five years of the Effective Date, such distribution, together with any
interest attributable to such amount, net of any applicable federal and state
taxes, will be paid or distributed to such Person. Subject to section 10.6 of
the Plan, if such Person does not communicate with the Reorganized Debtor
within five years of the Effective Date, any such distribution and any
interest thereon will become the Property of the Reorganized Debtor, and the
affected Claimant shall have no further rights against the Debtor or the
Reorganized Debtor.
11.7 PRESERVATION OF THE DEBTOR'S AFFIRMATIVE CLAIMS. Except as otherwise
provided in the Plan, the allowance of any pre-petition Claim, the resolution
of any Claim dispute, or the payment of such Claims shall not, absent an
express contrary ruling by the Court, operate as a bar, by application of the
principles of res judicata or collateral estoppel, to the recovery of pre-
petition Claims or the exercise of any right of setoff held by the Debtor with
respect to the Claims held by the affected Claimants. To the extent such right
of setoff is not resolved in the Claim objection process, any affected
Claimant shall retain its right of offset of mutual claims as provided in
section 553 of the Bankruptcy Code.
Page 105
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE XII
SECURITIES LAWS CONSIDERATIONS
12.1 GENERAL. The Senior Notes and the Subordinated Notes, if any, to be
issued pursuant to the Plan constitute "securities" for purposes of federal
and state securities laws. As discussed below, section 1145 of the Bankruptcy
Code provides that the registration requirements under federal and state
securities laws do not apply to the issuance of securities by a debtor under a
plan of reorganization to holders of claims or interests wholly or principally
in exchange for those claims or interests. With certain exceptions discussed
below, recipients of such securities may also resell them without registration
under such laws.
A. ISSUANCE. Section 1145 of the Bankruptcy Code exempts the original
issuance of securities under a plan of reorganization from registration
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
applicable state securities law registration requirements. For the original
issuance of securities under the Plan to be so exempt, three principal
requirements must be satisfied: (i) the securities must be issued by the
Debtor or its successor under the Plan, (ii) the recipient of the
securities must hold a Claim against or Interest in the Debtor, and (iii)
the securities must be issued entirely in exchange for the recipient's
Claim against or Interest in the Debtor, or "principally" in such exchange
and "partly" for cash or property. The original issuance of securities
pursuant to the Plan will satisfy the foregoing requirements and,
accordingly, will be exempt from registration under the Securities Act and
state securities laws. However, in certain circumstances, subsequent offers
or sales of such securities may be subject to the registration requirements
under the Securities Act and such state laws.
B. RESALE. Except for persons who may be deemed to be "underwriters" as
discussed below, holders of Claims who receive securities pursuant to the
Plan will be able to sell and transfer such securities without registration
under the Securities Act or state securities laws and without complying
with Rule 144 under the Securities Act.
Section 1145(b) of the Bankruptcy Code defines four types of
"underwriters": (i) a person who purchases a claim against, an interest in,
or a claim for administrative expenses against the debtor with a view to
distributing any security received in exchange for such a claim or
interest; (ii) a person who offers to sell securities offered under a plan
of reorganization for the holders of such securities; (iii) a person who
offers to buy such securities from the holders of such securities, if the
offer is (a) with a view to distributing such securities and (b) made under
a distribution agreement; and (iv) a person who is an "issuer" with respect
to the security, as the term "issuer" is defined in section 2(11) of the
Securities Act. Under section 2(11) of the Securities Act, an "issuer"
includes any person directly or indirectly controlling or controlled by the
debtor, or any person under direct or indirect common control with the
debtor.
To the extent that persons deemed "underwriters" receive securities
pursuant to the Plan, resales by such persons would not be exempted by
section 1145 of the Bankruptcy Code from registration under the Securities
Act or applicable state securities laws. However, such persons may be able
to sell such securities without registration subject to the provisions of
Rule 144 under the Securities Act, which would permit the public sale of
securities received pursuant to the Plan by "underwriters" subject to the
availability to the public of current information regarding DCC and to
compliance with specified volume limitations and certain other conditions.
Given the complex, subjective nature of the question of whether a
particular holder may be an underwriter, the Debtor makes no
representations concerning the right of any person to trade in any of the
securities received under the Plan. THE PROPONENTS RECOMMEND THAT POTENTIAL
RECIPIENTS OF SECURITIES UNDER THE PLAN CONSULT THEIR OWN COUNSEL
CONCERNING THE EFFECTS OF FEDERAL AND STATE SECURITIES LAWS ON THEIR
ABILITY TO TRADE SUCH SECURITIES.
Sales by "stockbrokers" of securities issued under the Plan will be
exempt under section 1145(a)(4) of the Bankruptcy Code from the
registration requirements of the Securities Act and state securities laws
if they deliver a copy of the Disclosure Statement (and supplements hereto,
if any, if ordered by the Court) at or before the time of delivery of such
securities to their customers for the first 40 days after the Effective
Date. Section 101 of the Bankruptcy Code defines "stockbroker" as a person
having customers that are engaged in the business of effecting transactions
in securities (i) for the accounts of others or (ii) with the general
public from or for such person's own account.
Page 106
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE XIII
FEDERAL INCOME TAX
CONSEQUENCES OF THE PLAN
13.1 GENERAL. The Plan will have tax consequences to the Debtor and to
holders of Claims and Interests. A description of certain federal income tax
consequences of the consummation of the Plan is provided below. The
description of tax consequences below is provided for informational purposes
only and is subject to significant uncertainties. No tax opinion has been
sought with respect to any tax consequences of the Plan, and no tax opinion is
given by this Disclosure Statement.
This discussion of federal income tax consequences is based on the IRC, the
Treasury Regulations promulgated and proposed thereunder, judicial decisions,
and published administrative rulings and pronouncements of the IRS as in
effect on the date hereof. Legislative, judicial, or administrative changes or
interpretations enacted or promulgated in the future could alter or modify the
analysis and conclusions set forth below. Any such changes or interpretations
may be retroactive, and could significantly affect the federal income tax
consequences discussed below.
THIS DISCUSSION DOES NOT ADDRESS FOREIGN, STATE, OR LOCAL TAX CONSEQUENCES
OF THE PLAN, NOR DOES IT PURPORT TO ADDRESS THE FEDERAL TAX CONSEQUENCES OF
THE PLAN TO SPECIAL CLASSES OF TAXPAYERS (SUCH AS FOREIGN COMPANIES,
NONRESIDENT ALIEN INDIVIDUALS, S CORPORATIONS, MUTUAL FUNDS, INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS, SMALL BUSINESS INVESTMENT COMPANIES,
REGULATED INVESTMENT COMPANIES, BROKER-DEALERS, AND TAX-EXEMPT ORGANIZATIONS).
FURTHERMORE, ESTATE AND GIFT TAX ISSUES ARE NOT ADDRESSED HEREIN.
NO REPRESENTATIONS ARE MADE REGARDING THE PARTICULAR TAX CONSEQUENCES OF
THE PLAN TO ANY HOLDER OF A CLAIM OR INTEREST. EACH HOLDER OF A CLAIM OR
INTEREST IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING THE
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE PLAN.
13.2 FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTOR.
A. CANCELLATION OF INDEBTEDNESS. Under the IRC, a taxpayer generally
must include in gross income the amount of any cancellation of indebtedness
income ("COD INCOME") realized during the taxable year. Section 108 of the
IRC provides an exception to this general rule, however, if the
cancellation occurs in a case under the Bankruptcy Code, but only if the
taxpayer is under the jurisdiction of a bankruptcy court and the
cancellation is granted by the court or is pursuant to a plan approved by
the court. Section 108 of the IRC requires the amount of COD Income so
excluded from gross income to be applied to reduce certain tax attributes
of the taxpayer. Section 108 of the IRC further provides that a taxpayer
does not realize COD Income from cancellation of indebtedness to the extent
that payment of such indebtedness would have given rise to a deduction.
Under the Plan, holders of Claims in Classes 1 through 4 and in Class 21
will be paid the full amount of their Allowed Claims. Since those Claims
will be paid in full, satisfaction of such Claims should not give rise to
COD Income to the Debtor (except to the extent that interest previously
accrued and deducted by the Debtor is not required to be paid).
With respect to holders of Claims in Classes 5 through 19, the
satisfaction of those Claims should not result in COD Income to the Debtor
because payment of such Claims would have given rise to a deduction to the
Debtor. In any event, the Debtor believes that the funding of the
Settlement Facility and the Litigation Facility pursuant to the Plan will
be sufficient to pay in full each holder of such Claims once the amount of
such Claims is ultimately determined.
To the extent holders of Claims in Classes 20 and 22 will be entitled to
receive payment of their Claims, the Debtor should not realize any COD
Income if payment of such Claims would have given rise to a deduction to
the Debtor. Moreover, it is intended that such payment be sufficient to
fully satisfy Claims to the extent they are canceled. To the extent the
holders of Class 20 and 22 Claims will not be entitled to receive payment
on their Claims, the Debtor's liability to the holders will not be
canceled, and therefore will result in no COD Income to the Debtor.
The Debtor believes that the consummation of the Plan will not cause it
to realize any COD Income. Accordingly, the Debtor believes that it will
not be required to suffer any reduction of its tax attributes under section
108 of the IRC.
Page 107
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
B. DEDUCTIBILITY OF PAYMENTS TO DEPOSITORY TRUST. It is a condition to
effectiveness of the Plan that the IRS issue to the Debtor a ruling (i) to
the effect that the Depository Trust will be a "qualified settlement fund"
within the meaning of section 468B of the IRC and the regulations
promulgated thereunder, and (ii) concerning deductibility (as more fully
described below) of payments to the Depository Trust on behalf of the
Settlement Facility.
The regulations promulgated under section 468B of the IRC provide that a
fund, account, or trust will be a qualified settlement fund if three
conditions are met. First, the fund, account, or trust must be established
pursuant to an order of or be approved by a government authority, including
a court, and must be subject to the continuing jurisdiction of that
government authority. A court order giving preliminary approval to a fund,
account, or trust will satisfy this requirement even though the order is
subject to review or revision. Second, the fund, account, or trust must be
established to resolve or satisfy one or more contested or uncontested
claims that have resulted or may result from an event or related series of
events that has occurred and that has given rise to at least one claim
asserting liability arising, among other things, out of a tort. Third, the
fund, account, or trust must be a trust under applicable state law or have
its assets physically segregated from the other assets of the transferor
and persons related to the transferor. The Depository Trust has been
established with the express purpose of satisfying the requirements of a
qualified settlement fund. While discretion to issue a ruling on this point
rests entirely with the IRS, the Debtor believes that it will be able to
obtain a ruling that the Depository Trust is a qualified settlement fund.
If, as expected, the Depository Trust is a qualified settlement fund,
the Reorganized Debtor will be entitled to a deduction for its payments
thereto once it has satisfied the usual requirements imposed on accrual
basis taxpayers with respect to liabilities. Those requirements should be
met at the time that payments are made to the Depository Trust or, in the
case of amounts paid to the Depository Trust and designated as the
Litigation Fund, no later than the time at which Claims are paid or
expenses are incurred by or on behalf of the Litigation Facility (and
possibly earlier). It is a condition to effectiveness of the Plan that
Debtor receive a ruling from the IRS with respect to both the status for
federal income tax purposes of the Depository Trust and the deductibility
of the Reorganized Debtor's payments thereto.
The Plan provides that up to $400 million (NPV) of the funds transferred
to the Depository Trust will be designated as the Litigation Fund and made
available for payment of Allowed Non-Settling Personal Injury Claims and
Allowed Third Party Claims and the expenses of operation of the Litigation
Facility, including the legal costs of defense of Claims against the
Facility. In addition, certain amounts in the Settlement Fund may be
utilized to make payments in connection with other claims to be litigated
by the Litigation Facility. It is conceivable that, among other features,
the Reorganized Debtor's ownership and control of the Litigation Facility
would cause the amounts in the Litigation Fund and other amounts to be
nondeductible at the time of transfer to the Depository Trust. In this
event, such amounts should be deductible at the time the Claims
Administrator pays the related claim or incurs an expense. While discretion
to issue a ruling on this point rests entirely with the IRS, and while the
legal form of the Litigation Facility presents some novel tax questions,
the Debtor believes that it will be able to obtain a ruling that the
amounts will be deductible no later than the time that claims are paid from
the Litigation Fund and expenses are incurred by the Litigation Facility.
In addition, the Debtor believes that it will be entitled to deductions
for the assignment of its interests in the Coverage-in-Place Policies and
any Insurance Debtor Action Recoveries, but only to the extent the Debtor
previously included such amounts in its gross income.
Any deductions for payments made to the Depository Trust first would
reduce or eliminate the Debtor's taxable income for the taxable year when
the payment is made. To the extent these deductions were to exceed such
year's otherwise taxable income, the excess would constitute a net
operating loss ("NOL") deduction. In general, NOLs generated in 1998 and
thereafter may be carried back two years and forward twenty years. To the
extent an NOL is a "specified liability loss," however, it may be carried
back ten years. The taxpayer may elect to waive the entire carry-back
period with respect to an NOL, or may elect to waive only the additional
eight years of carry-back afforded NOLs attributable to specified liability
losses.
An NOL constitutes a specified liability loss to the extent it is
attributable to product liability, or to expenses incurred in the
investigation or settlement of, or opposition to, claims against the
taxpayer on account of product liability. The Debtor believes that any NOL
resulting from the payments to the Depository Trust would constitute a
specified liability loss and accordingly would qualify for the ten-year
carry-back period.
The Debtor, however, believes that the carry-back of its NOL would cause
certain adverse tax consequences to the Debtor. Accordingly, the Debtor
presently intends to elect to waive the entire carry-back period with
respect to its NOL.
Page 108
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
The Debtor has filed (or will file) a private letter ruling request with
the Internal Revenue Service relating to the qualified settlement fund
status of the Depository Trust and the deductibility of payments thereto.
The Debtor believes that it will take several months to obtain a response
to the ruling request, but believes that a ruling should be obtained prior
to the Confirmation Date. If the ruling request is denied, the Debtor
anticipates that it would make amendments to the Settlement Facility
Agreement, Litigation Facility Agreement, and/or the Funding Payment
Agreement to obtain a favorable ruling. The Debtor does not believe any
amendments that might be required would significantly impact the operation
of the Settlement Facility.
If the Depository Trust is a qualified settlement fund, it will be
treated as a separate taxable entity. Its modified gross income, which will
consist generally of investment earnings on amounts on deposit in the
Depository Trust (less administrative fees and related costs) will
generally be subject to federal income tax at a 39.6% rate. For purposes of
determining the Depository Trust's modified gross income, payments to the
Depository Trust and payments from the Depository Trust to Personal Injury
Claimants in settlement of their Claims will not be taken into account.
13.3 FEDERAL INCOME TAX CONSEQUENCES TO CLAIMANTS.
A. GENERAL. The tax consequences of the Plan to a holder of a Claim will
depend, in part, on whether the Claim constitutes a "tax security," what
type of consideration the holder received in exchange for the Claim,
whether the holder is a resident of the United States for tax purposes,
whether the holder reports income on the accrual or cash-basis method, and
whether the holder receives distributions under the Plan in more than one
taxable year. In some cases, the modification of a Claim or the
substitution of a new debt instrument or instruments for the Claim pursuant
to the Plan may represent for tax purposes an exchange of the Claim for
such modified Claim or for such new debt instrument, as the case may be,
even though no actual transfer of the Claim takes place. HOLDERS ARE
STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
TREATMENT UNDER THE PLAN OF THEIR PARTICULAR CLAIMS.
B. HOLDERS OF CLAIMS OTHER THAN PERSONAL INJURY CLAIMS.
1. ORIGINAL ISSUE DISCOUNT. It is possible that the Senior Notes or
the Subordinated Notes will be treated as having been issued with
original issue discount. For example, if any such Senior Notes or
Subordinated Notes are part of an issue of (or are issued for) debt
instruments that are traded on an established securities exchange, and
if the fair market value of the property exchanged therefor is, for
purposes of section 1273(a)(3) of the IRC, more than a de minimis amount
less than the principal amount of such Senior Notes or Subordinated
Notes, such Senior Notes or Subordinated Notes may be treated as having
been issued at their fair market values (or the fair market value of the
property exchanged therefor) (that is, with original issue discount).
Otherwise, they will be deemed to have been issued at their principal
amounts. Pursuant to Treasury regulations, an "established securities
market" includes a system of general circulation (including a computer
listing disseminated to subscribing brokers, dealers, or traders) that
provides a reasonable basis to determine fair market value by
disseminating either recent price quotations or actual prices of recent
sales transactions.
If the Senior Notes or the Subordinated Notes are issued with
original issue discount, such original issue discount would be
includible in the holder's gross income as interest over the term of the
Note, based on the constant-interest method. As a result, holders would
be required to include amounts in gross income in advance of any receipt
of cash in respect of such income.
2. DEFINITION OF TAX SECURITIES. There is no precise definition under
the tax law of a "tax security," and all facts and circumstances
pertaining to the origin and character of the claim are relevant in
determining its status. Nevertheless, courts generally have held that
corporate debt obligations evidenced by written instruments with
original terms to maturity of ten years or more constitute tax
securities, while corporate debt obligations with original terms to
maturity of five years or less do not. The cases are unsettled with
respect to corporate debt obligations with original terms to maturity of
between five and ten years. It is likely that the Public Debt Claims
maturing in 1998 and thereafter and the Claims evidenced by notes
originally held by Nippon Life will be considered tax securities for
this purpose. The Public Debt Claims maturing in 1995 and 1996 may or
may not constitute tax securities. It is likely that the other Unsecured
Claims, including Claims arising from the purchase of goods or services,
will not be considered tax securities.
3. HOLDERS OF CLAIMS CONSTITUTING TAX SECURITIES. Holders of Claims
constituting tax securities who receive only tax securities of the
Debtor in satisfaction of such Claims under the Plan should not
generally recognize gain on the exchange, except to the extent the
principal amount of any tax securities received were to exceed the
principal amount (or issue price) of tax securities canceled. Holders of
Claims constituting tax securities
Page 109
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
may also recognize gain if they receive cash, or an obligation not
constituting a tax security or any other such non-cash items ("BOOT") in
either full or partial satisfaction of such Claims. In that event, any
gain on the exchange, measured generally by the excess of the amount
realized by the holder over the holder's tax basis in the Claim, will
likely be recognized by the holder, but in an amount not to exceed the
sum of the cash and the fair market value of the Boot. The amount
realized for this purpose will generally equal the sum of the cash and
the fair market value of any other consideration received under the Plan
in respect of their Claims, including any tax securities. The amount
realized with respect to any debt obligation received, however, will
likely equal the amount for which the obligation is treated as having
been issued, as determined for tax purposes.
Any gain recognized by the holder of a Claim constituting a tax
security will generally be treated as capital gain, provided that the
Claim represented a capital asset in such holder's hands. An
individual's net capital gain (i.e., any excess of net long-term capital
gains over net short-term capital losses) will be taxed at a maximum
rate of 20% for capital assets held for more than one year. The maximum
tax rate for individuals on ordinary income is generally 39.6%. Under
current law, corporations are taxed at the same rates on capital gain as
on ordinary income.
Holders of Claims constituting tax securities who receive tax
securities of the Debtor under the Plan in either partial or full
satisfaction of such Claims generally will not be permitted to recognize
any loss on such exchange.
A holder's aggregate tax basis in any tax securities received under
the Plan in respect of a Claim constituting tax securities, aside from
any amounts allocable to interest, will generally equal the holder's
adjusted basis in such Claim, increased by any gain recognized on the
exchange and decreased by the amount of cash and the fair market value
of any Boot received. This aggregate basis should be apportioned among
the items received according to their respective fair market values. The
Boot received, if any, will have a fair market value basis. The holding
period for any tax securities received in the exchange will generally
include the holding period of the Claim surrendered, whereas the holding
period for any Boot received will begin on the day after the date of
receipt. If the aggregate tax basis allocated to any debt obligation
received exceeds the fair market value of the debt obligation, the
holder of the Claim may be able to amortize the excess as a premium
expense over the term of the debt obligation. The rules and regulations
governing this amortization are complex; holders are therefore urged to
consult their tax advisors.
4. HOLDERS OF CLAIMS NOT CONSTITUTING TAX SECURITIES. Holders of
Claims not constituting tax securities will recognize gain or loss equal
to the amount realized under the Plan in respect of their Claims less
their respective tax bases in their Claims. The amount realized for this
purpose will generally equal the sum of the cash and the fair market
value of any other consideration received under the Plan in respect of
their Claims, including any tax securities. The amount realized with
respect to any debt obligation received, however, will likely equal the
amount for which the obligation is treated as having been issued, as
determined for tax purposes.
The character of any gain or loss recognized will depend on a number
of factors, including the tax status of the holder, whether the Claim
constitutes a capital asset in the holder's hands, whether the Claim was
held for more than one year, whether the Claim was purchased at a
discount, and whether and to what extent the holder has previously
claimed a bad debt deduction with respect to the Claim. The holder's
aggregate tax basis for any consideration received under the Plan will
generally equal the amount realized. The holding period for any
consideration received under the Plan will generally begin on the day
following the receipt of such consideration.
C. HOLDERS OF PERSONAL INJURY CLAIMS. Payments under the Plan to
Personal Injury Claimants with respect to damages on account of personal
injuries or sickness will not be includible in such Personal Injury
Claimants' gross income under section 104 of the IRC. However, to the
extent payments under the Plan to Personal Injury Claimants are
attributable to medical expense deductions allowed under section 213 of the
IRC for a prior taxable year, such payments will be taxable as ordinary
income to the recipient.
D. CERTAIN OTHER TAX CONSIDERATIONS FOR CLAIMANTS.
1. RECEIPT OF INTEREST. Holders of Claims not previously required to
have included in their gross income any accrued but unpaid interest on a
Claim may be treated as receiving taxable interest income to the extent
any consideration they receive under the Plan is allocable to such
interest. Holders previously required to include in their gross income
any accrued but unpaid interest on a Claim may be entitled to recognize
a deductible loss to the extent such interest is not satisfied under the
Plan. For purposes of determining the tax consequences to holders of
Allowed Claims in Classes 3 and 4 with respect to accrued interest, the
value of the consideration such holders receive under the Plan will be
allocated first to principal and second to unpaid interest accrued
thereon through the
Page 110
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Effective Date. The Debtor will file information returns reflecting the
fact that the consideration received by such holders under the Plan
equals such principal plus all such accrued interest.
2. INSTALLMENT METHOD. Holders of Claims constituting installment
obligations for tax purposes may be required to recognize currently any
gain remaining with respect to the obligation if pursuant to the Plan
the obligation is considered to be satisfied at other than its face
value, distributed, transmitted, sold, or otherwise disposed of within
the meaning of section 453B of the IRC.
3. REINSTATED CLAIMS. Holders should not generally recognize gain,
loss, or other taxable income or deduction upon the reinstatement of
their Claims under the Plan. Taxable income may, however, be recognized
by such holders if they are considered to receive interest, damages, or
other income in connection with the reinstatement of their Claims, or if
such reinstatement is considered for tax purposes to involve a
modification of the Claim.
4. BAD DEBT AND/OR WORTHLESS SECURITIES DEDUCTION. A holder who under
the Plan receives in respect of its Claim an amount less than the
holder's tax basis in such Claim may be entitled in the year of receipt
or in an earlier year to a bad debt deduction in some amount under
section 166(a) of the IRC or a worthless securities deduction under
section 165(g) of the IRC.
5. BACKUP WITHHOLDING. A holder of Senior Notes or Subordinated Notes
may, under certain circumstances, be subject to "backup withholding" at
the rate of 31% with respect to interest paid, or original issue
discount accrued, thereon, or the proceeds of a sale, exchange, or
redemption of such Senior Notes or Subordinated Notes, unless such
holder (i) is a corporation or is within the scope of certain other
exempt categories and, when required, demonstrates this fact; or (ii)
provides a correct taxpayer identification number, certifies that such
holder is not subject to backup withholding, and otherwise complies with
applicable requirements of the backup withholding provisions of the IRC.
A holder who does not provide a correct taxpayer identification number
may be subject to penalties imposed by the IRS. The Plan provides, in
section 11.7, that no distributions will be made under the Plan unless
tax identification information is provided. Backup withholding may apply
to any amounts payable to a holder of an instrument and, accordingly, to
the extent that any of the Senior Notes or Subordinated Notes is issued
with any original issue discount, the amount to be withheld may actually
exceed 31% of the stated interest payments that are made. Any amount
withheld under these rules will be creditable against the holder's U.S.
federal income tax liability, and may entitle such holder to a refund of
federal income tax, provided that the required information is furnished
to the IRS.
13.4 REQUEST FOR IRS RULING. The law with respect to certain federal
income tax consequences of the Plan is uncertain. Accordingly, the Debtor
shall file a request for the IRS to issue a ruling with respect to some of the
uncertain tax consequences of the Plan. In particular, the Debtor will seek a
ruling from the IRS that (i) the Depository Trust will be a "qualified
settlement fund" (within the meaning of section 468B of the IRC and the
regulations promulgated thereunder), (ii) the payments to be made with respect
to Claims Allowed through the procedures provided therefor in the Litigation
Facility will be fully deductible by the Reorganized Debtor at the time of (or
before) each such disbursement; and (iii) such other matters as tax counsel
for Dow Corning may reasonably require. There can be no assurance, however,
that the IRS will issue such a ruling.
13.5 IMPORTANCE OF OBTAINING PROFESSIONAL TAX ASSISTANCE. THIS DISCUSSION
IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE PLAN, AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX
PROFESSIONAL. THE TAX CONSEQUENCES ARE IN MANY CASES UNCERTAIN, AND MAY VARY
DEPENDING ON A HOLDER'S INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, HOLDERS ARE
URGED TO CONSULT WITH THEIR TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, AND
FOREIGN TAX CONSEQUENCES OF THE PLAN.
Page 111
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE XIV
REQUIREMENTS FOR
CONFIRMATION OF THE PLAN
14.1 GENERAL CONFIRMATION REQUIREMENTS. At the Confirmation Hearing, the
Court will determine whether the requirements of section 1129(a) of the
Bankruptcy Code have been satisfied. If those requirements have been
satisfied, the Court will enter the Confirmation Order. The requirements for
confirmation under the Bankruptcy Code are as follows:
A. The plan complies with the applicable provisions of the Bankruptcy
Code.
B. The proponents of the plan have complied with the applicable
provisions of the Bankruptcy Code.
C. The plan has been proposed in good faith and not by any means
forbidden by law.
D. Any payment made or promised by the proponents of the plan or by a
person issuing securities or acquiring property under the plan, for
services or for costs and expenses in, or in connection with, the case, or
in connection with the plan and incident to the case, was disclosed to the
court, and any such payment made before confirmation of the plan is
reasonable, or if such payment is to be fixed after confirmation of the
plan, such payment is subject to the approval of the court as reasonable.
E. The proponents of the plan have disclosed the identity and
affiliation of any individual proposed to serve, after confirmation of the
plan, as director, officer or voting trustee of the debtor, any affiliate
of the debtor participating in a joint plan with the debtor, or a successor
to the debtor under the plan, and the appointment to, or the continuance
in, such office of such individual, is consistent with the interests of
Creditors and equity security holders and with public policy.
F. The proponents of the plan have disclosed the identity of any insider
that will be employed or retained by the reorganized debtor and the nature
of the compensation for such insider.
G. Any governmental regulatory commission with jurisdiction, after
confirmation of the plan, over the rates of the debtor has approved any
rate change provided for in the plan, or such rate change is expressly
conditioned on such approval.
H. With respect to each class of impaired claims, either each holder of
a claim in such class has accepted the plan, or will receive or retain
under the plan on account of such claim property of a value, as of the
effective date of the plan, that is not less than the amount such claimant
would receive or retain if the debtor was liquidated on such date under
chapter 7 of the Bankruptcy Code.
I. Each class of claims or interests has either accepted the plan or is
not impaired under the plan or the proponents will demonstrate compliance
with section 1129(b) of the Bankruptcy Code and "cram down" any dissenting
class.
J. Except to the extent that the holder of a particular claim has agreed
to a different treatment of such claim, the plan provides that
administrative expense claims will be paid in cash in full on the effective
date and that any tax claim entitled to priority under section 507(a)(8) is
being paid in full in deferred cash payments, over a period not exceeding
six years after the date of assessment of such claim, of a value, as of the
effective date of the plan, equal to the allowed amount of such claim.
K. At least one impaired class of claims has accepted the plan,
determined without including any acceptance of the plan by any insider
holding a claim in such class.
L. Confirmation of the plan is not likely to be followed by the
liquidation of the debtor or the need for further financial reorganization
of the debtor or any successors to the debtor under the plan, unless such
liquidation or reorganization is proposed in the plan.
M. The plan provides for the payment of retiree benefits as required by
section 1114 of the Bankruptcy Code.
The Proponents believe that the confirmation requirements applicable to
the Case are met under the Plan. The Proponents will present evidence in
support of each applicable requirement at the Confirmation Hearing.
14.2 POTENTIAL CRAMDOWN OF THE PLAN. If at least one class of impaired
claims or interests accepts the plan, the Court may confirm a plan under the
"cramdown" provisions of section 1129(b) of the Bankruptcy Code, which permits
the confirmation of a plan over the dissenting votes of certain creditors and
equity interest holders.
Page 112
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
Cramdown under section 1129(b) of the Bankruptcy Code may not be effected
if a class of unsecured claims rejects the plan unless:
A. The plan provides that each holder of a claim of such class receive
or retain on account of such claim property of a value, as of the effective
date of the plan, equal to the allowed amount of such claim; or
B. The holder of any claim or interest that is junior to the claims of
such class will not receive or retain under the plan, on account of such
junior claim or interest, any property.
This Plan proposes that the Shareholders may receive or retain property on
account of their Interests in the Debtor. It is the position of the Debtor
that its assets exceed its liabilities and that the Allowed Claims of
creditors in impaired classes will receive property of a value, as of the
Effective Date, equal in amount to such class member's Allowed Claim.
If all impaired classes accept the Plan, and the Proponents meet the
confirmation requirements of section 1129, the Plan will be confirmed as a
consensual Plan. If all impaired classes do not accept the Plan, but at least
one impaired class accepts the Plan, and the Plan otherwise meets the
confirmation requirements of section 1129, the Debtor shall have the right,
independent of the Tort Committee, to seek confirmation of the Plan using the
"cramdown" provisions of section 1129(b) of the Bankruptcy Code. The Tort
Committee will support confirmation of the Plan in accordance with section
1129(b) as it relates to Classes 5 through 10.2 unless it determines that its
fiduciary duty to its constituency as a whole requires it to oppose such
confirmation.
14.3 ABSOLUTE PRIORITY RULE. Simply characterized, the absolute priority
rule set forth in section 1129(b)(2)(B) of the Bankruptcy Code requires that
confirmation obtained by "cramdown" meet an either/or test. Either (i) the
members of each dissenting impaired class of unsecured claims must receive
property of a value, as of the effective date of the plan, equal in amount to
such class members' Allowed Claim; or (ii) the holders of claims and interests
that are junior to each dissenting impaired class of claims must not receive
any property under the plan of reorganization. The absolute priority rule
applies only in cases where a class of claims or equity interests is both
impaired and does not accept the plan. Thus, the absolute priority rule does
not apply to all classes of claims and equity interests but only to the
dissenting class and classes junior to the dissenting class.
Absent acceptance of a Plan by each impaired Class, the Plan cannot be
confirmed unless Claims in each non-accepting Class are paid in full or the
Shareholders do not retain their interests in the Debtor. The Plan proposes
that the Shareholders retain their Interests, but expressly subject to the
Plan and the Funding Payment Agreement, which provide that the value of
Reorganized DCC, and thus, the retained equity in the Reorganized Debtor, is
available (i) for payment, up to the agreed cap, of Allowed Claims in Classes
5 through 19, and (ii) for payment of Allowed Claims in other classes. The
Proponents believe these provisions satisfy this requirement for confirmation
of the Plan.
Page 113
<PAGE>
AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO AMENDED
JOINT PLAN OF REORGANIZATION OF DOW CORNING CORPORATION
ARTICLE XV
CONCLUSION
15.1 Through confirmation of the Plan, the Proponents believe that all
Products Liability Claims that had been, or could be, asserted against Dow
Corning can be resolved in a timely and cost effective manner. The Proponents
believe that the Plan provides a mechanism to resolve, and provide reasonable
compensation to, the Products Liability Claimants. All other creditors are
treated in a manner that allows their Claims to be paid in full. The
Proponents believe that the Plan is fair to all parties-in-interest.
DOW CORNING CORPORATION AND THE TORT COMMITTEE URGE YOU TO VOTE TO ACCEPT
THE PLAN.
DATED: February 4, 1999.
DOW CORNING CORPORATION
OFFICIAL COMMITTEE OF TORT CLAIMANTS
/s/ Gary E. Anderson /s/ Ralph Knowles
By: __________________________________ By: __________________________________
Gary E. Anderson Ralph Knowles
President
SHEINFELD, MALEY & KAY, P.C.
KRAMER LEVIN NAFTALIS & FRANKEL LLP
/s/ Barbara J. Houser /s/ Kenneth H. Eckstein
By: __________________________________ By: __________________________________
Barbara J. Houser Kenneth H. Eckstein
1700 Pacific Avenue, Suite 4400 919 Third Avenue
Dallas, Texas 75201-4618 New York, New York 10022-3850
Telephone: (214) 953-0700 Telephone: (212) 715-9100
Facsimile: (214) 953-1189
Facsimile: (212) 715-8000
ATTORNEYS FOR DOW CORNING ATTORNEYS FOR OFFICIAL COMMITTEE OF
CORPORATION TORT CLAIMANTS
Page 114
<PAGE>
EXHIBIT "A"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
IN RE: (S)
(S) CASE NO. 95-20512 AJS
DOW CORNING CORPORATION (S) (CHAPTER 11)
(S)
DEBTOR. (S) JUDGE ARTHUR J. SPECTOR
(S)
ORDER APPROVING AMENDED JOINT DISCLOSURE STATEMENT,
SETTING HEARING ON CONFIRMATION OF THE PLAN, AND
ESTABLISHING DEADLINES FOR VOTING ON THE PLAN AND
FILING OBJECTIONS TO CONFIRMATION OF THE PLAN
An Amended Joint Disclosure Statement With Respect to Amended Joint Plan of
Reorganization (the "DISCLOSURE STATEMENT") and an Amended Joint Plan of
Reorganization (the "PLAN") were filed by the Debtor and the Tort Claimants'
Committee (collectively, the "PROPONENTS") on February 4, 1999. The Court,
after hearing, is of the opinion that the Disclosure Statement should be
approved and that notice of the hearing has been given in accordance with the
procedures approved and prescribed by this Court and is adequate and
sufficient pursuant to the Bankruptcy Code, the Bankruptcy Rules and other
applicable law. It is therefore
ORDERED and notice is hereby given that:
1. The Disclosure Statement is hereby found to contain "adequate
information" as such term is defined in section 1125 of the Bankruptcy Code
and is hereby approved.
2. On or before MARCH 15, 1999, the Disclosure Statement, the Plan, a copy
of this Order, ballots and voting instructions, any communications from the
Proponents and the Official Committees, the Special Note to Breast Implant and
Other Personal Injury Claimants, and related materials (collectively, the
"SOLICITATION PACKAGE") shall be transmitted by the Proponents to creditors,
equity security holders, other parties in interest and the United States
Trustee pursuant to the procedures and guidelines established by prior orders
of this Court. The Proponents shall file a certificate of service of the
Solicitation Package showing the date of mailing and to whom the same was
mailed.
3. APRIL 19, 1999 is fixed as the last day for filing and serving written
objections to confirmation of the Plan. The Court shall not consider any
objection to confirmation of the Plan if such objection is not timely filed
and properly served. Objections to confirmation of the Plan must be served so
that the objection is actually received by the following parties on or before
APRIL 19, 1999, with a copy of the proof of service attached to the timely
filed objection:
Counsel for the Debtor: Sheinfeld, Maley & Kay, P.C.
Attention: Barbara J. Houser
1700 Pacific Avenue, Suite 4400
Dallas, Texas 75201-4618
Counsel for Dow Chemical: Mayer, Brown & Platt
Attention: Richard Broude
1675 Broadway
New York, New York 10019-5820
Counsel for Corning: Shearman & Sterling
Attention: Debra McCullough
599 Lexington Avenue, Room 440
New York, New York 10022
(Disclosure Statement Exhibit) Page A-1
<PAGE>
Counsel for the Tort Committee: Kramer Levin Naftalis & Frankel LLP
Attention: Kenneth H. Eckstein
919 Third Avenue
New York, New York 10022-3850
Counsel for the Commercial Committee:
Davis Polk & Wardwell
Attention: Donald S. Bernstein
450 Lexington Avenue
New York, New York 10017
Counsel for the Physicians Committee:
Benesch, Friedlander, Coplan & Arnoff
Attention: H. Jeffrey Schwartz
2300 BP Tower
200 Public Square
Cleveland, Ohio 44114-2378
United States Trustee: Office of the United States Trustee
Attention: Leslie Berg
477 Michigan Avenue, Suite 1760
Detroit, Michigan 48226
4. MAY 14, 1999 AT 5:00 P.M. EASTERN TIME is fixed as the deadline by which
written acceptances or rejections of the Plan must be received by the
Balloting Agent, Corporate Election Services. Such ballots must be actually
received at the office of Corporate Election Services by the date and time
above in order to be counted as valid ballots.
5. The hearing on confirmation of the Plan shall be commenced on JUNE 28,
1999, AT 9:30 A.M. EASTERN TIME, in the United States Bankruptcy Courthouse,
111 First Street, Bay City, Michigan, or as relocated upon further notice, and
may be adjourned from time to time and from place to place by the Court either
by notice or by announcement by the Court at the time of the scheduled
hearing.
Signed this 4th day of February, 1999.
/s/ Arthur J. Spector
-----------------------------------------
Arthur J. Spector
United States Bankruptcy Judge
(Disclosure Statement Exhibit) Page A-2
<PAGE>
EXHIBIT "B"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
IN RE: (S)
(S) CASE NO. 95-20512
DOW CORNING CORPORATION (S) (CHAPTER 11)
(S)
DEBTOR (S) JUDGE ARTHUR J. SPECTOR
(S)
AMENDED JOINT PLAN OF REORGANIZATION
Barbara J. Houser Kenneth H. Eckstein
Craig J. Litherland Jeffrey S. Trachtman
David Ellerbe Philip Bentley
Thomas S. Henderson KRAMER LEVIN NAFTALIS &
SHEINFELD, MALEY & KAY, P.C. FRANKEL LLP
A PROFESSIONAL CORPORATION 919 Third Avenue
1700 Pacific Avenue, Suite 4400 New York, New York 10022-3850
Dallas, Texas 75201-4618
ATTORNEYS FOR OFFICIAL
ATTORNEYS FOR DOW CORNING CORPORATION COMMITTEE OF TORT CLAIMANTS
DATED: February 4, 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
INTRODUCTION............................................................... 1
ARTICLE ONE--DEFINITIONS................................................... 1
1.1 "Administrative Claim"............................................ 1
1.2 "Allowance Date".................................................. 1
1.3 "Allowed"......................................................... 1
1.4 "Assumed Third Party Claims"...................................... 1
1.5 "Assumed Warranties".............................................. 1
1.6 "Australia Breast Implant Settlement Claimants"................... 1
1.7 "Australia Breast Implant Settlement Option"...................... 1
1.8 "Australia Breast Implant Optional Settlement Fund"............... 1
1.9 "Bank Loan Claims"................................................ 2
1.10 "Bankruptcy Code"................................................. 2
1.11 "Bankruptcy Rules"................................................ 2
1.12 "Bar Date"........................................................ 2
1.13 "Bar Order"....................................................... 2
1.14 "B.C. Class Action Fund".......................................... 2
1.15 "B.C. Class Action Settlement Agreement".......................... 2
1.16 "B.C. Class Action Settlement Claimants".......................... 2
1.17 "Breast Implant".................................................. 2
1.18 "Breast Implant Claims"........................................... 2
1.19 "Breast Implant Other Claim"...................................... 2
1.20 "Breast Implant Personal Injury Claim"............................ 2
1.21 "Breast Implant User"............................................. 3
1.22 "Business Day".................................................... 3
1.23 "Case"............................................................ 3
1.24 "Case Interest Rate".............................................. 3
1.25 "Case Management Order"........................................... 3
1.26 "Children Direct Claims".......................................... 3
1.27 "Claimant"........................................................ 3
1.28 "Claimants' Advisory Committee"................................... 3
1.29 "Claims Administrator"............................................ 3
1.30 "Co-Defendant".................................................... 3
1.31 "Co-Defendant Claim".............................................. 3
1.32 "Commercial Committee"............................................ 3
1.33 "Confirmation Date"............................................... 3
1.34 "Confirmation Order".............................................. 3
1.35 "Consortium Claims"............................................... 3
1.36 "Convenience Claim"............................................... 3
1.37 "Corning"......................................................... 3
1.38 "Court"........................................................... 3
1.39 "Coverage-in-Place Policies"...................................... 4
1.40 "Covered Other Products".......................................... 4
1.41 "Current Obligations"............................................. 4
1.42 "DCC"............................................................. 4
1.43 "DCC Guaranty Claims"............................................. 4
1.44 "Debtor".......................................................... 4
1.45 "Debtor Actions".................................................. 4
1.46 "Debtor Action Recoveries"........................................ 4
1.47 "Debtor-Affiliated Parties"....................................... 4
1.48 "Depository Trust"................................................ 4
1.49 "Disallowed Claim"................................................ 4
1.50 "Disclosure Statement"............................................ 4
</TABLE>
Page i
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
<TABLE>
<C> <S> <C>
1.51 "Disputed Claim".................................................. 4
1.52 "Distribution Record Date"........................................ 4
1.53 "District Court".................................................. 4
1.54 "Domestic"........................................................ 4
1.55 "Domestic Health Insurer"......................................... 5
1.56 "Domestic Health Insurer Settlement Agreement".................... 5
1.57 "Dow Chemical".................................................... 5
1.58 "Dow Corning"..................................................... 5
1.59 "Effective Date".................................................. 5
1.60 "Environmental Laws".............................................. 5
1.61 "Estimated Amount"................................................ 5
1.62 "Estimation Order"................................................ 5
1.63 "Existing Debt Instruments"....................................... 5
1.64 "Family Member Claims"............................................ 5
1.65 "Final Order"..................................................... 5
1.66 "Finance Committee"............................................... 5
1.67 "Foreign"......................................................... 5
1.68 "Foreign Health Insurer".......................................... 5
1.69 "Funding Payment Agreement"....................................... 6
1.70 "General Contribution Claim"...................................... 6
1.71 "Government Payor"................................................ 6
1.72 "Government Payor Claim".......................................... 6
1.73 "Greater U.S.".................................................... 6
1.74 "Health Care Provider"............................................ 6
1.75 "Health Care Provider Claim"...................................... 6
1.76 "Health Insurer".................................................. 6
1.77 "Health Insurer Claim"............................................ 6
1.78 "Indenture"....................................................... 6
1.79 "Indenture Trustee"............................................... 6
1.80 "Insurance Allocation Agreement".................................. 6
1.81 "Insurance Company"............................................... 6
1.82 "Insurance Coverage".............................................. 6
1.83 "Insurance Debtor Actions"........................................ 6
1.84 "Insurance Debtor Action Recoveries".............................. 6
1.85 "Insurance Policy"................................................ 6
1.86 "Intercompany Claim".............................................. 6
1.87 "Interest"........................................................ 6
1.88 "Joint Ventures".................................................. 7
1.89 "Litigation Facility"............................................. 7
1.90 "Litigation Facility Agreement"................................... 7
1.91 "Litigation Protocol"............................................. 7
1.92 "London Market Insurers".......................................... 7
1.93 "LTCI Claims"..................................................... 7
1.94 "LTCI Indemnities"................................................ 7
1.95 "LTCI Other Claim"................................................ 7
1.96 "LTCI Personal Injury Claim"...................................... 7
1.97 "LTCI Products"................................................... 7
1.98 "LTCI User"....................................................... 7
1.99 "Mahlum Claimants"................................................ 7
1.100 "Mahlum Claims"................................................... 7
1.101 "Malpractice Claims".............................................. 7
1.102 "Miscellaneous Raw Material Claims"............................... 8
1.103 "Net Present Value" or "NPV"...................................... 8
1.104 "Non-Dow Corning Breast Implant".................................. 8
1.105 "Non-Dow Corning Breast Implant User"............................. 8
</TABLE>
Page ii
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
<TABLE>
<C> <S> <C>
1.106 "Non-Dow Corning Implant"......................................... 8
1.107 "Non-Dow Corning Implant User".................................... 8
1.108 "Non-Settling Co-Defendants"...................................... 8
1.109 "Non-Settling Health Care Providers".............................. 8
1.110 "Non-Settling Personal Injury Claimants".......................... 8
1.111 "Non-Settling Physicians"......................................... 8
1.112 "Official Committees"............................................. 8
1.113 "Ontario Breast Implant Settlement Agreement"..................... 8
1.114 "Ontario Class Action Fund"....................................... 8
1.115 "Ontario Class Action Settlement Claimants"....................... 9
1.116 "Other Claim"..................................................... 9
1.117 "Other Priority Claim"............................................ 9
1.118 "Other Products".................................................. 9
1.119 "Other Products Claims"........................................... 9
1.120 "Other Products Other Claims"..................................... 9
1.121 "Other Products Personal Injury Claims"........................... 9
1.122 "Other Products User"............................................. 9
1.123 "Participation Form".............................................. 9
1.124 "Personal Injury Claim"........................................... 9
1.125 "Personal Injury Claimant"........................................ 9
1.126 "Petition Date"................................................... 10
1.127 "Physician"....................................................... 10
1.128 "Physician Claim"................................................. 10
1.129 "Physicians' Committee"........................................... 10
1.130 "Plan"............................................................ 10
1.131 "Plan Documents".................................................. 10
1.132 "Plan Documents Filing Date"...................................... 10
1.133 "Plan Documents Review Center".................................... 10
1.134 "Plan Interest Rate".............................................. 10
1.135 "Prepetition Judgment Claim"...................................... 10
1.136 "Priority Tax Claim".............................................. 10
1.137 "Products Liability Claims"....................................... 10
1.138 "Proponents"...................................................... 10
1.139 "Pro Rata" or "Pro Rata Shares"................................... 10
1.140 "Public Debt Claims".............................................. 10
1.141 "Quebec Breast Implant Settlement Agreement"...................... 10
1.142 "Quebec Class Action Fund"........................................ 10
1.143 "Quebec Class Action Settlement Claimants"........................ 10
1.144 "Raw Material Breast Implant Claims".............................. 11
1.145 "Raw Material Breast Implant Personal Injury Claim"............... 11
1.146 "Raw Material Implant Claims"..................................... 11
1.147 "Raw Material Implant Personal Injury Claim"...................... 11
1.148 "Released Claim".................................................. 11
1.149 "Released Parties"................................................ 11
1.150 "Reorganized Debtor" or "Reorganized Dow Corning"................. 11
1.151 "Representatives"................................................. 11
1.152 "Retiree Benefit Claims".......................................... 11
1.153 "Secured Claim"................................................... 12
1.154 "Senior Note Supplemental Indenture".............................. 12
1.155 "Senior Notes".................................................... 12
1.156 "Settlement Facility"............................................. 12
1.157 "Settlement Facility Agreement"................................... 12
1.158 "Settling Co-Defendants".......................................... 12
1.159 "Settling Health Care Providers".................................. 12
1.160 "Settling Insurers"............................................... 12
</TABLE>
Page iii
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
<TABLE>
<C> <S> <C>
1.161 "Settling Personal Injury Claimants".............................. 12
1.162 "Settling Physicians"............................................. 12
1.163 "Shareholder--Affiliated Parties"................................. 12
1.164 "Shareholder Claim"............................................... 12
1.165 "Shareholders".................................................... 12
1.166 "Silicone Material Claims"........................................ 12
1.167 "Spitzfaden Claimants"............................................ 12
1.168 "Spitzfaden Claims"............................................... 12
1.169 "Subordinated Claim".............................................. 12
1.170 "Subordinated Note Supplemental Indenture"........................ 12
1.171 "Subordinated Notes".............................................. 13
1.172 "Subsidiaries".................................................... 13
1.173 "Tort Committee or Tort Claimants' Committee"..................... 13
1.174 "Unborn Breast Implant Claimants"................................. 13
1.175 "Unmanifested Claim".............................................. 13
1.176 "Unsecured Claim"................................................. 13
ARTICLE TWO--UNCLASSIFIED CLAIMS........................................... 13
2.1 Administrative Claims............................................. 13
2.2 Priority Tax Claims............................................... 13
ARTICLE THREE--CLASSIFICATION OF CLAIMS AND INTERESTS...................... 13
3.1 Classification.................................................... 13
3.2 Classes........................................................... 13
3.2.1Class 1--Other Priority Claims............................... 13
3.2.2Class 2--Secured Claims...................................... 13
3.2.3Class 3--Convenience Claims.................................. 13
3.2.4Class 4--Unsecured Claims that are not classified in any
other Class....................................................... 13
3.2.5Class 4A--Prepetition Judgment Claims........................ 13
3.2.6Class 4B--DCC Guaranty Claims................................ 14
3.2.7Class 5--Domestic Breast Implant Personal Injury Claims...... 14
3.2.8Class 6.1--Category 1 and 2 Foreign Breast Implant Personal
Injury Claims (other than Claims in Classes 6A, 6B,
6C and 6D)........................................... 14
3.2.9Class 6.2--Category 3 and 4 Foreign Breast Implant Personal
Injury Claims..................................................... 14
3.2.10Class 6A--Quebec Class Action Settlement Claims............. 14
3.2.11Class 6B--Ontario Class Action Settlement Claims............ 14
3.2.12Class 6C--B.C. Class Action Settlement Claims............... 14
3.2.13Class 6D--Australia Breast Implant Settlement Claims........ 14
3.2.14Class 7--Silicone Material Claims (other than Claims in
Classes 6B, 6C, 6D and 8)......................................... 14
3.2.15Class 8--Miscellaneous Raw Material Claims (other than
Claims in Classes 6B, 6C, 6D and 7)............................... 14
3.2.16Class 9--Domestic Other Products Personal Injury Claims..... 14
3.2.17 Class 10.1--Category 1 and 2 Foreign Other Products
Personal Injury Claims............................................ 14
3.2.18Class 10.2--Category 3 and 4 Foreign Other Products Personal
Injury Claims..................................................... 14
3.2.19 Class 11--Co-Defendant Claims.............................. 14
3.2.20 Class 12--Physician Claims................................. 14
3.2.21 Class 13--Health Care Provider Claims...................... 14
3.2.22 Class 14--Domestic Health Insurer Claims................... 14
3.2.23 Class 14A--Foreign Health Insurer Claims................... 14
3.2.24 Class 15--Government Payor Claims.......................... 14
3.2.25 Class 16--Shareholder Claims............................... 14
3.2.26 Class 17--General Contribution Claims...................... 14
3.2.27 Class 18--LTCI Personal Injury Claims...................... 14
3.2.28 Class 19--LTCI Other Claims................................ 14
3.2.29 Class 20--Intercompany Claims.............................. 14
3.2.30 Class 21--Subordinated Claims.............................. 14
</TABLE>
Page iv
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
<TABLE>
<C> <S> <C>
3.2.31 Class 22--Environmental Claims........................... 14
3.2.32 Class 23--Retiree Benefit Claims......................... 14
3.2.33 Class 24--Interests in the Debtor........................ 14
ARTICLE FOUR--TREATMENT OF CLAIMS NOT IMPAIRED UNDER THE PLAN............ 14
4.1 Other Priority Claims--Class 1.................................. 14
4.2 Secured Claims--Class 2......................................... 14
4.3 Convenience Claims--Class 3..................................... 15
4.4 DCC Guaranty Claims--Class 4B................................... 15
4.5 Environmental Claims--Class 22.................................. 15
4.6 Retiree Benefits Claims--Class 23............................... 15
ARTICLE FIVE--TREATMENT OF CLASSES IMPAIRED UNDER THE PLAN............... 15
5.1 Unsecured Claims--Class 4....................................... 15
5.2 Prepetition Judgment Claims--Class 4A........................... 15
Domestic and Foreign Personal Injury Claims--Classes 5 through
5.3 10.2............................................................ 16
5.4 Treatment of Classes 5 through 10.2............................. 16
5.4.1 Treatment of Settling Personal Injury Claimants........... 16
5.4.1.1Breast Implant Users..................................... 16
5.4.1.2Other Products Users..................................... 16
5.4.1.3Silicone Material Claims................................. 17
5.4.1.4Family Member Claims..................................... 17
5.4.2 Treatment of Non-Settling Personal Injury Claimants....... 17
5.5 Treatment of Class 6A........................................... 17
5.5.1 Treatment of Quebec Class Action Settlement Claimants..... 17
5.5.2 Treatment of Claims of Family Members of Quebec Class
Action Settlement Claimants..................................... 17
5.6 Treatment of Class 6B........................................... 17
5.6.1 Treatment of Ontario Class Action Settlement Claimants.... 17
5.6.2 Treatment of Claims of Family Members of Ontario Class
Action Settlement Claimants..................................... 18
5.7 Treatment of Class 6C........................................... 18
5.7.1 Treatment of B.C. Class Action Settlement Claimants....... 18
5.7.2 Treatment of Family Member Claims Related to Class 6C
Claims.......................................................... 18
5.8 Treatment of Class 6D........................................... 18
5.8.1 Treatment of Australia Breast Implant Settlement
Claimants....................................................... 18
5.8.2 Treatment of Family Member Claims Related to Class 6D
Claims.......................................................... 19
5.9 Funding the Settlement Facility, the Litigation Facility, the
Quebec Class Action Fund, the Ontario Class Action Fund, the
B.C. Class Action Fund and the Australia Breast Implant Optional
Settlement Fund for Payment of Personal Injury Claims........... 19
Treatment of Attorney's Fees of Settling Personal Injury
5.10 Claimants....................................................... 19
5.11 Treatment of Punitive Damages................................... 19
5.12 Venue for Liquidation of Foreign Personal Injury Claims......... 19
5.13 Other Claims Related to Implants Classes 11 through 17.......... 19
5.13.1 Claims in Class 11....................................... 19
5.13.2 Claims in Classes 12 and 13.............................. 20
5.13.3 Claims in Class 14....................................... 20
5.13.4 Claims in Class 14A...................................... 20
5.13.5 Claims in Classes 15 and 17.............................. 20
5.13.6 Claims in Class 16....................................... 21
5.14 LTCI-Related Claims Classes 18 and 19........................... 21
5.15 Intercompany Claims Class 20.................................... 21
5.16 Subordinated Claims Class 21.................................... 21
5.17 Holders of Interests Class 24................................... 21
5.18 Cramdown........................................................ 21
</TABLE>
Page v
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
<TABLE>
<C> <S> <C>
ARTICLE SIX--MEANS FOR IMPLEMENTATION OF PLAN............................. 21
6.1 Litigation Protocol.............................................. 21
Settlement Regarding Allocation of Insurance Proceeds and
6.2 Coverage......................................................... 21
6.3 Resolution of Other Claims to Insurance Settlement Proceeds...... 21
6.4 Settlement of Certain Foreign Claims............................. 22
6.5 Settlement with Domestic Health Insurers......................... 22
6.6 Filing and Payment of Allowed Administrative Claims.............. 22
6.7 Funding of Plan Payments......................................... 22
6.8 Resolution of Rights to Recover Against Settlement Facility...... 22
6.9 Payment to United States Trustee................................. 22
6.10 Closing.......................................................... 22
6.11 Debtor's Obligations at Closing.................................. 22
6.11.1 Payment, Cure and Reinstatement or Setoff of Allowed
Secured Claims................................................... 22
6.11.2 Satisfaction of Allowed Unsecured Claims.................. 23
6.11.3 Satisfaction of Personal Injury Claims (Other than Claims
in Classes 6A, 6B, 6C and 6D) and LTCI Other Claims.............. 23
6.11.4 Satisfaction of Personal Injury Claims in Class 6A........ 23
6.11.5 Satisfaction of Personal Injury Claims in Class 6B........ 23
6.11.6 Satisfaction of Personal Injury Claims in Class 6C........ 23
6.11.7 Satisfaction of Personal Injury Claims in Class 6D........ 23
6.11.8 Satisfaction of Other Claims Related to Implants.......... 23
6.11.9 Satisfaction of Settling Domestic Health Insurer Claims... 23
6.11.10Satisfaction of Allowed Subordinated Claims............... 23
6.11.11Contemporaneous Nature of Transactions at Closing......... 23
6.12 Documentation.................................................... 23
6.13 Merger; Choice of Law............................................ 23
6.14 Other Obligations of the Reorganized Debtor...................... 23
6.15 Board of Directors of the Reorganized Debtor..................... 24
6.16 Shareholders' Contribution....................................... 24
6.16.1Insurance Settlement....................................... 24
6.16.2Shareholder Revolving Credit Facility...................... 24
6.16.3Release of Shareholder Claims.............................. 24
6.16.4Shareholder Support of Plan................................ 24
6.16.5Mahlum and Spitzfaden Claims............................... 24
ARTICLE SEVEN--CONDITIONS PRECEDENT....................................... 25
7.1 Conditions to Confirmation....................................... 25
7.2 Conditions to the Effective Date................................. 25
7.3 Waiver of Conditions............................................. 25
7.4 Escrow of Payments to Settlement Facility Pending Appeal......... 25
ARTICLE EIGHT--EFFECTS OF PLAN CONFIRMATION............................... 26
8.1 Discharge........................................................ 26
8.2 Vesting.......................................................... 26
8.3 Release.......................................................... 26
8.4 Permanent Injunction Against Prosecution of Released Claims...... 28
8.5 Channeling Injunction for Certain Claims......................... 28
8.5.1Resolution and Trial Procedures............................. 28
8.5.2Trial Venue................................................. 29
8.5.3No Delay in Claim Resolution................................ 29
8.5.4Injunction.................................................. 29
Supplemental Release and Injunction for Certain Settling
8.6 Insurers......................................................... 29
8.7 Retention of Jurisdiction........................................ 29
8.8 Failure of Court to Exercise Jurisdiction........................ 30
8.9 Term of Injunction or Stay....................................... 30
8.10 Release of Official Committees and Estate Professionals.......... 30
8.11 Insurance Settlements Unaffected................................. 30
</TABLE>
Page vi
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
<TABLE>
<C> <S> <C>
ARTICLE NINE--TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES....... 30
9.1 Assumed Warranties............................................... 30
9.2 Assumed Collective Bargaining Agreements......................... 30
9.3 Assumed Employee and Retiree Benefit Plans....................... 30
9.4 General; Assumed if Not Rejected................................. 30
9.5 Claims for Contract Rejection.................................... 31
ARTICLE TEN--PROVISIONS RELATING TO PLAN DISTRIBUTIONS.................... 31
10.1 Distribution Shall be Made Only to Holders of Allowed Claims..... 31
10.2 Distributions to Holders of Allowed Bank Loan Claims............. 31
10.3 Distributions to Holders of Allowed Public Debt Claims........... 31
10.4 Distributions to Holders of Other Allowed Claims................. 32
10.5 Distribution Record Date; Suspension of Transfer of Claims....... 32
10.6 Surrender of Existing Debt Instruments........................... 32
10.7 Fractional Amounts............................................... 32
ARTICLE ELEVEN--MISCELLANEOUS PROVISIONS.................................. 32
11.1 Objection to Claims.............................................. 32
11.2 Survival of Certain Corporate Indemnification Obligations........ 32
11.3 Procedures for Distributions; Unclaimed Distributions of Certain
Claimants (Other Than Claimants in Classes 5 Through 19)......... 33
11.4 Modification of Plan............................................. 33
11.5 Payment Dates.................................................... 33
11.6 Severability..................................................... 33
11.7 Tax Identification Numbers....................................... 33
11.8 No Professional Fees or Expenses................................. 33
11.9 Post-Confirmation Professional Fees and Expenses................. 33
11.10 Headings......................................................... 33
11.11 Time............................................................. 34
11.12 Notices.......................................................... 34
11.13 Committees....................................................... 34
11.14 Successors and Assigns........................................... 34
</TABLE>
<TABLE>
<S> <C>
EXHIBITS TO JOINT
PLAN OF
REORGANIZATION:
</TABLE>
<TABLE>
<C> <C> <S> <C>
EXHIBIT "A": Settling Insurers....................................... A-1
EXHIBIT "B": Assumed Warranties Construction Products................ B-1
EXHIBIT "C": Calculation of Class 4 Commercial Claims................ C-1
EXHIBIT "D": Summary of Terms of Senior Notes........................ D-1
</TABLE>
Page vii
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
INTRODUCTION
Dow Corning Corporation, a Michigan corporation, the Debtor in the above-
captioned chapter 11 Case, and the Official Committee of Tort Claimants (the
"TORT COMMITTEE") propose the following Amended Joint Plan of Reorganization
pursuant to the provisions of chapter 11 of the Bankruptcy Code. For purposes
hereof, any term used in an initially capitalized form in this Plan of
Reorganization shall have the defined meaning ascribed to it in either section
101 of the Bankruptcy Code or Article One hereof unless the context otherwise
requires.
Reference is hereby made to the Disclosure Statement, as hereinafter
defined, of the Debtor, which discusses the history of the Debtor, its
business, management, properties, and other assets. The Disclosure Statement
also provides a summary of this Plan. YOU ARE URGED TO READ THE DISCLOSURE
STATEMENT WITH CARE IN EVALUATING HOW THIS PLAN WILL AFFECT YOUR CLAIM(S).
ARTICLE ONE
DEFINITIONS
Unless the context otherwise requires, when used in this Plan, the
following terms shall have the respective meanings set forth below. Whenever
the context requires, such terms shall include the singular as well as the
plural number, the masculine gender shall include the feminine, and the
feminine gender shall include the masculine. Any specific references to
promissory notes, deeds of trust, or other instruments of indebtedness or
security shall include any amendments, modifications and extensions thereto.
Nothing contained in this Plan shall constitute an admission or denial by any
party of either liability for or the validity, priority, or extent of any
Claim, Lien, or Security Interest asserted against the Debtor or against any
third party.
1.1"ADMINISTRATIVE CLAIM" means a Claim for payment of an administrative
expense of a kind specified in section 503(b) of the Bankruptcy Code and
referred to in section 507(a)(1) of the Bankruptcy Code including, without
limitation, the actual, necessary costs and expenses of preserving the
Debtor's estate and operating the Debtor's business including Current
Obligations, compensation for professional services and reimbursement of
expenses awarded under sections 330(a) or 331 of the Bankruptcy Code, and all
fees and charges assessed against the Debtor's estate under chapter 123 of
Title 28, United States Code.
1.2"ALLOWANCE DATE" means the date on which a Claim becomes an Allowed
Claim.
1.3"ALLOWED" means, with respect to a Claim, all or a portion thereof (a)
that has been agreed to by the Claimant and the Debtor, (b) that has been
allowed by Final Order, (c) that has been estimated for purposes of allowance
pursuant to section 502(c) of the Bankruptcy Code, (d) that either (i) is
listed in the schedules, other than a Claim that is listed as "disputed,"
"contingent," or "unliquidated," or (ii) the proof of which has been timely
filed pursuant to the Bar Order or filed pursuant to any other Final Order, or
otherwise deemed timely filed under applicable law, and as to which either (x)
no objection to its allowance has been filed within the periods of limitation
fixed by this Plan or by any Final Order, or (y) any objection to its
allowance has been settled or withdrawn or has been decided by a Final Order,
or (z) with respect to Products Liability Claims treated therein, has been
approved for payment pursuant to the Settlement Facility Agreement or the
Litigation Facility Agreement, or (e) that is expressly allowed in this Plan.
1.4"ASSUMED THIRD PARTY CLAIMS" is defined in section 8.5 hereof.
1.5"ASSUMED WARRANTIES" means the warranty obligations of DCC with respect
to those products itemized in EXHIBIT "B" to this Plan.
1.6"AUSTRALIA BREAST IMPLANT SETTLEMENT CLAIMANTS" means the holders of
Foreign Breast Implant Personal Injury Claims, Silicone Material Claims and
Raw Material Breast Implant Claims who currently reside in Australia or who
received Breast Implants in Australia and who timely elect to participate in
Class 6D.
1.7"AUSTRALIA BREAST IMPLANT SETTLEMENT OPTION" means that certain
agreement, styled the Dow Corning Settlement Option Regarding the Voluntary
Australian Subclass, pursuant to which the treatment of Class 6D Claimants
will be implemented.
1.8"AUSTRALIA BREAST IMPLANT OPTIONAL SETTLEMENT FUND" means the fund
established pursuant to the Australia Breast Implant Settlement Option for the
payment of Claims of Australia Breast Implant Settlement Claimants.
Page 1
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.9"BANK LOAN CLAIMS" means those Claims arising pursuant to agreements
between the Debtor and (a) Bank of New York dated February 18, 1994, (b) Bank
of Tokyo Trust Company dated May 26, 1994, (c) Comerica Bank dated February
24, 1994, (d) Credit Lyonnais dated November 16, 1992, and amended
November 16, 1992, and December 31, 1992, (e) First National Bank of Chicago
dated July 12, 1993, (f) Nippon Life Insurance dated October 5, 1988, and (g)
Bank of America National Trust and Savings Association as Administrative Agent
dated November 3, 1993.
1.10"BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as amended,
principally codified in 11 U.S.C. (S) 101 et seq.
1.11"BANKRUPTCY RULES" means the Rules and Forms of Practice and Procedures
in Bankruptcy promulgated under 28 U.S.C. (S) 2075, as amended, and the local
rules of the Court, as applicable to chapter 11 cases, together with all
amendments and modifications from time to time thereto.
1.12"BAR DATE" means January 15, 1997 (or February 14, 1997, for Foreign
Claimants who continuously maintained their residence outside of the United
States, its territories and Puerto Rico during the period from September 15,
1996, through November 15, 1996), the date set in the Bar Order as the last
day for filing any and all proofs of claim in this Case, or such other date as
may apply to a particular Claim pursuant to an order of the Court.
1.13"BAR ORDER" means the order of the Court, entered on July 29, 1996,
setting the Bar Date and approving the method of notification of the Bar Date.
1.14"B.C. CLASS ACTION FUND" means the fund established pursuant to the
B.C. Class Action Settlement Agreement for the payment of Claims of B.C. Class
Action Settlement Claimants.
1.15"B.C. CLASS ACTION SETTLEMENT AGREEMENT" means that certain agreement,
styled the Dow Corning British Columbia and Other Provinces Breast Implant
Litigation Settlement Agreement, between the B.C. Class Action Settlement
Claimants (which potentially includes Claimants who reside in provinces of
Canada other than Quebec and Ontario), as plaintiffs, and Dow Corning and
others, as defendants, pursuant to which the class action pending in the
British Columbia court is resolved.
1.16"B.C. CLASS ACTION SETTLEMENT CLAIMANTS" means the parties designated
as "Settling Claimants" in the B.C. Class Action Settlement Agreement.
1.17"BREAST IMPLANT" means all silicone gel and saline-filled breast
implants with silicone elastomer envelopes manufactured and either sold or
otherwise distributed by the Debtor.
1.18"BREAST IMPLANT CLAIMS" means all Claims (including Claims asserted by
or on behalf of Claimants with Unmanifested Claims and Unborn Breast Implant
Claimants), demands, suits, causes of actions, proceedings or any other rights
or asserted rights to payment heretofore, now or hereafter asserted against
the Debtor, any Released Parties, the Settlement Facility or the Litigation
Facility, based upon or in any manner arising from or related to (a) a Breast
Implant, (b) the research and development, manufacture, distribution,
advertising, sale, provision, recommendation, insertion, use or removal of any
raw materials and/or finished products manufactured by the Debtor, comprising
all or part of a Breast Implant, (c) the processing, adjustment, defense,
settlement, payment, negotiation, or handling of any Claims, demands, suits,
proceedings or causes of action based upon or relating in any way to a Breast
Implant, or (d) the failure to warn, disclose or provide information
concerning, the alleged fraud or misrepresentation regarding, or the failure
to take remedial action with respect to, a Breast Implant, including, without
limitation, (i) those for death or personal injuries, including emotional
distress, (ii) those of any Person against whom any claim, demand, proceeding,
suit or cause of action based upon or in any manner arising from or relating
to any of the matters enumerated or described in (a), (b), (c) and/or (d)
above has been, is or may be asserted (including, without limitation, rights
of indemnity, whether contractual or otherwise, contribution Claims and
subrogation Claims), (iii) those for damages, including punitive damages, (iv)
those for attorneys' fees and other expenses, fees or costs, (v) those for any
possible economic loss or loss of consortium, (vi) those for damage to
reputation, and (vii) those for any equitable remedy, but excluding Claims (x)
brought by the Debtor, its Joint Ventures or Subsidiaries and (y) any such
Claims which were the subject of prepetition final judgments or legally
enforceable settlement agreements, which Claims shall be treated as Unsecured
Claims in this Plan. In this Plan, Breast Implant Claims are either Breast
Implant Personal Injury Claims or Breast Implant Other Claims, as those terms
are defined herein.
1.19"BREAST IMPLANT OTHER CLAIM" means any Breast Implant Claim asserted by
the holder of an Other Claim.
1.20"BREAST IMPLANT PERSONAL INJURY CLAIM" means any Breast Implant Claim
asserted by a Personal Injury Claimant.
Page 2
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.21"BREAST IMPLANT USER" means any Person who at any time elected to
undergo or otherwise underwent surgery for placement of a Breast Implant
regardless of whether such Person is now living or using a Breast Implant.
1.22"BUSINESS DAY" means any day other than a Saturday, Sunday or "Legal
Holiday," as that term is defined in Bankruptcy Rule 9006(a).
1.23"CASE" means the case under chapter 11 of the Bankruptcy Code commenced
by DCC on May 15, 1995.
1.24"CASE INTEREST RATE" means, for any Unsecured Claim, the Federal
judgment rate provided in 28 U.S.C. (S) 1961 in effect on the Petition Date
(6.28%), compounded annually on each anniversary of the Petition Date.
1.25"CASE MANAGEMENT ORDER" means the order to be entered by the District
Court pursuant to which the Claims of Non-Settling Personal Injury Claimants
shall be resolved, which order shall be in substantially the form negotiated
and agreed to by the Debtor, the Shareholders and the Tort Committee and
attached as an exhibit to the Litigation Facility Agreement.
1.26"CHILDREN DIRECT CLAIMS" means the Personal Injury Claims asserted by
or on behalf of children of Breast Implant Users, Other Products Users and
Non-Dow Corning Breast Implant Users alleging that such Claims arose from
exposure to the mother's Breast Implants, Other Product, Non-Dow Corning
Breast Implants, or the component parts thereof.
1.27"CLAIMANT" means a Person or Governmental Unit that asserts a Claim
against Dow Corning.
1.28"CLAIMANTS' ADVISORY COMMITTEE" means those persons selected pursuant
to the terms of the Settlement Facility Agreement to represent the interests
of Personal Injury Claimants after the Effective Date.
1.29"CLAIMS ADMINISTRATOR" means that Person responsible to oversee the
processing and payment of Claims by the Settlement Facility in accordance with
the terms of the Settlement Facility Agreement.
1.30"CO-DEFENDANT" means a Person, other than a Shareholder-Affiliated
Party, Physician, Health Insurer, Government Payor or Health Care Provider,
who is named and/or aligned as a co-defendant with the Debtor in any legal
proceeding in any way relating to a Breast Implant, a Non-Dow Corning Breast
Implant, or Other Product, including, without limitation, Baxter Healthcare
Corp., Baxter International, Inc., Minnesota Mining & Manufacturing Co., and
Bristol-Myers Squibb Company.
1.31"CO-DEFENDANT CLAIM" means any Other Claim asserted by a Co-Defendant.
1.32"COMMERCIAL COMMITTEE" means the Official Committee of Unsecured
Creditors for the Debtor appointed by the United States Trustee to represent
the interests of creditors asserting Unsecured Claims against the Debtor in
the Case, as such committee may be reconstituted from time to time.
1.33"CONFIRMATION DATE" means the date of the entry of the Confirmation
Order.
1.34"CONFIRMATION ORDER" means the order(s) of the Court and/or the
District Court confirming this Plan.
1.35"CONSORTIUM CLAIMS" means the Claims asserted by the spouse, parents,
child or other individual relating to or claiming some personal relationship
to a Breast Implant User derivative of the Claims of the Breast Implant User
to the extent such Claims are recognized by applicable state or provincial
law.
1.36"CONVENIENCE CLAIM" means an Unsecured Claim (other than a Public Debt
Claim) in an amount of $10,000.00 or less, inclusive of interest accrued
thereon after the Petition Date through the later to occur of the Effective
Date or the Allowance Date at the Case Interest Rate; provided, that if the
holder of an Unsecured Claim in an amount greater than $10,000.00 shall make
an election to reduce such Claim to $10,000.00, such Claim shall be treated as
a Convenience Claim for all purposes. Such election shall be made on the
ballot for accepting or rejecting the Plan, completed and returned within the
time fixed by order of the Court. Making this election shall be deemed to be a
waiver by such electing holder of any right to participate in Class 4 as to
any and all Claims held by such holder.
1.37"CORNING" means Corning Incorporated.
1.38"COURT" means the United States Bankruptcy Court for the Eastern
District of Michigan, Northern Division, or any court or tribunal subsequently
constituted to adjudicate matters arising under the Bankruptcy Code or any
other bankruptcy laws promulgated by the Congress of the United States.
Page 3
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.39"COVERAGE-IN-PLACE POLICIES" means those general liability or products
liability insurance policies naming DCC as an insured in effect on or before
the Confirmation Date upon which any claim may be made with respect to any
Products Liability Claim and with respect to which coverage remains available
for such Claims as of the Effective Date of the Plan.
1.40 "COVERED OTHER PRODUCTS" means those "Other Products" listed in
Schedule I, Part II of the Claims Resolution Procedures, attached as Annex "A"
to the Settlement Facility Agreement, for which settlements are available
under the Settlement Facility.
1.41"CURRENT OBLIGATIONS" means (a) all accounts payable and other
liabilities or obligations of the Debtor that arose or accrued in the ordinary
course of the Debtor's business during the Case and (b) any taxes that were
incurred subsequent to the Petition Date and became or become legally due and
payable by the Debtor subsequent to the Petition Date and prior to the
Effective Date.
1.42"DCC" means Dow Corning.
1.43"DCC GUARANTY CLAIMS" means the Claims arising with respect to guaranty
agreements entered into between DCC and various lenders, guaranteeing certain
of the financial obligations of certain of the Subsidiaries.
1.44"DEBTOR" means Dow Corning.
1.45"DEBTOR ACTIONS" means any and all claims, causes of action, and
enforceable rights of the Debtor against third parties (other than Insurance
Debtor Actions) including, without limitation, claims of the Debtor for
recovery of or based upon or in any manner arising from or related to damages,
general or exemplary (or both), or other relief relating to (or based upon)
(a) indebtedness owing to the Debtor, (b) fraud, negligence, gross negligence,
willful misconduct, or any other tort actions, (c) breaches of contract, (d)
violations of federal or state securities laws, (e) violations of applicable
corporate laws, (f) breaches of fiduciary or agency duties, (g) disregard of
the corporate form or piercing the corporate veil or other liability theories,
and (h) any other claim of the Debtor to the extent not specifically
compromised or released pursuant to this Plan or an agreement referred to, or
incorporated into this Plan.
1.46"DEBTOR ACTION RECOVERIES" means the rights of the Debtor to any and
all proceeds or other relief from (a) any award, judgment, relief, or other
determination rendered or made as to any Debtor Action or (b) any compromise
or settlement of any Debtor Action.
1.47"DEBTOR-AFFILIATED PARTIES" means the Debtor, the Reorganized Debtor,
the Joint Ventures and Subsidiaries, and their respective Representatives.
1.48"DEPOSITORY TRUST" means the trust established pursuant to the
Settlement Facility Agreement for the purpose of (i) receiving, holding and
investing funds provided pursuant to the Settlement Facility Agreement, (ii)
issuing payments and disbursing funds as provided in the Settlement Facility
Agreement and (iii) qualifying as a "Qualified Settlement Fund" pursuant to
applicable provisions of the Internal Revenue Code.
1.49"DISALLOWED CLAIM" means any Claim (or any portion thereof) against the
Debtor that has been disallowed pursuant to (a) Final Order, (b) final
determination pursuant to the terms of the Settlement Facility or the
Litigation Facility, or (c) the applicable provisions of this Plan and/or the
Bankruptcy Code including, without limitation, any indemnity Claims,
contribution Claims or subrogation Claims disallowed pursuant to section
502(e) or section 509, respectively, of the Bankruptcy Code.
1.50"DISCLOSURE STATEMENT" means the Amended Joint Disclosure Statement
regarding this Plan, including all annexes, exhibits, and schedules attached
thereto and referenced therein (and the exhibits, if any, to any such annexes,
exhibits, and schedules), prepared by the Proponents pursuant to section 1125
of the Bankruptcy Code and approved by the Court, as such Disclosure Statement
may be amended and modified from time to time.
1.51"DISPUTED CLAIM" means any Claim against the Debtor to which an
objection is timely filed as provided in section 11.1 of this Plan or that is
listed as disputed on the Debtor's schedules and that has not been resolved
either by Final Order or by final determination of entitlement to payment
pursuant to the terms of the Settlement Facility Agreement or the Litigation
Facility Agreement.
1.52"DISTRIBUTION RECORD DATE" means the close of business on the Effective
Date.
1.53"DISTRICT COURT" means the United States District Court for the Eastern
District of Michigan.
1.54"DOMESTIC" means, with respect to a Personal Injury Claim, a Claim that
is not a Foreign Claim.
Page 4
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.55"DOMESTIC HEALTH INSURER" means a Health Insurer domiciled in the
United States who (a) has provided payments, benefits or coverage to any
Claimant with respect to a Personal Injury Claim, which Claimant was at such
time a resident of the Greater U.S. or (b) has provided payments, benefits or
coverage to any Claimant pursuant to any insurance policy, plan, or program
governed by the laws of the Greater U.S. or subdivisions thereof.
1.56"DOMESTIC HEALTH INSURER SETTLEMENT AGREEMENT" means that certain
agreement styled the Domestic Health Insurer/Dow Corning Corporation
Settlement Agreement between Dow Corning and certain Domestic Health Insurers
pursuant to which Domestic Health Insurers are provided an opportunity to
compromise and settle their claims.
1.57"DOW CHEMICAL" means The Dow Chemical Company.
1.58"DOW CORNING" means Dow Corning Corporation, a Michigan corporation,
the debtor and debtor-in-possession in the Case, and including any entities
merged with or into it as of the Petition Date.
1.59"EFFECTIVE DATE" means the first Business Day (a) that is at least 11
days after the Confirmation Date; (b) on which no stay of the Confirmation
Order is in effect; and (c) on which all conditions to effectiveness of this
Plan have occurred or been waived.
1.60"ENVIRONMENTAL LAWS" means (a) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. (S) 9601 et seq., (b)
the Resource Conservation and Recovery Act, as amended by the Hazardous and
Solid Waste Amendment of 1984, 42 U.S.C. (S) 6901 et seq., (c) the Clean Air
Act, 42 U.S.C. (S) 7401 et seq., (d) the Clean Water Act of 1977, 33 U.S.C.
(S) 1251 et seq., (e) the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et
seq., (f) all other laws (including the common law) of any Governmental Units
relating to air pollution, water pollution, noise control and/or the handling,
discharge, existence, disposal or recovery of on-site or off-site hazardous,
toxic or dangerous waste, substances or materials, as each of the foregoing
may be amended from time to time, and (g) the ordinances, rules, regulations,
orders, notices of violation, requests, demands and requirements issued or
promulgated by such Governmental Units in connection with such statutes and
laws.
1.61"ESTIMATED AMOUNT" means the maximum amount at which the Court or the
District Court, pursuant to section 502(c) of the Bankruptcy Code, at the
request of the Proponents estimates any Claim or class of Claims against the
Debtor that is contingent, unliquidated or disputed, including, without
limitation, any Personal Injury Claim or class thereof for the purpose of (a)
allowance, (b) distribution, (c) confirming this Plan pursuant to section 1129
of the Bankruptcy Code, (d) voting to accept or reject this Plan pursuant to
section 1126 of the Bankruptcy Code and Bankruptcy Rule 3018(a), or (e) any
other proper purpose.
1.62"ESTIMATION ORDER" means an order of the Court or the District Court
that determines, among other things, the Estimated Amount of any Claim or
class of Claims against the Debtor for any purpose.
1.63"EXISTING DEBT INSTRUMENTS" means all promissory notes, debentures and
any other instruments evidencing indebtedness of the Debtor on the Effective
Date for money borrowed prior to the Petition Date.
1.64"FAMILY MEMBER CLAIMS" shall mean, collectively, all applicable
Consortium Claims and Children Direct Claims.
1.65"FINAL ORDER" means an order, judgment, ruling or decree issued by the
Court, the District Court or other court having jurisdiction of the same, that
has not been reversed, stayed, modified or amended, and as to which the time
to appeal has expired, and as to which no appeal, reargument, petition for
certiorari, or rehearing is pending or as to which any right to appeal,
reargue, petition for certiorari or seek rehearing has been waived in writing,
or if an appeal, reargument, petition for certiorari, or rehearing thereof has
been denied, the time to take any further appeal or to seek certiorari or
further reargument or rehearing has expired.
1.66"FINANCE COMMITTEE" means the committee comprised of the Claims
Administrator, the Special Master (of the Litigation Facility), and the
Appeals Officer (of the Settlement Facility) that is responsible for financial
management for the Settlement Facility, including preparing recommendations to
the District Court regarding the release of funds for payment of Claims
resolved in the Settlement Facility and the Litigation Facility.
1.67"FOREIGN" means, with respect to a Personal Injury Claim, a Claim that
(a) is held by a Person who is neither a United States citizen nor a resident
alien of the Greater U.S., and (b) arises from a medical procedure performed
outside the Greater U.S.
1.68"FOREIGN HEALTH INSURER" means a Health Insurer which is not a Domestic
Health Insurer.
Page 5
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.69"FUNDING PAYMENT AGREEMENT" means that agreement executed among the
Reorganized Debtor, the Shareholders, the Settlement Facility, the Litigation
Facility and the Claimants' Advisory Committee which provides for the
Reorganized Debtor's obligation to fund the Settlement Facility and/or the
Litigation Facility from the Effective Date through and including the date of
termination of the Settlement Facility and/or the Litigation Facility.
1.70"GENERAL CONTRIBUTION CLAIM" means any Other Claim asserted by a Person
other than a Co-Defendant, a Health Insurer, a Physician, a Health Care
Provider, a Government Payor or a Shareholder-Affiliated Party.
1.71"GOVERNMENT PAYOR" means a Governmental Unit that has paid or provided
medical benefits with respect to a Personal Injury Claim. For purposes of this
definition, "Governmental Unit" shall include, without limitation and in
addition to those entities identified in section 101(27) of the Bankruptcy
Code, any governmental program that pays for claims by Physicians or Health
Care Providers on behalf of Personal Injury Claimants who qualify to receive
benefits under such program.
1.72"GOVERNMENT PAYOR CLAIM" means any Other Claim asserted by a Government
Payor.
1.73"GREATER U.S." means the geographical areas comprised of the United
States, Puerto Rico, any of the territories or possessions of the United
States, and any United States military facility.
1.74"HEALTH CARE PROVIDER" means any Person, other than a Physician, that
is a hospital, health care facility or like provider, or other health care
professional.
1.75"HEALTH CARE PROVIDER CLAIM" means any Other Claim asserted by a Health
Care Provider.
1.76"HEALTH INSURER" means a Person, including a health benefit plan, who
provides or has provided payments, benefits or coverage pursuant to an
insurance policy or program to any Claimant with respect to a Personal Injury
Claim.
1.77"HEALTH INSURER CLAIM" means any Other Claim asserted by a Health
Insurer.
1.78"INDENTURE" means the master indenture between Reorganized DCC and the
Indenture Trustee, containing terms and conditions usual and customary for
instruments of that type, under which, together with the Senior Note
Supplemental Indenture and the Subordinated Note Supplemental Indenture, the
Senior Notes and the Subordinated Notes will be issued.
1.79"INDENTURE TRUSTEE" means the Person designated in the Indenture to
serve as trustee for the holders of the Senior Notes and the Subordinated
Notes.
1.80"INSURANCE ALLOCATION AGREEMENT" means that agreement between the
Debtor and Dow Chemical dated as of February 16, 1998, as thereafter amended.
1.81"INSURANCE COMPANY" means any insurance company or insurance broker
providing Insurance Coverage to DCC for liability arising from or related to
Products Liability Claims.
1.82"INSURANCE COVERAGE" means the insurance coverage, not reduced to
settlement proceeds, available to DCC with respect to Products Liability
Claims under any Insurance Policy.
1.83"INSURANCE DEBTOR ACTIONS" means all claims, causes of action and
enforceable rights of DCC against any Insurance Company arising from or
related to (a) any such Insurance Company's failure to provide Insurance
Coverage under any Insurance Policy; (b) the refusal of any Insurance Company
to compromise and settle any claim pursuant to any such Insurance Policy; or
(c) the interpretation or enforcement of the terms of any such Insurance
Policy.
1.84"INSURANCE DEBTOR ACTION RECOVERIES" means the rights of DCC to any and
all proceeds, including any interest or income earned thereon, and other
relief from (a) any award, judgment, relief, or other determination entered or
made as to any Insurance Debtor Actions; (b) any and all amounts payable by a
settling Insurance Company under any insurance settlement agreement; and (c)
any and all proceeds of any Insurance Policy paid or payable with respect to
Products Liability Claims.
1.85"INSURANCE POLICY" means any general liability or products liability
insurance policy naming DCC as an insured in effect on or before the
Confirmation Date upon which any Claim may be made with respect to any
Products Liability Claim.
1.86"INTERCOMPANY CLAIM" means any claim held by the Debtor against one of
the Joint Ventures or one of the Subsidiaries or any Claim held by one of the
Joint Ventures or by one of the Subsidiaries against the Debtor.
1.87"INTEREST" means the common stock in the Debtor.
Page 6
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.88"JOINT VENTURES" means, collectively, (a) Hemlock Semiconductor
Corporation, (b) SDC Technologies, Inc. (and its subsidiaries), and (c) Dow
Corning Toray Silicone Co., Ltd.
1.89"LITIGATION FACILITY" means the Claims resolution facility to be
established in accordance with section 6.11.3 of this Plan wherein Claims
asserted by Non-Settling Personal Injury Claimants, certain Claims in Classes
11 through 17, and LTCI Claims will be administered.
1.90"LITIGATION FACILITY AGREEMENT" means that agreement between the
Reorganized Debtor and the DCC Litigation Facility, Inc. pursuant to which the
Litigation Facility shall be established and governed.
1.91"LITIGATION PROTOCOL" means the litigation procedures described in
section 6.1 of the Plan.
1.92"LONDON MARKET INSURERS" means those certain underwriters at Lloyd's,
London and those certain London Market Insurance Companies who are party to
that Settlement Agreement Between Dow Corning Corporation and certain London
Market Insurers approved by order of the Court entered on March 25, 1996.
1.93"LTCI CLAIMS" means all Claims, demands, suits, causes of action,
proceedings or any other rights or asserted rights to payment heretofore, now
or hereafter asserted against the Debtor, any Released Parties, or the
Litigation Facility, whether or not reduced to judgment, based upon or in any
manner arising from or related to (a) LTCI Products, (b) the research and
development, manufacture, distribution, advertising, sale provision,
recommendation, insertion, use or removal of any raw materials and/or finished
products manufactured by the Debtor, comprising all or part of an LTCI
Product, (c) the processing, adjustment, defense, settlement, payment,
negotiation or handling of any claims, demands, suits, proceedings or causes
of action based upon or relating in any way to the LTCI Products, or (d) the
failure to warn, disclose or provide information concerning, the alleged fraud
or misrepresentation regarding, or the failure to take remedial action with
respect to, the LTCI Products, including, without limitation, (i) those for
death or personal injuries, including emotional distress, (ii) those of
Persons against whom any claim, demand, proceeding, suit or cause of action
based upon or in any manner arising from or relating to any of the matters
enumerated or described in (a), (b), (c) and/or (d) above has been, is or may
be asserted (including, without limitation, rights of indemnity, whether
contractual or otherwise, and contribution Claims and subrogation Claims),
(iii) those for damages, including punitive damages, (iv) those for attorneys'
fees and other expenses, fees or costs, (v) those for any possible economic
loss or loss of consortium, (vi) those for damage to reputation, and (vii)
those for any equitable remedy, but excluding those claims brought by the
Debtor, its Joint Ventures, or Subsidiaries. In this Plan, LTCI Claims are
either LTCI Personal Injury Claims or LTCI Other Claims, as those terms are
defined herein.
1.94"LTCI INDEMNITIES" means the contractual indemnity agreements (and
related guaranty agreements) from the manufacturers and/or distributors of
LTCI Products, indemnifying DCC against the LTCI Claims.
1.95"LTCI OTHER CLAIM" means any LTCI Claim asserted by an Other Claimant.
1.96"LTCI PERSONAL INJURY CLAIM" means any LTCI Claim asserted by a
Personal Injury Claimant.
1.97"LTCI PRODUCTS" means long-term contraceptive implants containing
levonorgestrel.
1.98"LTCI USER" means any Person who at any time has utilized an LTCI
Product regardless of whether such Person is now living or now using an LTCI
Product.
1.99"MAHLUM CLAIMANTS" means all Personal Injury Claimants who have Mahlum
Claims.
1.100"MAHLUM CLAIMS" means all Personal Injury Claims against a
Shareholder-Affiliated Party held by the plaintiffs in Mahlum v. Dow Corning
Corp., et al., Case No. CV 93-05941 (Nev. Dist. Ct., Washoe Co., Nevada).
1.101"MALPRACTICE CLAIMS" means Claims that are not affected by the
releases of Settling Physicians and Settling Health Care Providers under the
Plan. Solely for purposes of Sections 8.3 and 8.5 of the Plan, "Malpractice
Claim" shall have the meaning given to that term by applicable non-bankruptcy
law, except that it shall exclude those Claims by Personal Injury Claimants
against Settling Physicians and Settling Health Care Providers that are based
on, related to, arising out of, or derived from injuries, illnesses or
conditions allegedly resulting from (i) characteristics or alleged
characteristics (as defined below) of Breast Implants or Other Products
(including component parts thereof), silicone or other implant materials; (ii)
failure to warn, make disclosure or provide adequate information to obtain
informed consent, regarding the characteristics or alleged characteristics of
Breast Implants, Other Products, silicone or other implant materials; or (iii)
failure to use an alternative breast implant or other product, or sale,
provision, distribution or selection of Breast Implants, Other Products,
silicone or other implant materials, where the Claim is based on the
characteristics or alleged characteristics of Breast
Page 7
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Implants or Other Products. For the sole purpose of interpreting and applying
this definition, the following are the "alleged characteristics" of Breast
Implants and Other Products:
(1)that gel can bleed or leak through the shell of the Breast Implant;
(2)that gel can migrate within the body;
(3)that Breast Implant or Other Product materials will degrade or
deteriorate;
(4)that Breast Implants can break or rupture even though they are not
subjected to significant trauma, surgical or otherwise;
(5)that Breast Implants impede detection of other diseases, including,
without limitation, breast cancer; and
(6)that Breast Implants, Other Products, silicone or other implant
materials cause diseases or combinations of conditions, symptoms or
injuries, or are otherwise inherently defective.
Notwithstanding any of the foregoing, Malpractice Claims will not exclude
claims for any injuries, diseases, illnesses or conditions allegedly resulting
from or claimed as an element of damages in connection with (x) leakage or
rupture of a Breast Implant or other complication or injury resulting from
performance of implant surgery or other medical procedures in breach of the
applicable standard of care; (y) express misrepresentation of the risks
disclosed in the applicable product inserts; provided, however, nothing herein
shall be interpreted to imply that misrepresentation of risks disclosed in
applicable product inserts necessarily constitutes a breach of the applicable
standard of care or a failure to obtain informed consent; or (z) the
implantation of loose silicone gel by the Settling Physician.
1.102"MISCELLANEOUS RAW MATERIAL CLAIMS" means (i) all Raw Material Implant
Claims and (ii) those Raw Material Breast Implant Claims which are not
classified in Class 7.
1.103"NET PRESENT VALUE" OR "NPV" means the value of an amount of money to
be paid in the future or over a period of time that has been adjusted or
discounted to reflect that amount as of a single earlier date. When used in
this Plan, the discount rate for calculating Net Present Value is 7%
compounded annually; and the date used for such adjustment is the Effective
Date.
1.104"NON-DOW CORNING BREAST IMPLANT" means all silicone gel and saline-
filled breast implants made with silicone and/or polyurethane envelopes
manufactured and sold by third parties for which the Debtor manufactured
and/or supplied silicone raw materials.
1.105"NON-DOW CORNING BREAST IMPLANT USER" means any Person who at any time
has utilized only a Non-Dow Corning Breast Implant regardless of whether such
Person is now living or now using a Non-Dow Corning Breast Implant.
1.106"NON-DOW CORNING IMPLANT" means all medical devices (other than Non-
Dow Corning Breast Implants) intended for implant into humans manufactured and
sold by third parties for which the Debtor manufactured and/or supplied
silicone raw materials.
1.107"NON-DOW CORNING IMPLANT USER" means any Person who at any time has
utilized a Non-Dow Corning Implant regardless of whether such Person is now
living or now using a Non-Dow Corning Implant.
1.108"NON-SETTLING CO-DEFENDANTS" means those Co-Defendants who are not
Settling Co-Defendants.
1.109"NON-SETTLING HEALTH CARE PROVIDERS" means those Health Care Providers
who are not Settling Health Care Providers.
1.110"NON-SETTLING PERSONAL INJURY CLAIMANTS" means those Personal Injury
Claimants (other than Claimants in Classes 6A, 6B, 6C and 6D) who are not
Settling Personal Injury Claimants.
1.111"NON-SETTLING PHYSICIANS" means those Physicians who are not Settling
Physicians.
1.112"OFFICIAL COMMITTEES" means the Tort Committee, the Commercial
Committee, and the Physicians' Committee, collectively.
1.113"ONTARIO BREAST IMPLANT SETTLEMENT AGREEMENT" means that certain
agreement, styled the Dow Corning/Ontario Breast Implant Litigation Settlement
Agreement, between the Ontario Class Action Settlement Claimants, as
plaintiffs, and Dow Corning and others, as defendants, pursuant to which the
class action pending in the Ontario court is resolved.
1.114"ONTARIO CLASS ACTION FUND" means the fund established pursuant to the
Ontario Breast Implant Settlement Agreement for the payment of Claims of
Ontario Class Action Settlement Claimants.
Page 8
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.115"ONTARIO CLASS ACTION SETTLEMENT CLAIMANTS" means the parties
designated as "Settling Claimants" in the Ontario Breast Implant Settlement
Agreement.
1.116"OTHER CLAIM" means any Breast Implant Claim, Other Products Claim,
Raw Material Breast Implant Claim, Miscellaneous Raw Material Claim or LTCI
Claim asserted by any Person or Governmental Unit, other than a Personal
Injury Claimant.
1.117"OTHER PRIORITY CLAIM" means any Claim which, if Allowed, would be
entitled to priority under section 507(a)(2) through (7) of the Bankruptcy
Code.
1.118"OTHER PRODUCTS" means metal, silicone or silicone-containing
products, other than Breast Implants and raw materials used in the manufacture
of a Non-Dow Corning Breast Implant or a Non-Dow Corning Implant, manufactured
by the Debtor or any of its Joint Ventures or Subsidiaries for implant into
humans, including, but not limited to: (a) reconstruction and aesthetic
surgery products (including custom implants) such as facial components, nasal
and chin implants, testicular and penile implants, or medical treatments, (b)
orthopedic products such as for use in legs, hips, knees, ankles, wrists,
hands, fingers, toes and wrists, (c) silicone temporomandibular joint (TMJ)
implants using medical grade or HP sheeting, the Wilkes implant or Silastic
Block, (d) medical products for use in the head, heart or eyes, and (e)
fluids. The inclusion of fluids among Other Products is not an admission of
any Dow Corning responsibility for, or the potential for Allowance of Claims
relating to, silicone injections.
1.119"OTHER PRODUCTS CLAIMS" means all Claims, demands, suits, causes of
action, proceedings or any other rights or asserted rights to payment
heretofore, now or hereafter asserted against the Debtor, any Released
Parties, the Settlement Facility or the Litigation Facility, whether or not
reduced to judgment, based upon or in any manner arising from or related to
(a) the Other Products, (b) the research and development, manufacture,
distribution, advertising, sale, provision, recommendation, insertion, use or
removal of any raw materials and/or finished products manufactured by the
Debtor, comprising all or part of the Other Products, (c) the processing,
adjustment, defense, settlement, payment, negotiation or handling of any
claims, demands, suits, proceedings or causes of action based upon or relating
in any way to the Other Products, or (d) the failure to warn, disclose or
provide information concerning, the alleged fraud or misrepresentation
regarding, or the failure to take remedial action with respect to, the Other
Products, including, without limitation, (i) those for death or personal
injuries, including emotional distress, (ii) those of Persons against whom any
claim, demand, proceeding, suit or cause of action based upon or in any manner
arising from or relating to any of the matters enumerated or described in (a),
(b), (c) and/or (d) above has been, is or may be asserted (including, without
limitation, rights of indemnity, whether contractual or otherwise,
contribution Claims and subrogation Claims), (iii) those for damages,
including punitive damages, (iv) those for attorneys' fees and other expenses,
fees or costs, (v) those for any possible economic loss or loss of consortium,
(vi) those for damage to reputation, and (vii) those for any equitable remedy,
but excluding those Claims (x) brought by the Debtor, its Joint Ventures or
Subsidiaries, and (y) any such Claims which were the subject of prepetition
final judgments or legally enforceable settlement agreements, which Claims
shall be treated as Unsecured Claims in this Plan. In this Plan, Other
Products Claims are either Other Products Personal Injury Claims or Other
Products Other Claims, as those terms are defined herein.
1.120"OTHER PRODUCTS OTHER CLAIMS" means any Other Products Claim asserted
by an Other Claimant.
1.121"OTHER PRODUCTS PERSONAL INJURY CLAIMS" means any Other Products Claim
asserted by a Personal Injury Claimant.
1.122"OTHER PRODUCTS USER" means any Person who at any time elected to
undergo surgery for placement of an Other Product regardless of whether such
Person is now living or now using an Other Product.
1.123"PARTICIPATION FORM" means that form to be mailed to all Personal
Injury Claimants by the Settlement Facility as soon as practicable after the
Effective Date (or, in the event of an appeal raising a Release/Funding Issue,
in accordance with section 7.4 of this Plan) pursuant to which such Personal
Injury Claimants will be given the opportunity to elect to settle or litigate
their Claims under the terms of the Settlement Facility Agreement or the
Litigation Facility Agreement, as applicable.
1.124"PERSONAL INJURY CLAIM" means a Claim asserted by a Personal Injury
Claimant.
1.125"PERSONAL INJURY CLAIMANT" means a Person who asserts a Breast Implant
Claim, an Other Products Claim, a Silicone Material Claim, a Raw Material
Breast Implant Claim, a Miscellaneous Raw Material Claim or an LTCI Claim as
or on behalf of a Breast Implant User, an Other Products User, a Non-Dow
Corning Breast Implant User, a Non-Dow
Page 9
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Corning Implant User or an LTCI User, or as or on behalf of a child, husband,
wife or other individual related to or claiming some other personal
relationship with a Breast Implant User, an Other Products User, a Non-Dow
Corning Breast Implant User or an LTCI User.
1.126"PETITION DATE" means May 15, 1995, the date the Debtor filed the
petition commencing the Case.
1.127"PHYSICIAN" means any Person licensed to practice medicine by a
Governmental Unit.
1.128"PHYSICIAN CLAIM" means any Other Claim asserted by a Physician.
1.129"PHYSICIANS' COMMITTEE" means the Official Committee of Physician
Creditors, the committee appointed by the United States Trustee to represent
the interests of Physicians holding Claims in the Case, as such committee may
be reconstituted from time to time.
1.130"PLAN" means this Amended Joint Plan of Reorganization proposed by the
Proponents, and any and all modifications and/or amendments thereto.
1.131"PLAN DOCUMENTS" means the Indenture, the Senior Note Supplemental
Indenture, the Subordinated Note Supplemental Indenture, the Settlement
Facility Agreement, the Dow Corning Settlement Program and Claims Resolution
Procedures, the Litigation Facility Agreement, the Funding Payment Agreement,
the Insurance Allocation Agreement, the Quebec Breast Implant Settlement
Agreement, the Ontario Breast Implant Settlement Agreement, the B.C. Class
Action Settlement Agreement, the Australia Breast Implant Settlement Option,
the Domestic Health Insurer Settlement Agreement and all other documents and
exhibits as the same may be amended, modified, supplemented, or restated from
time to time, that aid in effectuating this Plan, which documents and exhibits
shall be filed by the Proponents with the Court on or before the Plan
Documents Filing Date.
1.132"PLAN DOCUMENTS FILING DATE" means the date for the filing of the Plan
Documents which shall be either (a) a date, as determined by the Proponents,
that is as soon as practicable, but that in no event is later than 30 calendar
days before the deadline for filing objections to confirmation of the Plan or
(b) such other date (or dates) determined by the Court.
1.133"PLAN DOCUMENTS REVIEW CENTER" means the offices of DCC located at
2200 W. Salzburg Road, Midland, Michigan, 48611, and such other location or
locations designated by the Proponents, at which any party in interest may
review the Plan Documents as filed.
1.134"PLAN INTEREST RATE" means the interest rate for deferred payments
under the Plan, which rate shall be determined, based upon then-existing
market rates, as of the Effective Date.
1.135"PREPETITION JUDGMENT CLAIM" means a Personal Injury Claim against the
Debtor evidenced by a written judgment entered before the Petition Date that
was not yet subject to a Final Order as of the Petition Date.
1.136"PRIORITY TAX CLAIM" means any Claim against the Debtor that, if
Allowed, would be entitled to a priority in payment under section 507(a)(8) of
the Bankruptcy Code.
1.137"PRODUCTS LIABILITY CLAIMS" means, collectively, Breast Implant
Claims, Other Products Claims, Silicone Material Claims, Raw Material Breast
Implant Claims, Miscellaneous Raw Material Claims and LTCI Claims.
1.138"PROPONENTS" means the joint proponents of the Plan, Dow Corning and
the Tort Committee.
1.139"PRO RATA" or "PRO RATA SHARES" means the same proportion an Allowed
Claim in a particular Class bears to the aggregate amount of all Allowed
Claims in such Class.
1.140"PUBLIC DEBT CLAIMS" means those Claims arising pursuant to (a) the
Debtor's Medium Term Notes, Series A, having various maturities from August
10, 1995, through March 1, 2001, bearing interest at 8.55% per annum, (b) the
Debtor's 9 3/8% Debentures due February 1, 2008, or (c) the Debtor's 8.15%
Debentures due October 15, 2029.
1.141"QUEBEC BREAST IMPLANT SETTLEMENT AGREEMENT" means that certain
agreement, styled the Dow Corning/Quebec Breast Implant Litigation Settlement
Agreement, between the Quebec Class Action Settlement Claimants, as
plaintiffs, and Dow Corning and others, as defendants, pursuant to which the
class action pending in the Quebec court is resolved.
1.142"QUEBEC CLASS ACTION FUND" means the fund established pursuant to the
Quebec Breast Implant Settlement Agreement for the payment of Claims of Quebec
Class Action Settlement Claimants.
1.143"QUEBEC CLASS ACTION SETTLEMENT CLAIMANTS" means the parties
designated as "Settlement Class Members" in the Quebec Breast Implant
Settlement Agreement.
Page 10
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.144"RAW MATERIAL BREAST IMPLANT CLAIMS" means all Claims (including
Claims asserted by or on behalf of Unmanifested Claimants and Unborn Breast
Implant Claimants), demands, suits, causes of actions, proceedings or any
other rights or asserted rights to payment heretofore, now or hereafter
asserted against the Debtor, any Released Parties, the Settlement Facility or
the Litigation Facility, based upon or in any manner arising from or related
to (a) a Non-Dow Corning Breast Implant, (b) the research and development,
manufacture, distribution, advertising, sale, provision, recommendation,
insertion, use or removal of any raw materials manufactured by the Debtor,
comprising all or part of materials used in the manufacture of a Non-Dow
Corning Breast Implant, (c) the processing, adjustment, defense, settlement,
payment, negotiation, or handling of any claims, demands, suits, proceedings
or causes of action based upon or relating in any way to a Non-Dow Corning
Breast Implant, or (d) the failure to warn, disclose or provide information
concerning, the alleged fraud or misrepresentation regarding, or the failure
to take remedial action with respect to, any raw material comprising all or
part of a Non-Dow Corning Breast Implant, including, without limitation, (i)
those for death or personal injuries, including emotional distress, (ii) those
of any Person against whom any claim, demand, proceeding, suit or cause of
action based upon or in any manner arising from or relating to any of the
matters enumerated or described in (a), (b), (c) and/or (d) above has been, is
or may be asserted (including, without limitation, rights of indemnity,
whether contractual or otherwise, contribution Claims and subrogation Claims,
(iii) those for damages, including punitive damages, (iv) those for attorneys'
fees and other expenses, fees or costs, (v) those for any possible economic
loss or loss of consortium, (vi) those for damage to reputation, and (vii)
those for any equitable remedy, but excluding (x) Claims brought by the
Debtor, its Joint Ventures or Subsidiaries and (y) any such Claims which were
the subject of prepetition final judgment or executed settlement agreements,
which Claims shall be treated as Unsecured Claims in this Plan.
1.145"RAW MATERIAL BREAST IMPLANT PERSONAL INJURY CLAIM" means a Raw
Material Breast Implant Claim asserted by a Personal Injury Claimant.
1.146"RAW MATERIAL IMPLANT CLAIMS" means all Claims (including Unmanifested
Claims), demands, suits, causes of actions, proceedings or any other rights or
asserted rights to payment heretofore, now or hereafter asserted against the
Debtor, any Released Parties, the Settlement Facility or the Litigation
Facility, based upon or in any manner arising from or related to (a) a Non-Dow
Corning Implant, (b) the research and development, manufacture, distribution,
advertising, sale, provision, recommendation, insertion, use or removal of any
raw materials manufactured by the Debtor, comprising all or part of materials
used in the manufacture of a Non-Dow Corning Implant, (c) the processing,
adjustment, defense, settlement, payment, negotiation, or handling of any
claims, demands, suits, proceedings or causes of action based upon or relating
in any way to a Non-Dow Corning Implant, or (d) the failure to warn, disclose
or provide information concerning, the alleged fraud or misrepresentation
regarding, or the failure to take remedial action with respect to, any raw
material comprising all or part of a Non-Dow Corning Implant, including,
without limitation, (i) those for death or personal injuries, including
emotional distress, (ii) those of any Person against whom any claim, demand,
proceeding, suit or cause of action based upon or in any manner arising from
or relating to any of the matters enumerated or described in (a), (b), (c)
and/or (d) above has been, is or may be asserted (including, without
limitation, rights of indemnity, whether contractual or otherwise,
contribution Claims and subrogation Claims), (iii) those for damages,
including punitive damages, (iv) those for attorneys' fees and other expenses,
fees or costs, (v) those for any possible economic loss or loss of consortium,
(vi) those for damage to reputation, and (vii) those for any equitable remedy,
but excluding (x) Claims brought by the Debtor, its Joint Ventures or
Subsidiaries, (y) any such Claims which were the subject of prepetition final
judgment or executed settlement agreements, which Claims shall be treated as
Unsecured Claims in this Plan and (z) any Claims based on silicone injections.
1.147"RAW MATERIAL IMPLANT PERSONAL INJURY CLAIM" means a Raw Material
Implant Claim asserted by a Personal Injury Claimant.
1.148"RELEASED CLAIM" means any Claim waived or released in accordance with
section 8.3 of this Plan.
1.149"RELEASED PARTIES" is defined in section 8.3 of this Plan.
1.150"REORGANIZED DEBTOR" or "REORGANIZED DOW CORNING" means DCC on and
after the Effective Date, which entity shall be, and the Confirmation Order
shall so provide, the successor to DCC.
1.151"REPRESENTATIVES" means the current and former officers, directors,
agents, attorneys and employees of an Entity.
1.152"RETIREE BENEFIT CLAIMS" means claims for payments to any Entity or
Person for the purpose of providing or reimbursing payments for retired
employees of Dow Corning and their spouses and dependents, for medical,
surgical, or hospital care benefits, or benefits in the event of sickness,
accident, disability or death under any plan, fund, or program established by
Dow Corning prior to the Petition Date.
Page 11
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.153"SECURED CLAIM" means any Claim, including interest, fees and charges
as determined pursuant to section 506(b) of the Bankruptcy Code, against the
Debtor that is (a) secured in whole or in part as of the Petition Date by a
Lien on any of the assets or property of the Debtor, which Lien is valid,
perfected and enforceable under applicable law and is not subject to avoidance
under the Bankruptcy Code or applicable non-bankruptcy law, but only to the
extent of the value of the assets or property securing any such Claims, or
(b) subject to setoff under section 553 of the Bankruptcy Code, but only to
the extent of the amount subject to such setoff.
1.154"SENIOR NOTE SUPPLEMENTAL INDENTURE" means the supplemental indenture
to the Indenture under which, together with the Indenture, the Senior Notes
will be issued.
1.155"SENIOR NOTES" means those promissory notes of the Reorganized Debtor
to be issued under the Indenture, having the terms and conditions
substantially as contemplated by EXHIBIT "D" hereto.
1.156"SETTLEMENT FACILITY" means the Claims resolution facility to be
established in accordance with section 6.11.3 of this Plan pursuant to which
the Claims of Settling Personal Injury Claimants will be satisfied.
1.157"SETTLEMENT FACILITY AGREEMENT" means that agreement, called the
"Settlement Facility and Fund Distribution Agreement," between the Reorganized
Debtor, the Claimants' Advisory Committee and the Trustee of the Depository
Trust pursuant to which the Settlement Facility shall be established and
governed.
1.158"SETTLING CO-DEFENDANTS" means those Co-Defendants who timely elect to
settle their Claims as provided in the Plan.
1.159"SETTLING HEALTH CARE PROVIDERS" means the Health Care Providers in
Class 13 who timely elect to settle their Claims against the Debtor, together
with those Health Care Providers who do not timely elect to litigate the
allowability of their Claims against the Debtor.
1.160"SETTLING INSURERS" means those Insurance Companies listed on EXHIBIT
"A" hereto that have reached settlements with Dow Corning, and any Insurance
Companies that may reach a settlement with Dow Corning, on or before the
Confirmation Date, providing for a release of the Insurance Company or an
injunction against prosecution of claims against the Insurance Company.
1.161"SETTLING PERSONAL INJURY CLAIMANTS" means those Personal Injury
Claimants (other than Claimants in Classes 6A, 6B, 6C and 6D) who elect to
settle their Claims under the terms of the Settlement Facility, together with
those Personal Injury Claimants who do not timely return an Election Form.
1.162"SETTLING PHYSICIANS" means the Physicians in Class 12 who timely
elect to settle their Claims against the Debtor, together with those
Physicians who do not timely elect to litigate the allowability of their
Claims against the Debtor.
1.163"SHAREHOLDER-AFFILIATED PARTIES" means the Shareholders and their past
and present Affiliates (other than the Debtor-Affiliated Parties) and their
respective Representatives.
1.164"SHAREHOLDER CLAIM" means any Other Claim asserted by a Shareholder-
Affiliated Party.
1.165"SHAREHOLDERS" means Corning, Dow Chemical (which holds its Interest
through a wholly-owned subsidiary, Dow Holdings, Inc.), and Dow Holdings, Inc.
1.166"SILICONE MATERIAL CLAIMS" means all Raw Material Breast Implant
Claims arising from or related to the use or implantation of a Non-Dow Corning
Breast Implant which was manufactured by an Entity that is domiciled or has
its manufacturing facilities in the United States and that purchased medical
grade gel systems from Dow Corning.
1.167 "SPITZFADEN CLAIMANTS" means all Personal Injury Claimants who have
Spitzfaden Claims.
1.168 "SPITZFADEN CLAIMS" means all Personal Injury Claims against a
Shareholder-Affiliated Party held by the eight named plaintiffs and by any
absent former class members in Spitzfaden v. Dow Corning Corp., et al., Case
No. 92-2589 (Civil Dist. Ct., Orleans Parish, Louisiana).
1.169 "SUBORDINATED CLAIM" any Claim asserted against the Debtor that is
determined to be subordinated in right of payment to Unsecured Claims against
the Debtor under sections 509 and/or 510 of the Bankruptcy Code or under other
applicable law.
1.170 "SUBORDINATED NOTE SUPPLEMENTAL INDENTURE" the supplemental indenture
to the Indenture under which, together with the Indenture, the Subordinated
Notes will be issued.
Page 12
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
1.171 "SUBORDINATED NOTES" means those promissory notes to be distributed
to the holders of Subordinated (Class 21) Claims, having a maturity date of
the tenth anniversary of the Effective Date and bearing interest at the Plan
Interest Rate (payable semi-annually in arrears).
1.172"SUBSIDIARIES" means all of the subsidiary corporations of the Debtor.
1.173 "TORT COMMITTEE OR TORT CLAIMANTS' COMMITTEE" means the Official
Committee of Tort Claimants, the committee appointed by the United States
Trustee to represent the interests of Persons holding Personal Injury Claims
in the Case, as such committee may be reconstituted from time to time.
1.174 "UNBORN BREAST IMPLANT CLAIMANTS" means the children born after the
Confirmation Date to Breast Implant Users.
1.175 "UNMANIFESTED CLAIM" a Personal Injury Claim of a Claimant who, as of
the Effective Date, has not suffered any injury alleged to have been caused,
in whole or in part, by a product of the Debtor.
1.176 "UNSECURED CLAIM" means any Claim against the Debtor, other than a
Products Liability Claim, that is neither secured nor entitled to a priority
under the Bankruptcy Code or any order of the Court, including, without
limitation, any Claim arising from the rejection of an executory contract or
unexpired lease under section 365 of the Bankruptcy Code and any Personal
Injury Claim that was the subject of a prepetition Final Order or a legally
enforceable settlement agreement.
ARTICLE TWO
UNCLASSIFIED CLAIMS
2.1ADMINISTRATIVE CLAIMS. The holder of an Allowed Administrative Claim
shall receive an amount equal to the unpaid portion of such Allowed
Administrative Claim either (a) as soon as practicable following the Effective
Date, or, if later, the Allowance Date, or (b) upon such terms as may be
agreed to in writing by such Claimant and the Reorganized Debtor; provided,
however, that any Current Obligations shall be paid in full in the ordinary
course of business in accordance with the terms and conditions of any
agreement relating thereto.
2.2PRIORITY TAX CLAIMS. The Reorganized Debtor shall pay the holders of
Allowed Priority Tax Claims the Allowed amount of such Claims pursuant to the
provisions of section 1129(a)(9)(C) of the Bankruptcy Code in equal annual
installments commencing on the first anniversary of the Effective Date, or, if
later, the Allowance Date, with the final payment of the unpaid balance
thereof to be made on the sixth anniversary of the date of assessment of the
tax, together with interest thereon at the Plan Interest Rate (or such other
interest rate as the Court may approve) from and after the Effective Date, or,
if later, the Allowance Date, until the date of final payment; provided,
however, that the Reorganized Debtor shall have the right to pay any Allowed
Priority Tax Claim, or any unpaid balance of such Claim, in full, at any time
after the Effective Date, without premium or penalty.
ARTICLE THREE
CLASSIFICATION OF
CLAIMS AND INTERESTS
3.1 CLASSIFICATION. Section 3.2 hereof sets forth a designation of classes
of Claims and Interests. A Claim or Interest is classified in a particular
class only to the extent that the Claim or Interest qualifies within the
description of the class and is classified in a different class to the extent
the Claim or Interest qualifies within the description of that different
class. If a Claim is acquired or transferred, the Claim shall be placed in the
class in which it would have been placed if it were owned by the original
holder of such Claim.
3.2CLASSES. For purposes of this Plan, Claims against or Interests in the
Debtor are grouped in the following classes in accordance with section 1122(a)
of the Bankruptcy Code:
3.2.1 CLASS 1--Other Priority Claims.
3.2.2 CLASS 2--Secured Claims.
3.2.3CLASS 3--Convenience Claims.
3.2.4 CLASS 4--Unsecured Claims that are not classified in any other
Class.
3.2.5 CLASS 4A--Prepetition Judgment Claims.
Page 13
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
3.2.6 CLASS 4B--DCC Guaranty Claims.
3.2.7 CLASS 5--Domestic Breast Implant Personal Injury Claims.
3.2.8 CLASS 6.1--Category 1 and 2 Foreign Breast Implant Personal Injury
Claims (other than Claims in Classes 6A, 6B, 6C and 6D).
3.2.9 CLASS 6.2--Category 3 and 4 Foreign Breast Implant Personal Injury
Claims.
3.2.10CLASS 6A--Quebec Class Action Settlement Claims.
3.2.11 CLASS 6B--Ontario Class Action Settlement Claims.
3.2.12 CLASS 6C--B.C. Class Action Settlement Claims.
3.2.13 CLASS 6D--Australia Breast Implant Settlement Claims.
3.2.14CLASS 7--Silicone Material Claims (other than Claims in Classes
6B, 6C, 6D and 8).
3.2.15CLASS 8--Miscellaneous Raw Material Claims (other than Claims in
Classes 6B, 6C, 6D and 7).
3.2.16CLASS 9--Domestic Other Products Personal Injury Claims.
3.2.17CLASS 10.1--Category 1 and 2 Foreign Other Products Personal
Injury Claims.
3.2.18CLASS 10.2--Category 3 and 4 Foreign Other Products Personal
Injury Claims.
3.2.19CLASS 11--Co-Defendant Claims.
3.2.20CLASS 12--Physician Claims.
3.2.21CLASS 13--Health Care Provider Claims.
3.2.22CLASS 14--Domestic Health Insurer Claims.
3.2.23CLASS 14A--Foreign Health Insurer Claims.
3.2.24CLASS 15--Government Payor Claims.
3.2.25CLASS 16--Shareholder Claims.
3.2.26CLASS 17--General Contribution Claims.
3.2.27CLASS 18--LTCI Personal Injury Claims.
3.2.28CLASS 19--LTCI Other Claims.
3.2.29CLASS 20--Intercompany Claims.
3.2.30CLASS 21--Subordinated Claims.
3.2.31CLASS 22--Environmental Claims.
3.2.32CLASS 23--Retiree Benefit Claims.
3.2.33CLASS 24--Interests in the Debtor.
Except with respect to Convenience Claims, which shall not be aggregated,
if a Creditor has more than one Claim in the same class, such Claims shall be
aggregated and treated as a single Claim. If a Creditor has Claims in
different classes, such Claims shall be aggregated only within the same class
and not between classes.
ARTICLE FOUR
TREATMENT OF CLAIMS
NOT IMPAIRED UNDER THE PLAN
4.1 OTHER PRIORITY CLAIMS--CLASS 1. All Allowed Other Priority Claims shall
be paid by the Reorganized Debtor either (a) in full, in cash, as soon as
practicable after the Effective Date, or, if later, the Allowance Date, or (b)
upon such terms as may be agreed to in writing by a Claimant and the
Reorganized Debtor.
4.2 SECURED CLAIMS--CLASS 2. Class 2 shall contain separate subclasses for
each Secured Claim. Each subclass is deemed to be a separate class for all
purposes under the Bankruptcy Code.
Page 14
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
The legal, equitable and contractual rights of holders of Allowed Secured
Claims in any subclass of Class 2 will either (a) not be altered by this Plan
or (b) at the option of the Debtor, be treated in any other manner that will
result in such Allowed Secured Claims being deemed unimpaired under section
1124 of the Bankruptcy Code.
4.3 CONVENIENCE CLAIMS--CLASS 3. Holders of Allowed Convenience Claims
shall receive as soon as practicable after the Effective Date, or, if later,
the Allowance Date, payment of their Allowed Claims in full in cash.
4.4 DCC GUARANTY CLAIMS--CLASS 4B. The holders of Allowed DCC Guaranty
Claims shall retain their Claims, if any, against Reorganized Dow Corning, and
this Plan shall leave unaltered the legal, equitable and contractual rights to
which such Claims entitle the holders thereof.
4.5 ENVIRONMENTAL CLAIMS--CLASS 22. The holders of Claims, other than
Disallowed Claims, arising under Environmental Laws shall retain their Claims,
if any, against Reorganized Dow Corning, and this Plan shall leave unaltered
(a) the legal, equitable and contractual rights to which such Claims entitle
the holders thereof, and (b) the rights and obligations of the Debtor, and any
other holder of such Claims during the Case, pursuant to any settlement
approved by a Final Order of the Court entered before the Confirmation Date.
4.6 RETIREE BENEFITS CLAIMS--CLASS 23. The holders of Allowed Retiree
Benefit Claims shall not be impaired and shall not have their rights altered
by this Plan. Retiree Benefit Claims shall be deemed to be Allowed Claims and
shall be paid, performed and honored by the Reorganized Debtor in full when
due in accordance with their terms notwithstanding any other contrary
provision of the Plan or the Confirmation Order; provided, however, that the
rights of retirees shall be subject to modification or termination as provided
by the terms of the existing benefit plans and the terms of the collective
bargaining agreements, consistent with applicable law.
ARTICLE FIVE
TREATMENT OF CLASSES
IMPAIRED UNDER THE PLAN
5.1 UNSECURED CLAIMS--CLASS 4. Each Allowed Unsecured Claim in Class 4
shall include interest thereon from the Petition Date through the Effective
Date at the Case Interest Rate, and such fees, costs and expenses (including
prepayment penalties or liquidated damages), but only to the extent such fees,
costs and expenses are Allowable under applicable law. Each holder of an
Allowed Class 4 Claim will receive, as payment in full, on or as soon as
practicable following the Effective Date, or if later, the Allowance Date, the
sum of (a) a cash payment equal to the lesser of 24% of each such holder's
Allowed Class 4 Claim or a pro rata share of $315.6 million and (b) Senior
Notes in a principal amount equal to the balance of such holder's Allowed
Class 4 Claim. The terms of the Senior Notes are set forth in EXHIBIT "D" to
this Plan.
In the event the Court determines that the treatment of Class 4 does not
satisfy the requirements of either section 1129(a)(7) or 1129(b) (in the event
confirmation is sought pursuant to section 5.18 of this Plan) of the
Bankruptcy Code, the Proponents shall propose amendments to the Plan to ensure
its compliance with the applicable requirements of section 1129 of the
Bankruptcy Code, and thereafter request confirmation of the Plan, as amended.
To the extent distributions in respect of any Allowed Class 4 Claims are not
made on the Effective Date, interest shall accrue on the unsatisfied portion
of such Allowed Class 4 Claim from the Effective Date until the date on which
distribution is actually made in respect thereof at the rate set for the
initial issuance of Senior Notes under the Plan, compounded on each interest
payment date under the Senior Notes so issued. All such interest shall be paid
in cash at the time distributions in respect of such Claim are made.
5.2 PREPETITION JUDGMENT CLAIMS--CLASS 4A. Unless a different treatment is
agreed to by the Class 4A Claimant and the Debtor prior to the Confirmation
Date, on the Effective Date, the post-confirmation injunction provided in the
Confirmation Order shall be deemed modified to the limited extent required to
allow the exhaustion of any post-judgment appellate activity in connection
with any Prepetition Judgment Claim. In such appeals, the Litigation Facility
will be substituted for the Debtor as a party thereto. The appeals shall be
prosecuted in the appellate courts of the respective jurisdictions in which
the judgments were entered. If the final resolution of the appeal is in favor
of the holder of a Prepetition Judgment Claim, the amount of the judgment, as
finally determined on appeal (whether by settlement, remittitur or
affirmance), shall be treated and paid in cash and Senior Notes in the same
manner as Allowed Class 4 Claims under the Plan. If any such case is settled
prior to decision on appeal, the Reorganized Debtor shall receive a credit as
payments are made or notes are paid against its obligations under the Funding
Payment Agreement for all amounts paid by it in respect of such Claims. If the
appeal results in an order remanding the matter for new trial as to liability
and/or damages, the holder of
Page 15
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
the Prepetition Judgment Claim shall have her Claim resolved in accordance
with the terms of the Litigation Facility Agreement. The limited modification
of the post-confirmation injunction provided above shall not otherwise affect
or limit the effect of the release and injunction provisions of sections 8.3
through 8.5 of the Plan.
5.3 DOMESTIC AND FOREIGN PERSONAL INJURY CLAIMS--CLASSES 5 THROUGH 10.2. At
Closing, the Reorganized Debtor will, in full release, satisfaction and
discharge of all Claims in Classes 5 through 10.2, cause the following to
occur: (a) the execution and delivery of the Settlement Facility Agreement and
the Litigation Facility Agreement, thereby establishing the Settlement
Facility and the Litigation Facility for Claim liquidation and payment, (b)
the execution and delivery of the Funding Payment Agreement (which provides,
subject to its terms, for total scheduled payments of up to $3,172,000,000
with a Net Present Value as of the Effective Date of $2.35 billion), together
with the initial cash payment of $985 million as required therein and any
interest accrued on $905 million of the initial payment as provided in the
Funding Payment Agreement, and (c) the execution and delivery of the Quebec
Breast Implant Settlement Agreement, the Ontario Breast Implant Settlement
Agreement, the B.C. Class Action Settlement Agreement, the Australia Breast
Implant Settlement Option (together with any payments then due under each such
agreement).
Except as otherwise provided in this Plan, the funds paid with respect to
Personal Injury Claims will be paid to the Depository Trust. All assets
(including but not limited to funds and interests in insurance proceeds) of
the Settlement Facility shall be received, held, invested and disbursed by the
Depository Trust on behalf of the Settlement Facility. Whenever this Plan
refers to the Settlement Facility receiving, holding, investing, disbursing or
otherwise dealing with assets, it shall be deemed to refer to actions taken by
the Trustee of the Depository Trust at the instruction of the Finance
Committee as provided in the Settlement Facility Agreement.
The Settlement Facility and the Litigation Facility will assume full
responsibility for resolving all Personal Injury Claims in Classes 5 through
10.2 (other than Claims in Classes 6A, 6B, 6C and 6D) pursuant to the
Settlement Facility Agreement and the Litigation Facility Agreement, as
applicable; for making payments on account of those Personal Injury Claims in
Classes 5 through 10.2 (other than Claims in Classes 6A, 6B, 6C and 6D) that
become Allowed Personal Injury Claims under the conditions set forth in the
Settlement Facility Agreement or the Litigation Facility Agreement; for
collecting, investing and distributing funds for the benefit of Personal
Injury Claimants; for fulfilling all other obligations under the Settlement
Facility Agreement, the Litigation Facility Agreement and the Funding Payment
Agreement; and for paying the costs and expenses of the Settlement Facility
and the Litigation Facility, all as set forth more fully in the Settlement
Facility Agreement and the Litigation Facility Agreement.
5.4 TREATMENT OF CLASSES 5 THROUGH 10.2 (OTHER THAN CLASSES 6A, 6B, 6C AND
6D). Except as set forth in section 5.2, and subject to section 7.4, of this
Plan, each Personal Injury Claimant in Classes 5 through 10.2 (other than
Claimants in Classes 6A, 6B, 6C and 6D) shall be afforded the option, during
the six-month period following the Effective Date, to elect to settle or to
opt out of the settlement options under the Settlement Facility. Depending on
the election made, those Claimants shall be treated as follows:
5.4.1 TREATMENT OF SETTLING PERSONAL INJURY CLAIMANTS. Settling Personal
Injury Claimants shall receive payment of their Allowed Claims in
accordance with the terms, provisions and procedures contained in the
Settlement Facility Agreement. The various treatments for the Claims are
the following:
5.4.1.1 BREAST IMPLANT USERS. Breast Implant Users may select up to
three compensation options. All Breast Implant Users are eligible to
receive, subject to the qualification criteria: (i) either (a) an
expedited payment, for which the only qualification criterion is the use
of a Dow Corning Breast Implant, or (b) a payment for specified eligible
disease/disability (in accordance with the schedule of symptoms and
conditions in the Settlement Facility's "GRID," and (ii) an explant
payment and/or (iii) a rupture payment. Breast Implant Claimants
qualifying for payment under the Grid are entitled to apply for an
additional payment (the "INCREASED SEVERITY PAYMENT") from the
Settlement Facility.
5.4.1.2 OTHER PRODUCTS USERS. Other Products Users with Covered Other
Products Claims are eligible for two mutually exclusive compensation
options: (i) an expedited payment or (ii) a payment for specified
eligible medical conditions in accordance with the schedule of symptoms
and conditions in the Grid. Other Products Users who receive payments
based on the Grid may, depending on their particular symptoms and
conditions, be eligible for a supplemental payment if funds are
available within the $36 million (Net Present Value) fund dedicated to
settlement of Other Products Personal Injury Claims. Other Products
Users whose Claims do not arise from Covered Other Products will have
their Claims treated and paid, to the extent Allowed, through the
Litigation Facility.
Page 16
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
5.4.1.3 SILICONE MATERIAL CLAIMS. Claimants with Silicone Material
Claims in Class 7, whose Non-Dow Corning Breast Implants were
manufactured in the United States with medical grade gel systems
purchased from Dow Corning, shall receive payment from a $57.5 million
(Net Present Value) fund allocated as provided in the Settlement
Facility Agreement. (Breast Implant Claimants and Other Products
Claimants are not eligible for compensation as a Silicone Material
Claimant.)
5.4.1.4 FAMILY MEMBER CLAIMS. The Claims of family members of a
Personal Injury Claimant are comprised of the Consortium Claims and the
Children Direct Claims. The treatment of a Personal Injury Claimant
(referred to as the "PRIMARY CLAIMANT") who is a Breast Implant User, an
Other Products User or a Non-Dow Corning Breast Implant User under this
Plan shall be cumulative of the Consortium Claims of any spouse, child
or other individuals related to, or who have some other personal
relationship with the Primary Claimant. The Consortium Claims of such
related parties shall be governed by the election to settle or litigate
made by, and shall be deemed released by the treatment afforded the
Claims of, the Primary Claimants under the Plan.
Children Direct Claims shall not be affected by the election of the
Primary Claimant to settle through the Settlement Facility, but shall be
treated in the Litigation Facility pursuant to the terms of the
Litigation Facility Agreement and the holders of Children Direct Claims
shall be deemed Non-Settling Personal Injury Claimants.
Settling Personal Injury Claimants shall (i) not be subject to the
litigation conducted in accordance with the terms of the Litigation
Facility Agreement, (ii) be entitled to the payment under the settlement
option(s) for which they qualify irrespective of any otherwise adverse
determination in the Litigation Protocol, and (iii) be deemed to have
waived or modified their rights in litigation, including the right to trial
by jury, as provided in the Settlement Facility Agreement.
5.4.2TREATMENT OF NON-SETTLING PERSONAL INJURY CLAIMANTS. Non-Settling
Personal Injury Claimants, including all Miscellaneous Raw Material Implant
Personal Injury Claimants in Class 8 and all Children's Direct Claimants,
shall have their Claims and Assumed Third Party Claims resolved under the
terms of the Litigation Facility Agreement and the related Case Management
Order(s). Each Non-Settling Personal Injury Claimant shall (a) be subject
to the Litigation Protocol and (b) not receive any payment if (and to the
extent) the Claim is disallowed pursuant to the litigation procedures
constituting the Litigation Protocol. All Non-Settling Personal Injury
Claimants shall retain the right to adjudicate their Claim through
litigation (including trial by jury), subject, however, to the provisions
of the Plan and the Litigation Facility Agreement.
5.5TREATMENT OF CLASS 6A. Claimants in Class 6A shall be treated as
follows:
5.5.1TREATMENT OF QUEBEC CLASS ACTION SETTLEMENT CLAIMANTS. Claimants in
Class 6A shall receive payment of their Claims pursuant to the Quebec
Breast Implant Settlement Agreement from the Quebec Class Action Fund
administered by a claims administrator under the direct supervision of the
court of Quebec in which such action is pending. The Reorganized Debtor
shall receive a credit as payments are made against its obligations under
the Funding Payment Agreement for all amounts paid by it to the Quebec
Class Action Fund. The Class 6A Claims will be paid pursuant to a grid
contained in the Quebec Breast Implant Settlement Agreement, approved by
the Quebec court, which is generally consistent with the treatment of other
Class 6.1 Claimants and of the Claimants in Classes 6B, 6C and 6D.
Claimants in Class 6A shall (a) not be subject to the Disease Litigation
Protocol, (b) be entitled to the payment under the Quebec Breast Implant
Settlement Agreement irrespective of any otherwise adverse determination in
the Litigation Protocol, and (c) be deemed to have waived or modified their
rights in litigation, including the right to trial by jury.
Class 6A Claimants who have timely opted out of the class action in
Quebec shall become Class 6.1 Claimants under this Plan. In the event the
Quebec Breast Implant Settlement Agreement is not approved by the Court,
Class 6A Claimants shall be treated as Class 6.1 Claimants under this Plan.
5.5.2TREATMENT OF CLAIMS OF FAMILY MEMBERS OF QUEBEC CLASS ACTION
SETTLEMENT CLAIMANTS. Immediate family members of a Quebec Class Action
Settlement Claimant who have themselves timely filed proofs of claim in
this Case shall litigate the allowability of their Claims under the terms
of the Litigation Facility Agreement.
5.6TREATMENT OF CLASS 6B. Claimants in Class 6B shall be treated as
follows:
5.6.1TREATMENT OF ONTARIO CLASS ACTION SETTLEMENT CLAIMANTS. Claimants
in Class 6B shall receive payment of their Claims pursuant to the Ontario
Breast Implant Settlement Agreement from the Ontario Class Action Fund
administered by a claims administrator under the direct supervision of the
court of Ontario in which such action is pending. The Reorganized Debtor
shall receive a credit as payments are made against its obligations under
the Funding Payment Agreement for all amounts paid by it to the Ontario
Class Action Fund. The Class 6B Claims will be paid
Page 17
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
pursuant to a grid contained in the Ontario Breast Implant Settlement
Agreement, approved by the Ontario court, which is generally consistent
with the treatment of other Class 6.1 Claimants and of the Claimants in
Classes 6A, 6C and 6D. Claimants in Class 6B shall (a) not be subject to
the Disease Litigation Protocol, (b) be entitled to the payment under the
Ontario Breast Implant Settlement Agreement irrespective of any otherwise
adverse determination in the Litigation Protocol, and (c) be deemed to have
waived or modified their rights in litigation, including the right to trial
by jury.
Class 6B Claimants who timely opted out of the class action in Ontario
and who have not timely elected to become Ontario Class Action Settlement
Claimants shall be treated as Class 6.1, 7 or 8 Claimants, as applicable,
under this Plan. In the event the Ontario Breast Implant Settlement
Agreement is not approved by the Court, the Class 6B Claimants shall be
treated as Class 6.1, 7 or 8 Claimants under this Plan, as applicable.
5.6.2TREATMENT OF CLAIMS OF FAMILY MEMBERS OF ONTARIO CLASS ACTION
SETTLEMENT CLAIMANTS. The Ontario Breast Implant Settlement Agreement
provides for resolution of the Claims of Family Members. Family Member
Claims will be resolved out of the payments to the Ontario Class Action
Fund. The Claims of such Family Members shall be deemed released by the
treatment under the Ontario Breast Implant Settlement Agreement.
5.7TREATMENT OF CLASS 6C. Claimants in Class 6C shall be treated as
follows:
5.7.1TREATMENT OF B.C. CLASS ACTION SETTLEMENT CLAIMANTS. Claimants in
Class 6C shall receive payment of their Claims pursuant to the B.C. Class
Action Settlement Agreement from the B.C. Class Action Fund administered by
a claims administrator under the direct supervision of the court of British
Columbia in which such action is pending. The Reorganized Debtor shall
receive a credit as payments are made against its obligations under the
Funding Payment Agreement for all amounts paid by it to the B.C. Class
Action Fund. The Class 6C Claims will be paid pursuant to a grid contained
in the B.C. Class Action Settlement Agreement, approved by the British
Columbia court, which is generally consistent with the treatment of other
Class 6.1 Claimants and of the Claimants in Classes 6A, 6B and 6D.
Claimants in Class 6C shall (a) not be subject to the Litigation Protocol,
(b) be entitled to the payment under the B.C. Class Action Settlement
Agreement irrespective of any otherwise adverse determination in the
Litigation Protocol, and (c) be deemed to have waived or modified their
rights in litigation, including the right to trial by jury.
Potential Class 6C Claimants who either (i) are residents of British
Columbia and timely opt out of the B.C. Class Action or (ii) are residents
of Canadian provinces other than British Columbia, Quebec or Ontario and do
not timely opt to be included as a Settlement Class Member in the B.C.
Class Action shall be treated as Class 6.1, 7 or 8 Claimants, as
applicable, under this Plan.
If, in the view of Dow Corning, the number of opt-outs is excessive or
the number of opt-ins is insufficient, it may withdraw from the settlement.
In the event Dow Corning withdraws from the settlement or the B.C. Class
Action Settlement Agreement is not approved by the British Columbia court
or by the Court, the Class 6C Claimants shall be treated as Class 6.1, 7 or
8 Claimants under this Plan, as applicable.
5.7.2TREATMENT OF FAMILY MEMBER CLAIMS RELATED TO CLASS 6C CLAIMS. The
treatment of Claims in Class 6C shall be cumulative of the treatment of
Family Member Claims related thereto, and the Claims of such Family Members
shall be deemed released by the treatment of Class 6C Claimants under the
B.C. Class Action Settlement Agreement.
5.8TREATMENT OF CLASS 6D. Claimants in Class 6D shall be treated as
follows:
5.8.1TREATMENT OF AUSTRALIA BREAST IMPLANT SETTLEMENT
CLAIMANTS. Claimants in Class 6D shall receive payment of their Claims
pursuant to the Australia Breast Implant Settlement Option from the
Australia Breast Implant Optional Settlement Fund administered by a claims
administrator supervised by Trustees appointed pursuant to the Australia
Breast Implant Settlement Option. The Reorganized Debtor shall receive a
credit as payments are made against its obligations under the Funding
Payment Agreement for all amounts paid by it to the Australia Breast
Implant Optional Settlement Fund. The Class 6D Claims will be paid in a
manner which is generally consistent with the treatment of other Class 6.1
Claimants and of the Claimants in Classes 6A, 6B and 6C. Claimants in Class
6D shall (a) not be subject to the Litigation Protocol, (b) be entitled to
the payment under the Australia Breast Implant Settlement Option
irrespective of any otherwise adverse determination in the Litigation
Protocol, and (c) be deemed to have waived or modified their rights in
litigation, including the right to trial by jury.
Class 6D Claimants who fail to timely elect to participate as Australia
Breast Implant Settlement Claimants on the ballot provided to such
Claimants shall be treated as Class 6.1, 7 or 8 Claimants, as applicable,
under this Plan.
Page 18
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
If (i) the level of elections by potential Class 6D Claimants fails to
reach agreed minimum participation levels, or (ii) the Court declines to
approve the Australia Breast Implant Settlement Option, the Claimants who
have elected to participate as Class 6D Claimants shall be treated as Class
6.1, 7 or 8 Claimants under this Plan, as applicable.
5.8.2TREATMENT OF FAMILY MEMBER CLAIMS RELATED TO CLASS 6D CLAIMS. The
treatment of Claims in Class 6D shall be cumulative of the treatment of
Family Member Claims related thereto, and the Claims of such Family Members
shall be deemed released by the treatment of Class 6D Claimants under the
Australia Breast Implant Settlement Option.
5.9FUNDING THE SETTLEMENT FACILITY, THE LITIGATION FACILITY, THE QUEBEC
CLASS ACTION FUND, THE ONTARIO CLASS ACTION FUND, THE B.C. CLASS ACTION FUND
AND THE AUSTRALIA BREAST IMPLANT OPTIONAL SETTLEMENT FUND FOR PAYMENT OF
PERSONAL INJURY CLAIMS. The Settlement Facility, the Litigation Facility, the
Quebec Class Action Fund, the Ontario Class Action Fund, the B.C. Class Action
Fund and the Australia Breast Implant Optional Settlement Fund shall be funded
pursuant to the terms of the Funding Payment Agreement. The Reorganized Debtor
shall receive a credit as payments are made against its obligations under the
Funding Payment Agreement for all amounts paid by it to the Quebec Class
Action Fund, the Ontario Class Action Fund, the B.C. Class Action Fund and the
Australia Breast Implant Optional Settlement Fund.
5.10TREATMENT OF ATTORNEY'S FEES OF SETTLING PERSONAL INJURY CLAIMANTS. The
fees and expenses of attorneys representing any of the Settling Personal
Injury Claimants (other than Claimants in Classes 6A, 6B, 6C and 6D, whose
rights shall be governed by the settlement agreements applicable to those
classes) who receive payment from the Settlement Facility will be borne by
such Claimants based on applicable state law and the individual arrangements
made between them and their attorneys, subject to the following limitations:
5.10.1The fees charged by individually-retained attorneys to a Settling
Personal Injury Claimant shall not exceed the sum of:
(a) 10% of the first $10,000 paid to such Claimant;
(b) 22.5% of the next $40,000 paid to such Claimant; and
(c) 30% of the amount in excess of $50,000 paid to such Claimant.
5.10.2Amounts paid pursuant to either the Expedited Payment Option or
the Explant Payment Option under the Settlement Facility shall not be
counted as amounts paid to a Settling Personal Injury Claimant for purposes
of this section and no fees shall be paid with respect to such amounts.
5.11TREATMENT OF PUNITIVE DAMAGES. Claims for punitive or exemplary damages
in connection with Products Liability Claims, whether asserted by Personal
Injury Claimants, Physician Claimants, or any other Claimants, shall not be
Allowed.
5.12VENUE FOR LIQUIDATION OF FOREIGN PERSONAL INJURY CLAIMS. If a Claimant
in any of Classes 6.1, 6.2, 7, 8, 10.1 and 10.2 is a Non-Settling Personal
Injury Claimant, the manager of the Litigation Facility shall have the option,
but not the obligation, of seeking to have the Claim held by such Claimant
referred to the jurisdiction of the courts of the Claimant's domicile for
liquidation pursuant to principles of forum non conveniens. Upon conclusion of
the liquidation procedures, the Claimant shall be paid (subject to the terms
of the Funding Payment Agreement) the Allowed amount of the Claim (converted
to U.S. dollars at the then prevailing exchange rate) pursuant to the terms of
the Litigation Facility Agreement, the Settlement Facility Agreement and the
Funding Payment Agreement.
5.13OTHER CLAIMS RELATED TO IMPLANTS--CLASSES 11 THROUGH 17. Each class of
Claims in Classes 11 through 17 shall receive treatment as follows:
5.13.1CLAIMS IN CLASS 11. Notwithstanding any other provision of the
Plan, Claimants in Class 11 shall have the option to elect to settle their
Claims against the Debtor or to litigate the allowability of such Claims.
Settling Co-Defendant Claimants shall release all Claims (including but not
limited to contribution Claims) against the Debtor-Affiliated Parties and
the Shareholder-Affiliated Parties arising from or relating to Products
Liability Claims and, in exchange, the Debtor-Affiliated Parties and the
Shareholder-Affiliated Parties shall release all Claims (including but not
limited to contribution Claims) the Debtor-Affiliated Parties and/or the
Shareholder-Affiliated Parties may have against a Settling Co-Defendant
Claimant: (i) arising from or relating to any Claims that are discharged,
released and/or enjoined pursuant to the Plan; and (ii) for any amount that
was paid by any of the Debtor-Affiliated Parties or Shareholder-Affiliated
Parties that if not so paid would have been a Products Liability Claim or
would have been a Claim arising from or relating to a Products Liability
Claim. The parties shall exchange the releases described in this
Page 19
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
section 5.13.1 on the Effective Date or as soon thereafter as may be
practicable. To the extent a Personal Injury Claimant asserts a Product
Liability Claim against a Debtor-Affiliated Party and/or Shareholder-
Affiliated Party and a Claim against a Settling Co-Defendant Claimant in a
single action that has been or will be transferred to the District Court,
the Claims against the Debtor-Affiliated Party and/or the Shareholder-
Affiliated Party shall be severed from the Claim against the Settling Co-
Defendant Claimant and the Claim against the Settling Co-Defendant Claimant
shall be tried in the court from which such Claim was transferred. Co-
Defendant Claimants who do not elect to settle by the voting deadline shall
have their Claims estimated for distribution on or before the Effective
Date. The Estimated Amount of any such Claims will be paid (subject to the
terms of the Settlement Facility Agreement and the Funding Payment
Agreement) by the Claims Administrator on, or as soon as practicable after,
the Effective Date. If not estimated for distribution on or before the
Effective Date, such Claims will be channeled to the Litigation Facility
for purposes of Claim liquidation and paid (subject to the terms of the
Settlement Facility Agreement and the Funding Payment Agreement) when
Allowed. For purposes of this section 5.13.1, a "Claim" against a non-
Debtor party shall have the meaning contained in 11 U.S.C. (S) 101(5).
5.13.2CLAIMS IN CLASSES 12 AND 13. Claimants in Class 12 (Physician
Claims) and Class 13 (Health Care Provider Claims) shall have the option to
elect to settle their Claims against the Debtor or to litigate the
allowability of such Claims. Claimants in Classes 12 and 13 who do not
affirmatively elect to litigate shall be deemed to have settled their
Claims. Settling Physicians and Settling Health Care Providers shall
release all Claims against the Debtor and the Released Parties in exchange
for the protection of the release and, to the extent applicable, the
injunctive provisions of sections 8.3 through 8.5 of the Plan. The Claims
held by Non-Settling Physicians and Non-Settling Health Care Providers will
be channeled to the Litigation Facility and paid (subject to the terms of
the Settlement Facility Agreement and the Funding Payment Agreement) when
Allowed.
5.13.3CLAIMS IN CLASS 14. Domestic Health Insurers shall have the
option, pursuant to the terms of the Domestic Health Insurer Settlement
Agreement, to either (a) settle their claims against the Debtor and the
Released Parties or (b) litigate the allowability of their Claims and
receive that treatment provided in section 6.05 of the Litigation Facility
Agreement. All Domestic Health Insurers who do not timely elect to litigate
their Claims will be deemed to have settled their Claims and shall be
subject in all respects to the terms of the Domestic Health Insurer
Settlement Agreement.
Each Domestic Health Insurer that elects to settle, or is deemed to have
elected to settle, will receive its proportionate share of a cash
settlement fund. The amount of the settlement fund will be determined and
distributed as provided in the Domestic Health Insurer Settlement Agreement
which generally provides for distribution based upon the proportionate
number of "insured lives" of each settling Domestic Health Insurer. The
Reorganized Debtor shall receive a credit against its obligations under the
Funding Payment Agreement for all amounts paid pursuant to the Domestic
Health Insurer Settlement Agreement.
Except as otherwise set forth in the Domestic Health Insurer Settlement
Agreement, payments under the Domestic Health Insurer Settlement Agreement
will be in full satisfaction and release of all Claims of each settling
Domestic Health Insurer against the Debtor and the Released Parties. The
Domestic Health Insurer Settlement Agreement generally requires all
Domestic Health Insurers who elect to settle (or that are deemed to have
elected to settle) to release each Personal Injury Claimant from any and
all Claims, based on a theory of subrogation, reimbursement or otherwise,
for recovery of payments made or benefits provided by them, in the past,
present or future, relating to Products Liability Claims.
In the event the Domestic Health Insurer Settlement Agreement does not
become effective, all Domestic Health Insurer Claims shall be treated in
accordance with section 6.05 of the Litigation Facility Agreement.
5.13.4CLAIMS IN CLASS 14A. Foreign Health Insurer Claims shall be
treated in accordance with section 6.05 of the Litigation Facility
Agreement.
5.13.5CLAIMS IN CLASSES 15 AND 17. Unless a different treatment is
agreed to by the Proponents and the affected Claimants, the Proponents
shall seek to have the Claims in Classes 15 and 17 estimated for
distribution on or before the Confirmation Date. The Estimated Amount of
any such Claims will be paid (subject to the terms of the Settlement
Facility Agreement and the Funding Payment Agreement) by the Claims
Administrator on, or as soon as practicable after, the Effective Date. If
not estimated for distribution on or before the Confirmation Date, such
Claims will be channeled to the Litigation Facility for purposes of Claim
liquidation and paid (subject to the terms of the Settlement Facility
Agreement and the Funding Payment Agreement) when Allowed.
Page 20
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
5.13.6CLAIMS IN CLASS 16. Except as provided in section 6.16.5 of the
Plan, all Shareholder Claims shall be released in consideration of the
provisions contained in section 6.16 of the Plan.
5.14LTCI-RELATED CLAIMS--CLASSES 18 AND 19. At Closing, the Reorganized
Debtor will, in full release, satisfaction and discharge of all Claims in
Classes 18 and 19 and all Assumed Third Party Claims related to such Classes,
cause the assignment of the LTCI Indemnities to the Litigation Facility. The
Litigation Managers will assume full responsibility for resolving Claims in
Classes 18 and 19 pursuant to the Litigation Facility Agreement. The sole
remedy available to Class 18 and 19 Claimants shall be the Litigation
Facility's enforcement of the LTCI Indemnities.
5.15INTERCOMPANY CLAIMS--CLASS 20. The amount of each Allowed Intercompany
Claim shall include interest accrued thereon after the Petition Date through
the Effective Date at the Case Interest Rate. Each Subsidiary or Joint Venture
of the Debtor holding an Allowed Claim in Class 20 will retain its right to
payment from the Debtor; provided, however, that the Reorganized Debtor will
make no cash payment on account of such Allowed Claim. On the Effective Date
the Class 20 Claimants shall effect an offset of their Claims against any
obligation owing to the Debtor. To the extent a Class 20 Claim is not
satisfied in full by such setoff, the balance of such Claim shall be satisfied
by credits for future royalty obligations owing to the Reorganized Debtor or
for future sales of product and/or services by the Reorganized Debtor made in
the ordinary course of post-Effective Date business of the Reorganized Debtor
and such Subsidiary or Joint Venture.
5.16SUBORDINATED CLAIMS--CLASS 21. Each Subordinated Claim shall include
interest accrued thereon after the Petition Date through the later to occur of
the Effective Date or the Allowance Date at the Case Interest Rate, which
total sum shall be the Allowed Subordinated Claim. Each Claimant holding an
Allowed Subordinated Claim will receive, as soon as practicable following the
Effective Date, or, if later, the Allowance Date, a Subordinated Note in a
principal amount equal to the amount of the Allowed Subordinated Claim.
5.17HOLDERS OF INTERESTS--CLASS 24. The Shareholders shall retain their
Interests in the Reorganized Debtor.
5.18CRAMDOWN. If any impaired class of Claims fails to accept this Plan as
required by section 1126 of the Bankruptcy Code or in accordance with voting
procedures established by the Court, the Debtor shall have the right,
independent of the Tort Committee, to request that the Court confirm this Plan
in accordance with section 1129(b) of the Bankruptcy Code. The Tort Committee
will support confirmation of this Plan in accordance with section 1129(b) as
it relates to Classes 5 through 10.2 unless it reasonably determines that its
fiduciary duty to its constituency as a whole requires it to oppose such
confirmation.
ARTICLE SIX
MEANS FOR IMPLEMENTATION OF PLAN
6.1LITIGATION PROTOCOL. The procedures for resolving Claims of Non-Settling
Personal Injury Claimants and other Claims that are not settled under the Plan
are described in the Litigation Facility Agreement. In addition, the
Litigation Facility Agreement provides that the Case Management Order has been
approved by the parties and will be entered by the District Court. Pursuant to
the terms of the Litigation Facility Agreement, attempts will be made to
resolve Claims of Non-Settling Personal Injury Claimants and other Claims that
are not settled under the Plan, failing which the right of individual
Claimants to proceed to jury trial, if required by law, on their Claims will
be preserved.
6.2SETTLEMENT REGARDING ALLOCATION OF INSURANCE PROCEEDS AND COVERAGE. To
facilitate consummation of the Plan, and in partial consideration of the
releases and the injunctive provisions of sections 8.3 and 8.4 of the Plan,
Dow Chemical has agreed to a settlement regarding the allocation, as between
it and Dow Corning, of the proceeds and coverage afforded under the various
shared insurance arrangements in accordance with the terms of the Insurance
Allocation Agreement. The Court shall consider approval of the Insurance
Allocation Agreement at the hearing on confirmation of the Plan.
6.3RESOLUTION OF OTHER CLAIMS TO INSURANCE SETTLEMENT PROCEEDS. A number of
Insurance Companies, Physicians, Health Care Providers, and Government Payors
have asserted claims against or interests in amounts paid or payable by
Settling Insurers pursuant to settlement agreements reached with Dow Corning.
Dow Corning will seek, as part of the Confirmation Order or pursuant to an
adversary proceeding to be heard concurrently with confirmation, a
determination that Dow Corning's rights and interests in such amounts paid or
payable by the Settling Insurers are superior to the competing claims of all
other claimants except Dow Chemical, as provided in the Insurance Allocation
Agreement, and the rights of Hoechst Marion Roussel, Inc., as provided in a
settlement agreement approved by the Bankruptcy Court on January 25, 1996.
Consequently, if Dow Corning is successful, the Confirmation Order or another
order or judgment entered concurrently with the Confirmation Order will
disallow any competing claims to amounts paid or to be paid by the Settling
Page 21
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Insurers pursuant to settlement agreements with Dow Corning, other than the
rights of Dow Chemical pursuant to the Insurance Allocation Agreement and the
rights of Hoechst Marion Roussel, Inc. as provided in a settlement agreement
approved by the Bankruptcy Court on January 25, 1996.
6.4SETTLEMENT OF CERTAIN FOREIGN CLAIMS. To facilitate consummation of the
Plan, the Court shall consider approval of the Quebec Breast Implant
Settlement Agreement, the Ontario Breast Implant Settlement Agreement, the
B.C. Class Action Settlement Agreement and the Australia Breast Implant
Settlement Option at the hearing on confirmation of the Plan.
6.5SETTLEMENT WITH DOMESTIC HEALTH INSURERS. To facilitate consummation of
the Plan, the Court shall consider approval of the Domestic Health Insurer
Settlement Agreement at the hearing on confirmation of the Plan.
6.6FILING AND PAYMENT OF ALLOWED ADMINISTRATIVE CLAIMS. All requests for
the payment of administrative expenses pursuant to section 503(b)(1) of the
Bankruptcy Code, including applications for the compensation of professionals,
shall be filed with the Court no later than 75 days after the Effective Date
or at such time as the Court may otherwise order. The Reorganized Debtor will
have 60 days after the deadline for filing requests for the payment of
administrative expenses to file objections to any such requests. The
Reorganized Debtor shall cause all Allowed Administrative Claims to be paid in
accordance with section 2.1 of this Plan.
6.7FUNDING OF PLAN PAYMENTS. Payments of cash to be made pursuant to the
Plan will be made as provided in the Plan, the Funding Payment Agreement, the
Quebec Breast Implant Settlement Agreement, the Ontario Breast Implant
Settlement Agreement, the B.C. Class Action Settlement Agreement, and the
Australia Breast Implant Settlement Option, as applicable. Unless otherwise
provided in an order of the Court, all cash payments shall be made in United
States dollars.
6.8RESOLUTION OF RIGHTS TO RECOVER AGAINST SETTLEMENT FACILITY. A number of
Claimants in Classes 14, 14A and/or 15 assert rights to recover from the
Settlement Facility if the Settlement Facility pays Allowed Claims of Settling
Personal Injury Claimants without notice to or an adjudication of competing
rights of such Class 14, 14A and/or 15 Claimants to such settlement amounts.
Dow Corning will seek, as part of the Confirmation Order or pursuant to an
adversary proceeding to be heard concurrently with confirmation, a
determination that any such right to recover against the Settlement Facility
shall be cut off by the payment of an Allowed Claim of a Settling Personal
Injury Claimant and that the sole remedy available to such Class 14, 14A
and/or 15 Claimant shall be to pursue a recovery directly from the Settling
Personal Injury Claimant.
6.9PAYMENT TO UNITED STATES TRUSTEE. All fees due to the United States
Trustee pursuant to 28 U.S.C. (S) 1930(a) shall be paid by the Reorganized
Debtor as and when they become due and shall be based on the Reorganized
Debtor's total disbursements, including ordinary course of business
disbursements as well as disbursements made under the Plan, but shall not
include distributions by the Settlement Facility and the Litigation Facility
to the ultimate recipients. Such fee obligations shall not terminate until the
Case is converted or dismissed, or until the Case is no longer pending upon
entry of a final decree closing the Case, whichever shall first occur.
6.10 CLOSING. One or more closings (each, a "CLOSING" and collectively, the
"CLOSINGS") shall be conducted in the offices of DCC, or at such other
location(s) designated by the Proponents, at 10:00 o'clock a.m. on one or more
Business Days selected by the Proponents on, or as soon as practicable after,
the Effective Date (each, a "CLOSING DATE" and collectively, the "CLOSING
DATES") for the purpose of making the distributions to holders of Allowed
Claims provided for in the Plan. As soon as practicable after the conditions
to the Effective Date in section 7.2 have been satisfied or waived in
accordance with section 7.3, the Proponents shall give written notice of the
applicable Closing Date to the other Official Committees and any Claimant that
will be directly involved in a Closing. Separate Closing Dates may be
scheduled for different Classes of creditors treated under this Plan to the
extent necessary, in the sole discretion of the Proponents. All references in
this Plan to a Closing or a Closing Date shall refer to the effectuation of
the distribution to the holders of Allowed Claims in a particular Class
provided for in the Plan or the date prescribed therefor pursuant to this
section 6.10, as the case may be. (Although this provision is intended to
afford all parties-in-interest the flexibility to efficiently conclude the
transactions contemplated by the Plan, the Proponents intend, if at all
possible, to conduct a single Closing.)
6.11DEBTOR'S OBLIGATIONS AT CLOSING. The following shall occur at the
Closings:
6.11.1PAYMENT, CURE AND REINSTATEMENT OR SETOFF OF ALLOWED SECURED
CLAIMS. The Reorganized Debtor shall pay or make provision for the prompt
payment to the holders of Allowed Secured Claims an amount equal to all
overdue principal installments and accrued and unpaid interest, if any, on
the Allowed Secured Claims as of the Closing Date, and the Allowed Secured
Claims shall thereby be reinstated, without premium or penalty.
Alternatively, if an Allowed Secured Claim consists of an amount subject to
setoff under section 553 of the Bankruptcy Code, the holders of such
Allowed Secured Claims shall effect such setoffs on the Effective Date or,
if later, the Allowance Date.
Page 22
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
6.11.2SATISFACTION OF ALLOWED UNSECURED CLAIMS. The Reorganized Debtor
shall cause the distribution of cash, with respect to Allowed Claims in
Class 3, and cash and Senior Notes, with respect to Allowed Claims in Class
4 (and Class 4A, if applicable), to be made as provided in sections 4.3,
5.1 and 5.2 of this Plan.
6.11.3SATISFACTION OF PERSONAL INJURY CLAIMS (OTHER THAN CLAIMS IN
CLASSES 6A, 6B, 6C AND 6D) AND LTCI OTHER CLAIMS. Unless the Settlement
Facility and the Litigation Facility shall have been earlier established,
the Reorganized Debtor shall cause the Settlement Facility and the
Litigation Facility to be established and shall deliver the Funding Payment
Agreement (together with the initial cash payment of $985 million plus any
interest as provided by the Funding Payment Agreement) and the LTCI
Indemnities in full release, satisfaction and discharge of the Personal
Injury Claims and LTCI Other Claims.
6.11.4SATISFACTION OF PERSONAL INJURY CLAIMS IN CLASS 6A. The
Reorganized Debtor shall execute and deliver the Quebec Breast Implant
Settlement Agreement (together with any payment[s] then due thereunder to
the Quebec Class Action Fund).
6.11.5SATISFACTION OF PERSONAL INJURY CLAIMS IN CLASS 6B. The
Reorganized Debtor shall execute and deliver the Ontario Breast Implant
Settlement Agreement (together with any payment[s] then due thereunder to
the Ontario Class Action Fund).
6.11.6SATISFACTION OF PERSONAL INJURY CLAIMS IN CLASS 6C. The
Reorganized Debtor shall execute and deliver the B.C. Class Action
Settlement Agreement (together with any payment[s] then due thereunder to
the B.C. Class Action Fund).
6.11.7SATISFACTION OF PERSONAL INJURY CLAIMS IN CLASS 6D. The
Reorganized Debtor shall execute and deliver the Australia Breast Implant
Settlement Option (together with any payment[s] then due thereunder to the
Australia Breast Implant Optional Settlement Fund).
6.11.8SATISFACTION OF OTHER CLAIMS RELATED TO IMPLANTS. If such Claims
have been timely resolved or estimated for allowance, the Reorganized
Debtor shall cause the distribution of cash and Senior Notes with respect
to Allowed Claims of Non-Settling Co-Defendants in Class 11, and of
Claimants in Classes 15 and 17 in accordance with sections 5.13.1 and
5.13.5 of this Plan.
6.11.9SATISFACTION OF SETTLING DOMESTIC HEALTH INSURER CLAIMS. Provided
the Domestic Health Insurer Settlement Agreement has become effective, the
Reorganized Debtor shall consummate the transactions contemplated by that
agreement.
6.11.10SATISFACTION OF ALLOWED SUBORDINATED CLAIMS. The Reorganized
Debtor shall cause all Allowed Subordinated Claims to be satisfied in
accordance with section 5.16 of this Plan.
6.11.11CONTEMPORANEOUS NATURE OF TRANSACTIONS AT CLOSING. All
transactions consummated at the Closing shall be deemed to be
contemporaneous transactions. All documents and consideration which were
required to be exchanged at Closing shall be deemed contemporaneously
exchanged among the parties.
6.12DOCUMENTATION. The Proponents shall prepare all documentation to be
executed in connection with this Plan or the Closing, subject to any necessary
Court approval.
6.13MERGER; CHOICE OF LAW. All obligations of the Debtor to all Claimants
shall be merged into this Plan and the documents executed by the Reorganized
Debtor at Closing and delivered to the respective affected Claimants. All such
obligations of the Reorganized Debtor shall be evidenced by this Plan and such
executed and delivered documents. Unless otherwise provided therein, such
documents shall be governed by and construed in accordance with the laws of
the State of New York and applicable federal law.
6.14 OTHER OBLIGATIONS OF THE REORGANIZED DEBTOR. The Reorganized Debtor
shall:
6.14.1review all Claims other than Personal Injury Claims filed against
the estate and, if advisable, object to Claims;
6.14.2investigate, prosecute, settle, or dismiss all Debtor Actions and
Insurance Debtor Actions not otherwise released under this Plan. The
Reorganized Debtor shall be entitled to receive all Debtor Action
Recoveries and Insurance Debtor Action Recoveries. All such proceeds
related to Personal Injury Claims shall be paid to the Settlement Facility
or the Litigation Facility, as applicable, as provided in this Plan and the
Plan Documents; and
6.14.3perform all of its obligations under the Plan Documents,
including, without limitation, those obligations provided in the Settlement
Facility Agreement, the Litigation Facility Agreement and the Funding
Payment Agreement.
Page 23
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
6.15BOARD OF DIRECTORS OF THE REORGANIZED DEBTOR. The board of directors of
DCC shall continue to serve as the initial board of directors of the
Reorganized Debtor.
6.16SHAREHOLDERS' CONTRIBUTION. In order (a) to facilitate the consummation
of the Plan and the funding of the Settlement Facility and the Litigation
Facility, and (b) to provide additional sources for funding the Plan as
required by the Funding Payment Agreement, the Shareholders have agreed to
make certain financial accommodations, and the Debtor and the Shareholders
have agreed to resolve certain Claims asserted against the Debtor by the
Shareholder-Affiliated Parties. In exchange for the consideration contributed
to the Plan by the Shareholders, the Shareholder-Affiliated Parties will be
entitled to, and shall benefit from, the provisions of section 6.16.5 and the
releases and injunctions provided in sections 8.3 and 8.4 of the Plan. The
agreements between the Debtor and the Shareholders include the following:
6.16.1INSURANCE SETTLEMENT. Dow Chemical has agreed to the allocation of
the proceeds and coverage afforded under the various shared insurance
arrangements as provided in section 6.2 of the Plan.
6.16.2SHAREHOLDER REVOLVING CREDIT FACILITY. Dow Chemical and Corning
will enter into the Funding Payment Agreement, which shall contain
provisions obligating Dow Chemical and Corning to make available to the
Reorganized Debtor a ten-year revolving credit facility in the aggregate
amount of $300 million for years one through five after the Effective Date,
and decreasing by $50 million per year in years six through ten after the
Effective Date. Dow Chemical and Corning will each contribute one-half of
any funds advanced or borrowed under the facility. The facility will have a
final maturity at the end of year ten, at which time the Reorganized Debtor
will be required to repay all amounts not previously repaid in accordance
with the amortization schedule, and no funds will be available under the
facility thereafter. The facility will be available to lend funds to the
Reorganized Debtor in the event the Reorganized Debtor does not have
sufficient funds to meet its obligation to fund the Plan in accordance with
the Funding Payment Agreement. The Reorganized Debtor will be obligated to
repay all amounts advanced by Dow Chemical and Corning with interest, and
will be permitted to prepay at any time.
6.16.3RELEASE OF SHAREHOLDER CLAIMS. Except as provided in section
6.16.5 of the Plan and in the Litigation Facility Agreement with respect to
the Mahlum Claims and the Spitzfaden Claims, the Shareholder Claims shall
be deemed released on the Effective Date of the Plan.
6.16.4SHAREHOLDER SUPPORT OF PLAN. The Shareholders have agreed to
support the Plan, which calls for substantial payments for disease Claims
of Settling Personal Injury Claimants without requiring the Settling
Personal Injury Claimants to prove that the Claimants' diseases were caused
by a silicone implant manufactured by the Debtor.
6.16.5MAHLUM AND SPITZFADEN CLAIMS. In the event the Mahlum Claims
and/or the Spitzfaden Claims are settled prior to the Effective Date, all
amounts paid by a Shareholder to the Mahlum Claimants and/or the Spitzfaden
Claimants pursuant to the agreement(s) providing for the settlement of such
Claims shall constitute Allowed Class 16 Claims, and the Shareholder shall
be reimbursed such amounts in full, together with interest at the same rate
as the Senior Notes, by the Claims Administrator from funds maintained by
the Settlement Facility. Reimbursement shall be made on the same basis and
with the same priority as "premium payments" under the Settlement Facility
Agreement. Any such settlements will include a release of any corresponding
Claims against the Debtor-Affiliated Parties and the Shareholder-Affiliated
Parties. In the event the existing judgment with respect to the Mahlum
Claims is affirmed on appeal, the judgment shall be paid by Dow Chemical.
Dow Chemical may pursue reimbursement from Dow Corning, as a Class 16
Claim, of the amounts paid as provided in the Litigation Facility
Agreement.
In the event the Mahlum Claims and/or the Spitzfaden Claims remain
pending as of the Effective Date: (i) any unresolved Mahlum Claims and
Spitzfaden Claims shall be subject to the channeling injunction provisions
of section 8.5 of the Plan and shall be deemed transferred to the District
Court for resolution in accordance with the Claim resolution procedures
contained in and contemplated by the Litigation Facility Agreement;
provided, however, that such Claims shall not be transferred pursuant to
section 8.5 of the Plan, (a) in the case of the Mahlum Claims, unless the
existing judgment is reversed and remanded for retrial, and (b) in the case
of a Spitzfaden Claim, until the existing judgment entered in Phase I
proceedings is resolved by a Final Order, and then only to the extent the
judgment as to that Claim is affirmed as against a Shareholder-Affiliated
Party; and (ii) any judgment, award or settlement in respect of the Mahlum
Claims and Spitzfaden Claims shall be paid as provided in the Litigation
Facility Agreement.
The Shareholders' obligations in this section 6.16 are subject to the
conditions (unless waived by the Shareholders) that (a) the conditions set out
in sections 7.1 and 7.2 of the Plan shall have been satisfied and (b) no
amendment or modification to the Plan (including the release and injunction
provisions) shall have occurred that is adverse to the Shareholders in any
respect.
Page 24
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
ARTICLE SEVEN
CONDITIONS PRECEDENT
7.1CONDITIONS TO CONFIRMATION. Confirmation of the Plan shall not occur
unless and until each of the following conditions shall have been satisfied or
waived in accordance with section 7.3 of this Plan:
7.1.1The Court or the District Court, as appropriate, shall have entered
an Estimation Order(s) with respect to any Estimated Amount(s) that are
necessary for confirmation of the Plan;
7.1.2The District Court shall have entered the Case Management Order;
7.1.3The Confirmation Order shall provide that the settlement provisions
provided in section 5.4.1 of the Plan are binding on all Settling Personal
Injury Claimants;
7.1.4The Confirmation Order shall approve and provide for the
implementation of the Insurance Allocation Agreement;
7.1.5The Confirmation Order shall approve and provide for the
implementation of the Domestic Health Insurer Settlement Agreement;
7.1.6The Confirmation Order shall approve and provide for the
implementation of the other Plan Documents;
7.1.7The Confirmation Order shall effect the release of certain Claims
and the injunction against the prosecution of the Released Claims against
those third parties, including the Shareholder-Affiliated Parties, as
described in sections 8.3 and 8.4 of the Plan, and shall provide for the
channeling injunction with respect to Assumed Third Party Claims described
in section 8.5 of the Plan; and
7.1.8The Confirmation Order shall be in form and substance reasonably
acceptable to the Proponents and the Shareholders.
7.2CONDITIONS TO THE EFFECTIVE DATE. Notwithstanding any other provision of
the Plan or the Confirmation Order, the Effective Date shall not occur unless
and until each of the following conditions shall have been satisfied or waived
in accordance with section 7.3 of this Plan:
7.2.1No timely-filed appeal shall have been taken from the Confirmation
Order challenging, directly or indirectly, the validity and enforceability
of the releases and injunctions described in sections 8.3 and 8.4 of the
Plan and/or the limits of required funding as set forth in the Funding
Payment Agreement for the release, satisfaction and discharge of all claims
in Classes 5 through 19 of the Plan (collectively, the "RELEASE/FUNDING
ISSUES"), or, if such an appeal regarding any Release/Funding Issue shall
have been filed, such appeal shall have been denied or dismissed and such
releases and injunctions and such limits of required funding shall have
been affirmed in all respects pursuant to a Final Order;
7.2.2The Debtor shall have received from the Internal Revenue Service
("IRS") a ruling reasonably satisfactory to Dow Corning and its tax counsel
regarding the following matters: (i) the Depository Trust will be treated
as a qualified settlement fund within the meaning of section 468B of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder; (ii) the payments to be made with respect to Claims
Allowed through the procedures provided therefor in the Litigation Facility
will be fully deductible by the Reorganized Debtor at the time of (or
before) each such disbursement; and (iii) such other matters as tax counsel
for Dow Corning may reasonably require; and
7.2.3The Indenture shall have been qualified under the Trust Indenture
Act of 1939, as amended, by the Securities and Exchange Commission.
7.3WAIVER OF CONDITIONS. Any condition set forth in sections 7.1 or 7.2 of
this Plan may be waived by the Proponents and the Shareholders.
7.4ESCROW OF PAYMENTS TO SETTLEMENT FACILITY PENDING
APPEAL. Notwithstanding section 7.2.1 of the Plan, in the event an appeal is
filed from the Confirmation Order that does not raise a Release/Funding Issue
and does not result in a stay of the effect of the Confirmation Order,
Reorganized DCC shall consummate the Plan.
If the appeal does raise a Release/Funding Issue: (a) DCC and the Tort
Committee will cooperate in seeking an expedited appeal thereof, and (b) if
there is no stay of the Confirmation Order pending appeal, DCC shall timely
pay to the Settlement Facility that portion of the initial cash payment of
$985 million and such other subsequently available funds which Reorganized DCC
is obligated to pay under the terms of the Funding Payment Agreement.
Page 25
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
The funds paid to the Settlement Facility shall be held in escrow pending
the outcome of the appeal, with any interest accruing thereon to be held as
part of the fund. During the pendency of the appeal, the Settlement Facility
shall commence those operations necessary and appropriate to begin processing
Claims promptly after the Effective Date. Funds may be withdrawn for payment
of the administrative expenses of the Settlement Facility and/or the
Litigation Facility that are incurred during the pendency of the appeal. If
the appeal does not result in a reversal of the Confirmation Order, the
remaining escrowed funds, including the accrued interest thereon, shall, upon
termination of the appeal, be disbursed in accordance with the Plan. If the
appeal results in the reversal of the Confirmation Order, the remaining
escrowed funds, including the accrued interest thereon, shall be returned to
DCC.
ARTICLE EIGHT
EFFECTS OF PLAN CONFIRMATION
8.1DISCHARGE. Except as otherwise expressly provided in this Plan or in the
Confirmation Order, on the Effective Date the Debtor shall be discharged from
and its liability shall be extinguished completely in respect of any Claim and
Debt, whether reduced to judgment or not, liquidated or unliquidated,
contingent or noncontingent, asserted or unasserted, fixed or not, matured or
unmatured, disputed or undisputed, legal or equitable, known or unknown, that
arose from any agreement of the Debtor entered into or obligation of the
Debtor incurred before the Confirmation Date, or from any conduct of the
Debtor prior to the Confirmation Date, or that otherwise arose before the
Confirmation Date, including, without limitation, all interest, if any, on any
such Claims and Debts, whether such interest accrued before or after the date
of commencement of the Case, and including, without limitation, all Claims and
Debts based upon or arising out of Breast Implant Claims, Other Products
Claims, Raw Material Breast Implant Claims, Miscellaneous Raw Material Claims,
LTCI Claims, and from any liability of the kind specified in sections 502(g),
502(h), and 502(i) of the Bankruptcy Code, whether or not a proof of claim is
filed or is deemed filed under section 501 of the Bankruptcy Code, such Claim
is Allowed under section 502 of the Bankruptcy Code, or the holder of such
Claim has accepted this Plan.
Without limiting the generality or effect of the foregoing, on the
Effective Date, all Existing Debt Instruments shall be deemed canceled,
extinguished, retired and of no further force and effect, in all events
without any further action on the part of the Debtor or any other entity. The
holders of Existing Debt Instruments shall thereafter have no rights arising
from or relating to such Existing Debt Instruments, except the rights provided
pursuant to this Plan; provided, however, that no distribution under this Plan
shall be made to or on behalf of the holder of any Allowed Claim evidenced by
such Existing Debt Instruments unless or until such Existing Debt Instruments
are surrendered to the Reorganized Debtor pursuant to, or the holder has
otherwise complied with, section 10.6 of this Plan.
8.2VESTING. Except as otherwise expressly provided in this Plan or in the
Confirmation Order, on the Effective Date the Reorganized Debtor shall be
vested with all of the property of the estate free and clear of all Claims,
Liens, encumbrances, charges and other interests of Creditors and
Shareholders, and shall thereafter hold, use, dispose or otherwise deal with
such property and operate its business free of any restrictions imposed by the
Bankruptcy Code or by the Court. All Debtor Actions and, except to the extent
the same are transferred to the Settlement Facility or the Litigation
Facility, all Insurance Debtor Actions are hereby preserved for the benefit of
the Reorganized Debtor, the proceeds of which shall be used, as necessary for
funding obligations to either the Settlement Facility or the Litigation
Facility, except as otherwise provided in settlements approved by prior order
of the Court or approved by the Court in connection with confirmation of this
Plan. Prosecution and settlement of the Debtor Actions and the retained
interest in any Insurance Debtor Actions shall be the exclusive responsibility
of the Reorganized Debtor. The Reorganized Debtor shall have sole and absolute
discretion over whether to prosecute or settle such causes of action.
8.3RELEASE. Except as otherwise expressly provided in this Plan and in this
section 8.3, in consideration of (a) the promises and obligations of the
Debtor-Affiliated Parties under the Plan, including the establishment and
funding of the Settlement Facility, the Litigation Facility, the Quebec Class
Action Fund, the Ontario Class Action Fund, the B.C. Class Action Fund and the
Australia Breast Implant Optional Settlement Fund, (b) the undertakings of the
Shareholders pursuant to section 6.16 of the Plan, (c) the undertakings of the
Settling Insurers pursuant to their respective settlements with the Debtor,
and (d) the release of Claims against the Debtor-Affiliated Parties by the
Settling Physicians and Settling Health Care Providers, on the Effective Date
(i) all Persons who have held, hold, or may hold Products Liability Claims,
whether known or unknown, shall be deemed to have forever waived and released
all such rights or Claims, whether based upon tort or contract or otherwise,
that they heretofore, now or hereafter possess or may possess against the
Debtor-Affiliated Parties, the Shareholder-Affiliated Parties, the Settling
Insurers, and, to the extent released by the Debtor under the settlement
Page 26
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
agreements with such Settling Insurers, the respective predecessors,
successors, officials, shareholders, subsidiaries, divisions, affiliates,
representatives, attorneys, merged or acquired companies or operations or
assigns of the Settling Insurers, and (ii) all Persons who hold, may hold or
may have held Personal Injury Claims shall be deemed to have forever waived
and released all such rights or Claims, whether based upon tort or contract or
otherwise, that they heretofore, now or hereafter possess or may possess
against the Settling Physicians (except for Malpractice Claims) or the
Settling Health Care Providers (except for Malpractice Claims) (all such
parties released by this section 8.3, including, without limitation, the
Debtor-Affiliated Parties, the Shareholder-Affiliated Parties, the Settling
Insurers and, to the extent released by the Debtor under the settlement
agreements with such Settling Insurers, the respective predecessors,
successors, officials, shareholders, subsidiaries, divisions, affiliates,
representatives, attorneys, merged or acquired companies or operations or
assigns of the Settling Insurers, and, except for Malpractice Claims, the
Settling Physicians and Settling Health Care Providers, being collectively
called the "RELEASED PARTIES"), in each case based upon or in any manner
arising from or related to (v) the raw materials and/or finished products
manufactured or distributed by the Debtor, including a Breast Implant, an
Other Product, an LTCI Product, or the raw materials comprising part of a Non-
Dow Corning Breast Implant or a Non-Dow Corning Implant, (w) the research and
development, manufacture, distribution, advertisement, sale, provision,
recommendation, insertion, use or removal of any raw materials and/or finished
products manufactured or distributed by the Debtor, including a Breast
Implant, an Other Product, an LTCI Product or the raw materials comprising
part of such products or a Non-Dow Corning Breast Implant or a Non-Dow Corning
Implant, (x) the processing, adjustment, settlement, payment, defense,
negotiation or handling of any Claims, demands, suits, causes of action or
proceedings, based upon or relating in any way to any raw materials and/or
finished products manufactured or distributed by the Debtor, including a
Breast Implant, an Other Product or an LTCI Product, or the raw materials
comprising part of a Non-Dow Corning Breast Implant or a Non-Dow Corning
Implant, (y) the failure to warn, disclose or provide information concerning,
the alleged fraud or misrepresentation regarding, or the failure to take
remedial action with respect to, any raw materials and/or finished products
manufactured or distributed by the Debtor, including a Breast Implant, an
Other Product or an LTCI Product, or the raw materials comprising part of a
Non-Dow Corning Breast Implant or a Non-Dow Corning Implant, or (z) contingent
Claims against any of the Released Parties for liability, if any, otherwise
arising from the future payment by the Debtor, the Reorganized Debtor or
either the Settlement Facility and the Litigation Facility in potential
derogation of the lien rights or rights of subrogation held with respect to
the Claims of any direct Claimant against any of the Released Parties,
including, without limitation, (a) those for death or personal injuries,
including emotional distress, (b) those of any Person against whom any Claim,
demand, proceeding, suit or cause of action based upon or in any manner
arising from or relating to any of the matters enumerated or described in (v),
(w), (x), (y) and/or (z) above has been or may be asserted (including, without
limitation, rights of indemnity, whether contractual or otherwise,
contribution Claims and subrogation Claims), (c) those for damages, including
punitive damages, (d) those for attorneys' fees and other expenses, fees or
costs, (e) those for any possible economic loss or loss of consortium, (f)
those for damages to reputation, and (g) those for any equitable remedy.
The parties who are Released Parties in this section 8.3 shall be deemed
released by the Quebec Class Action Settlement Claimants, the Ontario Class
Action Settlement Claimants, the B.C. Class Action Settlement Claimants and
the Australia Breast Implant Settlement Claimants, and shall be entitled to
receive executed releases pursuant to, respectively, the Quebec Breast Implant
Settlement Agreement, the Ontario Breast Implant Settlement Agreement, the
B.C. Class Action Settlement Agreement and the Australia Breast Implant
Settlement Option.
Except as otherwise expressly provided in this Plan and the Plan Documents,
the release under this section 8.3 shall further operate, as between all
Released Parties, as a mutual release of all Products Liability Claims,
including, but not limited to, all Claims between any Shareholder-Affiliated
Parties. Further, save and except for the preservation of all rights in
insurance arrangements described below, Dow Corning shall be deemed to have
released any Claims for contribution or indemnity it may have against any of
the Released Parties. However, the release under this section 8.3 will not
affect contribution, indemnity, subrogation, or other claims of non-settling
Insurance Companies against Settling Insurers.
This section 8.3 shall not operate as a release or waiver of any
Malpractice Claim held against a Settling Physician or a Settling Health Care
Provider by a Settling Personal Injury Claimant. Malpractice Claims, if any,
asserted by Settling Personal Injury Claimants shall be resolved in the courts
where actions based on such Claims have been (or may be) filed. Moreover, this
section 8.3 shall not operate as a release or waiver in favor of the Settling
Physicians and the Settling Health Care Providers of the rights or Claims of
Non-Settling Personal Injury Claimants. Such rights and Claims shall be
preserved, subject to section 8.5 of this Plan. This section 8.3 shall not
operate as a release or waiver of those Claims preserved under the Domestic
Health Insurer Settlement Agreement.
Further, this section 8.3 and the injunction contained in section 8.4 are
not intended to release, impair or otherwise affect the terms of any Coverage-
in-Place Policies or other undertakings of any of the Settling Insurers under
their respective settlement agreements with the Debtor, or to release, impair
or otherwise affect the rights of the Shareholder-Affiliated
Page 27
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Parties in respect of any policy of insurance, except as expressly set forth
(a) in the orders entered by the Court with respect to the settlement
agreement between the Debtor and a Settling Insurer or (b) in the settlement
described in section 6.2 of this Plan.
The Representatives of the Debtor, the Joint Ventures and the Subsidiaries
shall be deemed indemnified and held harmless by the Reorganized Debtor with
respect to the Claims hereby released to the fullest extent available under
applicable statute and the bylaws of the Reorganized Debtor.
The foregoing release provisions are an integral part of this Plan and are
essential to its implementation.
8.4PERMANENT INJUNCTION AGAINST PROSECUTION OF RELEASED CLAIMS. Except as
otherwise expressly provided in this Plan, for the consideration described in
section 8.3 above, on the Effective Date all Persons who have held, hold, or
may hold Released Claims, whether known or unknown, and their respective
agents, attorneys, and all others acting for or on their behalf, shall be
permanently enjoined on and after the Effective Date from (a) commencing or
continuing in any manner, any action or any other proceeding of any kind with
respect to any Released Claim against the Debtor-Affiliated Parties, the
Shareholder-Affiliated Parties, the Settlement Facility, the Litigation
Facility, the Settling Physicians, the Settling Health Care Providers, the
Settling Insurers, and, to the extent released by the Debtor under the
settlement agreements with such Settling Insurers, the respective
predecessors, successors, officials, shareholders subsidiaries, divisions,
affiliates, representatives, attorneys, merged or acquired companies or
operations or assigns of the Settling Insurers, or any Representative of each
such party (collectively, the "PARTIES") or the property of the Parties, (b)
seeking the enforcement, attachment, collection or recovery by any manner or
means of any judgment, award, decree, or order against the Parties or the
property of the Parties, with respect to any Released Claim, (c) creating,
perfecting, or enforcing any encumbrance of any kind against the Parties or
the property of the Parties with respect to any Released Claim, (d) asserting
any setoff, right of subrogation, or recoupment of any kind against any
obligation due to the Parties with respect to any Released Claim, and (e)
taking any act, in any manner and in any place whatsoever, that does not
conform to or comply with provisions of this Plan, or the Settlement Facility
Agreement and the Litigation Facility Agreement. Notwithstanding this section
8.4, each Non-Settling Personal Injury Claimant shall be entitled to continue
or commence an action against the Litigation Facility in which the Non-
Settling Personal Injury Claimant shall be entitled to a jury trial for the
sole purpose of obtaining a judgment as permitted by the Litigation Facility
Agreement, thereby liquidating such Non-Settling Personal Injury Claimant's
Claim so that it may be paid with other Allowed Personal Injury Claims in the
ordinary course of the operations of the Litigation Facility, consistent with
the provisions of the Litigation Facility Agreement. The holder of any such
judgment shall be enjoined from executing against the Litigation Facility or
its assets.
In the event any Person takes any action that is prohibited by, or is
otherwise inconsistent with the provisions of sections 8.3 or 8.4 of this
Plan, then, upon notice to the Court by an affected Released Party, the action
or proceeding in which the Claim of such Person is asserted shall
automatically be transferred to the Court (or, as applicable, the District
Court) for enforcement of the provisions of sections 8.3 and 8.4 of this Plan.
The foregoing injunctive provisions are an integral part of this Plan and
are essential to its implementation.
8.5CHANNELING INJUNCTION FOR CERTAIN CLAIMS. Claims, if any, asserted by
Non-Settling Personal Injury Claimants against the Settling Physicians and the
Settling Health Care Providers (other than Malpractice Claims) shall be
subject to the channeling injunction provisions of this section 8.5 in the
event that jurisdiction over such Claims is transferred, as Claims "related
to" this Case, to the District Court. If such transfer is not effected, the
relief provided in this section is not effective as to Claims that are not
transferred, and such Claims shall be resolved by the procedures applicable in
the courts where actions based on such Claims have been (or may be) filed. In
the event that any such Claims against a Settling Physician or Settling Health
Care Provider are transferred to the District Court for liquidation, they
shall be subject to the following Claims resolution procedures. In addition,
subject to the provisions of section 6.16.5 of this Plan, any of the Mahlum
Claims and Spitzfaden Claims that are unresolved as of the Effective Date
shall be subject to the channeling injunction provisions and the Claims
resolution procedures specified in this section 8.5. All Claims transferred
pursuant to this section 8.5 are called the "ASSUMED THIRD PARTY CLAIMS".
8.5.1RESOLUTION AND TRIAL PROCEDURES. All Assumed Third Party Claims
shall be processed, settled, tried and otherwise resolved in accordance
with the Claims resolution procedures (including trial by jury) provided in
or contemplated by the Litigation Facility Agreement. To facilitate such
resolution, each Assumed Third Party Claim shall be joined and consolidated
with the corresponding Claim against the Debtor, if any, in order that the
Assumed Third Party Claim and any corresponding Claim against the
Litigation Facility as successor to the Debtor will be resolved jointly and
concurrently through the procedures contained in the Litigation Facility
Agreement.
Page 28
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
8.5.2TRIAL VENUE. Nothing contained herein shall limit the power and
authority of the District Court to set trial venue for Personal Injury
Claims against the Settling Physicians or the Settling Health Care
Providers in the District Court or in the district court in the district in
which the Claim arose, in accordance with 28 U.S.C. (S) 157(b)(5), except
that, as contemplated by the Litigation Facility Agreement, an Assumed
Third Party Claim will be tried together with any corresponding Claim
against the Litigation Facility as successor to the Debtor.
8.5.3NO DELAY IN CLAIM RESOLUTION. Claim resolution under the Litigation
Facility Agreement shall commence following the Effective Date of the Plan
in accordance with the terms of the Litigation Facility Agreement and shall
not be delayed or postponed pending adjudication of the transfer to the
District Court of any Assumed Third Party Claim.
8.5.4INJUNCTION. All Persons who have held, hold or may hold Assumed
Third Party Claims, whether known or unknown, and their respective
Representatives, shall be permanently enjoined on and after the Effective
Date from (a) commencing or continuing in any manner any action or any
other proceeding of any kind against any Settling Physician, Settling
Health Care Provider, or their property, based on, arising out of, or
relating to any Assumed Third Party Claims, except as permitted by this
Plan and the Litigation Facility Agreement, and (b) asserting any right or
Claim, or taking any other act, in any manner or in any place, against any
Settling Physician or Settling Health Care Provider in respect of a Assumed
Third Party Claim that does not conform to or comply with this Plan and the
Litigation Facility Agreement. The foregoing injunction provisions are an
integral part of this Plan and are essential to its implementation.
8.6SUPPLEMENTAL RELEASE AND INJUNCTION FOR CERTAIN SETTLING INSURERS. The
release and injunction provided in sections 8.3 and 8.4 shall, with respect to
the London Market Insurers and TIG Insurance Company, include, without
limitation, the prohibition against the commencement, continuation and/or
enforcement of claims against (a) the London Market Insurers with respect to
all Claims arising from or related to the development, manufacture and/or sale
of any products by DCC, as well as certain environmental claims, all as
described in the Order Authorizing and Approving Compromise and Settlement
With the London Market Insurers entered on March 25, 1996, and (b) TIG
Insurance Company with respect to pollution claims under the Excess Policy, as
defined and released in the Settlement Agreement attached as Exhibit "1" to
the Order Authorizing and Approving Compromise and Settlement With TIG
Insurance Company and Other Insurers entered on March 25, 1996.
8.7RETENTION OF JURISDICTION. Notwithstanding entry of the Confirmation
Order or the occurrence of the Effective Date, the Court and, as applicable,
the District Court, will retain exclusive jurisdiction:
8.7.1to determine any Disputed Claims;
8.7.2to determine requests for payment of Claims entitled to priority
under section 507(a)(1) of the Bankruptcy Code, including compensation of
and reimbursement of expenses of parties entitled thereto;
8.7.3to resolve controversies and disputes regarding interpretation and
implementation of this Plan and the Plan Documents;
8.7.4to resolve all actions involving the Depository Trust in accordance
with the Settlement Facility Agreement;
8.7.5to enter orders in aid of this Plan and the Plan Documents
including, without limitation, appropriate orders (which may include
contempt or other sanctions) to protect the Debtor, the Reorganized Debtor,
the Released Parties, the Parties, the Tort Committee and any of the Joint
Ventures and Subsidiaries from actions prohibited under this Plan and to
enforce the terms of the Funding Payment Agreement;
8.7.6to modify this Plan pursuant to section 11.4 of this Plan;
8.7.7to determine any and all applications, Claims, adversary
proceedings, and contested or litigated matters pending on the Effective
Date;
8.7.8to allow, disallow, estimate, liquidate or determine any Claim,
including Claims of a Non-Settling Personal Injury Claimant, against the
Debtor and to enter or enforce any order requiring the filing of any such
Claim before a particular date;
8.7.9to determine any and all pending motions for the rejection of
executory contracts or leases, and to hear and determine, and if need be to
liquidate, any and all Claims arising therefrom;
Page 29
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
8.7.10over actions either to enforce or to challenge the validity and
enforceability of the releases and injunctions referred to in sections 8.3
through 8.6 of this Plan;
8.7.11subject to section 8.5, to hear matters relating to the Assumed
Third Party Claims as contemplated by the Litigation Facility Agreement;
and
8.7.12to enter a final decree closing the Case.
Nothing within this section 8.7 shall preclude the Reorganized Debtor from
seeking the entry of an order closing the Case, upon motion after notice to
the Finance Committee and the Claimants' Advisory Committee, both of which
shall be created under the Settlement Facility Agreement. Any order closing
the Case shall provide that the Court (i) shall retain jurisdiction to enforce
by injunctive relief or otherwise the Confirmation Order, any other orders
entered in the Case and the contractual obligations created by the Plan and
the Plan Documents and (ii) shall retain all other jurisdiction and authority
granted to it under the Plan and the Plan Documents. Nothing within this
section 8.7 shall impair or alter the Reorganized Debtor's power to act
without Court authority on and after the Effective Date.
8.8FAILURE OF COURT TO EXERCISE JURISDICTION. If the Court abstains from
exercising, or declines to exercise, jurisdiction or is otherwise without
jurisdiction over any matter arising out of the Case, including the matters
set forth in this Article Eight, this Article Eight shall not diminish,
control, prohibit or limit the exercise of jurisdiction by any other court
having competent jurisdiction with respect to such matter.
8.9TERM OF INJUNCTION OR STAY. Unless otherwise provided, all injunctions
or stays provided for in the Case pursuant to sections 105 or 362 of the
Bankruptcy Code in effect on the Confirmation Date shall remain in full force
and effect until the Effective Date. The injunctive provisions of sections 524
and 1141 of the Bankruptcy Code and those contained in the foregoing sections
8.4 through 8.6 are permanent and shall not be affected by this provision.
8.10RELEASE OF OFFICIAL COMMITTEES AND ESTATE PROFESSIONALS. Upon the
Effective Date, the Tort Committee, the Commercial Committee, the Physicians
Committee, and each of their respective members, representatives and
professionals, and all other professionals retained in the Case pursuant to
(S) 327 of the Bankruptcy Code shall be deemed released from all claims and
causes of action relating to the bankruptcy estate of Dow Corning or that have
been or could be asserted by any party in interest in the Case or any Person
acting on behalf of such party in interest.
8.11INSURANCE SETTLEMENTS UNAFFECTED. This Plan does not modify the terms
of any settlement agreement between the Debtor and any of the Settling
Insurers. This provision does not limit the Debtor's ability to assert that
this Plan establishes, liquidates, or creates losses payable or reimbursable
under the terms of such agreements. This Plan does not limit the Settling
Insurers' ability to contest the Debtor's claims for payment or reimbursement
under the terms of such agreements.
ARTICLE NINE
TREATMENT OF EXECUTORY
CONTRACTS AND UNEXPIRED LEASES
9.1ASSUMED WARRANTIES. All warranty contracts with respect to the products
listed on EXHIBIT "B" hereto shall be assumed by the Reorganized Debtor on the
Effective Date.
9.2ASSUMED COLLECTIVE BARGAINING AGREEMENTS. The Debtor's collective
bargaining agreements with any union, including those with the United
Steelworkers of America, AFL-CIO-CIC, and Local 12934 of the United
Steelworkers of America, AFL-CIO-CIC, and all employee benefit plans related
to such collective bargaining agreements, and any and all obligations and
liabilities thereunder or related thereto shall be deemed assumed by the
Reorganized Debtor on the Effective Date.
9.3ASSUMED EMPLOYEE AND RETIREE BENEFIT PLANS. To the extent such
agreements or plans have not been previously assumed pursuant to this Court's
order dated August 11, 1995, all employee and retiree benefit plans shall be
deemed assumed by the Reorganized Debtor on the Effective Date.
9.4GENERAL; ASSUMED IF NOT REJECTED. Subject to the requirements of section
365 of the Bankruptcy Code, all executory contracts (other than pre-Petition
Date settlement agreements relating to Personal Injury Claims, which shall be
treated as Class 4 Claims herein), or unexpired leases of the Debtor that have
not been rejected by order of the Court or are not the subject of a motion to
reject pending on the Confirmation Date shall be deemed assumed by the
Reorganized Debtor on the Effective Date. If any party to an executory
contract or unexpired lease that is being assumed pursuant to this Article
Page 30
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Nine objects to such assumption, the Court may conduct a hearing on such
objection on any date that is either mutually agreeable to the parties or
fixed by the Court. All payments to cure defaults that may be required under
section 365(b)(1) of the Bankruptcy Code shall be made by the Reorganized
Debtor. In the event of a dispute regarding the amount of any such payments,
or the ability of the Debtor to provide adequate assurance of future
performance, the Debtor will make any payments required by section 365(b)(1)
after the entry of the Final Order resolving such dispute.
9.5CLAIMS FOR CONTRACT REJECTION. All proofs of claim with respect to
Claims arising from the rejection of executory contracts or unexpired leases
pursuant to section 9.4 above must be filed with the Court within 30 days
after the Effective Date or such Claims shall be barred. If any order
providing for the rejection of an executory contract or unexpired lease (other
than rejection effected pursuant to section 9.4 above) did not provide a
deadline for the filing of Claims arising from such rejection, proofs of claim
with respect thereto must be filed within 30 days after the later to occur of
(a) the Effective Date or, (b) if the order is entered after the Effective
Date, the date of entry of such order, or such Claims shall be barred.
ARTICLE TEN
PROVISIONS RELATING
TO PLAN DISTRIBUTIONS
10.1DISTRIBUTION SHALL BE MADE ONLY TO HOLDERS OF ALLOWED CLAIMS. Except as
otherwise provided in this Article Ten, distributions under this Plan shall be
made only to the holders of Allowed Claims or to holders of Assumed Third
Party Claims liquidated in the Litigation Facility. Until a Disputed Claim
becomes an Allowed Claim, the holder of that Disputed Claim shall not receive
the consideration otherwise provided to the Claimants under this Plan. If
necessary in determining the amount of a Pro Rata distribution due to the
holders of Allowed Claims in any class other than Classes 5 through 15 and
Class 17 (with respect to which classes any deferment or reduction in payment
shall be governed by the Funding Payment Agreement and, as applicable, the
Settlement Facility Agreement or the Litigation Facility Agreement), the
Reorganized Debtor shall make the Pro Rata calculation as if all Disputed
Claims were Allowed Claims in the full amount claimed or in the Estimated
Amount. When a Disputed Claim in any class other than Classes 5 through 19
becomes an Allowed Claim, the Reorganized Debtor shall make distributions with
respect to such Allowed Claim, together with any Allowable interest accrued on
the amount of each such distribution to the date thereof, net of any setoff
contemplated by the order, if any, Allowing such Claim and/or any required
withholding of applicable federal and state taxes. If the Court disallows or
allows in a reduced amount any Disputed Unsecured Claim, any cash and accrued
interest thereon otherwise distributable with respect to the disallowed Claim
(or the disallowed portion thereof) will become property of the Reorganized
Debtor and the affected Claimant shall have no further rights against the
Debtor or the Reorganized Debtor with respect to such disallowed Claim or
portion of such disallowed Claim.
10.2DISTRIBUTIONS TO HOLDERS OF ALLOWED BANK LOAN CLAIMS. Distributions
provided for in this Plan on account of Allowed Bank Loan Claims shall be made
either (a) if such agency relationship exists, to the agent bank for holders
of Bank Loan Claims under the applicable credit agreement for further
distribution to such holders, or (b) if no agent bank exists, directly to the
holders of Bank Loan Claims. Any such distribution made by an agent bank will
be made pursuant to the applicable credit agreement. Notwithstanding anything
to the contrary contained in this Plan, the delivery by or on behalf of the
Reorganized Debtor to an agent bank of the consideration to be distributed
under this Plan to holders of Allowed Bank Loan Claims arising pursuant to the
agreement under which such agent bank serves in such capacity shall fully
satisfy and discharge the Reorganized Debtor's obligations to distribute such
consideration to such holders. Senior Notes delivered to an agent bank
pursuant to this section 10.2 will be issued in such denominations and
registered in such names as may be requested by such agent bank in a writing
delivered to the Debtor on the Effective Date.
10.3DISTRIBUTIONS TO HOLDERS OF ALLOWED PUBLIC DEBT CLAIMS. Distributions
provided for in this Plan on account of Allowed Public Debt Claims shall be
made to the indenture trustee for holders of Public Debt Claims for further
distribution to such holders. Any such distribution made by an indenture
trustee will be made pursuant to the applicable indenture. Notwithstanding
anything to the contrary contained in this Plan, the delivery by or on behalf
of the Reorganized Debtor to an indenture trustee of the consideration to be
distributed under this Plan to holders of Allowed Public Debt Claims arising
pursuant to the indenture under which such indenture trustee serves in such
capacity shall fully satisfy and discharge the Reorganized Debtor's
obligations to distribute such consideration to such holders. Senior Notes
delivered to an indenture trustee pursuant to this section 10.3 will be issued
(subject to section 10.7) in such denominations and registered in such names
as may be requested by each indenture trustee in a writing delivered to the
Debtor at least two business days prior to the Effective Date.
Page 31
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
10.4DISTRIBUTIONS TO HOLDERS OF OTHER ALLOWED CLAIMS. The Reorganized
Debtor, or such third-party disbursing agents as the Reorganized Debtor may
employ in its sole discretion, will make all distributions of cash, Senior
Notes and Subordinated Notes required under this Plan, except for
distributions made by agent banks or indenture trustees pursuant to sections
10.2 and 10.3, respectively. The Reorganized Debtor and any such third-party
disbursing agent will serve as disbursing agents under this Plan without bond,
and the Reorganized Debtor and any such third-party disbursing agent may
employ or contract with other entities to assist in or make the distributions
required by this Plan.
10.5DISTRIBUTION RECORD DATE; SUSPENSION OF TRANSFER OF CLAIMS. As of the
Distribution Record Date, the transfer registers for all Existing Debt
Instruments maintained by the Debtor or its agents (including agent banks and
indenture trustees) shall be closed. The Reorganized Debtor and any third-
party disbursing agents (including agent banks and indenture trustees) shall
have no obligation to recognize the transfer of any Existing Debt Instruments
occurring after the Distribution Record Date, and shall be entitled to
recognize and deal only with holders of record of Existing Debt Instruments as
of the Distribution Record Date.
10.6SURRENDER OF EXISTING DEBT INSTRUMENTS. As a condition precedent to
receiving any distribution pursuant to the Plan on account of an Allowed Bank
Loan Claim or Allowed Public Debt Claim evidenced by an Existing Debt
Instrument, the holder of such Claim shall surrender the applicable Existing
Debt Instrument to the Reorganized Debtor pursuant to a letter of transmittal
furnished by the Reorganized Debtor (either directly or through an agent bank
or an indenture trustee). Such letter of transmittal shall be accompanied by
instructions for the proper completion, execution and delivery thereof, and
shall specify that delivery of such Existing Debt Instrument will be effected,
and risk of loss and title thereto will pass, only upon the proper delivery of
such Existing Debt Instrument with the letter of transmittal in accordance
with such instructions. Such letter of transmittal shall also include, among
other provisions, customary provisions with respect to the authority of the
holder of the applicable Existing Debt Instrument to act and the authenticity
of any signatures required on the letter of transmittal. All surrendered
Existing Debt Instruments shall be marked as canceled and delivered to the
Reorganized Debtor.
In addition to any requirements under the applicable credit agreement or
indenture, any holder of an Allowed Claim evidenced by an Existing Debt
Instrument that has been lost, stolen, mutilated or destroyed shall, in lieu
of surrendering such Existing Debt Instrument, deliver to the Debtor or the
Reorganized Debtor (a) evidence satisfactory to the Debtor or the Reorganized
Debtor of the loss, theft, mutilation or destruction and (b) such security or
indemnity as may be required by the Debtor or the Reorganized Debtor to hold
it and its agents harmless from any damages, liabilities or costs incurred in
treating such individual as a holder of such Existing Debt Instrument. Upon
compliance with this paragraph by a holder of a Claim evidenced by an Existing
Debt Instrument, such holder shall, for all purposes of this Plan, be deemed
to have surrendered such Existing Debt Instrument in accordance with the
provisions of this section 10.6.
Any holder of an Existing Debt Instrument that fails to surrender or to be
deemed to have surrendered such Existing Debt Instrument within one year after
the Effective Date shall have its claim for a distribution pursuant to the
Plan on account of the Claim evidenced thereby discharged and shall be forever
barred from asserting any such claim against the Reorganized Debtor or its
property.
10.7FRACTIONAL AMOUNTS. The calculation of Senior Notes to be distributed
to the holders of Allowed Unsecured Claims may mathematically entitle the
holder of such Claim to a fractional interest in such Senior Notes.
Notwithstanding such entitlement, all Senior Notes issued by the Reorganized
Debtor to holders of Allowed Unsecured Claims pursuant to the Plan will be
issued and distributed only in denominations of $1,000. To the extent any
holder would be entitled to a fractional denomination of Senior Notes but for
this provision, the denomination of Senior Notes to be issued to such holder
shall be rounded downward to eliminate such fractional amount and the
Reorganized Debtor shall distribute to such holder, in lieu of such fractional
amount, cash in an amount equal to such fractional amount.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
11.1OBJECTION TO CLAIMS. Objections to Claims as to which no objection is
pending as of the Confirmation Date may be filed solely by the Debtor or the
Reorganized Debtor.
11.2SURVIVAL OF CERTAIN CORPORATE INDEMNIFICATION OBLIGATIONS. Any
obligations, rights or agreements of the Debtor to indemnify its past or
present officers, directors, and employees pursuant to its Articles of
Incorporation, bylaws, board of directors resolutions, and applicable statutes
in respect of any Claims, demands, suits, causes of actions or proceedings
based upon any act or omission related to service with or for or on behalf of
the Debtor at any time prior to the
Page 32
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Effective Date shall be deemed assumed by the Reorganized Debtor on the
Effective Date and will not be discharged or impaired by confirmation or
consummation of this Plan, but will survive unaffected by this Plan and will
be performed and honored by the Reorganized Debtor.
11.3PROCEDURES FOR DISTRIBUTIONS; UNCLAIMED DISTRIBUTIONS OF CERTAIN
CLAIMANTS (OTHER THAN CLAIMANTS IN CLASSES 5 THROUGH 19). Except as provided
in section 11.5 of this Plan or otherwise provided for in this Plan, the Plan
Documents, or a Final Order of the Court, distributions to be made under this
Plan to Claimants holding Allowed Claims in any class other than Classes 5
through 19 shall be made by the Reorganized Debtor by first class, United
States mail, postage prepaid to (a) the latest mailing address set forth in a
Proof of Claim filed with the Court by or on behalf of such Claimant or (b) if
no such Proof of Claim has been timely filed, the mailing address set forth in
the Schedules filed by the Debtor in the Case, as amended. The Reorganized
Debtor shall not be required to make any other effort to locate or ascertain
the address of the holder of any Claim. The Debtor will seek the inclusion in
the Confirmation Order of a provision requiring any third-party paying agent
charged with making distributions to holders of the Debtor's public debt
instruments (including, if applicable, the indenture trustees therefor) to
advise the Reorganized Debtor from time to time as to the identity of the
persons, including the holders of Public Debt Claims, who are entitled to
unclaimed distributions with respect to their Claims. Based upon such advice,
the Reorganized Debtor will file with the Bankruptcy Court, on the second,
third and fourth anniversaries of the Effective Date, listings of persons who
are entitled to unclaimed distributions in respect thereof. Subject to the
provisions of section 10.6 hereof, if such Person comes forward within five
years of the Effective Date, such distribution, together with any interest
attributable to such amount, will be paid or distributed to such Person.
Subject to the provisions of section 10.6 hereof, if such Person fails to come
forward and claim the distribution within five years of the Effective Date,
any such distribution and any accrued interest thereon will become the
property of the Reorganized Debtor and the affected Claimant shall have no
further rights against the Debtor or the Reorganized Debtor.
11.4MODIFICATION OF PLAN. The Proponents reserve the right, in accordance
with the Bankruptcy Code, to jointly amend, modify or withdraw this Plan prior
to the entry of the Confirmation Order. After the entry of the Confirmation
Order, the Proponents may, upon order of the Court, jointly amend or modify
this Plan in accordance with section 1127(b) of the Bankruptcy Code, or remedy
any defect or omission or reconcile any inconsistency in this Plan in such
manner as may be necessary to carry out the purpose and intent of this Plan.
If Dow Corning proposes to amend or modify the Plan in any respect that does
not adversely affect Claimants in Classes 5 through 10.2, the Tort Committee
will not unreasonably withhold its consent.
11.5PAYMENT DATES. Unless otherwise agreed by the Reorganized Debtor and
the recipient of a distribution under the Plan, whenever any payment to be
made under this Plan is due on a day other than a Business Day, such payment
will instead be made on the next Business Day, with interest to the extent
expressly contemplated by the Plan or any applicable agreement, indenture or
instrument. Unless otherwise agreed by the Reorganized Debtor and the
recipient of a distribution under the Plan, (a) cash payments in excess of
$250,000 to be made by the Debtor pursuant to the Plan shall be made by wire
transfer, provided the payee shall have delivered specific wire transfer
instructions to the Reorganized Debtor not less than five Business Days prior
to the date on which such payment is to be made, and (b) all other cash
payments to be made by the Debtor pursuant to this Plan shall be made, at the
option of the Reorganized Debtor, by a check or wire transfer.
11.6SEVERABILITY. In the event of a successful collateral attack on any
provision of the Plan (i.e., an attack other than through a direct appeal of
the Confirmation Order), the remaining provisions of the Plan shall remain
binding on all other parties.
11.7TAX IDENTIFICATION NUMBERS. Prior to receiving any distribution under
this Plan, all Claimants shall provide the Reorganized Debtor or, as
applicable, the Settlement Facility or Litigation Facility with written
notification or confirmation of their respective federal tax identification
numbers or social security numbers or, with respect to Foreign Claimants, a
certificate of foreign status.
11.8NO PROFESSIONAL FEES OR EXPENSES. No professional fees or expenses will
be paid by the Debtor or the Reorganized Debtor with respect to any Claim
except as specified in this Plan or as Allowed by Final Order of the Court.
11.9POST-CONFIRMATION PROFESSIONAL FEES AND EXPENSES. All professional fees
and expenses incurred by the Debtor or the Reorganized Debtor after the
Effective Date shall be paid in the ordinary course of business of the Debtor
or the Reorganized Debtor. The Court shall retain jurisdiction to resolve any
dispute with respect to the payment of any such fees or expenses upon
application by the affected professional.
11.10HEADINGS. The headings of the articles, paragraphs, and sections of
this Plan are inserted for convenience only and shall not affect the
interpretation hereof.
Page 33
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
11.11TIME. In computing any period of time prescribed or allowed by this
Plan, the day of the act, event, or default from which a designated period of
time begins to run shall not be included. The last day of the period so
computed shall be included so long as it is a Business Day or, when the act to
be done is the filing of a paper in Court, so long as it is not a day on which
weather or other conditions have made the Clerk's office inaccessible, in
which event the period runs until the next day which is not one of the
aforementioned days. When the period of time prescribed or allowed is less
than 11 days, any day that is not a Business Day shall be excluded in the
computation.
11.12NOTICES. All notices or requests in connection with this Plan shall be
made in writing and will be deemed to have been given when received by mail
addressed to:
Dow Corning Tort Claimants Committee
Corporation Doffermyre, Shields,
2200 West Salzburg Canfield & Knowles
Road 1355 Peachtree Street,
Midland, Michigan Suite 1600
48611 Atlanta, Georgia 30309
Attention: James R. Attention: Ralph Knowles,
Jenkins, Esq., Esq.
General Counsel
WITH A COPY TO:
WITH A COPY TO:
Kramer Levin Naftalis &
Sheinfeld, Maley & Frankel LLP
Kay, P.C. 919 Third Avenue
1700 Pacific Avenue, New York, New York 10022-
Suite 4400 3850
Dallas, Texas 75201- Attention: Kenneth H.
4618 Eckstein, Esq.
Attention: Barbara J.
Houser, Esq.
All notices and requests to Persons holding any Claim or Interest shall be
sent to them at their last known address or to the last known address of their
attorney of record. The Debtor and any such holder of a Claim or Interest may
designate in writing any other address for purposes of this section 11.12,
which designation will be effective upon actual receipt by the Debtor or the
Reorganized Debtor, or by the holder of a Claim or Interest, as applicable.
11.13COMMITTEES. The duties of the Official Committees will terminate on
the Effective Date except with respect to any appeal of an order in the Case,
fee applications, and any matters related to any proposed post-confirmation
modification of this Plan.
11.14SUCCESSORS AND ASSIGNS. The rights, benefits and obligations of any
Person named or referred to in this Plan will be binding upon, and will inure
to the benefit of, the heir, executor, administrator, successor or assign of
such Person.
DATED: February 4, 1999.
DOW CORNING CORPORATION OFFICIAL COMMITTEE OF TORT CLAIMANTS
/s/ Gary E. Anderson /s/ Ralph Knowles
By: __________________________________ By: __________________________________
Gary E. Anderson Ralph Knowles
President
KRAMER LEVIN NAFTALIS & FRANKEL LLP
SHEINFELD, MALEY & KAY, P.C.
/s/ Kenneth H. Eckstein
/s/ Barbara J. Houser By: __________________________________
By: __________________________________ Kenneth H. Eckstein
Barbara J. Houser
919 Third Avenue
1700 Pacific Avenue, Suite 4400 New York, New York 10022-3850
Dallas, Texas 75201-4618 Telephone: (212) 715-9100
Telephone: (214) 953-0700 Facsimile: (212) 715-8000
Facsimile: (214) 953-1189
ATTORNEYS FOR OFFICIAL COMMITTEE
ATTORNEYS FOR DOW CORNING OF TORT CLAIMANTS
CORPORATION
Page 34
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
EXHIBIT "A"
(TO AMENDED PLAN OF REORGANIZATION)
SETTLING INSURERS
(DOW CORNING CORPORATION)
Allstate Insurance Company, successor-in-interest to Northbrook Excess and
Surplus Insurance Company formerly known as Northbrook Insurance Company
(collectively, "ALLSTATE")
Algemene Verzekering Maatschappij Diligentia N.V. Te Amsterdam
AIU Insurance Company, American Home Assurance Company, Birmingham Fire
Insurance Company of the State of Pennsylvania, Lexington Insurance Company
and National Union Fire Insurance Company of Pittsburgh, PA (collectively, the
"AIG MEMBER COMPANIES")
American Centennial Insurance Company
American Empire Surplus Lines Insurance Company (as managing agent for
Transport Indemnity Company)
American Guarantee and Liability Insurance Company
American Re-Insurance Company
Arab Insurance Group (BSC)
Centennial Insurance Company
Certain insurance companies doing business in the European Insurance Market
who are party to that Settlement Agreement Between Dow Corning Corporation and
Certain European Market Insurers approved by order of the Court entered on
March 25, 1996
European Reinsurance Company of Zurich (formerly known as European General
Reinsurance Company)
Employers Insurance of Wausau, a Mutual Company
Federal Insurance Company
Haftpflichtverband Der Deutschen Industrie
Hartford Accident and Indemnity Company, Hartford Fire Insurance Company,
Nutmeg Insurance Company, First State Insurance Company, First State
Underwriters Agency of New England Reinsurance Corp., Twin City Fire Insurance
Company and Excess Insurance Company (collectively, the "HARTFORD COMPANIES")
Insurance Company of North America, CIGNA Specialty Insurance Company, f/k/a
California Union Insurance Company, CIGNA Property and Casualty Insurance
Company, f/k/a Aetna Insurance Company, Pacific Employers Insurance Company,
St. Paul Mercury Insurance Company, as a member company of AFIA, and Cravens,
Dargan & Company, Pacific Coast, as managing general agents for Central
National Insurance Company of Omaha
Lloyd's, London and certain London Market Insurance Companies (collectively,
the "LONDON MARKET INSURERS")
Ludgate Insurance Company, Ltd.
National Casualty Company
Nationale-Nederlanden Schadeverzekering Maatschappij N.V.
The North River Insurance Company, United States Fire Insurance Company, and
International Surplus Lines Insurance Company (collectively, the "NORTH RIVER
COMPANIES")
Prudential Reinsurance Company and Gibraltar Casualty Company
Republic Insurance Company
Royale Belge I.R.S.AD'Assurances
Royal Indemnity Company
Seguros Comercial America, S.A. de C.V. (formerly known as Seguros
LaComercial, S.A.)
Stonewall Insurance Company
(Plan Exhibit) Page A-1
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Swiss Re-Insurance Company of Zurich
TIG Insurance Company, individually and as successor in interest to American
Surety Company, the Transamerica Insurance Company and the Transamerica Premier
Insurance Company (collectively, "TIG")
Travelers Casualty & Surety Company (formerly known as The Aetna Casualty &
Surety Company)
X.L. Insurance Company, Ltd.
Zurich Insurance Company, Zurich International Ltd. (collectively, "ZURICH")
(Plan Exhibit) Page A-2
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
EXHIBIT "B"
(TO AMENDED PLAN OF REORGANIZATION)
ASSUMED WARRANTIES--CONSTRUCTION PRODUCTS
(DOW CORNING CORPORATION)
AllGuard(TM) Concrete/Masonry Sealer
AllGuard(TM) Elastomeric Waterproof Coating
AllGuard(TM) Primer
Dow Corning(R) FC Parking Structure Sealant
Dow Corning(R) NS Parking Structure Sealant
Dow Corning(R) SL Parking Structure Sealant
Dow Corning(R) 123 Silicone Seal
Dow Corning(R) 399 Silicone Vinyl Window Sealant
Dow Corning(R) 499 Silicone Sash Sealant
Dow Corning(R) 756 Silicone Building Sealant-HP
Dow Corning(R) 786 Mildew Resistant Silicone Sealant
Dow Corning(R) 790 Silicone Building Sealant
Dow Corning(R) 791 Silicone Perimeter Sealant
Dow Corning(R) 795 Silicone Building Sealant
Dow Corning(R) 799 Silicone Glass & Metal Building Sealant
Dow Corning(R) 888 Silicone Joint Sealant
Dow Corning(R) 888-SL Self-leveling Silicone Joint Sealant
Dow Corning(R) 890-SL Self-leveling Silicone Joint Sealant
Dow Corning(R) 899 Silicone Glazing Sealant
Dow Corning(R) 902 RCS Joint Sealant
Dow Corning(R) 902 RCS Primer
Dow Corning(R) 980 Silicone Insulating Glass Sealant
Dow Corning(R) 982 Silicone Insulating Glass Sealant
Dow Corning(R) 983 Silicone Glazing & Curtainwall Adhesive/Sealant
Dow Corning(R) 984 Silicone Insulating Glass Sealant
Dow Corning(R) 986 Silicone Insulating Glass Sealant
Dow Corning(R) 995 Silicone Structural Adhesive
Dow Corning(R) 999A Silicone Building & Glazing Sealant
Dow Corning(R) 1200 Prime Coat
Dow Corning(R) 1205 Prime Coat
Dow Corning(R) 1593 Cleaner/Primer
Dow Corning(R) 3-0117 Silicone Insulating Glass Sealant
Dow Corning(R) 3-2306 Silicone Based Elastomer
Dow Corning(R) 3-5000 Silicone Roof Coating
Dow Corning(R) 3-7392 Silicone Window & Door Sealant
Trade Mate(R) Silicone Glazing Sealant
Trade Mate(R) HVAC/R Sealant
Trade Mate(R) Paintable Glazing Sealant
Trade Mate(R) Tile & Ceramic Sealant
Trade Mate(R) Shower Enclosure Sealant
Trade Mate(R) Professional Plumber's Sealant
Trade Mate(R) Plastic, Metal & Masonry Sealant
Trade Mate(R) Silicone Sealant/Adhesive
Trade Mate(R) Glass Block Sealant
(Plan Exhibit) Page B-1
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
EXHIBIT "C"
(TO AMENDED JOINT PLAN OF REORGANIZATION)
CALCULATION OF CLASS 4
COMMERCIAL CLAIMS
EXHIBIT
"C"
CLASS 4 CLAIM SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST TOTAL
AND INTEREST ACCRUAL PRINCIPAL
ON PETITION AT 6.28% AND
DATE (THROUGH INTEREST
6/30/99) (6/30/99)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM LOANS/REVOLVER
- -------------------------------------------------------------------------------
Revolver-BofA $100.8 $28.9 $129.7
- -------------------------------------------------------------------------------
Revolver-BofA 50.1 14.3 64.4
- -------------------------------------------------------------------------------
Revolver-BofA 110.6 31.7 142.3
- -------------------------------------------------------------------------------
Revolver-BofA 115.6 33.1 148.7
- -------------------------------------------------------------------------------
LOANS AND PUBLIC DEBT CLAIMS
- -------------------------------------------------------------------------------
1995 Medium Term Notes $5.0 $1.4 $6.5
- -------------------------------------------------------------------------------
1996 Medium Term Notes 10.0 2.9 12.9
- -------------------------------------------------------------------------------
1998 Medium Term Notes 10.0 2.9 12.9
- -------------------------------------------------------------------------------
2001 Medium Term Notes 9.5 2.7 12.3
- -------------------------------------------------------------------------------
9.375% Debentures (due 2008) 77.0 22.0 99.0
- -------------------------------------------------------------------------------
8.15% Debentures (due 2029) 50.3 14.4 64.7
- -------------------------------------------------------------------------------
Nippon Life (3.0B Yen-payable in Yen) 23.0 6.6 29.6
- -------------------------------------------------------------------------------
Credit Lyonnais 25.4 7.2 32.5
- -------------------------------------------------------------------------------
First National Bank of Chicago 7.2 2.0 9.2
- -------------------------------------------------------------------------------
Bank of New York 20.2 5.7 25.9
- -------------------------------------------------------------------------------
Comerica 10.0 2.9 12.9
- -------------------------------------------------------------------------------
Bank of Tokyo Term 20.3 5.7 26.0
- -------------------------------------------------------------------------------
OTHER DEBT
- -------------------------------------------------------------------------------
Trade Payables 61.6 17.6 79.1
- -------------------------------------------------------------------------------
Forward Contracts 24.3 6.9 31.2
- -------------------------------------------------------------------------------
Swaps 47.9 13.7 61.6
- -------------------------------------------------------------------------------
Pre-Petition Personal Injury Settlements 31.3 8.9 40.2
- -------------------------------------------------------------------------------
Miscellaneous Claims 200.0 57.2 257.2
- -------------------------------------------------------------------------------
TOTAL $1,010.1 $288.8 $1,298.9
- -------------------------------------------------------------------------------
</TABLE>
(Plan Exhibit) Page C-1
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
EXHIBIT "D"
(TO AMENDED PLAN OF REORGANIZATION)
SUMMARY OF TERMS OF SENIOR NOTES
ISSUER Dow Corning Corporation ("Dow Corning" or the "Company")
SECURITIES OFFERED Senior Unsecured Notes (the "Senior Notes")
MINIMUM $1000 (Fractional interests shall be paid in cash at the
Effective Date.)
DENOMINATION
MATURITY Ten years from the Effective Date (as defined in the Plan)
RATING Dow Corning will use its commercially reasonable best
efforts to obtain, prior to the issuance of the Senior
Notes, an investment grade rating on the Senior Notes
issued pursuant to the Plan of "Baa3" or higher by Moody's
Investors Service, Inc. or "BBB minus" or higher by
Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc. Dow Corning will also use its
commercially reasonable best efforts to obtain a
preliminary indication from the rating agencies of a
rating for the Senior Notes prior to the confirmation
hearing.
INTEREST RATE The interest rate on the Senior Notes shall be computed
based upon a formula or procedure (a "Rate Setting
Procedure") that is determined by the Court at the
confirmation hearing to result in the Senior Notes having
a value, as of the effective date of the Plan (within the
meaning of section 1129 of the Bankruptcy Code), that is
equal to the principal amount of the Senior Notes. Prior
to the confirmation hearing, the Proponents shall attempt
to reach agreement with the Commercial Committee regarding
the Rate Setting Procedure. Absent agreement between the
Proponents and the Commercial Committee, the Proponents
will request a Rate Setting Procedure providing that the
interest rate be set by establishing a financial reference
point, such as the interest rate on 10-year U.S. Treasury
securities as of the Effective Date, and providing for a
certain basis point spread above such reference rate,
resulting in automatic adjustments to account for changes
in market conditions between the Confirmation Date and the
Effective Date. Upon the motion of the Debtor or the
Commercial Committee, and after notice and a hearing prior
to the Effective Date, the Court shall approve a
modification of the Rate Setting Procedure if the Court
determines, prior to the Effective Date, that due to
changed circumstances the Rate Setting Procedure approved
at the confirmation hearing is no longer adequate to cause
the Senior Notes to have a value, as of the effective date
of the Plan, that is equal to their principal amount.
INTEREST PAYMENT Interest will be payable semi-annually, commencing on a
DATES date specified in the indenture for the Senior Notes not
later than six months after the Effective Date.
RANKING The Senior Notes will rank senior to or pari passu with
all existing and future unsecured indebtedness of the
Company.
SECURITY The Senior Notes will be senior unsecured obligations of
Dow Corning; provided, however, that as set forth in Annex
D-1, should the Company secure other indebtedness, the
Senior Notes will be equally and ratably secured.
CALL PROVISIONS The Senior Notes may be prepaid without premium or penalty
at any time.
COVENANTS As set forth in Annex D-1.
EVENTS OF DEFAULT
As set forth in Annex D-2.
EXCHANGE ACT
REGISTRATION
The Company shall prepare and file a registration
statement with the Securities and Exchange Commission
prior to the Effective Date to effect the registration of
the Senior Notes under the Securities Exchange Act of
1934, and shall use its reasonable best efforts to cause
the registration statement to become effective no later
than the Effective Date.
(Plan Exhibit) Page D-1
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
EXCHANGE LISTING The Company shall prepare and file an application to list
the Senior Notes on the New York Stock Exchange and shall
use its reasonable best efforts to cause the Senior Notes
to be approved for listing (subject to notice of issuance)
no later than the Effective Date.
SECURITIES ACT The Company will enter into a registration rights
REGISTRATION RIGHTS agreement with those holders in whose hands the Senior
Notes will not be freely tradeable as of the Effective
Date.
GOVERNING LAW New York
(Plan Exhibit) Page D-2
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
ANNEX D-1
COVENANTS
Payment of Principal, Premium and Interest on Securities. The Company, for
the benefit of the Senior Notes, will duly and punctually pay the principal of
and interest on the Senior Notes in accordance with the terms of the Senior
Notes and this Indenture.
Maintenance of Office or Agency. (a) The Company will maintain in each
Place of Payment for the Senior Notes an office or agency where Senior Notes
may be presented or surrendered for payment, where Senior Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Company in respect of the Senior Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices, and demands may be made or
served at the Corporate Trust Office, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices
and demands.
(b)The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or recision will in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Senior Notes for such purpose. The Company will give
prompt written notice to the Trustee of any such designation or recision and
of any change in the location of any such other office or agency.
Money for Senior Notes Payments to be Held in Trust. (a) If the Company
shall at any time act as its own Paying Agent with respect to the Senior
Notes, it will, on or before each due date of the principal of or any premium
or interest on the Senior Notes, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal and any
premium and interest so becoming due until such sums shall be paid to such
Person or otherwise disposed of as herein provided and will promptly notify
the Trustee of its action or failure to so act.
(b)Whenever the Company shall have one or more Paying Agents for the Senior
Notes, it will, prior to each due date of the principal of or any premium or
interest on the Senior Notes, deposit with the Paying Agent a sum sufficient
to pay such amount, such sum to be held as provided by the Trust Indenture
Act, and (unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of its action or failure to so act.
(c)The Company will cause each Paying Agent for the Senior Notes other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent will agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (i) comply with the provisions of the
Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Senior Notes) in the making of any payment in respect of the Senior Notes, and
upon the written request of the Trustee, forthwith to pay the Trustee all sums
held in trust by such Paying Agent for payment in respect of the Senior Notes.
(d)The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent will be released from all further liability
with respect to such money.
(e)Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any of the Senior Notes and remaining unclaimed for two years
after such principal, premium or interest has become due and payable will be
paid to the Company upon a Company Request (or, if then held by the Company,
will be discharged from such trust); and the Holder of such Senior Notes will
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, will thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which will be not less that 30 calendar days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
(Plan Exhibit) Page D-3
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
Payment of Taxes and Other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (a)
all taxes, assessments, and governmental charges levied or imposed on the
Company or any Subsidiary of the Company or upon the income, profits or
property of the Company or any Subsidiary of the Company, and (b) all lawful
claims for labor, materials, and supplies, in each case which, if unpaid,
would by law become a lien upon the property of the Company or any Subsidiary
of the Company and would have a Material Adverse Effect; provided, however,
that (x) the Company will not be required to pay or discharge or cause to be
paid or discharged any such tax, assessment, charge, or claim the amount,
applicability, or validity of which is being contested in good faith by
appropriate proceedings, and (y) any failure to pay any such tax, assessment,
charge, or claim shall not constitute a breach of this Section if such failure
(i) was not willful and (ii) does not and will not result in any Material
Adverse Effect.
Maintenance of Properties. The Company will cause all properties used or
useful in the conduct of its business or the business of any Subsidiary of the
Company to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof; provided, however, that nothing in this Section will (i) require the
Company to take any action that it determines in good faith to be contrary to
its best interests, so long as the failure to take such action will not have a
Material Adverse Effect or (ii) prevent the Company from taking any action
that it determines in good faith to be in its best interests, so long as the
taking of such action will not have a Material Adverse Effect.
Existence. Subject to the covenant entitled "Company May Consolidate, Etc.,
on Certain Terms," the Company will, and will cause each of its Subsidiaries
to do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter or statutory), and franchises;
provided, however, that, except with respect to the preservation of the
Company's existence, nothing in this Section will (i) require the Company to
take any action that it determines in good faith to be contrary to its best
interests, so long as the failure to take such action will not have a Material
Adverse Effect or (ii) prevent the Company from taking any action that it
determines in good faith to be in its best interests, so long as the taking of
such action will not have a Material Adverse Effect.
Compliance with Laws. The Company will, and will cause each of its
Subsidiaries to, comply with all applicable federal, state, local, or foreign
laws, rules, regulations, or ordinances, including, without limitation, such
laws, rules, regulations, or ordinances relating to pension, environmental,
employee, and tax matters, to the extent that, in the aggregate, the failure
so to comply would have a Material Adverse Effect.
Statement by Officers as to Default. The Company will deliver to the
Trustee within thirty (30) days after the end of each calendar quarter
following the date hereof, an Officer's Certificate signed by either the Chief
Executive Officer, the Chief Financial Officer, or the Controller of the
Company stating whether or not to the knowledge of such person after due
inquiry the Company is in default in the performance and observance of any of
the terms, provisions, and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and/or whether an
event which has a Material Adverse Effect has occurred, and, if the Company is
in default, specifying all such defaults and the nature and status thereof of
which such person may have such knowledge.
Financial Reporting. To the extent the Company is required to file periodic
reports with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act, the Company shall provide copies to the Trustee of each Annual Report on
Form 10-K, each Quarterly Report on Form 10-Q, and each Current Report on Form
8-K that is filed by the Company with the Commission within 15 days of the
filing of the same. To the extent that the Company is not required to file
such periodic reports with the Commission, the Company shall provide copies to
the Trustee of consolidated audited financial statements (including notes) of
the Company covering the most recently completed fiscal year as soon as
available but not later than 120 days after the end of the fiscal year until
this Indenture terminates and shall also provide quarterly unaudited financial
statements (including notes to the extent prepared) within 45 days after the
end of each quarter until the eighth anniversary of the date hereof; provided,
however, that the Company shall provide quarterly unaudited financial
statements to the Trustee beyond the eighth anniversary to the extent it is
required to do so under the Funding Payment Agreement (Classes 5 through 19)
among the Company, The Dow Chemical Company, Corning Incorporated, the
Settlement Facility, the Litigation Facility, and the Claimants' Advisory
Committee.
Company May Consolidate, etc., on Certain Terms. The Company covenants that
it will not merge or consolidate with any other corporation or sell or convey
(including by way of lease) all or substantially all of its assets to any
person, unless (i) either the Company or one of its wholly-owned subsidiaries
shall be the continuing corporation, or the successor corporation or the
person which acquires by sale or conveyance substantially all the assets of
the Company (if other than the Company or one of its wholly-owned
subsidiaries) shall be a corporation or entity organized under the laws of the
United States of America or any State thereof and shall expressly assume the
due and punctual payment of the principal of and
(Plan Exhibit) Page D-4
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
interest on all the Senior Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
the Indenture to be performed or observed by the Company, by supplemental
indenture reasonably satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation or entity, and (ii) the Company or such
successor corporation or entity, as the case may be, shall not, immediately
after such merger or consolidation, or such sale or conveyance, be in default
in the performance of any such covenant or condition.
"Material Adverse Effect" means a material adverse effect on the business,
assets, financial condition or results of operations of the Company (taken
together with its Subsidiaries as a whole).
"Subsidiary" means, as applied with respect to any Person, any corporation,
partnership or other business entity of which, in the case of a corporation,
more than 50% of the issued and outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation has or might have voting power upon the occurrence
of any contingency), or, in the case of any partnership or other legal entity,
more than 50% of the ordinary voting equity capital interests, is at the time
directly or indirectly owned or controlled by such Person, by such Person and
one or more of its Subsidiaries, or by one or more of such Person's other
Subsidiaries.
Limitation on Liens. So long as any of the Senior Notes remain outstanding
and unpaid, the Company will not itself, and will not permit any Domestic
Subsidiary to, incur, issue, assume or guarantee any indebtedness for money
borrowed evidenced by notes, bonds, debentures or other similar evidences of
indebtedness (such notes, bonds, debentures or other similar evidences of
indebtedness being hereinafter called "Debt"), secured by a Mortgage on any
Principal Domestic Manufacturing Property of the Company or any Domestic
Subsidiary, or any shares of stock of any Domestic Subsidiary, without
effectively providing that the Senior Notes (together with, if the Company
shall so determine, any other Debt of the Company or such Domestic Subsidiary
then existing or thereafter created which is not subordinated to the Senior
Notes) shall be secured equally and ratably with (or prior to) such secured
Debt, so long as such secured Debt shall be so secured, unless, after giving
effect thereto, the aggregate amount of all such secured Debt then outstanding
plus all Attributable Debt of the Company and its Domestic Subsidiaries in
respect of Sale and Leaseback Transactions (as that term is defined in the
covenant regarding Limitation on Sale and Lease-Back herein) entered into
after the date of this Indenture (other than Sale and Leaseback Transactions
permitted herein) would not exceed 10% of Consolidated Net Tangible Assets;
provided, however, that this Section shall not apply to, and there shall be
excluded from secured Debt in any computation under this Section, Debt secured
by:
i. Mortgages of the Company or any Domestic Subsidiary existing at the time
of this Indenture;
ii. Mortgages on property or any shares of stock (or other equity interest)
or arising out of any Debt of any entity existing at the time such
entity was merged into the Company or became a Domestic Subsidiary;
iii. Mortgages in favor of the Company or any Subsidiary;
iv. Mortgages in favor of the United States of America, any State of the
United States of America, or any subdivision, agency, department or
other instrumentality thereof, to secure progress, advance or other
payments pursuant to any contract or provision of any statute;
v. Mortgages on property or shares of stock (or other equity interest)
existing at the time of acquisition thereof (including acquisition
through merger or consolidation) or to secure the payment of all or any
part of the purchase price or construction cost thereof or to secure any
Debt incurred prior to, at the time of, or within 180 days after, the
acquisition of such property or shares or the completion of any such
construction for the purpose of financing all or any part of the
purchase price or construction cost thereof;
vi. Mortgages of carriers, warehousemen, mechanics and materialmen incurred
in the ordinary course of business for sums not yet due or being
contested in good faith;
vii. Mortgages arising by reason of any judgment, decree or order of any
court, so long as any appropriate legal proceedings which may have
been duly initiated for the review of such judgment, decree or order
shall not have been finally terminated or so long as the period within
which such proceedings may be initiated shall not have expired; or
pledges or deposits to secure payment of workers' compensation or
other insurance, good faith deposits in connection with tenders,
contracts (other than contracts for the payment of money) or leases,
deposits to secure public or statutory obligations, deposits to secure
or in lieu of surety or appeal bonds, or deposits as security for the
payment of taxes;
(Plan Exhibit) Page D-5
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
viii. Mortgages in connection with the issuance of tax-exempt industrial
development or pollution control bonds or other similar bonds issued
pursuant to Section 103(b) of the Internal Revenue Code of 1986, as
amended or as hereafter amended, to finance all or any part of the
purchase price of or the cost of constructing, equipping or improving
property; provided that such Mortgages shall be limited to such
property acquired (including personal property) or constructed or
such improvement and to theretofore substantially unimproved real
property on which such construction or improvement is located; and
provided, further, that the Company and its Domestic Subsidiaries may
further secure all or any part of such purchase price or the cost of
construction of such improvements and personal property by an
interest on additional property of the Company and its Domestic
Subsidiaries only to the extent necessary for the construction,
maintenance and operation of, and access to, such property so
acquired or constructed or such improvement;
ix. Mortgages in favor of any customer arising in respect of partial,
progress, advance or other payments made by or on behalf of such
customer for goods produced for or services rendered to such customer
in the ordinary course of business not exceeding the amount of such
payments;
x. any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Mortgage
referred to in the foregoing clauses (a) to (i), inclusive; provided,
that (i) such extension, renewal or replacement Mortgage shall be
limited to all or a part of the same property or shares of stock (or
other equity interest) that secured the Mortgage extended, renewed or
replaced (plus improvements on such property) and (ii) the principal
amount of the Debt secured by such Mortgage shall not exceed the
principal amount of Debt so secured at the time of such extension,
renewal or replacement.
xi. Mortgages for taxes or assessments or governmental charges or levies
not yet due or delinquent or which can thereafter be paid without
penalty, or which are being contested in good faith by appropriate
proceedings; landlord's liens on property held under lease, and
tenants' rights under leases; easements; and any other Mortgages of a
nature similar to those hereinabove described in this clause (k) which
do not, in the opinion of the Company, materially impair the use of
such property in the operation of the business of the Company or a
Domestic Subsidiary or the value of such property for the purposes of
such business.
Limitation on Sale and Lease-Back. The Company will not itself, and it will
not permit any Domestic Subsidiary to, enter into any arrangement with any
bank, insurance company or other lender or investor (not including the Company
or any Subsidiary) or to which any such lender or investor is a party,
providing for the leasing by the Company or a Domestic Subsidiary for a
period, including renewals, in excess of three years of any Principal Domestic
Manufacturing Property which has been or is to be sold or transferred, more
than 180 days after the acquisition thereof or the completion of construction
and commencement of full operation thereof, by the Company or any Domestic
Subsidiary to such lender or investor or to any person to whom funds have been
or are to be advanced by such lender or investor on the security of such
Principal Domestic Manufacturing Property (herein referred to as a "Sale and
Leaseback Transaction") unless either:
(a) the Attributable Debt of the Company and its Domestic Subsidiaries
in respect of such Sale and Leaseback Transaction and all other Sale and
Leaseback Transactions entered into after the date of this Indenture (other
than Sale and Leaseback Transactions permitted herein), plus the aggregate
amount of Debt secured by Mortgages on Principal Domestic Manufacturing
Properties then outstanding (excluding any such Debt secured by Mortgages
covered in clauses (i) through (xi) of the covenant entitled "Limitation on
Liens") without equally and ratably securing the Senior Notes, would not
exceed 10% of Consolidated Net Tangible Assets, or
(b) the net proceeds of the sale of the Principal Domestic
Manufacturing Property are at least equal to the fair value (as determined
by the Board of Directors of the Company) of such property.
"Attributable Debt" means, as to any particular lease under which any
person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such person
under such lease during the remaining term thereof (after giving effect to any
extensions at the option of the lessee), discounted from the respective due
dates thereof to such date at the rate per annum borne by the Senior Notes
compounded semi-annually. The net amount of rent required to be paid under any
such lease for any such period shall be the amount of rent payable by the
lessee with respect to such period, after excluding amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments,
water rates and similar changes. In the case of any lease which is terminable
by the lessee upon the payment of a penalty, such net amount shall also
include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which
it may be so terminated.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities (excluding any thereof constituting
Funded Debt by reason of being renewable or extendible) and (b) all goodwill,
trade names, trademarks, patents, unamortized debt discount
(Plan Exhibit) Page D-6
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
and expense and other intangibles, all as set forth on the most recent
consolidated balance sheet of the Company and its consolidated Subsidiaries
and computed in accordance with generally accepted accounting principles.
"Domestic Subsidiary" means any Subsidiary of the Company (i) substantially
all of the property of which is located, and substantially all of the business
of which is carried on, within the United States of America (excluding its
territories and possessions and the Commonwealth of Puerto Rico), and (ii)
which (A) owns or operates one or more Principal Domestic Manufacturing
Properties or (B) owns capital stock of another Domestic Subsidiary; except
that a Subsidiary which is primarily engaged in the business of a finance
company or insurance company shall not constitute a Domestic Subsidiary.
"Funded Debt" means all indebtedness for money borrowed having a maturity
of more than 12 months from the date as of which the amount thereof is to be
determined or having a maturity of less than 12 months but by its terms being
renewable or extendible beyond 12 months from such date at the option of the
borrower.
"Mortgage" means any mortgage, pledge, lien, charge, security interest,
conditional sale or other title retention agreement or other similar
encumbrance.
"Principal Domestic Manufacturing Property" means any building, structure
or other facility, together with the land upon which it is erected and
fixtures comprising a part thereof, used primarily for manufacturing or
warehousing and located in the United States of America, owned or leased by
the Company or any Domestic Subsidiary, the gross book value (without
deduction of any depreciation reserves) of which on the date as of which the
determination is being made exceeds 1.5% of Consolidated Net Tangible Assets,
other than any such building, structure or other facility or portion thereof
or any such land or fixture (i) which is financed by obligations issued by a
State, a Territory, or a possession of the United States, or any political
subdivision of any of the foregoing, or the District of Columbia, the interest
on which is excludable from gross income of the holders thereof pursuant to
the provisions of the Section 103(a)(1) of the Internal Revenue Code (or any
successor of such provision) as in effect at the time of the issuance of such
obligations, or (ii) which, in the opinion of the Board of Directors of the
Company is not of material importance to the total business conducted by the
Company and its subsidiaries as an entirety.
(Plan Exhibit) Page D-7
<PAGE>
AMENDED JOINT PLAN OF REORGANIZATION
ANNEX D-2
EVENTS OF DEFAULT
Events of Default. "Event of Default" with respect to the Senior Notes
means each one of the following events which shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) default in the payment of any installment of interest upon any of
the Senior Notes as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal on any
of the Senior Notes as and when the same shall become due and payable
either at maturity, upon redemption, by declaration or otherwise; or
(c) default in the performance, or breach, of any covenant or warranty
of the Company in respect of the Senior Notes (other than a covenant or
warranty in respect of the Senior Notes a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 90 days after there
has been given by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the holders of at least 25% in
principal amount of the outstanding Senior Notes affected thereby, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
or
(d) Debt of the Company, or any Domestic Subsidiary, is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default, the total amount of such Debt unpaid
or accelerated exceeds $100,000,000 or its foreign currency equivalent and
such default continues for 10 days after the notice thereof; or
(e) any judgment or decree for the payment of money in excess of
$100,000,000 is rendered against the Company or any Domestic Subsidiary and
is not discharged and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof
stayed and, in the case of (B), such default continues for 10 days after
the notice thereof; or
(f) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee
or sequestrator (or similar official) of the Company or for any substantial
part of its property or ordering the winding up or liquidation of its
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(g) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under
any such law, or consent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or
similar official) of the Company or for any substantial part of its
property, or make any general assignment for the benefit of creditors.
(Plan Exhibit) Page D-8
<PAGE>
EXHIBIT "C"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
FOREIGN CLAIM ADJUSTMENT CATEGORIES
For purposes of determining the appropriate amount payable to Foreign
Claimants with Allowed Personal Injury Claims will be categorized in one of
four groups (as specified below in this Exhibit "C") based on their place of
residence. Each "country group" is assigned a specific percentage (as
specified below)--which percentage shall be multiplied against the Allowed
amount applicable to the Allowed Claim in terms of U.S. dollars. The
resulting dollar amount is the amount payable to the Foreign Claimant with an
Allowed Claim.
<TABLE>
<CAPTION>
PERCENTAGE OF DOMESTIC
AMOUNT FOR APPLICABLE
COUNTRY COMPENSATION LEVEL
- ----------------------------------------------
<S> <C>
CATEGORY 1 COUNTRIES {60%}
Australia
Canada
New Zealand
United Kingdom
- ----------------------
CATEGORY 2 COUNTRIES {60%}
Austria
Bahamas
Belgium
Bermuda
Cayman Islands
Denmark
Finland
France including:
French Polynesia
New Caledonia
Germany
Greece
Hong Kong
Iceland
Ireland
Italy
Japan
Kuwait
Liechtenstein
Luxembourg
Monaco
Netherlands
Norway
Portugal
Singapore
Spain
Sweden
Switzerland
United Arab Emirates
- ----------------------
CATEGORY 3 COUNTRIES {35%}
Argentina
Barbados
British Virgin Islands
Chile
Cyprus
Czech Republic
Israel including:
Gaza Strip
West Bank
Korea
Malaysia
Malta
Mauritius
Qatar
Saudi Arabia
Taiwan
- ----------------------
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF DOMESTIC
AMOUNT FOR APPLICABLE
COUNTRY COMPENSATION LEVEL
----
<S> <C>
CATEGORY 4 COUNTRIES {35%}
Algeria
Belize
Bolivia
Botswana
Brazil
Bulgaria
Cambodia
Central African
Republic
China
Colombia
Cook Islands
Costa Rica
Cote d'Ivoire (Ivory
Coast)
Croatia
Cuba
Dominican Republic
Ecuador
Egypt
Estonia
Fiji
Ghana
Grenada
Guatemala
Guyana
Haiti
Honduras
Hungary
India
Indonesia
Jamaica
Jordan
Kenya
Lebanon
Lithuania
Mali
Mexico
Morocco
Namibia
New Guinea
Nicaragua
Nigeria
Oman
Pakistan
Panama
Paraguay
Peru
Philippines
Poland
Saint Kitts and Nevis
Senegal
South Africa
Thailand
Tonga
Turkey
Uruguay
Venezuela
Vietnam
Zambia
Zimbabwe
- ----------------------
</TABLE>
(Disclosure Statement Exhibit) Page C-1
<PAGE>
<TABLE>
<CAPTION>
FOREIGN SETTLEMENT GRID
PERSONAL INJURY CLAIMS--CATEGORY 1 & 2 COUNTRIES--CLASS 6.1
(ALL AMOUNTS IN U.S. $)
- ------------------------------------------------------------------------------
AMOUNT OF ADDITIONAL
COMPENSATION-- AMOUNT OF
SETTLEMENT OPTION "BASE" COMPENSATION--
PAYMENT "PREMIUM"
PAYMENT
- ------------------------------------------------------------------------------
<S> <C> <C>
BREAST IMPLANT CLAIMS
- ------------------------------------------------------------------------------
EXPLANTATION PAYMENT (SEE P. 78) $3,000 N/A
- ------------------------------------------------------------------------------
RUPTURE PAYMENT (SEE PP. 78-79) 12,000 $3,000
- ------------------------------------------------------------------------------
50% multiple manufacturer reduction 50% 50%
applied to compensation under the
Disease Payment Option, for silicone gel
breast implants manufactured by Bristol,
Baxter, or 3M
- ------------------------------------------------------------------------------
DISEASE PAYMENT (SEE PP. 79-80)
- ------------------------------------------------------------------------------
Disease Payment Option I: Level One C or
D 6,000 1,200
- ------------------------------------------------------------------------------
Level One B 12,000 2,400
- ------------------------------------------------------------------------------
Level One A 30,000 6,000
- ------------------------------------------------------------------------------
Disease Payment Option II: Level Two--
GCTS--B 45,000 9,000
- ------------------------------------------------------------------------------
Level Two--GCTS--A/PM/DM 66,000 13,200
- ------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus C 90,000 18,000
- ------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus B 120,000 24,000
- ------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus A 150,000 30,000
- ------------------------------------------------------------------------------
EXPEDITED RELEASE PAYMENT (SEE P. 80) 1,200 N/A
- ------------------------------------------------------------------------------
OTHER PRODUCTS CLAIMS (SEE P. 83)
- ------------------------------------------------------------------------------
EXPEDITED RELEASE PAYMENT OPTION 600
- ------------------------------------------------------------------------------
MEDICAL CONDITION PAYMENT OPTION
- ------------------------------------------------------------------------------
Level One--Base
- ------------------------------------------------------------------------------
Chins, Facial, Nasal Gel Implants 3,000 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
</TABLE>
(Disclosure Statement Exhibit) Page C-2
<PAGE>
<TABLE>
<CAPTION>
FOREIGN SETTLEMENT GRID
PERSONAL INJURY CLAIMS--CATEGORY 1 & 2 COUNTRIES--CLASS
6.1
(ALL AMOUNTS IN U.S. $)
- -----------------------------------------------------------
AMOUNT OF ADDITIONAL
COMPENSATION-- AMOUNT OF
SETTLEMENT OPTION "BASE" COMPENSATION--
PAYMENT "PREMIUM"
PAYMENT
- -----------------------------------------------------------
<S> <C> <C>
SJO $3,000 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -----------------------------------------------------------
LJO--Knee 4,500 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -----------------------------------------------------------
LJO--Hip 6,000 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -----------------------------------------------------------
TMJ 3,000 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -----------------------------------------------------------
Testicular, Penile 3,000 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
</TABLE>
(Disclosure Statement Exhibit) Page C-3
<PAGE>
<TABLE>
<CAPTION>
FOREIGN SETTLEMENT GRID
PERSONAL INJURY CLAIMS--CATEGORY 1 & 2 COUNTRIES--CLASS 6.1
(ALL AMOUNTS IN U.S. $)
- --------------------------------------------------------------------------------
AMOUNT OF ADDITIONAL
COMPENSATION-- AMOUNT OF
SETTLEMENT OPTION "BASE" COMPENSATION--
PAYMENT "PREMIUM"
PAYMENT
- --------------------------------------------------------------------------------
<S> <C> <C>
Level Two--TMJ Enhanced $6,000 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- --------------------------------------------------------------------------------
Multiple manufacturer reduction for TMJ 50% N/A
Claimants who have both a Dow Corning
Covered Other Product and a TMJ product
made by any other manufacturer
- --------------------------------------------------------------------------------
SILICONE MATERIAL CLAIMS (SEE P. 83)
- --------------------------------------------------------------------------------
Expedited Release Payment To be paid from To be paid from
a fixed fund of a fixed fund of
$57.5 million $57.5 million
(NPV) (NPV)
(allocated to (allocated to
Foreign and Foreign and
Domestic Domestic
Silicone Silicone
Material Material
Claimants); the Claimants); the
amount paid to amount paid to
each individual each individual
Claimant will Claimant will
be determined be determined
after review after review
and evaluation and evaluation
by the Claims by the Claims
Office Office
- --------------------------------------------------------------------------------
<CAPTION>
Disease Option Payment To be paid from To be paid from
a fixed fund of a fixed fund of
$57.5 million $57.5 million
(NPV) (allocated (NPV) (allocated
to Foreign and to Foreign and
Domestic Domestic
Silicone Silicone
Material Material
Claimants); the Claimants); the
amount paid to amount paid to
each individual each individual
Claimant (up to Claimant (up to
40% of the 40% of the
Allowed Amount Allowed Amount
for Foreign Dow for Foreign Dow
Corning Breast Corning Breast
Implant Implant
Claimants) Claimants)
determined after determined after
review and review and
evaluation by evaluation by
the Claims the Claims
Office Office
</TABLE>
(Disclosure Statement Exhibit) Page C-4
<PAGE>
<TABLE>
<CAPTION>
FOREIGN SETTLEMENT GRID
PERSONAL INJURY CLAIMS--CATEGORY 3 & 4 COUNTRIES--CLASS 6.2
(ALL AMOUNTS IN U.S. $)
- ------------------------------------------------------------------------------
AMOUNT OF ADDITIONAL
COMPENSATION-- AMOUNT OF
SETTLEMENT OPTION "BASE" COMPENSATION--
PAYMENT "PREMIUM"
PAYMENT
- ------------------------------------------------------------------------------
<S> <C> <C>
BREAST IMPLANT CLAIMS
- ------------------------------------------------------------------------------
EXPLANTATION PAYMENT (SEE P. 78) $1,750 N/A
- ------------------------------------------------------------------------------
RUPTURE PAYMENT (SEE PP. 78-79) 7,000 $1,750
- ------------------------------------------------------------------------------
50% multiple manufacturer reduction 50% 50%
applied to compensation under the
Disease Payment Option, for silicone
gel breast implants manufactured by
Bristol, Baxter, or 3M
- ------------------------------------------------------------------------------
DISEASE PAYMENT (SEE PP. 79-80)
- ------------------------------------------------------------------------------
Disease Payment Option I: Level One C 3,500 700
or D
- ------------------------------------------------------------------------------
Level One B 7,000 1,400
- ------------------------------------------------------------------------------
Level One A 17,500 3,500
- ------------------------------------------------------------------------------
Disease Payment Option II: Level Two-- 26,250 5,250
GCTS--B
- ------------------------------------------------------------------------------
Level Two--GCTS--A/PM/DM 38,500 7,700
- ------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus 52,500 10,500
C
- ------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus 70,000 14,000
B
- ------------------------------------------------------------------------------
Level Two--Systemic Sclerosis/Lupus 87,500 17,500
A
- ------------------------------------------------------------------------------
EXPEDITED RELEASE PAYMENT (SEE P. 80) 700 N/A
- ------------------------------------------------------------------------------
OTHER PRODUCTS CLAIMS (SEE P. 83)
- ------------------------------------------------------------------------------
EXPEDITED RELEASE PAYMENT OPTION 350
- ------------------------------------------------------------------------------
MEDICAL CONDITION PAYMENT OPTION
- ------------------------------------------------------------------------------
Level One--Base
- ------------------------------------------------------------------------------
Chins, Facial, Nasal Gel Implants 1,750 Additional
payments
</TABLE> (including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
(Disclosure Statement Exhibit) Page C-5
<PAGE>
<TABLE>
<CAPTION>
FOREIGN SETTLEMENT GRID
PERSONAL INJURY CLAIMS--CATEGORY 3 & 4 COUNTRIES--CLASS
6.2
(ALL AMOUNTS IN U.S. $)
- -------------------------------------------------------------
AMOUNT OF ADDITIONAL
COMPENSATION-- AMOUNT OF
SETTLEMENT OPTION "BASE" COMPENSATION--
PAYMENT "PREMIUM"
PAYMENT
- -------------------------------------------------------------
<S> <C> <C>
SJO $1,750 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -------------------------------------------------------------
LJO--Knee 2,625 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -------------------------------------------------------------
LJO--Hip 3,500 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -------------------------------------------------------------
TMJ 1,750 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -------------------------------------------------------------
Testicular, Penile 1,750 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
</TABLE>
(Disclosure Statement Exhibit) Page C-6
<PAGE>
<TABLE>
<CAPTION>
FOREIGN SETTLEMENT GRID
PERSONAL INJURY CLAIMS--CATEGORY 3 & 4 COUNTRIES--CLASS 6.2
(ALL AMOUNTS IN U.S. $)
- -------------------------------------------------------------------------------
AMOUNT OF ADDITIONAL
COMPENSATION-- AMOUNT OF
SETTLEMENT OPTION "BASE" COMPENSATION--
PAYMENT "PREMIUM"
PAYMENT
- -------------------------------------------------------------------------------
<S> <C> <C>
Level Two--TMJ Enhanced $3,500 Additional
payments
(including any
"premium"
entitlement) to
be allocated
from excess
Other Products
Fund, if any
- -------------------------------------------------------------------------------
Multiple manufacturer reduction for TMJ 50% N/A
Claimants who have both a Dow Corning
Covered Other Product and a TMJ product
made by any other manufacturer
- -------------------------------------------------------------------------------
SILICONE MATERIAL CLAIMS (SEE P. 83)
- -------------------------------------------------------------------------------
Expedited Release Payment To be paid from To be paid from
a fixed fund of a fixed fund of
$57.5 million $57.5 million
(NPV) (NPV)
(allocated to (allocated to
Foreign and Foreign and
Domestic Domestic
Silicone Silicone
Material Material
Claimants); the Claimants); the
amount paid to amount paid to
each individual each individual
Claimant will Claimant will
be determined be determined
after review after review
and evaluation and evaluation
by the Claims by the Claims
Office Office
</TABLE>
(Disclosure Statement Exhibit) Page C-7
<PAGE>
EXHIBIT "D"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
BIOGRAPHIES OF DIRECTORS AND
OFFICERS OF DOW CORNING CORPORATION
RICHARD A. HAZLETON--Chairman of the Board of Dow Corning. Mr. Hazleton began
his Dow Corning career in 1965 as a chemical engineer. In 1968 Hazleton was
named Economic Evaluator for Process Engineering. He was promoted to Business
Evaluator Controller in 1973 and in 1976 became Manager of Planning and
Evaluation for Europe. Hazleton was elected European Area Vice President and
European Area Finance Director in 1978. Hazleton returned to the U.S. in 1981
as Corporate Controller and in 1983 became Midland Plant Manager. Hazleton was
named a U.S. Area Vice President and Director of Manufacturing and Engineering
in 1985 and in 1987 was elected a Corporate Vice President. Hazleton became
General Manager of the Fluids, Resins and Process Industries Business in 1989.
In 1991 he was named President of Dow Corning Europe. He became a member of
the Dow Corning Board in December 1992, was named President of Dow Corning in
January 1993, and assumed the additional responsibilities as Chief Executive
Officer in June 1993. In September, 1994, he was named Chairman and Chief
Executive Officer.
Mr. Hazleton holds bachelor's and master's degrees in chemical engineering
from Purdue University, and he earned a master's in business administration
from Central Michigan University. Hazleton attended Harvard University's
Advanced Management Program in 1983. He received an honorary doctorate in
commercial sciences from Central Michigan University in 1993 and an honorary
doctorate of engineering degree from Purdue University in 1998.
ROGER G. ACKERMAN--Chairman of the Board and Chief Executive Officer of
Corning. Mr. Ackerman has been with Corning since 1962 in a variety of
engineering, sales and management positions. In 1972 he was elected the
President of a Corning subsidiary, Corhart Refractories Co., in 1975 the
General Manager and Vice President of the Corning Incorporated Ceramic
Products Division and in 1980 a Senior Vice President of Corning. In 1981 he
became the Director of Corning's Manufacturing and Engineering Division, in
1983 the President of MetPath Inc. (now Quest Diagnostics Incorporated) and in
1985 Group President and a Director of Corning. In 1990 he was elected the
President and Chief Operating Officer of Corning and in 1996 he was elected to
his present position.
Mr. Ackerman is a graduate of Rutgers University and the Program for
Management Development program at Harvard University, with an honorary
doctorate from Rutgers.
GARY E. ANDERSON--President of Dow Corning. Mr. Anderson began his Dow Corning
career in 1967 in the Products Development-Fluids area and became a Building
Superintendent in the Resins and Chemical Manufacturing area in 1969. Anderson
became a Project Engineer in Process Engineering in 1973 and a Project
Engineer supervisor in the Resins and Chemicals area in 1974. Anderson was
named Evaluator/Controller for Fluids and Lubricants in 1976 and became a
Manager of Economic Evaluation and Business Control in 1977. Anderson was
promoted to Director, Manufacturing and Engineering in Europe in 1979 and
became Vice President for Dow Corning Europe in 1980. Anderson was on leave
from Dow Corning in 1983-84 to serve as acting Deputy Assistant Secretary for
Basic Industries in the Department of Commerce. In 1984, Anderson returned to
Dow Corning and became General Manager of Fluids, Resins and Process
Industries. He was elected a Corporate Vice President in 1986 and was named a
Group Vice President, Businesses, in 1989. In 1993, Anderson was elected
Executive Vice President of Dow Corning. In October, 1994, he was named
President.
Mr. Anderson holds a bachelor's degree in chemical engineering from
Michigan Technological University and a masters's degree in business
administration from Central Michigan University.
DAVID T. BUZZELLI--Senior Consultant to Dow Chemical. Mr. Buzzelli joined Dow
Chemical in 1965, and held several process engineering positions before
becoming Technical Director of the Michigan Division Process Development Group
in 1976. In 1980 he became Manager of Agricultural Products, Health and
Environmental Services in the Michigan Division. In 1984 he was appointed
Director of Governmental and Public Affairs for Dow Chemical and a Vice
President of Dow Chemical U.S.A. Mr. Buzzelli was appointed Chairman,
President and Chief Executive Officer of Dow Chemical Canada in 1986. From
1990 to 1997, he was Vice President and Corporate Director of Environment,
Health & Safety, Public Affairs and Information Systems of Dow Chemical.
Mr. Buzzelli graduated from the University of Minnesota in 1964 with a
degree in Chemical Engineering. He received his master's degree in chemical
engineering from the University of Delaware in 1965.
VAN C. CAMPBELL--Vice Chairman Finance & Administration, Corning. Mr. Campbell
joined Corning in 1964. He was elected an Assistant Treasurer in 1971,
Treasurer in 1972, a Vice President in 1973, Financial Vice President in 1975
and
(Disclosure Statement Exhibit) Page D-1
<PAGE>
Senior Vice President for Finance in 1980. He became General Manager of
Corning's Consumer Products Division in 1981. He was elected Vice Chairman,
responsible for finance and administration and a director of Corning in 1983.
Mr. Campbell has been a Director of Dow Corning since 1983, and had previously
been a Director from 1977 through 1981.
Mr. Campbell is a graduate of Cornell University, and has a master's degree
in Business Administration from Harvard University.
ENRIQUE C. FALLA--Senior Consultant to Dow Chemical. Mr. Falla joined Dow
Latin America in 1967 as a Financial Staff Assistant. Beginning in 1971 Mr.
Falla served, in turn, as Area Treasurer, General Manager for the Mexico
Region, Director of Administration and Director of Business Development for
Dow Latin America. In 1979 he was appointed Commercial Vice President for Dow
Latin America, and became President of Dow Latin America in 1980. He was named
Financial Vice President for Dow Chemical in 1984, was appointed to the Board
of Directors of Dow Chemical in 1985. and was elected an Executive Vice
President of Dow Chemical in 1991.
Mr. Falla has a bachelor's degree in business administration and a master's
degree in economics/finance, both from the University of Miami.
NORMAN E. GARRITY--President, Corning Technologies. Mr. Garrity joined Corning
in 1966, serving in various production, sales and marketing positions. In 1984
he was named General Manager of Corning's Electrical Products Division and a
Vice President of Corning. In 1987 he was named a Senior Vice President of
Manufacturing and Engineering for the Corning Specialty Materials Group and
became an Executive Vice President of Corning in 1990. In 1996 he was elected
to his present position, and in that same year became a member of the Board of
Directors for both Corning and Dow Corning.
Mr. Garrity has both bachelor's and advanced degrees from Bucknell
University.
WILLIAM S. STAVROPOULOS--President and Chief Executive Officer of Dow
Chemical. Mr. Stavropoulos joined Dow Chemical as a research chemist in
Pharmaceutical Research in 1967. He became Research Manager of Diagnostics
Products Research in 1973 and Business Manager of that division in 1976. He
became Business Manager of Polyolefins in 1977. Mr. Stavropoulos became
Director of Marketing for Dow U.S.A. Plastics Department in 1979, and was
named Commercial Vice President for Dow Latin America in 1980. He then became
President of Dow Latin America in 1984, and was named Commercial Vice
President for Dow U.S.A. Basics and Hydrocarbons in 1985. He became Group Vice
President for Dow U.S.A. Plastics and Hydrocarbons in 1987. In 1990 Mr.
Stavropoulos was named President of Dow U.S.A. and was elected a Vice
President of Dow Chemical. In 1991 he was elected a Senior Vice President and
member of the Board of Directors of Dow Chemical. He became President and
Chief Operating Officer of Dow Chemical in 1993, and assumed his current
position in 1995.
Mr. Stavropoulos holds a bachelor's degree in pharmaceutical chemistry from
Fordham University and a doctorate in medicinal chemistry from the University
of Washington.
OFFICER BIOGRAPHIES
(DOW CORNING CORPORATION)
RICHARD A. HAZLETON--See above.
GARY E. ANDERSON--See above.
SIEGFRIED HABERER--Executive Vice President of Dow Corning. Mr. Haberer joined
Dow Corning in 1970. Prior to assuming his current post, he was European Area
President and a Vice President of Dow Corning, General Manager of the Global
Rubber Business, Manager of the European EEI Business, Director of Marketing
USA EEI Business, and Marketing Manager of the European EEI Business. He
assumed his present position in 1997.
Mr. Haberer is a Diplom Ingenieur graduate (the equivalent of a bachelor's
degree in engineering).
JOHN W. CHURCHFIELD--Mr. Churchfield began his career with Dow Corning in 1969
and in his early years was involved in silicone product development, sales and
product marketing in the United States. In 1978, Churchfield joined the
Corporate Economic Evaluation staff and became manager of that department in
1978. From 1981-1984, Churchfield was Director of Finance for Dow Corning's
European Area operations in Brussels, Belgium. In 1984, Churchfield became
Vice President of Sales and Marketing for Dow Corning's European Area
operations. In 1986, Churchfield was promoted to Executive Vice President of
Dow Corning Toray Silicone, Ltd. in Tokyo, Japan, and in 1989 he became
General Manager of Heat Cured Rubber Products and Automotive/Fabrication
Industries. In 1991, he was named General Manager, Designed Products Business.
He was elected Vice President, Planning and Finance and Chief Financial
Officer in 1993.
(Disclosure Statement Exhibit) Page D-2
<PAGE>
Mr. Churchfield has a bachelor's degree in chemical engineering from Grove
City College, Grove City, Pennsylvania. He attended the Harvard Business
School Advanced Management Program in 1990.
JAMES R. JENKINS--Mr. Jenkins joined the Dow Corning legal department in 1976
as a Staff Attorney, leaving a position as a Federal Defender in the Federal
Defender's Office in Detroit. In 1978 Jenkins was named Senior Attorney and he
completed studies at the Parker School of Foreign and Comparative Law at
Columbia University. In early 1981, Jenkins became Senior Managing Counsel and
in 1982 he was elected Secretary and General Counsel. Jenkins was elected Vice
President, Secretary and General Counsel in 1984.
Mr. Jenkins received his bachelor's degree and his law degree from the
University of Michigan. Jenkins completed the Program for Management
Development at the Harvard University Business School in 1982.
BARBARA S. CARMICHAEL--Ms. Carmichael joined Dow Corning in 1990 as Director
of Corporate Communications. In 1993 she was named Executive Director of
Corporate Communications. In 1991, Carmichael was elected a U.S. Area Vice
President and in 1995 she was named a Corporate Vice President. Prior to
joining Dow Corning, Carmichael served as Director of Corporation
Communications for a subsidiary of the NCR Corporation.
Ms. Carmichael holds a Bachelor's Degree in English from Carleton College
and a Master's Degree in English from the University of Minnesota.
GIFFORD E. BROWN--Mr. Brown joined Dow Corning as an accountant in 1969 and
has held numerous positions in accounting and control and in systems and
information management both in the United States and in Dow Corning's foreign
divisions prior to becoming Manager of Economic Evaluation/Business Control in
1988. In 1991 he became Director of Corporate Planning and Business
Development, and in 1992 he assumed the role of Director of Administration and
Finance and Vice President of the Asian Area. He assumed his post as Executive
Director or Human Resources in February, 1995, and was named a Corporate Vice
President in February, 1997.
Mr. Brown holds a Bachelor's Degree in accounting and finance from Bentley
College in Boston and has participated in the Massachusetts Institute of
Technology's Sloan School of Management senior executive program.
JAMES V. CHITTICK--Mr. Chittick joined Dow Corning in 1963 in Product
Development. During his career at Dow Corning, he has worked at five plants--
Medical, Trumbull Lubricants and Rubber Finishing, Midland Plant, Seneffe
Belgium, and Elizabethtown. Chittick was Plant Manager at both Seneffe and
Elizabethtown. His other positions include Section Manager for Process
Engineering, Material Flow Manager for the European Area, Director of
Facilities Engineering, U.S. Area Vice President and Director of Quality and
supply, and Executive Director of Human Resources. In February, 1995, Chittick
was named Executive Director of Manufacturing and Engineering, and in March,
1995, Chittick was named a Corporate Vice President.
Mr. Chittick graduated from South Dakota School of Mines and Technology as
a Chemical Engineer and holds an MBA from Central Michigan University.
LEON D. CROSSMAN--As Director of Science and Technology for Dow Corning, Dr.
Crossman is responsible for ensuring that Dow Corning continues to expand its
materials science base and accelerates its ability to work across the
science/application interface as required by its customers and the industries
that Dow Corning services. Crossman joined Dow Corning in 1967. Crossman was
named Manager of Semiconductor Silicon Research in 1973, Resins and Chemicals
Unit Manufacturing Manager in 1978, Fluids and Lubricants Manufacturing
Manager in 1981, Director of TS&D in 1982, Manager of the Specialty Elastomers
Business in 1984, Manager of the High Tech CU in 1987, Director of Central
Research and Development in 1989, and Director of Science and Technology in
early 1991. Crossman was elected a Corporate Vice President in March 1991.
Mr. Crossman received his bachelor's and master's degrees in engineering
physics from South Dakota State University and his Ph.D. in solid state
physics from Iowa State University.
BURNETT S. KELLY--Mr. Kelly joined Dow Corning in 1978 as a staff attorney. He
served as Manager of Employee Relations from 1985 to 1989 and became Manager
of the Hemlock Medical Plant in 1989. Kelly was named Manager of the Medical
Materials Commercial Unit in 1991 and Director, Human Resources and Chairman
of the Breast Implant Issue Management Team in 1992. In 1993, Kelly was named
President of Dow Corning USA. In December 1993 he was named a Corporate Vice
President. Immediately prior to joining Dow Corning, Kelly served as Counsel
to the Chairman of the Equal Employment Opportunity Commission in Washington
D.C.
Mr. Kelly received his bachelor's degree from Michigan State University and
his law degree from the Detroit College of Law.
(Disclosure Statement Exhibit) Page D-3
<PAGE>
R.P. KRASA--Mr. Krasa joined Dow Corning in 1974 and was named Economic
Evaluator for Elastomers in 1977 and also led the Engineered Products Product
Management Group. He became Greensboro Plant Manager in 1980 and returned to
Midland in 1981 to manage Economic Evaluation. In 1984 Krasa was named Manager
of the Automotive/Electrical Commercial Unit and in 1986, president of Dow
Corning STI. He was Silicone Rubber Global Product Line manager in 1988 and
was named Executive Vice President of Dow Corning Toray Silicone in 1989 and
became President of that unit in 1991. In 1994 he became President of Dow
Corning Asia and was elected a Corporate Vice President. In February, 1996, he
returned to the U.S. to become General Manager of the Core Products Global
Business Group.
Mr. Krasa holds a bachelor's degree in chemical engineering from Iowa State
University and an MBA from Central Michigan University.
RICHARD H. HOOVER--Mr. Hoover joined Dow Corning in 1971 as a salesperson for
Fluids, Emulsions and Compounds. He moved to Fluids and Lubricants Marketing
in 1976 and in 1978 was named product market manager of the Latin American
Area. In 1982 he became Regional Manager in Mexico and in 1986, Market
Development Manager for the Fluids, Resins and Process Industries Business.
Hoover became manager of the Select Industries Commercial Unit in 1987, and in
1988, Director of Marketing for Elastomers and Engineered Industries Business.
He was named Manager of the Construction Commercial Unit in 1989 and became
Manager of the Performance Materials Business in 1991. In 1993, Hoover was a
U.S. Area Vice President and Business Group manager for Advanced Materials in
the U.S. In June, 1994, he became Executive Director or Health and
Environmental Policy. In February, 1995, Mr. Hoover became President of Dow
Corning Asia and was elected a Corporate Vice President.
Mr. Hoover received his bachelor's degree in chemical engineering from the
University of Kansas.
JERE D. MARCINIAK--Mr. Marciniak joined Dow Corning in 1997. He was named
Product Marketing Manager in 1979. In 1980, he was named Elastomer Marketing
manager for the European Area. He was named U.S. Area Vice President and
Director of Sales and Marketing administration in 1989. He assumed the
position of General Manager of the Global Sealants Business in August, 1993.
In August, 1993, he became the General Manager of the U.S. Area Core Products
Business Group. After the integration of the U.S. and Inter-America Areas, he
was named Americas Area Vice President and General Manager of the Core
Products Business Group. In January, 1998, he became European Area President
and was named a Corporate Vice President.
Mr. Marciniak received his bachelor's and master's degrees in business
administration from Central Michigan University.
CHARLES W. LACEFIELD--Mr. Lacefield joined Dow Corning in 1962 as a chemist
and has worked in various manufacturing positions in Midland, Michigan;
Elizabethtown, Kentucky; and Brussels, Belgium. Prior to being named Vice
President and Executive Director of Business Processes and Information
Technology, Lacefield was Vice President and Director of Manufacturing and
Engineering.
Mr. Lacefield received his bachelor's in chemistry from the University of
Florida and an MBA in management from Central Michigan University. In 1987
Lacefield attended the Sloan School of Management Program for Senior
Executives.
ENDVAR ROSSI--Mr. Rossi joined Dow Corning in 1970 and held various positions
in Sales and Marketing, including nearly four years in the Marketing Group of
Latin America Area. In 1979, he was names Sales and Marketing Manager for the
Brazil Region, and later Brazil Region manager. In 1986, he became European
Area Director of Sales and Marketing and a European Area Vice President in
1988. He became Inter-America president in 1992. Rossi was named Executive
Director of Marketing and Sales for Dow Corning in 1996, and was named a
Corporate Vice President in 1997.
Mr. Rossi holds a Bachelor's Degree in economics from the Pontificia
Universidade Catolica de Sao Paulo and has completed Harvard University's
Program for Management Development.
NEVILLE J. WHITFIELD--Mr. Whitfield joined a Dow Corning affiliate in 1967 and
was initially involved in research and development in the fluids and resins
business. In 1976 Whitfield managed the European regional sales offices and
order entry and in 1978 he was named Research and Development Manager for
Elastomers. In 1980 Whitfield began managing distribution, scheduling,
planning and purchasing in Brussels and in 1982 he was named Manager of the
European Paper and Textile Industry Groups. In 1984 Whitfield moved to
Midland, Michigan where he managed the Performance Chemicals and Coatings
Industries Commercial Unit. He was named Marketing Director for the fluids and
resins business in 1986 and in 1988 he was named European Finance and Systems
and Information Management Director. In 1993, Whitfield was named General
Manager of the Advanced Materials Business Group and a Corporate Vice
President.
Mr. Whitfield is an honors chemistry graduate from Durham University in
England. He completed the Program for Management Development at the Harvard
Business School in 1979.
(Disclosure Statement Exhibit) Page D-4
<PAGE>
EXHIBIT "E"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
NON-DEBTOR JOINT VENTURES AND
SUBSIDIARIES OF DOW CORNING CORPORATION
A. DCC JOINT VENTURES.
1. HEMLOCK SEMICONDUCTOR CORPORATION is a corporation organized under
the laws of the State of Michigan. Its principal place of business is
located in Hemlock, Michigan. DCC owns 63.25% of the common stock; Shin-
Etsu Handotai owns 24.5% of the common stock; and Mitsubishi Metal Company
owns 12.25% of the common stock. Hemlock Semiconductor Corporation is
engaged in the production of polycrystalline silicon for use in the
manufacture of semiconductor devices and solar cells.
2. SDC TECHNOLOGIES, INC. is a corporation organized under the laws of
the State of Delaware. Its principal place of business is located in
Anaheim, California. DCE owns 50% of the common stock. Pilkington PLC owns
the balance of the common stock. SDC Technologies, Inc. is a holding
company for the stock of two subsidiary corporations, SDC Coatings, Inc.
and Applied Hardcoating Technologies, Inc.
A. SDC COATINGS, INC. is a corporation organized under the laws of
the State of Delaware. Its principal place of business is located in
Anaheim, California. SDC Technologies, Inc. owns 100% of the common
stock. SDC Coatings, Inc. is engaged in the business of the development,
manufacture and marketing of colloidal silica-based coating resins.
B. APPLIED HARDCOATING TECHNOLOGIES, INC. is a corporation
organized under the laws of the State of Delaware. Its principal place
of business is located in Henderson, Nevada. SDC Technologies, Inc. owns
100% of the common stock. applied Hardcoating Technologies, Inc. is
engaged in the business of custom coasting certain hard substrates with
colloidal silica-based coating resins manufactured by SDC Coatings, Inc.
3. DOW CORNING TORAY SILICONE CO., LTD. is a corporation organized
under the laws of Japan. Its principal place of business is located in
Tokyo, Japan and it operates manufacturing plants in Chiba-ken and Fukui-
ken, Japan. DCC owns 65% of the stock. Toray Industries Co., Inc. owns the
balance of the stock. Dow Corning Toray Silicone Co., Ltd. is engaged in
the research, production and sale of organosilicon products.
B. DCC DIRECT AND INDIRECT DOMESTIC SUBSIDIARIES.
1. DEVONSHIRE UNDERWRITERS LIMITED is a corporation organized under
the laws of Bermuda. Its principal place of business is located in
Hamilton, Bermuda. DCC is the equitable owner of 100% of the common stock.
Devonshire Underwriters Limited is engaged in the business of underwriting
insurance.
2. DOW CORNING FOREIGN SALES CORPORATION is a corporation organized
under the laws of the United States Virgin Islands. Its principal place of
business is located in Charlotte Amalie, St. Thomas, Virgin Islands. DCC
owns 50% of the common stock (Class A Common). Hemlock Semiconductor
Corporation (an Affiliate) owns the balance of the common stock (Class B
Common). Dow Corning Foreign Sales Corporation was established to conform
to the U.S. tax rules for a foreign sales corporation. It is currently
active.
3. DOW CORNING STI, INC. is a corporation organized under the laws of
the State of Delaware. Its principal place of business is located in
Plymouth, Michigan. DCC owns 100% of the common stock. Dow Corning STI,
Inc. is engaged in the business of manufacturing, sales and service of
specialty compounded silicone rubber products, primarily to the automotive
industry.
4. SITE SERVICES, INC. is a corporation organized under the laws of
the State of Delaware. Its principal place of business is located in
Midland, Michigan. DCC owns 100% of the common stock. Site Services, Inc.
is engaged in the business of providing maintenance, engineering and
computer repair and original installation services to DCC's operations in
the Midland, Michigan area.
5. BAY ASSET FUNDING CORPORATION is a corporation organized under the
laws of the State of Delaware. Its principal place of business is located
in Midland, Michigan. DCC owns 100% of the common stock. Bay Asset Funding
Corporation is engaged in the purchase and sale of trade receivables.
(Disclosure Statement Exhibit) Page E-1
<PAGE>
6. DC LIQUID SYSTEM TECHNOLOGIES, INC. is a corporation organized
under the laws of the State of Delaware. Its principal place of business is
located in Midland, Michigan. DCC owns 100% of the common stock. DC Liquid
System Technologies, Inc. engaged in the business of manufacturing and
selling cellular and other elastomeric silicone sheet goods. It has sold
substantially all of its operating assets to a third party.
7. DOW CORNING SILICON ENERGY SYSTEMS, INC. is a corporation organized
under the laws of the State of Delaware. Its principal place of business is
located in Selkirk, Manitoba, Canada. DCC owns 100% of the common stock.
Dow Corning Silicon Energy Systems, Inc. was established to engage in the
business of conducting research and development in the area of silicon
metals in conjunction with the Province of Manitoba, Canada. Substantially
all of the operating assets of this corporation have been disposed of and
its operations have been discontinued.
8. WICKHEN PRODUCTS OF DELAWARE ("WPD") is a corporation organized under
the laws of the State of Delaware. Its principal place of business is
located in Midland, Michigan. DCC owns 100% of the common stock. WPD is the
remaining inactive shell corporation from a former DCC acquisition.
A. RECON ASSOCIATES is a corporation organized under the laws of the
State of Delaware. WPD owns 100% of the common stock. Recon Associates
is an inactive shell corporation.
B. WICKHEN PRODUCTS INC. is a corporation organized under the laws of
the State of Wisconsin. WPD owns 100% of the common stock. Wickhen
Products Inc. is an inactive shell corporation.
C. AGRON INC. is a corporation organized under the laws of the State
of Delaware. WPD owns 100% of the common stock. Agron Inc. is an
inactive shell corporation.
9. DOW CORNING ENTERPRISES INC. ("DCE") is a corporation organized under
the laws of the State of Delaware. Its principal place of business is
located in Midland, Michigan. DCC owns 100% of the common stock. DCE is
engaged in the business of investing in new ventures supporting DCC
business activities.
A. UNIVERSAL SILICONES AND LUBRICANTS LTD. is a joint venture
organized under the laws of India. Its principal place of business is
located in Bombay, India. DCE owns 49.9% of the ownership interests.
Gandhi and Associates owns the balance of the ownership interests.
Universal Silicones and Lubricants Ltd. is engaged in the manufacture,
sale and distribution of silicone sealants and speciality lubricants in
India.
B. DOW CORNING POLSKA SP. ZO.O is a limited liability company
organized under the laws of Poland. It is wholly-owned by DCE. It
maintains its principal place of business in Warsaw, Poland. Dow Corning
Polska Sp. zo.o is engaged in the business of undertaking commercial
activities for materials and products relating to the chemical industry,
and in particular to the silicone industry with both local and foreign
partners in Eastern Europe.
C. DCC INTER-AMERICAN SUBSIDIARIES.
1. DOW CORNING DE ARGENTINA S.A.I.C. is a corporation organized under
the laws of Argentina. Its principal place of business is located in Buenos
Aires, Argentina. DCC is the equitable owner of 100% of the common stock.
Dow Corning de Argentina S.A.I.C. is engaged in the business of selling
silicone and silicone based products.
2. DOW CORNING DO BRAZIL LTDA is a limited liability company organized
under the laws of Brazil. Its regional headquarters are located in Sao
Paulo, Brazil and its manufacturing plant is located near Campinas, Brazil.
DCC is the equitable owner of 100% of the ownership interests. Dow Corning
do Brazil LTDA is engaged in the business of manufacturing and selling
silicone and silicone based products.
A. SIL TRADE INDUSTRIA E COMMERCIO LTDA is a limited liability
corporation organized under the laws of Brazil. Its principal place of
business is Sao Paulo, Brazil. Dow Corning do Brazil LTDA owns
approximately 49% of the ownership interest with the remainder of the
ownership interest owned by a number of businesses within Brazil. Sil
Trade LTDA is engaged in the business of distributing sealant products.
3. DOW CORNING CANADA, INC. is a corporation organized under the laws
of Canada. Its regional headquarters are located in Mississauga, Ontario,
Canada and it has sales offices in Calgary, Alberta, Canada; Montreal,
Quebec, Canada; and in Vancouver, British Columbia, Canada. DCC owns 100%
of the common stock. Dow Corning Canada, Inc. is engaged in the business of
manufacturing and selling silicone and silicone based products.
4. DOW CORNING DE COLOMBIA S.A. is a corporation organized under the
laws of Colombia. Its principal place of business is located in Bogota,
Colombia. DCC is the equitable owner of 100% of the common stock. Dow
Corning de Colombia, S.A. is engaged in the business of importing and
distributing silicone and silicone based products produced by DCC and its
Subsidiaries.
(Disclosure Statement Exhibit) Page E-2
<PAGE>
5. DOW CORNING DE MEXICO S.A. DE C.V. is a corporation organized under
the laws of Mexico. Its regional headquarters are located in Mexico City,
Mexico, its manufacturing operations are conducted at a plant located in
San-Martin, Texmelucan, Puebla, Mexico, and a sales office is located in
Guadalajara, Jalisco, Mexico. DCC is the equitable owner of 100% of the
common stock. Dow Corning Canada, Inc. owns the balance of the common
stock. Dow Corning de Mexico S.A. de C.V. is engaged in the business of
manufacturing and selling silicone and silicone based products.
6. DOW CORNING PUERTO RICO, INC. is a corporation organized under the
laws of Puerto Rico. Its principal place of business is located in San
Juan, Puerto Rico. DCC owns 100% of the common stock. Dow Corning Puerto
Rico, Inc. is engaged in the business of importing and selling silicone and
silicone based products produced by DCC and its Subsidiaries.
7. DOW CORNING DE VENEZUELA S.A. is a corporation organized under the
laws of Venezuela. Its principal place of business is located in Caracas,
Venezuela. DCC is the equitable owner of 100% of the common stock. Dow
Corning de Venezuela S.A. is engaged in the business of importing and
selling silicone and silicone based products produced by DCC and its
Subsidiaries.
8. DOW CORNING CHILE S.A. is a corporation organized under the laws of
Chile. Its principal place of business is located in Santiago, Chile. DCC
is the equitable owner of 100% of the common stock. Dow Corning Chile S.A.
is engaged in the business of importing and selling silicone and silicone
based products produced by DCC and its Subsidiaries.
D. DCC ASIAN SUBSIDIARIES.
1. DOW CORNING ASIA LTD. is a corporation organized under the laws of
Japan. Its area headquarters are located in Tokyo, Japan and its research
and development center is located in Yamakita, Japan. DCC owns 100% of the
common stock. Dow Corning Asia Ltd. conducts the following operational
activities: Asian management (consisting of business and functional
managers), the operation of the Japan Computer Center and the Japan
Research and Information Center; and the commercial businesses of selling
chemicals, lubricants and medical materials.
2. DOW CORNING AUSTRALIA PTY. LTD. is a corporation organized under
the laws of Australia. Its principal place of business is located in
Pennant Hills, New South Wales, Australia, and it has its manufacturing
facility in Blacktown, New South Wales, Australia. DCC owns 100% of the
common stock. Dow Corning Australia PTY, Ltd. is engaged in the business of
manufacturing and selling silicone and silicone based products.
3. DOW CORNING CHINA LIMITED is a corporation organized under the laws
of Hong Kong. Its principal place of business is located in Hong Kong. DCC
owns 100% of the common stock. Dow Corning China Limited is engaged in
general marketing and liaison services with DCC distributors and customers
in the People's Republic of China, in the introduction of, and the
explanation of the application of, silicones to the People's Republic of
China market and in furnishing other promotional and associated services.
4. DOW CORNING KOREA LTD. is a corporation organized under the laws of
South Korea and its manufacturing facility is located in Manseung, South
Korea. Its principal place of business is located in Seoul, South Korea.
DCC owns 100% of the common stock. Dow Corning Korea Ltd. is engaged in the
business of manufacturing and selling silicones and silicone-based
products.
5. DOW CORNING NEW ZEALAND LTD. is a corporation organized under the
laws of New Zealand. Its principal place of business is located in
Auckland, New Zealand. DCC owns 100% of the common stock. Dow Corning New
Zealand Ltd. is engaged in the sale and distribution of silicones and
silicone-based products.
6. DOW CORNING SINGAPORE PTE. LTD. is a corporation organized under
the laws of Singapore. Its principal place of business is located in
Singapore. DCC owns 100% of the common stock. Dow Corning Singapore PTE.
Ltd. is engaged in the sale and distribution of silicones and silicone-
based products.
7. DOW CORNING TAIWAN INC. is a corporation organized under the laws
of Taiwan. Its principal place of business is located in Taipei, Taiwan and
it maintains a manufacturing plant in Chungli, Taiwan. DCC is the equitable
owner of 100% of the common stock. Dow Corning Taiwan Inc. acts as a
manufacturing site for silicone emulsions, heat vulcanizing silicone
rubber, silicone sealants, and silicone dispersions. Dow Corning Taiwan
Inc. is also engaged in the importation of silicone chemicals for sale in
Taiwan and for export.
8. DOW CORNING (THAILAND) LTD. is a corporation organized under the
laws of Thailand. Its principal place of business is located in Bangkok,
Thailand. DCC owns approximately 99.9% of the common stock. The following
(Disclosure Statement Exhibit) Page E-3
<PAGE>
individuals own the balance of the common stock: Miss Choopun Chaiprabha,
Miss Peerapan Kusathitsiriphan, Miss Suwannee Jirarudee, Mr. Suriyong
Tungsuwan, Miss Wilarporn Pokhasuwan, Mr. Nitat Wattanakul, and Miss Jariya
Thitirattanapinum. Dow Corning Thailand Ltd. is engaged in the business of
importing, manufacturing and selling silicones in Thailand.
9. DOW CORNING (SHANGHAI) CO. LTD. is a corporation organized under
the laws of the People's Republic of China. Its principal place of business
is located in Shanghai Municipality, People's Republic of China. Dow
Corning Enterprises, Inc. owns 100% of the common stock. Dow Corning
Shanghai Co. is engaged in the processing, manufacture and sale of silicone
sealants, silicone emulsions and other silicone products and the provision
of technical service to customers.
10. DOW CORNING MALAYSIA SDN. BHD. is a corporation organized under
the laws of Malaysia. Its principal place of business is Kuala Lumpur,
Malaysia. DCC owns 100% of the common stock. Dow Corning Malaysia was
established to manufacture, export, import, sell or distribute all types of
silicone produces and chemical products. Currently, the corporation is an
inactive shell corporation.
E. DCC DIRECT AND INDIRECT EUROPEAN SUBSIDIARIES.
1. DC BELGIAN PENSION FUND (ASBL) is a non-profit association
organized under the laws of Belgium. Its principal place of business is
located in La Hulpe, Belgium. DC Belgian Pension Fund (ASBL) is engaged in
the management of occupational retirement pensions, lump sum death benefits
and other benefits for the employees of Dow Corning Europe (a DCC branch),
Dow Corning Coordination Center S. A. and Dow Corning Seneffe S. A.
2. DOW CORNING CONSTRUCTION S.A. is a stock company organized under
the laws of France. Its principal place of business is located in Nanterre,
France. DCC is the equitable owner of 100% of the common stock. Dow Corning
Construction S.A. is engaged in the commercialization and sale of products
and equipment related to the construction industry.
3. DC STI S.A. is a stock company organized under the laws of France.
It maintains its principal place of business in Chassieu, France. DCC owns
100% of the common stock. DC STI S.A. is engaged in the business of
manufacturing and commercializing high consistency rubber products and
selling such products in France, Belgium and North Africa.
4. DOW CORNING FRANCE S.A. is a stock company organized under the laws
of France. It maintains its principal place of business in Valbonne, France
and has two additional locations in Lyon and Nanterre, France. DCC is the
equitable owner of 100% of the common stock. Dow Corning France S.A.
engages in research and manufacturing activities, the commercialization of
medical and pharmaceutical products and the marketing and sale of
industrial silicone products.
5. DOW CORNING G.M.B.H (WIESBADEN) is a limited liability company
organized under the laws of Germany. It maintains its registered office in
Wiesbaden, Germany and two additional locations in Munich and Meerbusch,
Germany. DCC owns 100% of the common stock. Dow Corning G.m.b.H (Wiesbaden)
is engaged in research and manufacturing activities, and the
commercialization of chemicals including sealants, silicone compounds,
lubricants and application equipment and medical and pharmaceutical
products.
6. DOW CORNING GESMBH (AUSTRIA) is a limited liability company
organized under the laws of Austria. It maintains its registered office in
Vienna. DCC owns 100% of the common stock. Dow Corning GesmbH (Austria) is
engaged in the business of commercialization of industrial silicone
products in Eastern Europe.
7. DOW CORNING IBERICA, S.A. is a stock company organized under the
laws of Spain. It maintains its principal place of business in Barcelona,
Spain. DCC owns 100% of the common stock. Dow Corning Iberica S.A. is
engaged in the business of manufacturing and selling silicone chemicals.
8. DOW CORNING INVESTMENT S.A. is a joint stock company organized
under the laws of Belgium. It maintains its principal place of business in
La Hulpe, Belgium. DCC is the equitable owner of 100% of the common stock.
Dow Corning Investment S.A. is engaged in the business of holding stocks
and participations in various other companies.
9. DOW CORNING COORDINATION CENTER S.A. is a stock company organized
under the laws of Belgium. Its principal place of business is located in La
Hulpe, Belgium. Dow Corning Investment S.A. is the equitable owner of 100%
of the common stock. Dow Corning Coordination Center S.A. provides the
following services to other DCC European Subsidiaries: the centralization
of financial operations, accounting activities and the hedging of foreign
(Disclosure Statement Exhibit) Page E-4
<PAGE>
exchange risks, the centralization of scientific research, patent and
administrative law activities, relations with national and international
governmental authorities, and insurance and reinsurance.
10. DOW CORNING LIMITED is a limited liability company organized
under the laws of the United Kingdom. It maintains its principal place of
business in Barry, Wales and has a sales office in Reading, Great Britain.
DCC is the equitable owner of 100% of the common stock. Dow Corning Limited
is engaged in the business of manufacturing basic silicone products for
sale and is engaged in the business of selling DC products in the United
Kingdom and other countries in the United Kingdom region.
A. DOW CORNING HANSIL LIMITED is a corporation organized under the
laws of England. It maintains its principal place of business in
Byfleet, Surrey, England. Dow Corning Limited owns 100% of the common
stock. Dow Corning Hansil Limited is engaged in the business of
marketing and selling sealants in the United Kingdom.
B. DOW CORNING STI LIMITED is a company incorporated under the laws
of England. It maintains its principal business office in Manchester,
United Kingdom. Dow Corning Limited is the equitable owner of 100% of
the common stock. Dow Corning STI Limited is engaged in the business of
custom compounding of rubber and acting as a distributor of DCC's
silicone rubber products in the United Kingdom.
11. DOW CORNING S.A. is a joint stock company organized under the
laws of Belgium. It maintains its principal place of business in Seneffe,
Belgium. Dow Corning Corporation is the equitable owner of 100% of the
common stock. Dow Corning S.A. is engaged in the business of manufacturing
silicone products and serves as the contract manufacturer for Dow Corning
Europe.
12. DOW CORNING S.P.A. is a joint stock corporation organized under
the laws of Italy. It maintains its business offices in Agrate, Brianza,
Sesto Ulterianio, and Trento. DCC owns 100% of the common stock. Dow
Corning S.p.A. is engaged in the business of manufacturing and selling
products of DCC and its Subsidiaries in Italy.
13. DC KRAFFT S.A. is a stock company organized under the laws of
Spain. It maintains its registered office in Andoain, Spain. DCC owns 65%
of the ownership interests. Krafft S.A. owns the balance of the ownership
interests. DC Krafft S.A. is engaged in the business of manufacturing,
marketing and selling sealants in Spain and Portugal.
(Disclosure Statement Exhibit) Page E-5
<PAGE>
EXHIBIT "F"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
EXHIBIT F
PROJECTED FINANCIAL STATEMENTS
The Debtor believes that the Plan meets the Bankruptcy Code's feasibility
requirement that plan confirmation is not likely to be followed by a
liquidation, or the need for further financial reorganization of the Debtor or
any successor of the Debtor under the Plan. In connection with the development
of the Plan, and for the purpose of determining whether the Plan satisfies
this feasibility standard, the Debtor analyzed its ability to satisfy its
financial obligations while maintaining sufficient liquidity and capital
resources. In this regard, the management of the Debtor prepared financial
projections for the period from fiscal year 1998 through 2002 (the "Projection
Period") (the "Projections"). The Projections and certain of the underlying
assumptions are summarized below.
The Debtor does not, as a matter of course, publish its business plan or make
projections of its anticipated financial position or results of operations.
Accordingly, the Debtor does not anticipate that it will, and disclaims any
obligation to, furnish updated business plans or projections to holders of
Claims prior to the Effective Date or holders of Senior Notes after the
Effective Date, or to include such information in documents required to be
filed with the Securities and Exchange Commission or otherwise make such
information public.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS, THE FINANCIAL ACCOUNTING STANDARDS BOARD, OR THE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION REGARDING PROJECTIONS.
FURTHERMORE, THE PROJECTIONS HAVE NOT BEEN AUDITED OR REVIEWED BY DOW
CORNING'S INDEPENDENT CERTIFIED ACCOUNTANTS. WHILE PRESENTED WITH NUMERICAL
SPECIFICITY, THE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS, WHICH
MAY NOT BE REALIZED, AND ARE SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND
COMPETITIVE UNCERTAINTIES AND CONTINGENCIES WHICH ARE BEYOND THE CONTROL OF
THE COMPANY. CONSEQUENTLY, THE PROJECTIONS SHOULD NOT BE REGARDED AS A
REPRESENTATION OR WARRANTY BY DOW CORNING, OR ANY OTHER PERSON, THAT THE
PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE
PRESENTED IN THE PROJECTIONS. HOLDERS OF CLAIMS MUST MAKE THEIR OWN
DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE
RELIABILITY OF THE PROJECTIONS IN MAKING THEIR DETERMINATIONS OF WHETHER TO
ACCEPT OR REJECT THE PLAN.
PRINCIPAL ASSUMPTIONS
(i) Projections: In connection with its efforts to develop the Plan, DCC and
its consolidated subsidiaries and joint ventures prepared the Projections.
The Projections assume the Company will remain the leading manufacturer of
silicone-based products worldwide.
(ii) Effective Date: The Projections assume confirmation of the Plan in
accordance with its terms prior to June 30, 1999. For ease of
presentation, the Projections assume that all transactions contemplated
by the Plan to be consummated as of the Effective Date will be so
consummated as of June 30, 1999 (the "Effective Date"). References in the
Projections to "Predecessor" are references to the Debtor and its
consolidated subsidiaries and joint ventures for dates and periods prior
to and including the assumed Effective Date. References in the
Projections to "Successor" are references to the Reorganized Debtor and
its consolidated subsidiaries and joint ventures for dates and periods
from and after the assumed Effective Date.
(iii) Treatment of Insurance Policies: The Debtor and The Dow Chemical
Company as co-insureds: The Debtor has estimated the amount and timing
of cash it is entitled to receive from insurance policies as a source
of its payments to the Settlement Trust and Litigation Trust as a
result of the total nominal liabilities recognized on the balance
sheet. Estimated insurance assets on the balance sheet are comprised of
recoveries from all sources of insurance related funds available to the
Debtor, including: (a) scheduled cash payments with respect to
settlements with certain insurers which provided coverage solely to the
Debtor; (b) estimate of funds the Debtor is entitled to receive from
the cash in an escrow
(Disclosure Statement Exhibit) Page F-1
<PAGE>
account resulting from prior cash settlements with respect to insurance
policies which provided coverage to the Debtor and The Dow Chemical Company
as co-insureds ("Shared Policies"); (c) estimate of funds the Debtor is
entitled to receive from coverage-in-place settlements with respect to
Shared Policies; and (d) estimate of funds the Debtor is entitled to
receive from carriers which have not reached a cash or coverage-in-place
settlement with the Debtor, including Shared Policies. The treatment of
insurance policies as reflected in the projected financial statements is
based on the settlement regarding allocation of insurance proceeds and
coverage. (See Section 6.2 of the Plan of Reorganization)
(iv) Accounting Treatment of Product Liability Related Items Prior to the
Effective Date: Prior to the fiscal year ended December 31, 1995, DCC had
taken steps to reflect the anticipated financial consequences to DCC of
product liability claims and related matters prior to the Bankruptcy
Filing. Prior to the Bankruptcy Filing, DCC recorded sizable charges in
excess of estimated insurance recoveries, recognized potential
liabilities based on previous settlement negotiations, recorded related
insurance receivables based on anticipated recoveries and accrued
significant net deferred taxes on its books. The Projections maintain the
level of product liability reserves and other balance sheet items for
dates prior to the assumed Effective Date. Changes in insurance
receivables for dates prior to the assumed Effective Date reflect amounts
received from settlements with certain insurance carriers.
(v) Accounting Treatment of Estimated Settlement Facility and Litigation
Facility Funding Requirements--Post Effective Date: Proforma liabilities
recognized on the balance sheet include the total nominal value of the
estimated funding requirements to or on behalf of the Settlement Facility
and Litigation Facility. The total maximum nominal value of the estimated
funding requirements is $3,172 million based on the Funding Payment
Agreement. The Projections assume the Company is required to fund the
entire Annual Payment Ceiling in each Funding Period.
(vi) Accounting Treatment of the Plan of Reorganization: The projected balance
sheet of the Successor as of the assumed Effective Date, and the
projected statements of operations and cash flows and projected financial
information of the Successor for periods ending after the assumed
Effective Date, do not give effect to the adoption of "fresh start
accounting" as promulgated by the AICPA Statement of Position 90-7
entitled "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code."
(vii) Reorganization Expenses: The Debtor has incurred and expects to continue
to incur significant reorganization expenses in the bankruptcy
proceeding: approximately $20 million, $50 million, $45 million, $50
million, and $18 million in 1995, 1996, 1997, 1998, and the first half
of 1999, respectively. The projected expenses are comprised of the
actual and necessary costs and expenses of preserving the estate and
operating the Debtor's business, including wages, salaries, or
commissions for services rendered after the commencement of the
bankruptcy proceeding and compensation for legal, financial and other
services awarded under section 330 (a) or 331 of the Bankruptcy Code.
OPERATING ASSUMPTIONS
1. Market Position: DCC is the leading manufacturer of silicone-based products
worldwide. DCC believes that it is positioned within the industry to
maintain or, with respect to certain applications and business lines,
increase its worldwide segment share over the Projection Period as a result
of its reputation and commitment to innovation, globalization of the
silicone industry and anticipated increases in demand for silicone-based
products.
2. Inflation: The Projections assume that the impact of inflation will be
largely offset by price increases and productivity gains. Historically, the
impact of inflation on DCC's financial position and results of operations
has been minimal.
3. Currency: DCC manufactures and markets its products on five continents. As
such, DCC's assets and cash flow fluctuate, in dollar terms, with the
dollar value of a number of currencies. The Projections do not undertake to
specifically project possible fluctuations in the U.S. dollar value of
foreign currencies. However, the projections do assume that the U.S.
dollar's value in relation to applicable foreign currencies will reduce
dollar denominated operating profits by approximately 8% as compared with
1997 results.
4. Revenues: Sales revenue growth, which is based upon DCC's assessment of the
competitive environment, macro-economic expectations and demand, is
expected to be driven primarily by volume increases. The assumed volume
increases are based upon, among other things, continued displacement of
organic materials by silicones in various applications and the narrowing of
the cost-performance gap between silicones and non-silicone materials.
5. Operating Costs and Expenses: Operating costs and expenses consist of
manufacturing cost of sales and marketing and administrative expenses.
Manufacturing cost of sales includes the variable costs of products sold
consisting primarily of (a) raw material costs, (b) variable selling
expense and (c) certain fixed operating expenses.
(Disclosure Statement Exhibit) Page F-2
<PAGE>
(a)RAW MATERIALS: The Projections assume that DCC continues to source the
majority of its purchases of chemical grade silicon, the principal raw
material used in the production of its products, through long-term supply
contracts with preferred suppliers. The Projections assume that worldwide
production capacity of silicon will continue to be adequate to meet
worldwide demand and that DCC will be able to procure adequate supply of
silicon throughout the Projection Period. The Projections also assume
that raw material cost increases will be largely offset by improvements
in raw material usage and yield in DCC's manufacturing operations.
(b)VARIABLE SELLING EXPENSE: Variable selling expense includes freight,
duty, sales commissions and sales allowances. Variable selling expenses are
projected to be a constant percentage of sales, based on current and
historical experience.
(c)FIXED OPERATING EXPENSES: DCC's projected fixed expenses are based on
the level of fixed manufacturing expenses, research and development (both
included in manufacturing cost of sales), and marketing and administrative
expenses assumed to be necessary to achieve sales and volume targets during
the Projection Period. DCC will incur increasing levels of fixed operating
expenses.
6. Capital Expenditures: The Projections assume aggregate capital expenditures
from 1998 through 2002 in an amount assumed to be sufficient to maintain
DCC's manufacturing facilities, to expand production capacity to meet
increasing demand, to provide for selective strategic investments and to
provide the necessary capital improvements to comply with environmental
regulations. The Projections assume that all capital expenditures are
funded with internally generated cash with the exception of Hemlock
Semiconductor Corporation ("HSC"), a majority owned joint venture (see
Minority Interests in Consolidated Joint Ventures). HSC funds its capital
expenditures with cash from HSC operations and a revolving credit facility.
7. Income Taxes: Upon emergence from Chapter 11, projected income taxes are
based upon an assumed composite tax rate of approximately 40% for foreign,
federal, state and local taxes. Projected cash taxes reflect assumed
reductions in taxable income related to post-petition interest on claims
and net cash contributions related to product liabilities in excess of cash
recoveries from insurance assets.
8. Minority Interests in Consolidated Joint Ventures: Joint ventures more than
50% owned and less than 100% owned, which are fully consolidated and
adjusted for minority interest, consist primarily of the 63.25% ownership
in HSC and the 65% ownership in Dow Corning Toray Silicone Co., Ltd. ("DCTS
"). The Business Plan assumes that 50% of the earnings of DCTS are paid as
dividends in the following year and that 36% of the earnings of HSC are
paid as dividends in the following year. For fiscal year end 1997, DCTS had
trade sales of $350.7 million and net earnings of $16.7 million and HSC had
trade sales of $236.9 million and net earnings of $41.3 million.
9. Retiree Benefits: DCC maintains defined benefit retirement plans covering
most domestic and certain foreign employees and has various defined
contribution and savings plans covering certain employees. The Projections
assume that benefits will be maintained at current levels.
(Disclosure Statement Exhibit) Page F-3
<PAGE>
DOW CORNING CORPORATION AND SUBSIDIARY COMPANIES
PROJECTED FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31,
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------- ----------------------------------------
ACTUAL PROFORMA
1996 1997 1998 6/30/99 ADJUST. 6/30/99 1999 2000 2001 2002
------- ------- ------- ------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and marketable
securities $ 528.5 $ 593.4 $ 560.9 $ 566.8 ($ 431.8) $ 135.0 $ 209.9 $ 276.6 $ 356.2 $ 202.5
Trade accounts
receivable 489.8 474.3 481.6 485.6 -- 485.6 490.4 513.0 549.4 587.5
Insurance receivable
(1) 23.7 85.5 117.2 4.3 27.3 31.6 25.7 197.7 155.6 75.1
Inventory 298.3 325.9 357.8 349.8 -- 349.8 340.1 352.7 371.4 397.5
Prepaid expenses and
other 188.4 142.6 142.5 142.4 -- 142.4 142.1 142.6 142.7 142.8
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Total current assets 1,528.7 1,621.7 1,660.0 1,548.9 (404.5) 1,144.4 1,208.2 1,482.6 1,575.2 1,405.4
Property, plant and
equipment--net 1,305.4 1,480.1 1,636.0 1,673.0 -- 1,673.0 1,680.5 1,718.2 1,820.7 1,955.5
Investments 50.7 23.1 24.2 25.0 -- 25.0 25.0 25.6 26.2 26.8
Insurance receivable (2) 1,479.9 1,428.8 1,416.4 1,539.3 (881.3) 658.0 632.3 434.6 279.0 203.9
Patents, goodwill and
other intangibles 32.6 27.1 26.2 25.8 -- 25.8 25.3 24.4 23.5 22.6
Deferred tax asset--non-
current (3) 383.0 393.8 374.8 368.0 540.9 908.8 908.8 908.8 908.8 908.8
Restricted cash in
escrow (4) 275.0 275.0 275.0 300.0 (300.0) -- -- -- -- --
Other 58.7 69.1 69.1 69.1 -- 69.1 69.1 69.1 69.1 69.1
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
5,114.1 5,318.7 5,481.6 5,549.0 (1,045.0) 4,504.0 4,549.3 4,663.3 4,702.6 4,592.3
======= ======= ======= ======= ======== ======= ======= ======= ======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 5.0 $ 14.8 $ 14.8 $ 14.8 $ 0.0 $ 14.8 $ 14.8 $ 14.8 $ 14.8 $ 14.8
Long term debt--current 1.3 24.2 19.8 -- -- -- 0.4 0.5 5.7 0.2
Facility funding
requirement (7) -- -- -- -- 31.6 31.6 25.7 197.7 374.0 204.0
Accounts payable 172.3 164.6 159.4 162.4 -- 162.4 166.1 171.9 180.5 192.4
Accrued expenses 165.3 178.2 182.7 184.9 -- 184.9 187.6 190.8 195.5 200.8
Other current
liabilities (5) 136.6 108.0 106.9 107.9 (2.4) 105.5 105.5 107.5 110.6 113.8
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Total current
liabilities 480.4 489.8 483.5 470.0 29.2 499.3 500.2 683.2 881.0 725.9
Long term debt (6) 103.3 140.9 121.2 121.2 983.3 1,104.5 1,104.0 1,103.6 1,097.9 1,097.6
Liabilities subject to
compromise 3,452.1 3,419.1 3,419.0 3,419.0 (3,419.0) -- -- -- -- --
Facility funding
requirement (7) -- -- -- -- 2,120.0 2,120.0 2,094.3 1,896.6 1,522.6 1,318.6
Minority interest 128.4 130.6 125.0 121.2 -- 121.2 123.6 132.1 143.6 152.1
Deferred tax--non-
current (3) -- 3.8 27.9 38.9 -- 38.9 51.5 81.3 130.3 190.7
Other liabilities (8) 111.4 108.2 109.4 110.3 170.4 280.7 296.8 296.8 306.4 307.2
Stockholders' equity (9) 838.4 1,026.3 1,195.7 1,268.3 (928.9) 339.5 378.8 469.8 620.8 800.1
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
5,114.1 5,318.7 5,481.6 5,549.0 (1,045.0) 4,504.0 4,549.3 4,663.3 4,702.6 4,592.3
======= ======= ======= ======= ======== ======= ======= ======= ======= =======
</TABLE>
(Disclosure Statement Exhibit) Page F-4
<PAGE>
DOW CORNING CORPORATION AND SUBSIDIARY COMPANIES
PROJECTED FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31,
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
-------------------------------------- --------------------------------------
ACTUAL
Q1 & Q2 Q3 & Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1997 1998 1999 1999 2000 2001 2002
-------- -------- -------- -------- -------- -------- -------- --------
Net sales $2,532.3 $2,643.5 $2,500.0 $1,147.5 $1,402.5 $2,680.0 $2,890.0 $3,110.0
Operating costs and
expenses:
Manufacturing cost of
sales 1,674.0 1,795.9 1,750.0 828.9 1,013.1 1,904.0 1,993.0 2,127.0
Marketing and
administrative
expenses 462.3 466.9 465.0 225.0 275.0 511.0 527.0 558.0
-------- -------- -------- -------- -------- -------- -------- --------
2,136.3 2,262.9 2,215.0 1,053.9 1,288.1 2,415.0 2,520.0 2,685.0
Operating income 396.0 380.7 285.0 93.6 114.4 265.0 370.0 425.0
Other expense (income):
Net interest expense
(income) (10) (46.3) (59.4) (64.7) (27.8) 42.9 93.5 89.6 91.6
Implant expense
(income) (11) -- -- -- (25.0) -- -- -- --
Other expense(income) (16.1) (32.2) (3.0) -- (0.6) (2.8) (7.6) (10.0)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
reorganization costs
and income taxes 458.4 472.2 352.7 146.4 72.0 174.3 287.9 343.4
Reorganization costs
(12) 49.4 45.0 50.0 1,492.4 -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes 409.0 427.2 302.7 (1,346.1) 72.0 174.3 287.9 343.4
Income tax provision 168.9 168.8 121.1 (494.2) 28.8 69.7 115.2 137.4
Minority interest's
share in income 18.4 20.9 12.2 4.3 3.9 13.6 21.8 26.7
-------- -------- -------- -------- -------- -------- -------- --------
Net Income (loss) $ 221.7 $ 237.6 $ 169.3 ($ 856.2) $ 39.3 $ 91.0 $ 151.0 $ 179.3
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(Disclosure Statement Exhibit) Page F-5
<PAGE>
DOW CORNING CORPORATION AND SUBSIDIARY COMPANIES
PROJECTED FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31,
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
SUCCESSOR
------------------------------
Q3&Q4
1999 2000 2001 2002
------ ------ ------ ------
<S> <C> <C> <C> <C>
CASH FROM OPERATIONS:
Net Income $ 39.3 $ 91.0 $151.0 $179.3
Operating adjustments:
Depreciation and amortization 138.7 308.8 287.2 302.3
Changes in assets and liabilities:
Accounts and notes receivable (4.8) (22.6) (36.4) (38.1)
Inventories 9.7 (12.6) (18.7) (26.1)
Prepaid expenses 0.2 (0.5) (0.1) (0.1)
Accounts payable 3.7 5.8 8.5 11.9
Accrued expenses 2.7 3.1 4.7 5.3
------ ------ ------ ------
Cash provided by operations 189.6 373.0 396.3 434.5
CASH FLOWS FROM INVESTING:
Capital expenditures (145.8) (345.6) (388.8) (436.3)
Other (0.0) (0.0) (0.0) 0.0
------ ------ ------ ------
Cash used for investing (145.8) (345.6) (388.8) (436.3)
CASH FLOWS FROM FINANCING:
Net change due to financing (0.0) (0.4) (0.5) (5.7)
Payment of deferred obligations--net (13) 0.0 0.0 0.0 (218.4)
Dividends paid to stockholders -- -- -- --
Minority interest 2.5 8.4 11.5 8.5
------ ------ ------ ------
Cash used for financing 2.5 8.0 11.1 (215.6)
OTHER:
Deferred income taxes 12.6 29.8 49.0 60.4
Other 16.1 1.5 12.0 3.4
NET CHANGE IN CASH 75.0 66.6 79.6 (153.7)
Cash at beginning of year 135.0 209.9 276.6 356.2
------ ------ ------ ------
Cash at end of year 209.9 276.6 356.2 202.5
</TABLE>
(Disclosure Statement Exhibit) Page F-6
<PAGE>
DOW CORNING CORPORATION AND SUBSIDIARY COMPANIES
PROJECTED FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31,
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------- -------------------------------
ACTUAL Q1 & Q2 Q3 & Q4
1996 1997 1998 1999 1999 2000 2001 2002
------ ------ ------ ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROJECTED CASH FLOW DATA:
Operating profit $396.0 $380.7 $285.0 $ 93.6 $114.4 $265.0 $370.0 $425.0
Depreciation and
amortization 174.4 168.5 195.0 128.5 128.5 286.0 266.0 280.0
------ ------ ------ ------ ------ ------ ------ ------
EBITDA (14) 570.3 549.2 480.0 222.1 242.9 551.0 636.0 705.0
Changes in working capital:
Accounts and notes
receivable (15.4) 15.5 (7.3) (4.0) (4.8) (22.6) (36.4) (38.1)
Inventories 30.7 (27.6) (31.9) 8.0 9.7 (12.6) (18.7) (26.1)
Prepaid expenses and
other 6.2 10.3 0.1 0.2 0.2 (0.5) (0.1) (0.1)
Accounts payable 25.5 (7.7) (5.2) 3.1 3.7 5.8 8.5 11.9
Accrued expenses 11.0 (9.4) 4.5 2.2 2.7 3.1 4.7 5.3
------ ------ ------ ------ ------ ------ ------ ------
Total 58.1 (18.8) (39.9) 9.5 11.6 (26.8) (41.9) (47.2)
Capital expenditures (15) (312.6) (425.3) (350.0) (165.0) (145.8) (345.6) (388.8) (436.3)
------ ------ ------ ------ ------ ------ ------ ------
Operating cash flow 315.8 105.0 90.1 66.6 108.7 178.6 205.3 221.5
====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
PROFORMA LONG-TERM DEBT AND
NOTES PAYABLE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New Senior Notes $ 983 $ 983 $ 983 $ 983 $ 983
Other Debt 136 136 136 135 129
Less: Current portion 0 (0) (0) (6) (0)
------ ------ ------ ------ ------
Total Long-Term Debt and
Notes Payable 1,119 1,119 1,118 1,113 1,112
<CAPTION>
OTHER LIABILITY RELATED
ITEMS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Facility funding
requirement--current $ 32 $ 26 $ 198 $ 374 $ 204
Facility funding
requirement 2,120 2,094 1,897 1,523 1,319
------ ------ ------ ------ ------
2,152 2,120 2,094 1,897 1,523
</TABLE>
(Disclosure Statement Exhibit) Page F-7
<PAGE>
DOW CORNING CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Prior to the Effective Date, the current insurance receivable includes
scheduled cash payments, with respect to settlements with certain
insurers which provided coverage solely to the Debtor, and to the Debtor
and The Dow Chemical Company as co-insureds ("Shared Policies"), to be
held in escrow accounts. Proforma insurance assets reflect estimated
recoveries from all sources of insurance related funds available to the
Debtor. The treatment of insurance policies as reflected in the
projected financial statements is based on the settlement regarding
allocation of insurance proceeds and coverage.
(2) Prior to the Effective Date, the long-term insurance receivable
includes: (i) an estimated $762.5 million of cash settlements as of the
Effective Date, prior to the application of the Insurance Allocation
Agreement, held in escrow accounts with respect to certain insurers
which provided coverage solely to the Debtor, and to the Debtor and The
Dow Chemical Company as co-insureds ("Shared Policies"); and, (ii) an
estimated $776.8 million of recoveries as of the Effective Date, prior
to the application of the Insurance Allocation Agreement, from all other
sources of insurance, assuming for accounting purposes, liability levels
based on pre-petition settlement negotiations. Following the Effective
Date, proforma insurance assets reflect estimated recoveries from all
sources of insurance related funds available to the Debtor. The
treatment of insurance policies as reflected in the projected financial
statements following the Effective Date is based on the settlement
regarding allocation of insurance proceeds and coverage. Amounts shown
are nominal amounts and do not reflect any discount due to the timing of
receipts.
(3) The adjustments on the balance sheet to the deferred tax accounts
reflect the tax effects of the Plan.
(4) Restricted cash in 1999 is comprised of $300 million of funds previously
escrowed pursuant to the Global Settlement Agreement.
(5) Adjustment to "other current liabilities" reflects projected
administrative claims.
(6) Adjustment reflects additional long term debt due to the issuance of
Senior Notes to certain creditors.
(7) Proforma liabilities recognized on the balance sheet include the total
nominal value of the estimated funding requirements to or for the
benefit of the Settlement Facility and Litigation Facility. The total
maximum nominal value of the funding requirement is $3,172 million based
on the Funding Payment Agreement. The Projections assume the Company is
required to fund the entire Annual Payment Ceiling in each Funding
Period.
(8) Adjustment to "other liabilities" reflects the re-classification of
Retiree Benefit liabilities from "liabilities subject to compromise" to
"other liabilities."
(9) Adjustment to stockholders' equity account reflects the difference due
to necessary adjustments to book assets and liabilities to restate the
balance sheet to reflect the Plan.
(10) Interest income is calculated based upon the average balance of cash and
marketable securities and restricted cash held in escrow accounts.
Amounts include interest income, net of tax, on cash from settlements
with certain insurance carriers held in qualified settlement funds.
(11) Assumes $25 million of the $42.5 million of administrative funds
contributed to the Global Settlement Agreement would be recovered in
1999.
(12) Amount in 1999 is comprised of $18 million of reorganization expenses
incurred in 1999 and a $1,474.4 million net adjustment as a result of
emergence from bankruptcy.
(13) Net of cash recovery from certain insurance assets.
(14) Defined as earnings before interest, taxes, depreciation, amortization
and other non-operating items.
(15) Capital expenditures during the Projection Period include significant
expansion at the HSC joint venture. HSC funds its capital expenditures
with cash from HSC operations and a revolving credit facility.
(Disclosure Statement Exhibit) Page F-8
<PAGE>
EXHIBIT "G"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
SUMMARY OF INSURANCE SETTLEMENTS
AND REMAINING COVERAGES
The following exhibit provides a description of settlements approved by the
Bankruptcy Court since May 15, 1995, between Dow Corning Corporation ("Dow
Corning") and its product liability insurers. Pre-petition settlements that
provide coverages that remain available are also described. Finally the
exhibit describes the remaining product liability coverages that are not the
subject of any settlements and that may relate to medical implant claims.
The settlements descriptions are divided into two categories: buy-out
settlements and coverage-in-place settlements. Generally buy-out settlements
provide that the insurer has paid or agreed to pay specific amounts for
release of its product liability coverages. Coverage-in-place settlements are
agreements that obligate the insurers to recognize and pay claims upon agreed
terms that resolve disputes between Dow Corning and the insurers as to claims
covered by the policies. The descriptions indicate the amount of money
generated by buy-out settlements with interest accrued thereon as of November
30, 1998, net of payments made to Hoechst Marion Roussel, Inc. out of such
proceeds, and payments scheduled to be received. Coverage-in-place settlements
are described by the remaining limits available for product liability claims.
Some of the buy-out settlements and, in certain specific situations, the
coverage-in-place settlement with the AIG Member Companies are subject to an
escrow agreement under which various parties in interest, including Dow
Corning and The Dow Chemical Company, continue to assert rights.
BUY-OUT SETTLEMENTS
<TABLE>
<CAPTION>
BALANCE AS OF
INSURERS 11/30/98
-------- ---------------
<C> <S> <C>
1. Hartford Accident and Indemnity Company, et al. $119,483,044.53
approved August 11, 1995
2. London Market Insurance Companies approved March $196,682,214.98
25, 1996
remaining balance to be collected $ 1,502,747.13/2/
3. National Casualty Company approved March 25, 1996 $ 759,319.25
4. Federal Insurance Company approved March 25, 1996 $ 15,102,788.88
5. Arab Insurance Group (BSC) approved March 25, 1996 $ 532,529.83
6. Ludgate Insurance Company, Ltd. approved March 25, $ 1,077,216.48
1996
7. Algemene Verzekering Maatschappij Diligentia N.V. $ 12,217.12
Te Amsterdam approved
March 25, 1996
8. Nationale-Nederlanden Schadeverzekering $ 457,644.66
Maatschappij N.V. approved
March 25, 1996
9. American Re-Insurance Company approved March 25, $ 4,888,309.29
1996
10. American Empire Surplus Lines Insurance Company (as $ 7,278,149.01
managing agent for Transport Indemnity Company)
approved March 25, 1996
11. Zurich Insurance Company, Zurich International, $ 4,127,905.31
Ltd. approved March 25, 1996
12. European Market Insurance approved March 25, 1996 $ 7,809,915.15
13. TIG Insurance Company, et al. approved March 25, $ 26,997,749.26
1996
14. Seguros Comercial America, S.A. de C.V. approved $ 1,393,837.01
June 6, 1996
15. American Centennial Insurance Company approved June $ 24,651,150.27
14, 1996
16. Centennial Insurance Company approved June 14, 1996 $ 2,277,179.87
</TABLE>
- ----------------------
/1 /In addition, one of the London Market Insurers, the London Group, has
commenced insolvency proceedings. This London Group still owes Dow Corning
Corporation partial payments of $1,502,747.13, the majority of which is now
past due.
/2 /All remaining balances are shown net of corresponding obligations due
to Hoechst Marion Roussel, Inc. upon receipt.
(Disclosure Statement Exhibit) Page G-1
<PAGE>
<TABLE>
<CAPTION>
BALANCE AS OF
INSURERS 11/30/98
-------- ---------------
<C> <S> <C>
17. Prudential Reinsurance Company and Gibraltar $ 53,873,190.47
Casualty Company approved
July 5, 1996
remaining balance to be collected $ 14,400,000.00/3/
Republic Insurance Company approved September 5,
18. 1996 $ 737,448.31
19. Stonewall Insurance Company approved September
5, 1996 $ 5,950,639.79
20. Employers Insurance of Wausau, a Mutual Company
approved
November 21, 1996 $ 12,193,279.53
remaining balance to be collected $ 4,833,333.00/4/
21. Swiss Re-Insurance Company of Zurich approved
May 1, 1997 $ 1,527,478.55
22. European Reinsurance Company of Zurich approved
May 1, 1996 $ 2,291,217.70
23. Royal Belge I.R.S. AD'Assurances approved May 1,
1997 $ 2,890,585.47
24. Haftpflichtverband Der Deutschen Industrie
approved May 1, 1997 $ 2,923,065.10
25. North River Insurance Company, et al. approved
March 29, 1996 $ 44,079,058.82
26. Allstate Insurance Company approved June 14,
1996 $ 39,760,000.00
27. X L Insurance Company approved June 6, 1996 $ 32,936,307.66
28. Unione Italiana Reinsurance Company of America
approved December 18, 1997 $ 1,494,224.18
29. KWELM Companies approved June 4, 1998 $ 3,979,491.52
additional payments will be received upon the
Established Scheme Liabilities created under the
settlement but the amount of such payments that
will be paid under the KWELM Companies' Scheme
of Arrangement is not known at this time
COVERAGE-IN-PLACE SETTLEMENTS
<CAPTION>
REMAINING
INSURERS LIMITS/5/
-------- ---------------
<C> <S> <C>
30. Travelers Casualty & Surety Company (formerly $206,351,569.00
The Aetna Casualty & Surety Company) pre-
petition agreement/6/
31. AIU Insurance Company, et al. (AIG Member $396,300,000.00
Companies) approved
June 6, 1996
32. American Guarantee and Liability Insurance $ 4,000,000.00/7/
Company approved May 16, 1996
33. Royal Indemnity Company approved August 16, 1995 $ 7,000,000.00
</TABLE>
- ----------------------
/3 /A payment of $10,000,000.00 was received in December, 1998, which
increased the received balance and reduced the remaining balance to
$4,400.000.00 which is due December 15, 1999.
/4 /A payment of $2,416,667.00 was received in January, 1999, which
increased the received balance and reduced the remaining balance to
$2,416,666.00, which is due on January 5, 2000.
/5 /Remaining limits shown are net of payments received as of November 30,
1998. Only a portion of these limits are available for breast implant claims.
/6 /This pre-petition agreement also included a buy-out of primary
policies. Proceeds of this pre-petition buy-out were not segregated or
escrowed as with post-petition buy-out settlement proceeds. Travelers disputes
Dow Corning's calculation of the balance of the remaining coverage.
/7 /Dow Corning anticipates that this remaining coverage will be included
in a buy-out settlement of unsettled coverages with American Guarantee that
appears to be in the final stages of negotiation.
(Disclosure Statement Exhibit) Page G-2
<PAGE>
REMAINING COVERAGES
There are a number of insurance policies that Dow Corning contends provide,
or may provide, coverages for medical implant claims. Many of the insurers who
issued these policies dispute Dow Corning's contentions that the policies
provide coverage for medical implant claims and/or dispute the manner in which
Dow Corning has allocated claims among insurance policies. The ultimate amount
that may be collectable from these policies is dependent upon numerous
factors. The amounts that may be collectable will be affected by the
resolution of Michigan law regarding the interpretation of policy terms, the
amount of Dow Corning's liability for medical products claims and the
distribution of those claims among different product types and over different
policy periods, the amount of competing claims by other insureds including Dow
Chemical, the ability of the insurers to meet their financial obligations,
etc.
The remaining coverages are listed by the insurance company or group of
related insurance companies that issued the policies. These coverages are
divided into insurance companies or groups of insurance companies that are
involved in some type of insolvency proceedings and those that are not
involved currently in any insolvency proceedings. Among those that are not
currently involved in any insolvency proceeding, some may have financial
issues that could impair their ability to pay claims and some may become
involved in insolvency proceedings in the future.
The insurance coverages are further divided into those coverages that Dow
Corning believes provide coverages based upon an occurrence basis, policies
that cover injuries that "occur" within the policy period, and those policies
that provide coverages based upon a claims made basis, policies that cover
claims that are asserted and reported within the policy period.
The Remaining limits listed for these coverages are the approximate amount
of coverages that Dow Corning believes have not been exhausted as of September
30, 1997.
<TABLE>
<CAPTION>
REMAINING
INSURERS LIMITS
- -------- ---------------
<S> <C>
SOLVENT INSURERS
OCCURRENCE POLICIES
34.AIU Foreign $ 20,000,000.00
35.Allianz Versicherungs $ 3,500,000.00
36.American Bankers $ 4,500,000.00
37.American Guarantee-Foreign/8/ $ 22,000,000.00
38.Argonaut Ins. Co. $ 9,000,000.00
39.Associated International Ins. Co. $ 5,000,000.00
40.Brittany Ins. Co./8/ $ 1,333,120.00
41.Continental Casualty/Boston/Harbor $ 19,250,000.00
42.Employers Mutual Casualty Ins. Co. $ 14,500,000.00
43.Highlands Ins. Co. $ 8,391,098.00
44.Home Ins. Co. $ 61,573,200.00
45.International Surplus Lines $ 25,373,060.00
46.Interstate Fire and Casualty $ 2,763,334.00
47.Kemper/American Manufacturers/Lumberman's Mutual $ 7,000,000.00
48.National Indemnity/8/ $ 18,750,000.00
49.Safety Mutual/Safety National $ 9,150,000.00
50.Timber $ 77,750,000.00
51.Unigard Mutual Ins. Co. $ 6,000,000.00
52.Wesport/Manhattan Fire/Puritan $ 15,000,000.00
CLAIMS MADE POLICIES
53.ACE Ins. Co./8/ $150,000,000.00
54.Zurich Re/Anglo American/Turegum $ 40,000,000.00
POTENTIALLY INSOLVENT INSURERS
OCCURRENCE POLICIES
55.Centaur Ins. Co. $ 22,500,000.00
56.Ins. Co. of Florida $ 1,000,000.00
</TABLE>
- ----------------------
/8 /Dow Corning anticipates that these coverages may be resolved as a
result of settlement discussions that appear to be nearing successful
conclusion.
(Disclosure Statement Exhibit) Page G-3
<PAGE>
<TABLE>
<CAPTION>
REMAINING
INSURERS LIMITS
- -------- ---------------
<S> <C>
57.Ideal Mutual Ins. Co. $ 15,500,000.00
58.Integrity Ins. Co. $ 25,448,350.00
59.Midland Ins. Co. $114,952,230.00
60.Mission/Mission National $ 66,776,407.00
61.Pine Top Ins. Co. $ 25,000,000.00
62.Southern American Ins. Co. $ 2,000,000.00
63.Transit Casualty $ 25,000,000.00
64.English & American $ 17,204,742.00
65.Slater Walker $ 35,693.00
66.Orion/London & Overseas $ 26,379,428.00
67.Andrew Weir $ 8,950,506.00
68.Bermuda Fire & Marine/8/ $ 8,899,740.00
69.British Northwestern $ 999,600.00
70.Bryanston/8/ $ 575,818.00
71.L'Etoille $ 17,846.00
72.Pine Top (UK) $ 113,263.00
73.Southern American Ins. Co. (UK) $ 141,355.00
74.St. Helens $ 2,620,140.00
75.Agricola $ 350,597.00
76.Bercanus Ins. Co. $ 2,000,000.00
77.Canadian Universal $ 2,000,000.00
78.Colonial Assurance $ 2,553,052.00
79.Hafez $ 134,971.00
80.Insurance Exchange of Americas $ 500,000.00
81.Mutual Fire & Marine $ 2,116,217.00
82.Reserve Ins. Co. $ 1,000,000.00
83.Yuval $ 17,359.00
</TABLE>
(Disclosure Statement Exhibit) Page G-4
<PAGE>
EXHIBIT "H"
(TO AMENDED JOINT DISCLOSURE STATEMENT WITH RESPECT TO
AMENDED JOINT PLAN OF REORGANIZATION)
LIQUIDATION ANALYSIS
($ in millions)
<TABLE>
<CAPTION>
RANGE OF
VALUES
--------------
<S> <C> <C> <C> <C>
LOW HIGH
------ ------
<CAPTION>
LIQUIDATION PROCEEDS COMPUTATION
- --------------------------------
<S> <C> <C> <C> <C>
Going Concern Value (1) $2,765 $3,440
Less: Applicable Risk Adjustments (2) (700) (869)
------ ------
Gross Proceeds from Sale of Business 2,065 2,572
Average of the Range $2,318
======
Less: Cost of Selling Business (3) (116)
------
Net Proceeds from Asset Sales $2,203
Net Proceeds from Asset Sales $2,203
Add: Cash and Other Assets (4) 735
Add: Estimated Insurance Assets (5) 1,067
Less: Liquidation Tax Liabilities (6) (291)
Add: Tax Benefits of Deductions due to Claims (6) 431
------
Net Liquidation Proceeds Available 4,145
<CAPTION>
SECURED AND UNSECURED PRIORITY CLAIMS
- -------------------------------------
<S> <C> <C> <C> <C>
Administrative Claims 2
Priority Tax Claims 5
Professional Fees and potential claims for
Severance, Pension and Contracts 100
------
108
Net Proceeds Available for Unsecured Claims,
Personal Injury Claims and Equity $4,037
======
</TABLE>
(Disclosure Statement Exhibit) Page H-1
<PAGE>
NOTES TO LIQUIDATION ANALYSIS
The following footnotes set forth the assumptions and methodology employed in
the preceding hypothetical chapter 7 liquidation analysis. While the Debtor
believes that the assumptions utilized in the liquidation analysis are
reasonable, the validity of such assumptions may be affected by the occurrence
of events or the existence of conditions not now contemplated or by other
factors. Underlying this analysis are a number of assumptions which are
inherently subject to significant uncertainties and contingencies, many of
which would be beyond control of the Debtor. Accordingly, while the analysis
is necessarily presented with numerical specificity, the actual liquidation
value of the Debtor may vary from that considered herein and variations may be
material.
The principal assumptions used in DCC's liquidation analysis include the
following:
(1) GOING CONCERN VALUE:
The analysis assumes that in hypothetical chapter 7 liquidation, DCC, its
wholly owned subsidiaries and joint venture interests would be sold as going
concerns. It is assumed that this strategy would produce the highest value
consistent with the chapter 7 trustee's obligation to liquidate assets of the
estate expeditiously. The liquidation analysis assumes hypothetically that a
chapter 7 case is initiated on June 30, 1999.
The following factors, not listed in order of importance, were considered in
valuing DCC as a going concern:
b) information concerning current operations and prospects of the
business;
c) market valuation of certain publicly traded chemical companies, whose
operating businesses are characterized as comparable to that of DCC;
d) acquisition values, multiples and premiums of recent acquisitions for
comparable companies or operating divisions;
e) a discounted cash flow analysis of DCC, based on projected financial
information;
f) certain economic, industry and company specific information which was
deemed to be appropriate and relevant.
Debt of DCC's wholly owned subsidiaries that are not debtors in the
proceedings, comprised of approximately $35m, has been reflected as a
deduction from the Going Concern Value.
(2) APPLICABLE RISK ADJUSTMENTS:
The Debtor believes that a liquidation under chapter 7 would inevitably lead
to selling conditions which would substantially reduce the total value
available to the estate. The following are some, but not all, of the
deleterious consequences that the Debtor believes would result from a chapter
7 liquidation:
a) The sale of the Debtor's assets and businesses under the time pressure
and adverse publicity attendant to a chapter 7 liquidation would create
a difficult selling environment and could result in a transaction
consummated at a substantial discount to going-concern value. In the
Debtor's circumstances, these effects would be particularly acute
because (i) the concerns of a purchaser over successor liability and
(ii) the scale, technology and experience required in the silicone-
based products industry limits the number of strategic buyers.
b) Conversion of the Case to a chapter 7 liquidation would adversely
affect (i) morale, productivity and retention of the Debtor's
employees; (ii) the willingness of the Debtor's vendors to provide
goods and services and extend credit; (iii) the business relationships
between the Debtor and its customers; and (iv) the ability of the
Debtor to attract new customers and to exploit various business
opportunities otherwise available to it. Given that the Debtor's
profitability is heavily dependent on the maintenance of market share
and sustained research and development efforts, any prolonged delay
which results in loss of customers or loss of key personnel would cause
a significant decline in projected cash flows and, therefore, value to
a potential acquirer.
The discount applied to the going concern value represents a judgment as to
the discount that would be required in selling the operating businesses to
take into account the matters referred to above and other risks inherent in
the chapter 7. The chapter 7 discount applied to the going concern value is
25%. The discounts applied by any particular purchaser could be significantly
different due to the factors mentioned above.
(3) COST OF SELLING BUSINESS:
The costs associated with selling the business as a going concern including
agency fees, trustee fees, commissions, etc., are estimated to be 5% of the
sale proceeds (excluding cash and cash equivalents).
(Disclosure Statement Exhibit) Page H-2
<PAGE>
(4) ESTIMATED CASH AND CASH EQUIVALENTS:
Estimated cash and cash equivalents is comprised of the following:
a) Projected cash and cash equivalents as of June 30, 1999.
b) Restricted cash comprised of $300m of funds previously escrowed
pursuant to the Global Settlement Agreement.
(5) ESTIMATED INSURANCE ASSETS:
The estimate of insurance assets is based on the insurance settlement
agreement, which may or may not be in effect in chapter 7 liquidation. The
estimate assumes a delay in insurance collection during the liquidation.
(6) CERTAIN TAX ASSUMPTIONS:
LIQUIDATION TAX LIABILITIES:
Amount represents the tax liability resulting from corporate liquidation,
assuming estate were to sell all of its assets pursuant to a chapter 7
liquidation. It is assumed that the estate would pay taxes at 40% on the tax
gain on the sale of the assets.
TAX BENEFIT OF DEDUCTIONS DUE TO CLAIMS:
The estimated tax benefit from the payment of claims, net of insurance assets,
which is assumed to be available to offset taxable income from the gain on
sale of assets and taxable income in prior years.
(Disclosure Statement Exhibit) Page H-3
