<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-6333
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 1, 1996)
$150,000,000
LOGO
Armstrong
Armstrong World Industries, Inc.
6 1/2% SENIOR NOTES DUE 2005
---------------
Interest payable February 15 and August 15
---------------
THE SENIOR NOTES WILL MATURE ON AUGUST 15, 2005. THE SENIOR NOTES WILL NOT BE
REDEEMABLE PRIOR TO MATURITY AND WILL NOT BE SUBJECT TO ANY SINKING FUND. THE
SENIOR NOTES WILL BE REPRESENTED BY ONE OR MORE GLOBAL SECURITIES REGISTERED
IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR ITS
NOMINEE. BENEFICIAL INTERESTS IN SUCH GLOBAL SECURITIES WILL BE SHOWN ON,
AND TRANSFERS THEREOF WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY THE
DEPOSITARY AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, SENIOR
NOTES IN DEFINITIVE FORM WILL NOT BE ISSUED. CONCURRENTLY WITH THIS
OFFERING, THE COMPANY IS OFFERING TO SELL IN A PUBLIC OFFERING BY A
SEPARATE PROSPECTUS SUPPLEMENT (THE "CONCURRENT OFFERING"), $200
MILLION AGGREGATE PRINCIPAL AMOUNT OF ITS 6.35% SENIOR NOTES DUE
2003. NEITHER THIS OFFERING NOR THE CONCURRENT OFFERING IS
CONDITIONED UPON THE COMPLETION OF THE OTHER.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
PRICE 99.804% AND ACCRUED INTEREST, IF ANY
---------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)
---------- --------------- --------------
<S> <C> <C> <C>
Per Senior Note..................... 99.804% .625% 99.179%
Total............................... $149,706,000 $937,500 $148,768,500
</TABLE>
- -------
(1) Plus accrued interest, if any, from August 11, 1998.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
See "Underwriters."
(3) Before deducting expenses payable by the Company estimated at $250,000.
---------------
The Senior Notes are offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Senior Notes will be made on or about August 11, 1998 through
the book-entry facilities of the Depositary against payment therefor in
immediately available funds.
---------------
MORGAN STANLEY DEAN WITTER CHASE SECURITIES INC.
J.P. MORGAN & CO.
August 6, 1998
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE
UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION TO ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR ANY SALE MADE
HEREUNDER AND THEREUNDER DOES NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE ON WHICH
SUCH INFORMATION IS GIVEN.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Incorporation of Certain Documents by Reference.......................... S-3
Cautionary Statement Concerning Forward-Looking Statements............... S-3
The Company.............................................................. S-4
Proposed Acquisition..................................................... S-4
Recent Developments...................................................... S-5
Concurrent Offering...................................................... S-6
Ratios of Earnings From Continuing Businesses to Fixed Charges........... S-6
Use of Proceeds.......................................................... S-7
Capitalization........................................................... S-8
Selected Financial Data.................................................. S-9
Selected Unaudited Pro Forma Financial Data.............................. S-10
Description of Senior Notes.............................................. S-16
Underwriters............................................................. S-19
Legal Matters............................................................ S-20
Experts.................................................................. S-20
<CAPTION>
PROSPECTUS
<S> <C>
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 3
The Company.............................................................. 5
Use of Proceeds.......................................................... 5
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed
Charges and Preferred Stock Dividends................................... 5
Description of Debt Securities........................................... 6
Description of Capital Stock............................................. 17
Description of Depositary Shares......................................... 22
Plan of Distribution..................................................... 24
Validity of Securities................................................... 25
Experts.................................................................. 25
</TABLE>
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE SENIOR NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR AND PURCHASE THE SENIOR NOTES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
S-2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Securities and Exchange
Commission (the "SEC") by the Company (file number 001-02116) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference: (1) the Company's Annual Report on Form 10-K
for the year ended December 31, 1997; (2) the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998; (3) the Company's Current
Report on Form 8-K filed on June 10, 1998; (4) the Company's Current Report on
Form 8-K filed on June 15, 1998; (5) the Company's Current Report on Form 8-K
filed on July 13, 1998; (6) the Company's Current Report on Form 8-K filed on
July 28, 1998; and (7) the Company's Definitive Proxy Statement filed on March
16, 1998.
All documents filed by the Company with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus Supplement and prior to the termination of the Offering shall be
deemed to be incorporated by reference in this Prospectus Supplement and to be
part hereof from the date of filing of such documents. Any statement
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus Supplement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute part of this Prospectus
Supplement. All information appearing in this Prospectus Supplement is
qualified in its entirety by the information and financial statements
(including the notes thereto) contained in the documents incorporated by
reference herein.
The Company will provide without charge, upon written or oral request, to
each person, including any beneficial owner, to whom a copy of this Prospectus
Supplement and accompanying Prospectus of the Company is delivered, a copy of
any or all of the documents incorporated by reference in this Prospectus
Supplement and accompanying Prospectus of the Company (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to Deborah K. Owen, Senior
Vice President, Secretary and General Counsel, Armstrong World Industries,
Inc., 313 West Liberty Street, Lancaster, PA 17603-2717 or by telephone at
(717) 397-0611.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement contains or incorporates statements that
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Act"), and Section 21E of the
Exchange Act, and are subject to the safe harbor created by such sections.
Such statements appear in a number of places in this Prospectus Supplement and
the accompanying Prospectus and in the documents incorporated herein and
therein by reference and may include statements regarding, among other
matters, the intent, belief or current expectations of the Company or its
officers and, information concerning possible or assumed future results of
operations of the Company. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance, and
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements to differ materially
from the future results, performance or achievements expressed or implied in
such forward-looking statements.
S-3
<PAGE>
THE COMPANY
Armstrong World Industries, Inc. (the "Company") is a Pennsylvania
corporation incorporated in 1891. The Company is a manufacturer of interior
furnishings, including floor coverings, and building products, primarily
acoustical ceiling systems, which are sold primarily for use in the
furnishing, refurbishing, repair, modernization and construction of
residential, commercial and institutional buildings. The Company also makes
and markets a variety of specialty products for the building, automotive,
textile, and other industries.
The Company is a worldwide manufacturer of floor coverings for the interiors
of homes and commercial and institutional buildings, with a broad range of
resilient flooring together with adhesives, installation and maintenance
materials and accessories. Resilient flooring, in both sheet and tile form,
together with laminate flooring, is made in a wide variety of types, designs,
and colors. Included are types of flooring that offer such features as ease of
installation, reduced maintenance (no-wax), and cushioning for greater
underfoot comfort. Floor covering products are sold to the commercial and
residential market segments through wholesalers, retailers (including large
home centers), and contractors, and to the hotel/motel and manufactured homes
industries.
A major producer of ceiling materials in the United States and abroad, the
Company also markets both residential and commercial ceiling systems. Ceiling
materials for the home are offered in a variety of types and designs; most
provide noise reduction and incorporate Company-designed features intended to
permit ease of installation. These residential ceiling products are sold
through wholesalers and retailers (including large home centers). Commercial
ceiling systems, designed for use in shopping centers, offices, schools,
hospitals, and other commercial and institutional structures, are available in
numerous colors, performance characteristics and designs and offer
characteristics such as acoustical control, rated fire protection, and
aesthetic appeal. Commercial ceiling materials and accessories, along with
acoustical wall panels, are sold by the Company to ceiling systems contractors
and to resale distributors. Suspension ceiling systems products are
manufactured and sold through a joint venture with Worthington Industries.
The Company, including a number of its subsidiaries, manufactures and
markets a variety of specialty products for the building, automotive, textile
and other industries. These products include flexible pipe insulation sold for
use in construction and in original equipment manufacture; gasket materials
for new equipment and replacement use in the automotive, farm equipment,
appliance, and other industries; and textile mill supplies, including cots and
aprons sold to equipment manufacturers and textile mills. Industry products
are sold, depending on type and ultimate use, to original equipment
manufacturers, contractors, wholesalers, fabricators and end users.
Ceramic tile for floors, walls and countertops, together with adhesives,
installation and maintenance materials and accessories are sold through home
centers, independent ceramic and floor covering wholesalers, as well as sales
service centers operated by Dal-Tile International Inc. ("Dal-Tile"). The
Company owns approximately 15% of the outstanding shares of common stock of
Dal-Tile following the Company's disposition in the third quarter of fiscal
year 1998 of approximately 56% of its shares of common stock in Dal-Tile.
PROPOSED ACQUISITION
On June 5, 1998, the Company and DLW Aktiengesellschaft, a corporation
organized under the laws of the Federal Republic of Germany ("DLW"), announced
that the Company would launch a tender offer for all outstanding shares of DLW
at a purchase price of DM 350 per share (the "DLW Acquisition"). DLW is a
leading flooring manufacturer in Germany and the Company believes that it is
the third largest flooring manufacturer in Europe. The DLW Acquisition has
been unanimously approved by the Board of Directors of the Company and has
received the support of the Managing Board of DLW. The tender offer commenced
on July 8, 1998 and is initially scheduled to expire on August 19, 1998,
unless otherwise extended. The tender offer is conditioned on the Company
acquiring 75% of the shares of DLW and obtaining all necessary regulatory
approvals. The transaction places a total equity value on DLW of DM 495
million (approximately $275 million). The Triangle Pacific Acquisition (as
defined herein) and the DLW Acquisition are intended to position the Company
as a leading worldwide manufacturer of hard surface flooring.
S-4
<PAGE>
RECENT DEVELOPMENTS
The Triangle Pacific Acquisition. On June 12, 1998, the Company agreed to
acquire all the outstanding common stock of Triangle Pacific Corporation
("Triangle"), a Delaware corporation (the "Triangle Pacific Acquisition"), at
a price equal to $55.50 per share. Triangle is a leading manufacturer of
hardwood flooring products and kitchen and bathroom cabinets. The acquisition
of Triangle was completed on July 24, 1998. Triangle is now a wholly-owned
subsidiary of the Company. Including the assumption of Triangle's net debt of
approximately $260 million and certain expenses related to the acquisition,
the total value of the Triangle Pacific Acquisition was approximately $1.18
billion.
Second Quarter Results. The information set forth below is based on
preliminary, unaudited data prepared by the Company and is subject to
adjustments and the completion by the Company of its financial statements with
respect to the quarter ended June 30, 1998. There can be no assurance that
actual results, when finalized, will not vary from the financial information
set forth below. The following financial data do not give effect to the
Triangle Pacific Acquisition or the financing thereof.
For the three months ended June 30, 1998, net earnings are estimated to have
decreased $2.8 million, or 4.9%, to $56.1 million from net earnings of $58.9
million for the comparable period ended June 30, 1997. The estimated decline
in earnings from the prior year reflected the effect of lower sales in
emerging markets as a result of adverse economic conditions in such markets,
competitive activity in North American flooring sales, particularly in the
residential builder and base grade sheet vinyl product categories, and higher
corporate expense. Excluding the effects of a one-time $5.1 million charge in
1997 related to Dal-Tile in which the Company owned a 34.4% (currently 15%)
equity interest, net earnings for the three months ended June 30, 1998 are
estimated to have decreased 12.5% from $64.0 million for the comparable period
ended June 30, 1997. For the three months ended June 30, 1998, sales are
estimated to have decreased $21.8 million, or 3.8%, to $555.6 million from
$577.4 million for the comparable period ended June 30, 1997. For the three
months ended June 30, 1998, operating income is estimated to have decreased
$5.0 million, or 5.1%, to $92.9 million from $97.9 million for the comparable
period ended June 30, 1997.
For the six-month period ended June 30, 1998, net earnings are estimated to
have decreased $1.8 million, or 1.8%, to $102.6 million from $104.4 million
for the comparable period ended June 30, 1997, or a decrease of 6.4% from the
comparable period ended June 30, 1997, after excluding the second-quarter one-
time charge related to Dal-Tile. For the six-month period ended June 30, 1998,
sales are estimated to have increased $3.0 million, or 0.3%, to $1,098.7
million from $1,095.7 million for the comparable period ended June 30, 1997.
For the six months ended June 30, 1998, operating income is estimated to have
decreased $2.7 million, or 1.6% to $170.0 million from $172.7 million for the
comparable period ended June 30, 1997, a decrease of 4.6% from $178.2 million
for the comparable period, after excluding the second quarter, one-time charge
related to Dal-Tile.
Downgrading of Commercial Paper, Corporate Credit and Senior Unsecured
Debt. On July 15, 1998, Standard & Poor's ("S&P") lowered the Company's
corporate credit and senior unsecured debt ratings to single "A' minus from
single "A' and lowered its commercial paper rating on the Company to "A-2'
from "A-1.' At the same time, S&P assigned its single "A' minus bank loan
rating to the Company's New Credit Facility (as defined) and existing
multiyear $300 million senior unsecured revolving credit facility (the
"Existing Multiyear Facility"). On July 16, 1998, Moody's Investors Service
("Moody's") also lowered the Company's corporate credit and senior unsecured
debt ratings to Baa1 from A2, assigned a rating of Baa1 to the Company's New
Credit Facility and Existing Multiyear Facility and lowered its commercial
paper rating on the Company to P-2 from P-1. Both Moody's and S&P cited
factors relating to the Triangle Pacific and DLW acquisitions as the major
reasons for their downgrading.
S-5
<PAGE>
CONCURRENT OFFERING
Concurrently with the Offering made hereby, the Company is offering to sell
in a public offering by a separate Prospectus Supplement (the "Concurrent
Offering"), $200 million aggregate principal amount of its 6.35% Senior Notes
due 2003 (the "2003 Notes"). Neither this Offering nor the Concurrent Offering
is conditioned upon the completion of the other. See "Use of Proceeds."
RATIO OF EARNINGS FROM CONTINUING BUSINESSES TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
from continuing businesses to fixed charges for the indicated periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------- -------------------
MARCH 31, MARCH 31,
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings from continu-
ing businesses to fixed
charges(1).................... 2.49 8.70 1.20 9.22 11.04 9.62 10.05
</TABLE>
- --------
(1) Excluding restructuring charges for all periods and the pre-tax loss on
the ceramic tile business combination for 1995, the ratios would have been
4.50, 8.70, 7.40, 10.91 and 11.04 for 1993, 1994, 1995, 1996 and 1997,
respectively. See "Selected Financial Data."
The ratio of earnings from continuing businesses to fixed charges has been
computed by dividing earnings from continuing businesses by fixed charges. For
purposes of calculating this ratio, earnings from continuing businesses
consist of consolidated earnings from continuing business operations before
income taxes plus fixed charges. Fixed charges consist of interest expense and
one-third of rent expense which is deemed to be representative of interest and
amortization of finance costs.
S-6
<PAGE>
USE OF PROCEEDS
The net proceeds from the Offering are estimated to be approximately
$148,518,500 after giving effect to underwriting discounts and commissions and
expenses payable by the Company. Concurrently with the Offering, the Company
is conducting the Concurrent Offering, the net proceeds to the Company of
which are estimated to be approximately $198,370,000 after giving effect to
underwriting discounts and commissions and expenses payable by the Company.
The Company expects to utilize the net proceeds from the Offering and the
Concurrent Offering to repay short-term indebtedness as described below.
Neither this Offering nor the Concurrent Offering is conditioned upon the
completion of the other.
Pursuant to a new privately-placed commercial paper program (the "CP
Program"), the Company issued approximately $1.0 billion of commercial paper
to finance the Triangle Pacific Acquisition. The commercial paper notes issued
under the CP Program are secured by lines of credit under the New Credit
Facility (as defined below), have maturities of up to 364 days and bear
interest at rates between approximately 5.5% and 6.0%. The Company intends to
use the proceeds of the Offering and the Concurrent Offering to repay the
commercial paper notes issued under the CP Program and may utilize a portion
of such proceeds for general corporate purposes pending the application
thereof or invest such funds in short-term, interest bearing, investment grade
obligations.
In connection with the Triangle Pacific Acquisition, the Company entered
into a $1.0 billion credit facility (the "New Credit Facility") with Morgan
Guaranty Trust Company of New York, Bank of America NT&SA and The Chase
Manhattan Bank, as lenders. Pursuant to the New Credit Facility, the Company
may borrow up to an aggregate of $1.0 billion for general corporate purposes.
As of July 24, 1998, there was no outstanding indebtedness under the New
Credit Facility. However, all amounts available under the New Credit Facility
have been reserved to guaranty repayment of the commercial paper notes issued
under the CP Program described above. Borrowings under the New Credit Facility
generally bear interest at rates based on the London interbank offered rate
("LIBOR") plus a facility fee and LIBOR margin based fee (ranging from 0.225%
per year to 0.55%) on the total outstanding indebtedness of the Company and
its direct and indirect subsidiaries and the rating of the Company's senior
unsecured long-term debt (including senior unsecured long-term debt of
Triangle that is assumed by the Company and indebtedness under the New Credit
Facility).
S-7
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents,
short-term debt and capitalization of the Company as of March 31, 1998 (i) on
an actual basis, (ii) on a pro forma basis giving effect to the Triangle
Pacific Acquisition as if it had occurred on that date, and (iii) on a pro
forma basis as adjusted to give effect to the consummation of the Offering and
the Concurrent Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds." This table should be read in conjunction
with and is qualified by reference to the selected historical and pro forma
financial data contained in this Prospectus Supplement and the unaudited pro
forma combined condensed financial statements and notes thereto included in
documents incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
FOR TRIANGLE PRO FORMA AS
PACIFIC ADJUSTED FOR
ACTUAL ACQUISITION DEBT OFFERINGS (3)
-------- ------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents............ $ 48.9 $ 45.8 $ 45.8
Short-term debt:
Short-term debt.................... 135.7 135.7 135.7
Current maturities of long-term
debt.............................. 3.5 7.4 7.4
-------- -------- --------
$ 139.2 $ 143.1 $ 143.1
======== ======== ========
Long-term debt:
6.35% Senior Notes due 2003........ $ -- $ -- $ 200.0
6 1/2% Senior Notes due 2005....... -- -- 150.0
-------- -------- --------
Subtotal of senior debt offering... -- -- 350.0
9 3/4% Debentures due 2008......... 125.0 125.0 125.0
10 1/2% Senior Notes due 2003...... -- 166.3 166.3
Short-term Notes (1)(2)............ -- 900.0 550.0
Medium-term notes 8 3/4-9% due
1998-2001......................... 28.1 28.1 28.1
Bank loans due 1999-2000........... 25.0 25.0 25.0
Industrial development bonds....... 19.5 41.0 41.0
Other (1).......................... 29.7 112.4 112.4
Less: Current maturities........... (3.5) (7.4) (7.4)
-------- -------- --------
Net long-term debt................... 223.8 1,390.4 1,390.4
Employee Stock Ownership Plan (ESOP)
loan guarantee...................... 201.8 201.8 201.8
Shareholders' equity:
Common stock $1 par value per
share, authorized 200 million
shares; issued 51,878,910 shares.. 51.9 51.9 51.9
Capital in excess of par value..... 169.0 169.0 169.0
Reduction for ESOP loan guarantee.. (205.8) (205.8) (205.8)
Retained earnings.................. 1,369.0 1,369.0 1,369.0
Other comprehensive income (4)..... (14.5) (14.5) (14.5)
-------- -------- --------
1,369.6 1,369.6 1,369.6
Less common stock in treasury, at
cost:
1997--11,759,510 shares; 1996--
10,714,572 shares................. 539.6 539.6 539.6
-------- -------- --------
Total shareholders' equity....... 830.0 830.0 830.0
-------- -------- --------
Total capitalization............. $1,255.6 $2,422.2 $2,422.2
======== ======== ========
</TABLE>
- --------
(1) See notes (a) and (d) to Unaudited Condensed Combined Pro Forma Financial
Statements.
(2) The acquisition financing included the issuance by Armstrong of public
and/or private short and long-term debt securities. The long-term debt
issued was comprised of short-term notes, which will be characterized as
long-term debt for accounting purposes because the notes are backed by a
long-term debt facility, and term debt.
(3) Gives effect to the consummation of the Offering and the Concurrent
Offering and the application of the net proceeds therefrom. However,
neither this Offering nor the Concurrent Offering is conditioned upon the
completion of the other. If the Concurrent Offering is not consummated,
the Company's short-term debt and long-term debt will be affected
accordingly. See "Use of Proceeds."
(4) Includes minimum pension liability adjustment and foreign currency
translation adjustment and hedging activities.
S-8
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for the
Company for each of the years in the five-year period ended December 31, 1997,
and selected unaudited historical financial data for the three-month periods
ended March 31, 1997 and 1998. The historical data for the five full years
shown below has been derived from the audited consolidated financial
statements of the Company. The historical data for the three-month periods
ended March 31, 1997 and 1998 has been derived from the Company's unaudited
consolidated financial statements and includes, in the opinion of the
Company's management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the data for such periods. Financial
information for the interim periods presented is not necessarily indicative of
the financial information for the full year. The historical data set forth
below should be read in conjunction with the consolidated financial statements
and notes thereto of the Company incorporated by reference herein.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
AT OR FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $ 2,075.7 $ 2,226.0 $ 2,325.0 $ 2,156.4 $ 2,198.7 $ 518.3 $ 543.1
Costs of goods sold..... 1,453.7 1,483.9 1,581.1 1,459.9 1,461.7 347.0 362.7
Selling, general and
administrative
expenses............... 435.6 449.2 457.0 413.2 385.3 100.3 104.0
Equity (earnings) loss
from affiliates........ (1.4) (1.7) (6.2) (19.1) 29.7 (3.8) (0.7)
Restructuring charges... 89.3 -- 71.8 46.5 -- -- --
Loss from ceramic tile
business combination... -- -- 177.2 -- -- -- --
Operating income........ 98.5 294.6 44.1 255.9 322.0 74.8 77.1
Interest expense........ 38.0 28.3 34.0 22.6 28.0 6.3 6.6
Other expense (income),
net.................... (6.1) 0.5 1.9 (6.9) (2.2) 0.2 (1.0)
Earnings from continuing
businesses before
income tax(a).......... 66.6 265.8 8.2 240.2 296.2 68.3 71.5
Income taxes............ 17.6 78.6 (5.4) 75.4 111.2 22.8 25.0
Earnings from continuing
businesses............. 49.0 187.2 13.6 164.8 185.0 45.5 46.5
Earnings (loss) from
continuing businesses
applicable to common
stock(b)............... 35.1 173.1 (0.7) 158.0 185.0 45.5 46.5
Per common share-
basic................. 0.95 4.62 (0.02) 4.04 4.55 1.11 1.17
Per common share-
diluted............... 0.93 4.09 (0.02) 3.82 4.50 1.10 1.15
Net earnings............ 63.5 210.4 123.3 155.9 185.0 45.5 46.5
Net earnings applicable
to common stock(b)..... 49.6 196.3 109.0 149.1 185.0 45.5 46.5
BALANCE SHEET DATA:
Total assets............ 1,869.2 2,159.0 2,149.8 2,135.6 2,375.5 2,191.0 2,408.6
Net long-term debt...... 256.8 237.2 188.3 219.4 223.1 228.9 223.8
Shareholders' equity.... 569.5 735.1 775.0 790.0 810.6 781.9 830.0
OTHER DATA:
Capital expenditures.... 110.3 138.4 182.7 228.0 160.5 30.2 30.4
Depreciation and
amortizations.......... 117.0 120.7 123.1 123.7 132.7 32.3 32.2
Working capital--
continuing businesses.. 279.3 384.4 346.8 243.5 128.5 232.1 106.0
</TABLE>
- --------
(a) Continuing businesses excludes the results of Thomasville Furniture
Industries, Inc., reclassified as a discontinued business in 1993, 1994
and 1995.
(b) After deducting preferred dividend requirements and adding the tax
benefits for unallocated preferred shares.
Beginning in 1996, ceramic tile results were reported under the equity
method, whereas prior to 1996, ceramic tile operations were reported on a
consolidated or line item basis.
S-9
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The Unaudited Condensed Combined Pro Forma Balance Sheet as of March 31,
1998, gives effect to the Triangle Pacific Acquisition as if the acquisition,
accounted for as a purchase, had occurred on that date. The Unaudited Pro
Forma Condensed Combined Statements of Earnings for the year ended December
31, 1997, and three months ended March 31, 1998, give effect to the Triangle
Pacific Acquisition as if it had occurred on January 1, 1997 and 1998,
respectively. The pro forma information is based on historical financial
statements of Triangle and the Company after giving effect to the Triangle
Pacific Acquisition using the purchase method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma
financial statements. The Company will continue its study to determine the
fair value of the acquired assets and liabilities. The pro forma financial
statements have been prepared on the basis of preliminary estimates.
The pro forma statements have been prepared by the Company based on the
financial statements of Triangle (filed with the Company's Current Report on
Form 8-K dated July 13, 1998 under Item 7 (a) thereto). These pro forma
statements may not be indicative of the results that actually would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. The pro forma financial statements should be
read in conjunction with the audited financial statements and notes of the
Company included in the Company' Annual Report on Form 10-K for the year ended
December 31, 1997, the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, and the Company's Current Reports on Form 8-K filed on
June 15, 1998, July 13, 1998 and July 28, 1998, each of which is incorporated
by reference in this Prospectus Supplement.
S-10
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET (UNAUDITED)
AS OF MARCH 31, 1998 (AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
ARMSTRONG TRIANGLE PRO-FORMA ARMSTRONG
CONSOLIDATED PACIFIC ADJUSTMENTS PRO-FORMA
------------ -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents...... $ 48.9 $ 4.7 $ (7.8)(d) $ 45.8
Accounts receivable less
allowance..................... 293.0 77.5 -- 370.5
Inventories.................... 217.9 146.6 11.9 (a) 376.4
Income tax benefits............ 22.5 24.5 (a) 47.0
Other current assets........... 35.8 4.3 -- 40.1
-------- ------ ------- --------
Total current assets........... 618.1 233.1 28.6 879.8
-------- ------ ------- --------
Property, plant and equipment... 1,990.8 255.6 -- 2,246.4
Less: accumulated depreciation
and amortization.............. 1,022.5 57.2 -- 1,079.7
-------- ------ ------- --------
Net property, plant and
equipment..................... 968.3 198.4 -- 1,166.7
Insurance for asbestos-related
liabilities.................... 291.6 0.0 -- 291.6
Investment in affiliates........ 173.4 0.0 -- 173.4
Goodwill........................ 97.2 (97.2)(a)
787.4 (a) 787.4
Trademarks...................... 38.6 -- 38.6
Deferred financing fees......... 4.3 (4.3)(a) 0.0
Other noncurrent assets......... 357.2 4.2 -- 361.4
-------- ------ ------- --------
Total assets................... $2,408.6 $575.8 $ 714.5 $3,698.9
======== ====== ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current Liabilities
Short-term debt................ $ 135.7 $ -- $ -- $ 135.7
Current installments of long-
term debt..................... 3.5 3.9 -- 7.4
Accounts payable and accrued
expenses...................... 333.5 67.8 -- 401.3
Income taxes................... 39.4 6.2 -- 45.6
-------- ------ ------- --------
Total current liabilities...... 512.1 77.9 -- 590.0
-------- ------ ------- --------
Long-term debt.................. 223.8 261.1 899.2 (d)
6.3 (a) 1,390.4
ESOP loan guarantee............. 201.8 -- -- 201.8
Postretirement and
postemployment benefits........ 248.7 -- -- 248.7
Asbestos-related liabilities.... 149.9 -- -- 149.9
Other long-term liabilities..... 171.6 3.6 1.4 (a) 176.6
Deferred income taxes........... 56.2 39.3 1.5 (a) 97.0
Minority interest in
subsidiaries................... 14.5 -- -- 14.5
-------- ------ ------- --------
Total noncurrent liabilities.... 1,066.5 304.0 908.4 2,278.9
-------- ------ ------- --------
SHAREHOLDER'S EQUITY:
Common stock................... 51.9 0.1 (0.1)(a) 51.9
Capital in excess of par
value......................... 169.0 93.9 (93.9)(a) 169.0
Reduction for ESOP loan
guarantee..................... (205.8) -- -- (205.8)
Retained earnings.............. 1,369.0 99.9 (99.9)(a) 1,369.0
Other comprehensive income..... (14.5) -- -- (14.5)
Treasury stock................. (539.6) -- -- (539.6)
-------- ------ ------- --------
Total shareholders' equity...... 830.0 193.9 (193.9) 830.0
-------- ------ ------- --------
Total liabilities and
shareholders' equity........... $2,408.6 $575.8 $ 714.5 $3,698.9
======== ====== ======= ========
</TABLE>
The accompanying notes to unaudited condensed combined pro forma financial
statements are an integral part of these statements.
S-11
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
ARMSTRONG TRIANGLE PRO-FORMA ARMSTRONG
CONSOLIDATED PACIFIC ADJUSTMENTS PRO-FORMA
------------ -------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales....................... $2,198.7 $652.9 $ -- $2,851.6
Cost of goods sold.............. 1,461.7 495.3 -- 1,957.0
Selling, general and
administrative expense......... 385.3 80.5 19.7 (e) 485.5
Goodwill Amortization........... -- 2.6 (2.6)(f) --
Equity loss from affiliates..... 29.7 -- -- 29.7
-------- ------ ------ --------
Operating income................ 322.0 74.5 (17.1) 379.4
Interest expense................ 28.0 22.9 58.4 (g) 109.3
Other (income) expenses, net.... (2.2) -- -- (2.2)
-------- ------ ------ --------
Earnings before income taxes.... 296.2 51.6 (75.5) 272.3
Income taxes.................... 111.2 19.8 (19.5)(h) 111.5
-------- ------ ------ --------
Net Earnings.................... $ 185.0 $ 31.8 $(56.0) $ 160.8
======== ====== ====== ========
Net earnings per share of common
stock:
Basic......................... $ 4.55 $ 3.96
Diluted....................... $ 4.50 $ 3.92
Average number of common shares
outstanding
Basic......................... 40.6 40.6
Diluted....................... 41.0 41.0
</TABLE>
The accompanying notes to unaudited condensed combined pro forma financial
statements are an integral part of these statements.
S-12
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
ARMSTRONG TRIANGLE PRO-FORMA ARMSTRONG
CONSOLIDATED PACIFIC ADJUSTMENTS PRO-FORMA
------------ -------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales....................... $543.1 $173.4 $ -- $716.5
Cost of goods sold.............. 362.7 133.5 -- 496.2
Selling, general and
administrative expense......... 104.0 22.2 4.9 (e) 131.1
Goodwill Amortization........... -- 0.7 (0.7)(f) --
Equity (earnings) from
affiliates..................... (0.7) -- -- (0.7)
------ ------ ------ ------
Operating income................ 77.1 17.0 (4.2) 89.9
Interest expense................ 6.6 6.2 14.6 (g) 27.4
Other (income) expenses, net.... (1.0) -- -- (1.0)
------ ------ ------ ------
Earnings before income taxes.... 71.5 10.8 (18.8) 63.5
Income taxes.................... 25.0 4.1 (4.9)(h) 24.2
------ ------ ------ ------
Net Earnings.................... $ 46.5 $ 6.7 $(13.9) $ 39.3
====== ====== ====== ======
Net earnings per share of common
stock:
Basic......................... $ 1.17 $ 0.99
Diluted....................... $ 1.15 $ 0.97
Average number of common shares
outstanding
Basic......................... 39.8 39.8
Diluted....................... 40.5 40.5
</TABLE>
The accompanying notes to unaudited condensed combined pro forma financial
statements are an integral part of these statements.
S-13
<PAGE>
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS
(a) The acquisition is to be accounted for as a purchase business combination.
The purchase price, including acquisition costs, has been allocated as
follows (see note b):
<TABLE>
<CAPTION>
MARCH 31,
1998
-------------
(IN MILLIONS)
<S> <C>
Purchase price:
Acquisition of outstanding shares of common stock(b)......... $ 818.8
Effect of assumed exercise of employee and director stock
options and outstanding warrants............................ 70.1
Tax benefit on exercise of options and warrants.............. (24.5)
Acquisition expenses........................................... 18.1
Book value of net assets acquired.............................. (193.9)
-------
Excess of purchase price over net assets acquired.............. $ 688.6
=======
Allocation of purchase price:
Increase in inventory value to convert from LIFO to current
cost.......................................................... $ 11.9
Elimination of deferred financing fees......................... (4.3)
Eliminate acquired goodwill.................................... (97.2)
Adjust senior notes to redemption price (at August 1, 1998).... (6.3)
Adjustment to pension liability to reflect projected benefit
obligation and a change in discount rate assumptions.......... (1.4)
Net increase in deferred tax liabilities....................... (1.5)
Goodwill....................................................... 787.4
-------
$ 688.6
=======
</TABLE>
The purchase price allocation is preliminary and further refinements are
likely to be made based on the completion of final valuation studies.
(b) Represents the cash purchase of 100% of Triangle's outstanding common
stock (14,752,345 shares at March 31, 1998 at $55.50 per share, or $818.8
million).
(c) In accordance with the merger agreement, Triangle has cancelled all
outstanding options and warrants and pay to the holders of such options
and warrants cash equal to the difference between the offer price and the
exercise price. As of March 31, 1998, 2,183,540 options and warrants with
an average fair value of $32.10 were held by officers and directors of
Triangle. Triangle will record an expense of $70.1 million before tax
($45.6 million after tax) related to these options and warrants. In
addition, the Company will pay Triangle for the payments related to the
cancellation of these options.
The total amount of cash payments related to outstanding shares of common
stock and the options and warrants held by officers and directors of Triangle
is as follows:
<TABLE>
<CAPTION>
MARCH 31,
1998
----------
(MILLIONS)
<S> <C>
Cash purchase of Triangle outstanding common stock............... $818.8
Expense for cancellation of outstanding options and warrants..... 70.1
------
Total............................................................ $888.9
======
</TABLE>
S-14
<PAGE>
(d) The acquisition financing included the issuance by the Company of short
and long-term public and private debt securities. The long-term debt
issued was comprised of short-term notes, which will be characterized as
long-term debt for accounting purposes because the notes are backed by a
long-term debt facility, and term debt.
<TABLE>
<CAPTION>
MARCH 31,
1998
----------
(MILLIONS)
<S> <C>
Details of acquisition financing:
Uses of cash requirements:
Acquisition of outstanding shares of common stock............... $818.8
Reimbursement for payment for exercise of officers' and
directors' options and outstanding warrants.................... 70.1
Acquisition costs............................................... 18.1
------
Total cash requirements......................................... $907.0
======
Sources of cash requirements:
Long-term debt issuance, estimated interest rate 6.5%........... $899.2
Cash from internal sources...................................... 7.8
------
Total cash requirements......................................... $907.0
======
</TABLE>
(e) Represents the amortization of goodwill of $787.4 million over a 40 year
amortization period, or $19.7 million per year.
(f) Represents an adjustment to general expenses to eliminate amortization of
the goodwill acquired from Triangle.
(g) Represents interest expense related to the long-term debt identified in
(d) above.
(h) Represents income tax benefits related to pro forma adjustments at the
effective rate.
(i) The unaudited condensed combined pro forma financial statements exclude
the effect of the DLW Acquisition announced on June 5, 1998.
S-15
<PAGE>
DESCRIPTION OF SENIOR NOTES
The following description of the particular terms of the Senior Notes
(referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the accompanying Prospectus, to which description reference is hereby
made. The following summary of the Senior Notes is qualified in its entirety
by reference to the Indenture referred to in the accompanying Prospectus.
Capitalized terms not otherwise defined herein or in the accompanying
Prospectus have the meanings given to them in the Prospectus.
GENERAL
The Senior Notes offered hereby constitute a series of Senior Debt
Securities under the Senior Indenture limited to $150,000,000 in aggregate
principal amount. The Senior Notes will mature on August 15, 2005. The Senior
Notes will bear interest at the rate per annum set forth on the cover page of
this Prospectus Supplement from the date of issue, or the most recent Interest
Payment Date to which interest has been paid or provided for, and will be
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1999 to the persons in whose names the Senior Notes are
registered at the close of business on February 1 or August 1 (each, a
"Regular Record Date"), as the case may be, next preceding such Interest
Payment Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Senior Notes are not entitled to the benefit of any
sinking fund. The Senior Notes will be issued in denominations of U.S. $1,000
or any integral multiple thereof.
The Senior Notes will be unsecured senior obligations of the Company,
ranking on a parity with all other unsecured and unsubordinated indebtedness
of the Company which may be outstanding from time to time. The Senior Notes
will not be redeemable prior to maturity.
BOOK-ENTRY SYSTEM, FORM AND DELIVERY
The Senior Notes will be represented by one or more Global Securities
registered in the name of Cede & Co., the nominee of the Depository Trust
Company, as Depositary, and the provisions set forth under "Description of
Debt Securities--Global Securities" in the accompanying Prospectus will apply
to the Senior Notes.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants (the
"Participants") deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants (the "Direct
Participants") include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by The New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the Depositary's system is also available
to others such as securities brokers and dealers, banks and trust companies
that clear through, or maintain a custodial relationship with a Direct
Participant, either directly or indirectly (the "Indirect Participants"). The
rules applicable to the Depositary and its Participants are on file with the
U.S. Securities and Exchange Commission.
Purchases of the Senior Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for the Senior
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Senior Note (a "Beneficial Owner") is in turn to be recorded
on the Direct and Indirect Participants' respective records. Beneficial Owners
will not receive written confirmation from the
S-16
<PAGE>
Depositary of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interest in the Senior Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interest in
Senior Notes except in the event that use of the book-entry system for the
Offered Securities is discontinued.
To facilitate subsequent transfers, all Senior Notes deposited by
Participants with the Depositary will be registered in the name of Cede & Co.
The deposit of the Senior Notes with the Depositary and their registration in
the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Senior
Notes; the Depositary's records reflect only the identify of the Direct
Participants to whose accounts such Senior Notes are credited, which may or
may not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Senior Notes. Under its usual procedures, the Depositary mails an omnibus
proxy (an "Omnibus Proxy") to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Offered Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Principal, redemption premium, if any, and interest payments on the Senior
Notes will be made to Cede & Co. The Depositary's practice is to credit Direct
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on the Depositary's records unless the Depositary
has reason to believe that it will not receive payment on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities for the
accounts of customers in bearer form or registered in "street-name," and will
be the responsibility of such Participant and not of the Depositary, the
underwriters, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
redemption premium, if any, and interest to Cede & Co. is the responsibility
of the Company or the respective trustees. Disbursement of such payments to
Direct Participants is the responsibility of the Depositary, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
The Depositary may discontinue providing its services as securities
depository with respect to the Senior Notes at any time by giving reasonable
notice to the Company. Under such circumstances and in the event that a
successor securities depository is not obtained, certificates for the Senior
Notes are required to be printed and delivered. In addition, the Company may
decide to discontinue use of the system of book-entry transfers through the
Depositary (or a successor securities depository). In that event, certificates
will be printed and delivered.
The Company will not have any responsibility or obligation to Participants
or the persons for whom they act as nominees with respect to the accuracy of
the records of the Depositary, its nominee or any Direct or Indirect
Participant with respect to any ownership interest in the Senior Notes, or
with respect to payments to or providing of notice for the Direct
Participants, the Indirect Participants or the Beneficial Owners.
The information contained herein under the caption "Description of Offered
Securities--Book-Entry System, Form and Delivery" concerning the Depositary
and the Depositary's book-entry system has been obtained from sources that the
Company believes to be reliable. Neither the Company, the Trustee nor the
underwriters, dealers or agents take responsibility for the accuracy or
completeness thereof.
S-17
<PAGE>
THE TRUSTEE
The trustee under the Senior Indenture will be The Chase Manhattan Bank,
formerly known as Chemical Bank, as successor to Mellon Bank, N.A., as Trustee
(the "Trustee"). In addition, ChaseMellon Shareholder Services, L.L.C., an
affiliate of The Chase Manhattan Bank, is the Rights Agent under the Company's
Rights Plan, as defined and discussed more fully in the accompanying
Prospectus. The Trustee also provides cash management and other banking and
advisory services to the Company in the normal course of business.
Upon the occurrence of an Event of Default or an event which, after notice
or lapse of time or both, would become an Event of Default, or upon the
occurrence of a default under such other indenture, the Trustee may be deemed
to have a conflicting interest with respect to the Senior Notes for purposes
of the Trust Indenture Act of 1939 and, unless the Trustee is able to
eliminate any such conflicting interest, the Trustee may be required to resign
as Trustee under the Senior Indenture. In that event, the Company would be
required to appoint a successor trustee for the Senior Indenture.
S-18
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amounts of the Senior Notes set forth opposite their
respective names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF SENIOR NOTES
----------- ----------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 68,250,000
Chase Securities Inc........................................ 48,750,000
J.P. Morgan Securities Inc.................................. 33,000,000
------------
Total................................................... $150,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to pay for and accept delivery of the Senior Notes is subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Senior Notes if any are taken.
The Underwriters initially propose to offer part of the Senior Notes
directly to the public at the public offering prices set forth on the cover
page hereof and part to certain dealers at prices that represent a concession
not to exceed .375% of the principal amount of the Senior Notes. Any
Underwriter may allow, and any such dealers may reallow, a concession to
certain other dealers not to exceed .250% of the principal amount of the
Senior Notes.After the initial offering of the Senior Notes, the respective
offering prices and other selling terms may from time to time be varied by the
Underwriters.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Act.
The Senior Notes are a new issue of securities with no established trading
market. The Company does not intend to apply for the listing of the Senior
Notes on a national securities exchange, but has been advised by the
Underwriters that they intend to make a market in the Senior Notes. However,
they are not obligated to do so and may discontinue the market making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Senior Notes.
In order to facilitate the offering of the Senior Notes, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
prices of the Senior Notes. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Senior Notes
for their own account. In addition, to cover overallotments or to stabilize
the price of the Senior Notes, the Underwriters may bid for, and purchase, the
Senior Notes in the open market. Finally, the Underwriters syndicate may
reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Senior Notes in the Offering, if the Underwriter repurchases
previously distributed Senior Notes in transactions to cover Underwriter short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market prices of the Senior Notes above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
Certain of the Underwriters and their respective affiliates have, from time
to time, performed various investment or commercial banking and financial
advisory services for the Company, including Morgan Stanley & Co. Incorporated
which recently acted as lead manager in connection with the sale by the
Company of 9,000,000 shares of Dal-Tile's common stock. For its advisory
services to the Company in the Triangle Pacific Acquisition, the Company paid
J.P. Morgan Securities Inc., one of the Underwriters, a fee of $4.0 million,
reimbursed J.P. Morgan Securities Inc. for its out-of-pocket expenses and
agreed to indemnify J.P. Morgan Securities Inc. and certain related persons
against certain liabilities, including certain liabilities under the federal
S-19
<PAGE>
securities laws, arising out of its engagement. J.P. Morgan Securities Inc.
also received customary fees for acting as dealer manager in connection with
the Triangle Pacific Acquisition.
Each of Morgan Stanley & Co. Incorporated, Chase Securities Inc. and J.P.
Morgan Securities Inc. act as dealers under the CP Program. In addition, The
Chase Manhattan Bank, an affiliate of Chase Securities Inc., and Morgan
Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities
Inc., act as lenders under the New Credit Facility and The Chase Manhattan
Bank is the trustee under the Indenture.
LEGAL MATTERS
Certain matters with respect to the validity of the Senior Notes offered
hereby will be passed upon for the Company by Rogers & Wells LLP, New York,
New York. Certain legal matters relating to the Senior Notes will be passed
upon for the Underwriters by Davis Polk & Wardwell, New York, New York. Rogers
& Wells LLP and Davis Polk & Wardwell will rely upon the opinion of David D.
Wilson, Associate General Counsel of the Company as to matters of Pennsylvania
law.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1997
and 1996, and for each of the years in the three-year period ended December
31, 1997, have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The consolidated financial statements of
Triangle as of January 2, 1998 and January 3, 1997, and for the years ended
January 2, 1998 and January 3, 1997, incorporated by reference in this
Prospectus Supplement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and or
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
S-20
<PAGE>
PROSPECTUS
$500,000,000
LOGO
ARMSTRONG WORLD INDUSTRIES, INC.
$250,000,000
DEBT SECURITIES, COMMON STOCK,
PREFERRED STOCK AND DEPOSITARY SHARES
$250,000,000
DEBT SECURITIES
Armstrong World Industries, Inc., a Pennsylvania corporation ("Armstrong" or
the "Company"), may offer and sell from time to time, (i) together or
separately, up to an aggregate initial public offering price of $250,000,000
or the equivalent thereof in other currencies, foreign currency units or
composite currencies such as the European Currency Unit (the "Specified
Currency"), subject to the limitations set forth below, in one or more series
(a) debt securities ("Debt Securities"), which may be either senior debt
securities ("Senior Debt Securities") or subordinated debt securities
("Subordinated Debt Securities"); (b) shares of common stock, $1.00 par value
per share ("Common Stock"), including Preferred Stock Purchase Rights which
attach to each share of Common Stock (the "Rights"); (c) shares of Class A
preferred stock, no par value per share ("Preferred Stock"); and (d)
depositary shares ("Depositary Shares") or any combination of the foregoing,
each in amounts, at prices and on terms to be determined at the time of sale
and (ii) up to an aggregate initial public offering price of an additional
$250,000,000, of Debt Securities, in one or more series. The Debt Securities,
Common Stock with attached Rights, Preferred Stock, and Depositary Shares are
collectively referred to herein as the "Securities."
All specific terms of the offering and sale of Securities, including the
initial public offering price, aggregate amount, listing on any securities
exchange or quotation system, risk factors, if any, and the agents,
underwriters or dealers, if any, to be utilized in connection with the sale of
the Securities, will be set forth in an accompanying Prospectus Supplement
("Prospectus Supplement"). With respect to the Debt Securities, the related
Prospectus Supplement will set forth the specific designation, rights and
restrictions, whether they are senior or subordinated, the currencies or
currency units or composite currencies in which they are denominated, the
aggregate principal amount, the maturity, rate and time of payment of
interest, any conversion, exchange, redemption or sinking fund provisions, and
any other terms of the Securities offered thereby. With respect to the
Preferred Stock, the related Prospectus Supplement will set forth the specific
designation, rights, preferences, privileges and restrictions thereof,
including dividend rate or rates (or method of ascertaining the same),
dividend payment dates, voting rights, liquidation preference, any conversion,
exchange, redemption or sinking fund provisions, and any other terms of the
Securities offered thereby. The Prospectus Supplement will also contain
information, where applicable, regarding certain United States federal income
tax considerations relating to the Securities offered thereby.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
The Company may sell the Securities directly, or through agents,
underwriters or dealers designated from time to time, or through a combination
of such methods, which underwriters may include Morgan Stanley & Co.
Incorporated, Goldman, Sachs & Co. and Merrill Lynch & Co. or may be a group
of underwriters represented by firms including one or more of such firms and
such firms may act as agents. See "Plan of Distribution." If agents of the
Company or underwriters or any dealers are involved in the sale of Securities
in respect of which this Prospectus is being delivered, the name of such
agents, underwriters or dealers, and any applicable commissions or discounts,
will be set forth in or may be calculated from the Prospectus Supplement
relating to such Securities. The Company reserves the sole right to accept
and, together with their respective agents from time to time, to reject in
whole or in part any proposed purchase of Securities to be made directly or
through agents.
---------------
The Prospectus may not be used to consummate the sale of Securities unless
accompanied by a Prospectus Supplement.
November 1, 1996
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES DESCRIBED HEREIN OR THEREIN OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THE PROSPECTUS
OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION..................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 3
THE COMPANY............................................................... 5
USE OF PROCEEDS........................................................... 5
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS............................................ 5
DESCRIPTION OF DEBT SECURITIES............................................ 6
DESCRIPTION OF CAPITAL STOCK.............................................. 17
DESCRIPTION OF DEPOSITARY SHARES.......................................... 22
PLAN OF DISTRIBUTION...................................................... 24
VALIDITY OF SECURITIES.................................................... 25
EXPERTS................................................................... 25
</TABLE>
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK, PACIFIC AND/OR PHILADELPHIA
STOCK EXCHANGES. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
2
<PAGE>
AVAILABLE INFORMATION
Armstrong is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC" or the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the Regional Offices of
the SEC located at Citicorp Center, Suite 1400, 500 West Madison Street, Room
1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such information can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, the
offices of the Pacific Stock Exchange, Inc., 301 Pine Street, San Francisco,
California 94104-7098, and the offices of the Philadelphia Stock Exchange,
1900 Market Street, Philadelphia, Pennsylvania 19103, on which exchanges
certain of Armstrong's securities are listed. Armstrong's Common Stock is
listed on the New York, Pacific and Philadelphia Stock Exchanges under the
symbol "ACK."
Armstrong has filed with the SEC two Registration Statements on Form S-3
(the "Registration Statements") under the Securities Act of 1933, as amended
(the "1933 Act"), with respect to the Securities. This Prospectus does not
contain all of the information set forth in the Registration Statements,
certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is hereby made to the Registration
Statements and related exhibits for further information with respect to the
Company and the Securities offered hereby. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the SEC. The Registration
Statements and the exhibits thereto may be inspected without charge at the
office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies thereof may be obtained from the SEC at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding the Company that is electronically
filed through the Commission's Electronic Data Gathering, Analysis and
Retrieval system. Such information is publicly available through the
Commission's Web site (http://www.sec.gov.).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the SEC by Armstrong under the
1934 Act (file number 001-02116) are incorporated herein by reference: (1) the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
certain portions of which are superseded by the Company's Current Report on
Form 8-K filed on October 18, 1996; (2) the Company's Current Report on Form
8-K filed on January 16, 1996; (3) the Company's Current Report on Form 8-K
filed on January 16, 1996, as amended by a Form 8-K/A filed on March 13, 1996;
(4) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, certain portions of which are superseded by the Company's Current
Report on Form 8-K filed on October 18, 1996; (5) the Company's Current Report
on Form 8-K filed on May 13, 1996; (6) the Company's Current Report on Form 8-
K filed on July 29, 1996, and any amendments or reports filed for the purpose
of updating the Description of the Company's Capital Stock contained in such
report; (7) the description of the Company's Preferred Stock Purchase Rights,
set forth in the Registration Statement on Form 8-A/A dated March 15, 1996;
(8) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, certain portions of which are superseded by the Company's Current Report
on Form 8-K filed on October 18, 1996; (9) the Company's Current Report on
Form 8-K filed on October 15, 1996; and (10) the Company's Current Report on
Form 8-K filed on October 18, 1996.
All documents filed by Armstrong with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus
and prior to the termination of the offering or offerings of the Securities
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof
3
<PAGE>
from the date of filing of such documents. Any statement incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus. All information
appearing in this Prospectus is qualified in its entirety by the information
and financial statements (including the notes thereto) contained in the
documents incorporated by reference herein.
Armstrong will provide without charge, upon written or oral request, to each
person, including any beneficial owner, to whom a copy of this Prospectus is
delivered, a copy of any or all of the documents incorporated by reference in
this Prospectus (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents). Requests
should be directed to L.A. Pulkrabek, Senior Vice-President, Secretary and
General Counsel, Armstrong World Industries, Inc., 313 West Liberty Street,
Lancaster, Pennsylvania 17603-2717 (telephone 717-397-0611).
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
4
<PAGE>
THE COMPANY
Armstrong World Industries, Inc. is a Pennsylvania corporation incorporated
in 1891. The Company is a manufacturer of interior furnishings, including
floor coverings, and building products which are sold primarily for use in the
furnishing, refurbishing, repair, modernization and construction of
residential, commercial and institutional buildings. It also manufactures
various industrial and other products. In late 1995, Armstrong sold its
furniture business and combined its ceramic tile business with Dal-Tile
International Inc. ("Dal-Tile"), retaining a minority equity interest in the
combined company. Unless the context indicates otherwise, the term "Company"
means Armstrong World Industries, Inc. and its consolidated subsidiaries.
USE OF PROCEEDS
Except as otherwise described in the Prospectus Supplement, Armstrong
intends to use the net proceeds from the sale of the Securities offered hereby
for general corporate purposes, which may include additions to working
capital, refinancing existing indebtedness, capital expenditures and possible
acquisitions. Armstrong has not allocated a specific portion of the net
proceeds for any particular use at this time. Specific information concerning
the use of proceeds from the sale of any Securities may be included in the
Prospectus Supplement relating to such Securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the indicated periods.(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------- SIX MONTHS ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
---- ----- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
2.56 N/A(2) 2.49 8.70 1.20 7.59
</TABLE>
- --------
(1) Excluding restructuring charges for all periods and the pre-tax loss on
the ceramic tile business combination for 1995, the ratios would have been
2.80, 2.89, 4.50, 8.70 and 7.40 for 1991, 1992, 1993, 1994 and 1995,
respectively.
(2) Earnings were inadequate to cover fixed charges by $66.3 million.
The following table sets forth the Company's consolidated ratio of earnings
to combined fixed charges and preferred dividends for the indicated
periods:(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------- SIX MONTHS ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
---- ----- ---- ---- ----- ----------------
<S> <C> <C> <C> <C> <C>
1.88 N/A(2) 1.74 5.61 N/A(3) 4.79
</TABLE>
- --------
(1) Excluding restructuring charges for all periods and the pre-tax loss on
the ceramic tile business combination for 1995, the ratios would have been
2.05, 2.08, 3.14, 5.61 and 5.04 for 1991, 1992, 1993, 1994 and 1995,
respectively.
(2) Earnings were inadequate to cover fixed charges and preferred stock
dividends by $85.6 million.
(3) Earnings were inadequate to cover fixed charges plus preferred stock
dividends by $10.6 million.
The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. The ratio of earnings to fixed charges and
preferred stock dividends has been computed by dividing earnings by the sum of
fixed charges and preferred stock dividend requirements. For purposes of
calculating these ratios, earnings consist of consolidated earnings from
continuing business operations before income taxes plus fixed charges. Fixed
charges consist of interest expense, one-third of rent expense which is deemed
to be representative of
5
<PAGE>
interest and amortization of finance costs. In June 1989, the Company
established an Employee Stock Ownership Plan (the "ESOP"). The Company is the
guarantor of a $270 million loan to the ESOP. Contributions made by the
Company to the ESOP and dividends paid by the Company on the convertible
preferred stock purchased by the ESOP are used by the ESOP to pay installments
of principal and interest on the ESOP loan. Such contributions and dividends
are not included in the above ratios of earnings to fixed charges or ratios to
combined fixed charges and preferred stock dividends. Interest expense on the
ESOP loan was approximately $23.2 million, $22.9 million, $22.3 million, $21.7
million and $21.0 million for the years ended December 31, 1991, 1992, 1993,
1994 and 1995, respectively. Part of the contributions made by the Company
represent payroll deductions made by participants in the ESOP.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture, dated as of
August 6, 1996 (the "Senior Indenture"), between the Company and Mellon Bank,
N.A., as Trustee (the "Trustee" or "Mellon"). The Subordinated Debt Securities
are to be issued under a separate Indenture, dated as of August 6, 1996 (the
"Subordinated Indenture"), also between the Company and Mellon as Trustee. The
Senior Indenture and Subordinated Indenture are sometimes referred to
collectively as the "Indentures." Copies of the Senior Indenture and
Subordinated Indentures are filed as exhibits to the Registration Statement of
which this Prospectus is a part. The Debt Securities may be issued from time
to time in one or more series. The particular terms of each series, or of Debt
Securities forming a part of a series, which are offered by a Prospectus
Supplement will be described in such Prospectus Supplement.
The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indentures, including the definitions
therein of certain terms, and, with respect to any particular Debt Securities,
to the description of the terms thereof included in the Prospectus Supplement
relating thereto. Wherever particular Sections or defined terms of the
Indentures are referred to herein or in a Prospectus Supplement, such Sections
or defined terms are incorporated by reference herein or therein, as the case
may be.
GENERAL
The Indentures will provide that Debt Securities in separate series may be
issued thereunder from time to time without limitation as to aggregate
principal amount. The Company may specify a maximum aggregate principal amount
for the Debt Securities of any series. (Section 301) The Debt Securities are
to have such terms and provisions which are not inconsistent with the
Indentures, including as to maturity, principal and interest, as the Company
may determine. Unless otherwise specified in the applicable Prospectus
Supplement, the Senior Debt Securities when issued will be unsecured and
unsubordinated obligations of the Company and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities when issued will be subordinated in right of
payment to the prior payment in full of all Senior Debt of the Company, as
described under "Subordination of Subordinated Debt Securities" and in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will set forth whether the Debt
Securities offered shall be Senior Debt Securities or Subordinated Debt
Securities, the price or prices at which the Debt Securities to be offered
will be issued and will describe the following terms of such offered Debt
Securities: (1) the title of such Debt Securities; (2) any limit on the
aggregate principal amount of such Debt Securities or the series of which they
are a part; (3) the Person to whom any interest on a Debt Security of the
series shall be payable, if other than the Person in whose name that Debt
Security (or one or more predecessor Debt Securities) is registered at the
close of business on the Regular Record Date for such interest; (4) the date
or dates on which the principal of any of such Debt Securities will be
payable; (5) the rate or rates at which any of such Debt Securities will bear
interest, if any, the date or dates from which any such interest will accrue,
the Interest Payment Dates on which any such interest will be payable and the
Regular Record Date for any such interest payable on any Interest Payment
Date;
6
<PAGE>
(6) the place or places where the principal of and any premium and interest on
any of such Debt Securities will be payable; (7) the period or periods within
which, the price or prices at which and the terms and conditions on which any
of such Debt Securities may be redeemed, in whole or in part, at the option of
the Company; (8) the obligation, if any, of the Company to redeem or purchase
any of such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of the Holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions on
which any of such Debt Securities will be redeemed or purchased, in whole or
in part, pursuant to any such obligation; (9) the denominations in which any
of such Debt Securities will be issuable, if other than denominations of
$1,000 and any integral multiple thereof; (10) if the amount of principal of
or any premium or interest on any of such Debt Securities may be determined
with reference to an index or pursuant to a formula, the manner in which such
amounts will be determined; (11) if other than the currency of the United
States of America, the currency, currencies or currency units in which the
principal of or any premium or interest on any of such Debt Securities will be
payable (and the manner in which the equivalent of the principal amount
thereof in the currency of the United States of America is to be determined
for any purpose, including for the purpose of determining the principal amount
deemed to be Outstanding at any time); (12) if the principal of or any premium
or interest on any of such Debt Securities is to be payable, at the election
of the Company or the Holder thereof, in one or more currencies or currency
units other than those in which such Debt Securities are stated to be payable,
the currency, currencies or currency units in which payment of any such amount
as to which such election is made will be payable, the periods within which
and the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount is to be determined);
(13) if other than the entire principal amount thereof, the portion of the
principal amount of any of such Debt Securities which will be payable upon
declaration of acceleration of the Maturity thereof; (14) if the principal
amount payable at the Stated Maturity of any of such Debt Securities will not
be determinable as of any one or more dates prior to the Stated Maturity, the
amount which will be deemed to be such principal amount as of any such date
for any purpose, including the principal amount thereof which will be due and
payable upon any Maturity other than the Stated Maturity or which will be
deemed to be Outstanding as of any such date (or, in any such case, the manner
in which such deemed principal amount is to be determined); (15) if
applicable, that such Debt Securities, in whole or any specified part, are
defeasible pursuant to the provisions of the Indentures described under
"Defeasance and Covenant Defeasance--Defeasance and Discharge" or "Defeasance
and Covenant Defeasance--Covenant Defeasance," or under both such captions;
(16) if applicable, the terms of any right to convert Debt Securities into
shares of Common Stock of the Company or other securities or property; (17)
whether any of such Debt Securities will be issuable, in whole or in part, in
the form of one or more Global Securities, defined below, and, if so, the
respective Depositaries for such Global Securities, the form of any legend or
legends to be borne by any such Global Security in addition to or in lieu of
the legend referred to under "Form, Exchange and Transfer--Global Securities"
and, if different from those described under such caption, any circumstances
under which any such Global Security may be exchanged, in whole or in part,
for Debt Securities registered, and any transfer of such Global Security, in
whole or in part, may be registered, in the names of Persons other than the
Depositary for such Global Security or its nominee; (18) any addition to or
change in the Events of Default applicable to any of such Debt Securities and
any change in the right of the Trustee or the Holders to declare the principal
amount of any of such Debt Securities due and payable; (19) any addition to or
change in the covenants in the Indentures described under "Certain Restrictive
Covenants" applicable to any of such Debt Securities; and (20) any other terms
of such Debt Securities not inconsistent with the provisions of the applicable
Indenture. (Section 301)
Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their principal amount. Certain special United
States federal income tax considerations (if any) applicable to Debt
Securities sold at an original issue discount will be described in a
Prospectus Supplement under "United States Taxation." In addition, certain
special United States federal income tax or other considerations (if any)
applicable to any Debt Securities which are denominated in a currency or
currency unit other than United States dollars will be described in a
Prospectus Supplement under "United States Taxation."
Unless otherwise set forth in the applicable Prospectus Supplement, neither
the Indentures nor the Debt Securities will contain provisions which would
afford holders of the Debt Securities protection in the event of a takeover,
recapitalization, or similar restructuring involving the Company that could
adversely affect such holders.
7
<PAGE>
CONVERSION RIGHTS
The terms on which Debt Securities of any series are convertible into Common
Stock or other securities or property will be set forth in the Prospectus
Supplement relating thereto. Such terms shall include provisions as to whether
conversion is mandatory or at the option of the holder and may include
provisions pursuant to which the number of shares of Common Stock or other
securities or property to be received by the Holders of Debt Securities would
be calculated according to the market price of Common Stock or other
securities or property as of a time stated in the applicable Prospectus
Supplement. (Article Fourteen)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior
payment in full of all Senior Debt, including the Senior Debt Securities. Upon
any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the Holders of the Subordinated
Debt Securities will be entitled to receive or retain any payment in respect
of the principal of (and premium, if any) or interest, if any, on the
Subordinated Debt Securities. (Section 1502)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not holders of Senior Debt or Holders of
Subordinated Debt Securities may recover less, ratably, than holders of Senior
Debt and may recover more, ratably, than the Holders of the Subordinated Debt
Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Subordinated Debt Securities will be
entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities. (Section 1503)
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting
in the acceleration of the maturity thereof, or if any judicial proceeding
shall be pending with respect to any such default. (Section 1504) For purposes
of the subordination provisions, the payment, issuance and delivery of cash,
property or securities (other than stock and certain subordinated securities
of the Company) upon conversion of a Subordinated Debt Security will be deemed
to constitute payment on account of the principal of such Subordinated Debt
Security.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent that
such claim for post-petition interest is allowed in such proceeding), on Debt
(as defined under "Restrictive Covenants--Limitation on Liens"), whether
incurred on or prior to the date of the Subordinated Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debt
Securities or to other Debt which is pari passu with, or subordinated to, the
Subordinated Debt Securities; provided, however, that Senior Debt shall not be
deemed to include the Subordinated Debt Securities.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior Debt.
8
<PAGE>
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issuable only in fully registered
form, without coupons, and, unless otherwise specified in the applicable
Prospectus Supplement, only in denominations of $1,000 and integral multiples
thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indentures and the
limitations applicable to Global Securities, Debt Securities of each series
will be exchangeable for other Debt Securities of the same series of any
authorized denomination and of a like tenor and aggregate principal amount.
(Section 305)
Subject to the terms of the Indentures and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose. No service charge will be made for any registration of transfer
or exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
has appointed the Trustee as Security Registrar. Any transfer agent (in
addition to the Security Registrar) initially designated by the Company for
any Debt Securities will be named in the applicable Prospectus Supplement.
(Section 305) The Company may at any time designate additional transfer agents
or rescind the designation of any transfer agent or approve a change in the
office through which any transfer agent acts, except that the Company will be
required to maintain a transfer agent in each Place of Payment for the Debt
Securities of each series. (Section 1002)
If the Debt Securities of any series (or of any series and specified terms)
are to be redeemed in part, the Company will not be required to (i) issue,
register the transfer of or exchange any Debt Security of that series (or of
that series and specified terms, as the case may be) during a period beginning
at the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security that may be selected for redemption and
ending at the close of business on the day of such mailing or (ii) register
the transfer of or exchange any Debt Security so selected for redemption, in
whole or in part, except the unredeemed portion of any such Debt Security
being redeemed in part. (Section 305)
GLOBAL SECURITIES
Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more global securities which will have an
aggregate principal amount equal to that of the Debt Securities represented
thereby (a "Global Security"). Each Global Security will be registered in the
name of a Depositary or a nominee thereof identified in the applicable
Prospectus Supplement, will be deposited with such Depositary or nominee or a
custodian therefor and will bear a legend regarding the restrictions on
exchanges and registration of transfer thereof referred to below and any such
other matters as may be provided for pursuant to the Indentures.
Notwithstanding any provision of the Indentures or any Debt Security
described herein, no Global Security may be exchanged, in whole or in part,
for Debt Securities registered, and no transfer of a Global Security, in whole
or in part, may be registered, in the name of any Person other than the
Depositary for such Global Security or any nominee of such Depositary unless
(i) the Depositary has notified the Company that it is unwilling or unable to
continue as Depositary for such Global Security or has ceased to be qualified
to act as such as required by the Indentures, (ii) there shall have occurred
and be continuing an Event of Default with respect to the Debt Securities
represented by such Global Security or (iii) there shall exist such
circumstances, if any, in addition to or in lieu of those described above as
may be described in the applicable Prospectus Supplement. All securities
issued in exchange for a Global Security or any portion thereof will be
registered in such names as the Depositary may direct. (Sections 204 and 305)
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As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the Indentures. Except in the limited circumstances referred to above, owners
of beneficial interests in a Global Security will not be entitled to have such
Global Security or any Debt Securities represented thereby registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange therefor and will not be considered
to be the owners or Holders of such Global Security or any Debt Securities
represented thereby for any purpose under the Debt Securities or the
Indentures. All payments of principal of and any premium and interest on a
Global Security will be made to the Depositary or its nominee, as the case may
be, as the Holder thereof. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
definitive form. These laws may impair the ability to transfer beneficial
interests in a Global Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of Debt Securities represented by the Global
Security to the accounts of its participants. Ownership of beneficial
interests in a Global Security will be shown only on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depositary (with respect to participants' interests) or any such
participant (with respect to interests of persons held by such participants on
their behalf). Payments, transfers, exchanges and other matters relating to
beneficial interests in a Global Security may be subject to various policies
and procedures adopted by the Depositary from time to time. None of the
Company, the Trustee or any agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the Depositary's or any
participant's records relating to, or for payments made on account of,
beneficial interests in a Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to
the Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a
particular series will be payable at the office of such Paying Agent or Paying
Agents as the Company may designate for such purpose from time to time, except
that at the option of the Company payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address appears
in the Security Register. Unless otherwise indicated in the applicable
Prospectus Supplement, the corporate trust office of the Trustee in The City
of New York will be designated as the Company's sole Paying Agent for payments
with respect to Debt Securities of each series. Any other Paying Agents
initially designated by the Company for the Debt Securities of a particular
series will be named in the applicable Prospectus Supplement. The Company may
at any time designate additional Paying Agents or rescind the designation of
any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Company will be required to maintain a Paying
Agent in each Place of Payment for the Debt Securities of a particular series.
(Section 1002)
All monies paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
has become due and payable will be repaid to the Company, and the Holder of
such Debt Security thereafter may look only to the Company for payment
thereof. (Section 1003)
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RESTRICTIVE COVENANTS
Limitation on Liens. The Senior Indenture will provide that, except as
otherwise provided in the next succeeding paragraph, the Company shall not,
and shall not permit any Restricted Subsidiary to, issue, assume or guarantee
any indebtedness for borrowed money ("Debt") secured by any mortgage, pledge,
security interest, lien or other encumbrance (a "Lien") upon any Principal
Property of the Company or of any Restricted Subsidiary or upon any shares of
stock or Debt of any Restricted Subsidiary (whether such Principal Property,
shares of stock or Debt are now owned or hereafter acquired) without in any
such case effectively providing concurrently with the issuance, assumption or
guaranty of any such Debt that the Senior Debt Securities (together with, if
the Company shall so determine, any other indebtedness of or guaranty by the
Company or such Restricted Subsidiary then existing or thereafter created
which is not subordinate to the Senior Debt Securities) shall be secured
equally and ratably with (or, at the option of the Company, prior to) such
Debt, so long as such Debt shall be so secured; provided, however, that the
foregoing restrictions shall not prevent, restrict or apply to (and there
shall be excluded from secured Debt in any computation made for purposes of
the "Limitation on Liens" covenant) Debt secured by (A) Liens on property,
shares of stock or indebtedness of any corporation existing at the time such
corporation becomes a Restricted Subsidiary or arising thereafter (i)
otherwise than in connection with the borrowing of money arranged thereafter
and (ii) pursuant to contractual commitments entered into prior to and not in
contemplation of such corporation's becoming a Restricted Subsidiary; (B)
Liens on any property (including shares of stock or Debt) existing at the time
of acquisition thereof (including acquisition through merger or consolidation)
or securing the payment of all or any part of the purchase price or
construction cost thereof or securing any Debt incurred prior to, at the time
of or within 180 days after, the acquisition of such property, shares of stock
or Debt or the completion of any such construction, whichever is later, for
the purpose of financing all or any part of the purchase price or construction
costs thereof (provided such Liens are limited to such property, improvements
thereon and the land upon which such property and improvements are located and
any other property not then constituting a Principal Property); (C) Liens on
any property to secure all or any part of the cost of development, operations,
construction, alteration, repair or improvement of all or any part of such
property, or to secure Debt incurred prior to, at the time of or within 180
days after, the completion of such development, operation, construction,
alteration, repair or improvement, whichever is later, for the purpose of
financing all or any part of such cost (provided such Liens are limited to
such property, improvements thereon and the land upon which such property and
improvements are located and any other property not then constituting a
Principal Property); (D) Liens which secure Debt owing by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary or by the
Company to a Restricted Subsidiary; (E) Liens securing indebtedness of a
corporation which becomes a successor of the Company in accordance with the
provisions described under "Consolidation, Merger and Sale of Assets"; (F)
Liens on property of the Company or a Restricted Subsidiary in favor of the
United States of America or any State thereof, or any department agency or
instrumentality or political subdivision of the United States of America or
any State thereof, or in favor of any other country or any political
subdivision thereof, to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness incurred for
the purpose of financing all or any part of the purchase price or the cost of
construction of the property subject to such Liens, or in favor of any trustee
or mortgagee for the benefit of holders of indebtedness of any such entity
incurred for any such purpose; (G) Liens existing at August 6, 1996; and (H)
any extension, renewal or replacement (or successive extension, renewals or
replacements), in whole or in part, of any Lien referred to in the foregoing
clauses (A) to (G), inclusive, or of any Debt secured thereby; provided that
such extension, renewal or replacement Lien shall be limited to all or any
part of the same property that secured the Lien extended, renewed or replaced
(plus any improvements on such property) and shall secure no larger amount of
Debt than that existing at the time of such extension, renewal or replacement.
Notwithstanding the foregoing restrictions, the Company and any one or more
Restricted Subsidiaries may issue, assume or guarantee Debt secured by a Lien
which would otherwise be subject to the foregoing restrictions if at the time
it does so (the "Incurrence Time") the aggregate amount of such Debt plus all
other Debt of the Company and its Restricted Subsidiaries secured by a Lien
which would otherwise be subject to the foregoing restrictions (not including
Debt permitted to be secured under clauses (A) through (H) of the next
preceding paragraph), plus the aggregate Attributable Debt (determined as of
the Incurrence Time) of Sale and Leaseback
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Transactions (other than Sale and Leaseback Transactions permitted by clause
(1) under "--Limitations on Sale and Leaseback Transactions") entered into
after August 6, 1996 and in existence at the Incurrence Time (less the
aggregate amount of proceeds of such Sale and Leaseback Transactions which
shall have been applied in accordance with clause (3) under "Limitations on
Sale and Leaseback Transactions"), does not exceed 15% of Consolidated Net
Tangible Assets.
Limitations on Sale and Leaseback Transactions. The Senior Indenture will
provide that the Company shall not itself, and shall not permit any Restricted
Subsidiary to, enter into any arrangements after August 6, 1996 with any bank,
insurance company or other lender or investor (other than the Company or
another Restricted Subsidiary) providing for the leasing as lessee by the
Company or by any such Restricted Subsidiary of any Principal Property (except
a lease for a temporary period not to exceed three years by the end of which
it is intended the use of such Principal Property by the lessee will be
discontinued), which was or is owned by the Company or a Restricted Subsidiary
and which has been or is to be sold or transferred by the Company or a
Restricted Subsidiary more than 180 days after the completion of construction
and commencement of full operation thereof by the Company or such Restricted
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 Property (herein called a "Sale and Leaseback Transaction") unless
(1) the Company or such Restricted Subsidiary would (at the time of entering
into such arrangement) be entitled pursuant to clauses (A) through (H) above
under "--Limitation on Liens," without equally and ratably securing the Senior
Debt Securities, to issue, assume or guarantee indebtedness secured by a Lien
on such Principal Property; or (2) the Attributable Debt of the Company and
its Restricted Subsidiaries in respect of such Sale and Leaseback Transaction
and all other Sale and Leaseback Transactions entered into after August 6,
1996 (other than such Sale and Leaseback Transactions as are permitted by
clause (1) or clause (3) of this paragraph), plus the aggregate principal
amount of Debt secured by Liens on Principal Properties then outstanding
(excluding any such Debt secured by Liens covered in subdivisions (A) through
(H) under "--Limitation on Liens") which do not equally and ratably secure the
Senior Debt Securities, would not exceed 15% of Consolidated Net Tangible
Assets; or (3) the Company, within 180 days after the sale or transfer,
applies or causes a Restricted Subsidiary to apply an amount equal to the
greater of the net proceeds of such sale or transfer or fair market value of
the Principal Property so sold and leased back at the time of entering into
such Sale and Leaseback Transaction (in either case as determined by the Board
of Directors) to the retirement of Senior Debt Securities or other
indebtedness of the Company (other than indebtedness subordinated to the
Senior Debt Securities) or indebtedness of a Restricted Subsidiary, for money
borrowed, having a stated maturity more than 12 months from the date of such
application or which is extendible at the option of the obligor thereon to a
date more than 12 months from the date of such application, provided that the
amount to be so applied shall be reduced by (i) the principal amount of Senior
Debt Securities delivered within 180 days after such sale or transfer to the
Trustee for retirement and cancellation, and (ii) the principal amount of any
such indebtedness of the Company or a Restricted Subsidiary other than Senior
Debt Securities voluntarily retired by the Company or a Restricted Subsidiary
within 180 days after such sale or transfer; provided, further, that
notwithstanding the foregoing, no retirement referred to in this clause (3)
may be affected by payment at Maturity.
Notwithstanding the foregoing, where the Company or any Restricted
Subsidiary is the lessee in any Sale and Leaseback Transaction, Attributable
Debt shall not include any Debt resulting from the guarantee by the Company or
any other Restricted Subsidiary of the lessee's obligation thereunder.
CERTAIN DEFINITIONS
The term "Attributable Debt" means, in respect of a Sale and Leaseback
Transaction and as of any particular time, the present value (discounted at
the rate of interest implicit in the terms of the lease involved in such Sale
and Leaseback Transaction, as determined in good faith by the Company) of the
obligation of the lessee thereunder for net rental payments (excluding,
however, any amounts required to be paid by such lessee, whether or not
designated as rent or additional rent, on account of maintenance and repairs,
services, insurance, taxes, assessments, water rates or similar charges or any
amounts required to be paid by such lessee thereunder
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contingent upon monetary inflation or the amount of sales, maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges) during
the remaining term of such lease (including any period for which such lease
has been extended or may, at the option of the lessor, be extended).
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 goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, and (b) all
current liabilities, all as reflected in the Company's latest audited
consolidated balance sheet contained in the Company's most recent annual
report to its stockholders under Rule 14a-3 of the Exchange Act prior to the
time as of which "Consolidated Net Tangible Assets" shall be determined.
The term "Maturity," when used with respect to any security, means the date
on which the principal of such 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.
The term "Principal Property" means any single manufacturing plant, research
laboratory or other similar facility located within the United States of
America (other than its territories and possessions) and owned by, or leased
to, the Company or any Restricted Subsidiary, the book value of the property,
plant and equipment of which (as shown, net of depreciation, on the books of
the owner or owners) is not less than 2% of the Consolidated Net Tangible
Assets at the end of the most recent fiscal year of the Company, reflected in
the latest audited consolidated statement of financial position contained in
the Company's most recent annual report to its stockholders under Rule 14a-3
of the Exchange Act, except (a) any such plant or facility (i) owned or leased
jointly or in common with one or more Persons other than the Company and its
Subsidiaries, in which the interest of the Company and its Restricted
Subsidiaries does not exceed 50%, or (ii) which the Board of Directors
determines by Board Resolution in good faith is not of material importance to
the total business conducted, or assets owned, by the Company and its
Subsidiaries as an entirety, or (b) any portion of any such plant or facility
which the Board of Directors determines by Board Resolution in good faith not
to be of material importance to the use or operation thereof.
The term "Restricted Subsidiary" means any Subsidiary substantially all the
property of which is located, or substantially all of the business of which is
carried on, within the United States of America (other than its territories
and possessions) which shall at the time, directly or indirectly through one
or more Subsidiaries or in combination with one or more other Subsidiaries,
own or be a lessee of a Principal Property.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures will provide that the Company may not consolidate with or
merge into, or convey, transfer or lease its properties and assets
substantially as an entirety to, any Person (a "successor Person"), and may
not permit any Person to merge into, or convey, transfer or lease its
properties and assets substantially as an entirety to, the Company, unless (i)
the successor Person (if any) is a corporation, partnership, trust or other
entity organized and validly existing under the laws of any domestic
jurisdiction and assumes the Company's obligations on the Debt Securities and
under the Indentures, (ii) immediately after giving effect to the transaction,
no Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be continuing,
(iii) if, as a result of the transaction, property of the Company or a
Restricted Subsidiary would become subject to a Lien that would not be
permitted under "Restrictive Covenants--Limitations on Liens," the Company
takes such steps as shall be necessary to secure the Senior Debt Securities,
if any, equally and ratably with (or prior to) the indebtedness secured by
such Lien, and (iv) certain other conditions are met. (Section 801)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indentures with respect to Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Security of that series when due (with
respect to Subordinated Debt Securities, whether or not such payment is
prohibited by the
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subordination provisions of the Subordinated Indenture); (b) failure to pay
any interest on any Debt Securities of that series when due, continued for 30
days (with respect to Subordinated Debt Securities whether or not such payment
is prohibited by the subordination provision of the Subordinated Indenture);
(c) failure to deposit any sinking fund payment, when due, in respect of any
Debt Security of that series (with respect to Subordinated Debt Securities,
whether or not such deposit is prohibited by the subordination provisions of
the Subordinated Indenture); (d) failure to perform any other covenant of the
Company in the Indentures (other than a covenant included in the Indentures
solely for the benefit of a series other than that series), continued for 60
days after written notice has been given by the Trustee, or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that
series, as provided in the Indentures; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default specified in
the applicable Prospectus Supplement. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(e) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders
of at least 25% in aggregate principal amount of the Outstanding Securities of
that series by notice as provided in the Indentures may declare the principal
amount of the Debt Securities of that series (or, in the case of any Debt
Security that is an Original Issue Discount Security or the principal amount
of which is not then determinable, such portion of the principal amount of
such Debt Security, or such other amount in lieu of such principal amount, as
may be specified in the terms of such Debt Security) to be due and payable
immediately. If an Event of Default described in clause (e) above with respect
to the Debt Securities of any series at the time Outstanding shall occur, the
principal amount of all the Debt Securities of that series (or, in the case of
any such Original Issue Discount Security or other Debt Security, such
specified amount) will automatically, and without any action by the Trustee or
any Holder, become immediately due and payable. After any such acceleration,
but before a judgment or decree based on acceleration, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series may, under certain circumstances, rescind and annul such acceleration
if all Events of Default, other than the nonpayment of accelerated principal
(or other specified amount), have been cured or waived as provided in the
Indentures. (Section 502) For information as to waiver of defaults, see
"Modification and Waiver."
Subject to the provisions of the Indentures relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indentures at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Debt Securities of that series. (Section 512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indentures, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of that series, (ii) the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series have made written request, and such Holder or
Holders have offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee and (iii) the Trustee has failed to institute such
proceeding, and has not received from the Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series a direction
inconsistent with such request, within 60 days after such notice, request and
offer. (Section 507) However, such limitations do not apply to a suit
instituted by a Holder of a Debt Security for the enforcement of payment of
the principal of or any premium or interest on such Debt Security on or after
the applicable due date specified in such Debt Security. (Section 508)
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the performance or observance of any of the terms,
provisions and conditions of the Indentures and, if so, specifying all such
known defaults. (Section 1004)
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MODIFICATION AND WAIVER
Modifications and amendments of the Indentures may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debt Security, (b) reduce the
principal amount of, or any premium or interest on, any Debt Security, (c)
reduce the amount of principal of an Original Issue Discount Security or any
other Debt Security payable upon acceleration of the Maturity thereof, (d)
change the place or currency of payment of principal of, or any premium or
interest on, any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f), in
the case of Subordinated Debt Securities, modify the subordination provisions
in a manner adverse to the Holders of the Subordinated Debt Securities, (g)
reduce the percentage in principal amount of Outstanding Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Indentures, (h) reduce the percentage in principal amount of
Outstanding Securities of any series necessary for waiver of compliance with
certain provisions of the Indentures or for waiver of certain defaults, or (i)
modify such provisions with respect to modification and waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Securities
of any series may waive compliance by the Company with certain restrictive
provisions of the Indentures. (Sections 1010 and 1008 of the Senior Indenture
and the Subordinated Indenture, respectively). The Holders of a majority in
principal amount of the Outstanding Securities of any series may waive any
past default under the Indentures, except a default in the payment of
principal, premium or interest and certain covenants and provisions of the
Indentures which cannot be amended without the consent of the Holder of each
Outstanding Security of such series affected. (Section 513)
The Indentures will provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken
any direction, notice, consent, waiver or other action under the Indentures as
of any date, (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 such date upon acceleration of the
Maturity thereof to such date, (ii) if, as of such date, the principal amount
payable at the Stated Maturity of a Debt Security is not determinable (for
example, because it is based on an index), the principal amount of such Debt
Security deemed to be Outstanding as of such date will be an amount determined
in the manner prescribed for such Debt Security, and (iii) the principal
amount of a Debt Security denominated in one or more foreign currencies or
currency units that will be deemed to be Outstanding will be the U.S. dollar
equivalent, determined as of such date in the manner prescribed for such Debt
Security, of the principal amount of such Debt Security (or, in the case of a
Debt Security described in clause (i) or (ii) above, of the amount described
in such clause). Certain Debt Securities, including those for whose payment or
redemption money has been deposited or set aside in trust for the Holders and
those that have been fully defeased pursuant to Section 1302, will not be
deemed to be Outstanding. (Section 101)
Except in certain limited circumstances, the Company will be entitled to set
any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the Indentures, in the manner
and subject to the limitations provided in the Indentures. In certain limited
circumstances, the Trustee will be entitled to set a record date for action by
Holders. If a record date is set for any action to be taken by Holders of a
particular series, such action may be taken only by persons who are Holders of
Outstanding Securities of that series on the record date. To be effective,
such action must be taken by Holders of the requisite principal amount of such
Debt Securities within a specified period following the record date. For any
particular record date, this period will be 180 days or such shorter period as
may be specified by the Company (or the Trustee, if it set the record date),
and may be shortened or lengthened (but not beyond 180 days) from time to
time. (Section 104)
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DEFEASANCE AND COVENANT DEFEASANCE
If and to the extent indicated in the applicable Prospectus Supplement, the
Company may elect, at its option at any time, to have the provisions of
Section 1302, relating to defeasance and discharge of indebtedness, or Section
1303, relating to defeasance of certain restrictive covenants in the
Indentures, applied to the Debt Securities of any series, or to any specified
part of a series. (Section 1301)
Defeasance and Discharge. The Indentures will provide that, upon the
Company's exercise of its option (if any) to have Section 1302 applied to any
Debt Securities, with respect to any Subordinated Debt Securities, the
provisions of Article Fifteen of the Subordinated Indenture relating to
subordination will cease to be effective and, with respect to any Debt
Securities, the Company will be discharged from all its obligations with
respect thereto (except for certain obligations to exchange or register the
transfer of Debt Securities, to replace stolen, lost or mutilated Debt
Securities, to maintain paying agencies and to hold moneys for payment in
trust) upon the deposit in trust for the benefit of the Holders of such Debt
Securities of money or U.S. Government Obligations, or both, which, through
the payment of principal and interest in respect thereof in accordance with
their terms, will provide money in an amount sufficient to pay the principal
of and any premium and interest on such Debt Securities on the respective
Stated Maturities in accordance with the terms of the Indentures and such Debt
Securities. Such defeasance or discharge may occur only if, among other
things, the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Company has received from, or there has been published by, the
United States Internal Revenue Service a ruling, or there has been a change in
tax law, in either case to the effect that Holders of such Debt Securities
will not recognize gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal income
tax on the same amount, in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge were not to occur.
(Sections 1302 and 1304)
Defeasance of Certain Covenants. The Indentures will provide that, upon the
Company's exercise of its option (if any) to have Section 1303 applied to any
Debt Securities, the Company may omit to comply with certain restrictive
covenants, including those described under "Restrictive Covenants" and in the
last sentence under "Consolidation, Merger and Sale of Assets" and any that
may be described in the applicable Prospectus Supplement, and the occurrence
of certain Events of Default, which are described above in clause (d) (with
respect to such restrictive covenants) under "Events of Default" and any that
may be described in the applicable Prospectus Supplement, will be deemed not
to be or result in an Event of Default, in each case with respect to such Debt
Securities, and, in the case of the Subordinated Indenture, the provisions of
Article Fifteen relating to subordination will cease to be effective with
respect to any Subordinated Debt Securities. The Company, in order to exercise
such option, will be required to deposit, in trust for the benefit of the
Holders of such Debt Securities, money or U.S. Government Obligations, or
both, which, through the payment of principal and interest in respect thereof
in accordance with their terms, will provide money in an amount sufficient to
pay the principal of and any premium and interest on such Debt Securities on
the respective Stated Maturities in accordance with the terms of the
Indentures and such Debt Securities. The Company will also be required, among
other things, to deliver to the Trustee an Opinion of Counsel to the effect
that Holders of such Debt Securities will not recognize gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case
if such deposit and defeasance were not to occur. In the event the Company
exercised this option with respect to any Debt Securities and such Debt
Securities were declared due and payable because of the occurrence of any
Event of Default, the amount of money and U.S. Government Obligations so
deposited in trust would be sufficient to pay amounts due on such Debt
Securities at the time of their respective Stated Maturities but may not be
sufficient to pay amounts due on such Debt Securities upon any acceleration
resulting from such Event of Default. In such case, the Company would remain
liable for such payments. (Sections 1303 and 1304)
NOTICES
Notices to Holders of Debt Securities will be given by mail to the addresses
of such Holders as they may appear in the Security Register. (Sections 101 and
106)
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TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the
purpose of making payment and for all other purposes. (Section 308)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112)
REGARDING THE TRUSTEE
The Trustee is the trustee for the Debt Securities to be issued. The Trustee
is also trustee under the Company's ESOP, as defined below, as discussed more
fully herein. In addition, Chemical Mellon Shareholder Services, L.L.C., an
affiliate of the Trustee, is the Rights Agent under the Company's Rights Plan,
as defined below, as discussed more fully herein. The Trustee also provides
cash management and other banking and advisory services to the Company in the
normal course of business.
Upon the occurrence of an Event of Default or an event which, after notice
or lapse of time or both, would become an Event of Default, or upon the
occurrence of a default under such other indenture, the Trustee may be deemed
to have a conflicting interest with respect to the Debt Securities for
purposes of the Trust Indenture Act of 1939 and, unless the Trustee is able to
eliminate any such conflicting interest, the Trustee may be required to resign
as Trustee under either the Subordinated Indenture or the Senior Indenture. In
that event, the Company would be required to appoint a successor trustee for
such Indenture.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 200,000,000 shares
of Common Stock, par value $1.00 per share, and 20,000,000 shares of Class A
Preferred Stock, without par value. The following description of the capital
stock of the Company is a summary, and as such, it does not purport to be
complete and is subject, and qualified in its entirety by reference to, the
more complete descriptions contained in (i) the Articles of Incorporation of
the Company, as amended (the "Articles"), the Bylaws of the Company, as
amended (the "Bylaws"), and the Rights Agreement, effective March 21, 1996,
between the Company and Chemical Mellon Shareholder Services, L.L.C., as
Rights Agent (the "Rights Agreement"), copies of each of which are
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part, and (ii) the certificate of designation relating to
each series of Preferred Stock.
COMMON STOCK
Dividends. Subject to the rights and preferences that may be applicable to
any outstanding Preferred Stock, the holders of Common Stock are entitled to
receive dividends, when, if and as declared by the Board of Directors of the
Company, out of funds legally available therefor.
Voting Rights. The holders of Common Stock are entitled to one vote per
share on all matters to be voted upon by shareholders, except that
shareholders are entitled to cumulate their votes in the election of
directors. Under cumulative voting, a shareholder has the right to multiply
the total number of shares which the shareholder is entitled to vote by the
number of directors to be elected and to cast the whole number of votes so
determined for one nominee or to distribute them among different nominees. The
Bylaws require shareholders desiring to nominate persons for election as a
director to give advance notice of such nominations to the Company.
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Other than in the election of directors, whenever any corporate action is to
be taken by vote of the shareholders of the Company, or by a class of such
shareholders of the Company, generally, it shall be authorized upon receiving
the affirmative vote of a majority of the votes cast by such shareholders, or
by such class of shareholders, entitled to vote thereon. The Articles and
Bylaws require, however, the approval by the holders of at least 80% of the
votes which all shareholders of the Company would be entitled to cast at an
annual election of directors, voting together as a single class, for the
removal of any director, class of directors or the entire Board of Directors
(subject to nonremoval if sufficient votes are cast against removal) or for
any change to any provision of the Articles or Bylaws providing for the number
of directors, the classification of directors or the filling of vacancies on
the Board of Directors, unless any such change is unanimously approved by the
Board of Directors of the Company. In addition, the Bylaws of the Company may
be amended only by a vote of two-thirds of the Board of Directors then in
office, subject to the power of the shareholders to change such action.
The Bylaws provide for the Board of Directors to be divided into three
classes of directors, each class as nearly equal in number as possible, with
one class being elected each year for a three-year term. The classification of
the Board helps to ensure continuity and stability of corporate leadership and
policy; however, it also has the effect of making it more difficult for a
person to acquire control of the Company because at least two annual meetings
are necessary to effect a change in a majority of the Company's directors.
Further, while cumulative voting enables minority shareholders to gain
representation on the Board, the existence of a classified Board increases the
number of shares required to elect at least one director.
Liquidation. In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after the payment of the liabilities and the liquidation
preferences of any outstanding preferred stock.
Other Information. The Common Stock does not carry preemptive rights, is not
redeemable, does not have any conversion rights, is not subject to further
calls and is not subject to any sinking fund provisions. The shares of Common
Stock currently outstanding are freely alienable, fully paid and
nonassessable. Except in certain circumstances as discussed below under
"Description of Capital Stock--Certain Provisions Affecting Control of the
Company," the Common Stock is not subject to discriminatory provisions based
on ownership thresholds.
Conversion of Series A ESOP Preferred Stock. On July 31, 1996, the Trustee
appointed by the Company's Employee Stock Ownership Plan, Mellon Bank, N.A.,
converted the shares of Series A ESOP Preferred Stock formerly held by the
trustee for the account of participants in the Employee Stock Ownership Plan
into Company Common Stock.
CLASS A PREFERRED STOCK
The Class A Preferred Stock, other than Series One Preferred Stock as
discussed below, is issuable in one or more series and will have the dividend,
conversion, redemption, voting and liquidation rights set forth below unless
otherwise provided in the Prospectus Supplement relating to a particular
series of the Preferred Stock. Reference is made to the Prospectus Supplement
relating to the particular series of the Preferred Stock offered thereby for
specific terms, including: (i) the title of the series and the number of
shares in the series offered; (ii) the price at which such series will be
issued; (iii) the dividend rate (or method of calculation), the dates on which
dividends shall be payable and the dates from which dividends shall commence
to accumulate for such series; (iv) any redemption or sinking fund provisions
of such series; (v) any conversion provisions of such series; (vi) the voting
rights, if any, of such series; (vii) the liquidation preference of such
series; and (viii) any additional dividend, liquidation, redemption, sinking
fund and other special or relative rights, preferences, qualifications,
privileges, limitations, options and restrictions of such series. The Class A
Preferred Stock is available for possible future financing and acquisition
transactions, to pay stock dividends or make distributions, to fund employee
benefit plans and for other general corporate purposes. Under certain
circumstances, the Class A Preferred Stock could be used to create voting
impediments for persons seeking to gain control of the Company.
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Dividends. The Preferred Stock will be preferred over the Common Stock (but
may be subordinated as to the other series of Preferred Stock) as to the
payment of dividends. Before any dividends or distributions on the Common
Stock shall be declared and set apart for payment or paid, the holders of
shares of each series of Preferred Stock shall be entitled to receive
dividends (either in cash, shares of Common Stock or Preferred Stock, or
otherwise), when, as and if declared by the Board of Directors, at the rate
and on the date or dates as set forth in the Prospectus Supplement. With
respect to each series of Preferred Stock, the dividends on each share of such
series shall be cumulative from the date of issuance of such shares unless
some other date is set forth in the Prospectus Supplement relating to any such
series. Accruals of dividends shall not bear interest.
Conversion. Shares of any series of Preferred Stock will be convertible into
shares of Common Stock or into shares of any other series of Preferred Stock
to the extent set forth in the Prospectus Supplement relating to any such
series.
Redemption. Shares of any series of Preferred Stock will be redeemable to
the extent set forth in the Prospectus Supplement relating to any such series,
which may or may not include any restrictions on the repurchase or redemption
thereof while there is any arrearage in the payment of dividends.
Voting Rights. Unless otherwise provided in the Prospectus Supplement, the
holders of shares of Preferred Stock will be entitled to one vote for each
share of Preferred Stock held by them on all matters presented to
shareholders.
Liquidation. The Preferred Stock will be preferred over the Common Stock
(but may be subordinated as to other series of Preferred Stock, as described
herein) as to assets so that the holders of each series of Preferred Stock
will be entitled to be paid, upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company and before any distribution is made
to the holders of Common Stock, the amount set forth in the Prospectus
Supplement relating to any such series, but in such case the holders of such
series of Preferred Stock will not be entitled to any other or further
payment.
Other Information. Unless otherwise provided in the Prospectus Supplement,
the Preferred Stock will not carry any preemptive rights, will not be, upon
issuance, subject to further calls and will not be, upon issuance, subject to
any sinking fund provisions. The Preferred Stock will be, when issued, fully
paid and nonassessable. Unless otherwise provided in the Prospectus
Supplement, and except in certain circumstances as discussed below under
"Description of Capital Stock--Certain Provisions Affecting Control of the
Company," the Preferred Stock will not be, upon issuance, subject to
discriminatory provisions based on ownership thresholds.
SERIES ONE PREFERRED STOCK AND PREFERRED STOCK PURCHASE RIGHTS
Preferred Stock Purchase Rights. The Series One Preferred Stock, which is a
series of Class A Preferred Stock, is issuable pursuant to the exercise of
rights to purchase Series One Preferred Stock ("Rights"). The Series One
Preferred Stock is not being offered hereby, although the Rights will attach
to any Common Stock which may be sold pursuant to this Prospectus and any
Prospectus Supplement. On March 21, 1996, the Board of Directors of the
Company paid a distribution of one Right for each outstanding share of Common
Stock of the Company to shareholders of record on January 19, 1996, and with
respect to each share of Common Stock that may be issued by the Company prior
to the date on which the Rights first become exercisable (or the earlier
redemption or expiration of the Rights), subject to adjustment in certain
events. In general, the Rights become exercisable ten days after a person or
group either acquires beneficial ownership of shares representing 20% or more
of the voting power of the Company or announces a tender or exchange offer
that would result in such person or group beneficially owning shares
representing 28% or more of the voting power of the Company. When the Rights
become exercisable, each Right entities its holder (other than such 20%
shareholder or tender or exchange offeror) to buy one one-hundredth of a newly
issued share of Series One Preferred Stock at a purchase price of $300,
subject to adjustment. If, after the Rights become exercisable, any person or
group becomes the beneficial owner of 28% or more of the voting power of the
Company or if the Company is the surviving corporation in a merger with a
person or group that owns 20% or more of the voting power of the
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Company, then each owner of a Right (other than such 20% or 28% shareholder)
will be entitled to purchase shares of Armstrong's Common Stock having a value
equal to twice the exercise price of the Right. In addition, if, after the
Rights become exercisable, the Company is a party to a merger and is not the
surviving company or 50% or more of the Company's assets or earnings power are
sold in a single or series of related transactions, then each owner of a Right
will be entitled to purchase shares of the acquiring person having a value
equal to twice the exercise price of the Right. Until the Rights first become
exercisable, the Rights attach to and trade with shares of the Company's
Common Stock. Generally, the Rights are redeemable at the option of the
Company for $.05 per Right at any time prior to the tenth day following a
public announcement that a person or group has acquired beneficial ownership
of 20% or more of the voting power of the Company. The Rights expire by their
terms on March 21, 2006, unless earlier redeemed.
The terms of the Rights are set forth in the Rights Agreement which has been
filed with the SEC as an Exhibit to a Registration Statement on Form 8-A/A
filed on March 15, 1996, file number 001-02116, and is incorporated herein by
reference.
Dividends. Subject to the rights and preferences of the holders of any other
series of Class A Preferred Stock, the holders of Series One Preferred Stock
are entitled to receive cumulative, quarterly dividends, without interest,
when and as declared by the Board of Directors of the Company, out of funds
legally available therefor, in preference to the holders of Common Stock and
in an amount per share equal to the greater of $36.00 or 100 times, as
adjusted, the aggregate per share amount of all cash and non-cash dividends or
other distributions, other than a dividend or distribution payable in shares
of Common Stock, paid on the Common Stock in the immediately preceding
quarter.
Conversion Rights. In the event the Company enters into any consolidation,
merger, combination or other transaction in which the Common Stock is
exchanged for or changed into other stock or securities, cash and/or any other
property, then the Series One Preferred Stock will be at the same time,
similarly exchanged for or converted into an amount per share equal to 100
times, as adjusted, the aggregate amount for or into which the Common Stock is
exchanged or converted.
Voting Rights. Holders of Series One Preferred Stock have no voting rights
except as may be provided by law.
Redemption. The Series One Preferred Stock may be redeemed at the option of
the Board of Directors of the Company, as a whole, but not in part, at any
time, at a cash price per share equal to 100 times, as adjusted, the average
market value, as defined, of the Common Stock, plus all accrued but unpaid
dividends. The Company is not entitled, however, to purchase or otherwise
acquire shares of the Series One Preferred Stock if the quarterly dividend in
respect thereof is accrued and has not been paid or declared and a sum
sufficient for the payment thereof set apart unless all shares of such stock
at the time outstanding are purchased or otherwise acquired.
Liquidation. Subject to the rights and preferences of the holders of any
other series of Class A Preferred Stock, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of Series
One Preferred Stock are entitled to $100 per share, plus all accrued and
unpaid dividends, plus an amount equal to the holder's pro rata share of
assets that would be available for distribution after payment of all
liabilities, liquidation preferences and distributions on the Common Stock, if
any, as determined according to a formula and subject to adjustment in certain
events. The amount payable to the holders of Series One Preferred Stock as so
determined is prior to any payment or distribution to the holders of Common
Stock.
Other Information. The Series One Preferred Stock does not carry any
preemptive rights, will not be subject, upon issuance, to any sinking fund
provisions and will not be subject, upon issuance, to any further calls. Upon
issuance, the shares of the Series One Preferred Stock will be freely
alienable, fully paid and nonassessable. Except in certain circumstances as
discussed below under "Description of Capital Stock--Certain Provisions
Affecting Control of the Company," the Series One Preferred Stock will be,
upon issuance, freely alienable and not subject to discriminatory provisions
based on ownership thresholds.
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CERTAIN PROVISIONS AFFECTING CONTROL OF THE COMPANY
General. Certain provisions of the Company's Articles, Bylaws and the
Pennsylvania Business Corporation Law (the "PBCL") operate only with respect
to extraordinary corporate transactions, such as mergers, reorganizations,
tender offers, sales or transfers of substantially all of the Company's assets
or the liquidation of the Company, and could have the effect of delaying or
making more difficult a change in control of the Company in certain
circumstances.
Certain Provisions of the Articles. The Articles provide that a Business
Combination (as defined below) with an Interested Shareholder (as defined
below) requires the affirmative vote of shareholders entitled to cast at least
a majority of the votes which all shareholders, other than the Interested
Shareholder, would be entitled to cast at an annual election of directors,
voting together as a single class, unless the transaction is approved by a
majority of the Disinterested Directors (as defined below) or the transaction
meets certain fair price and procedural requirements. An "Interested
Shareholder" is, with certain exceptions, any person, or his assignee or
successor (not including Armstrong or an affiliate of Armstrong), who is (or
was within the previous two years) the beneficial owner of more than ten
percent of the voting power of the outstanding voting stock, together with
such person's affiliates and associates. A "Business Combination" includes,
among other transactions, the following: (i) the merger or consolidation of
the Company with the Interested Shareholder; (ii) the sale of all or
substantially all of the assets of the Company to the Interested Shareholder
or its affiliates or associates; (iii) the issuance of securities of the
Company to an Interested Shareholder having a value equal to greater than ten
percent of the assets of the Company; (iv) the adoption of any plan for the
liquidation or dissolution of the Company proposed by or on behalf of the
Interested Shareholder; or (v) any reclassification or recapitalization of
securities which effectively increases the proportional equity share of the
Interested Shareholder. The term "Disinterested Director" means a director who
is neither affiliated with nor a representative of an Interested Shareholder
and (i) was a director prior to the time an Interested Shareholder became
such, (ii) was recommended or elected to fill a vacancy created by an increase
in the size of the Board of Directors by a majority of the Disinterested
Directors then in office, or (iii) was a successor of a Disinterested Director
and was recommended or elected to succeed a Disinterested Director by a
majority of the Disinterested Directors then in office. Certain other
provisions of the Articles and Bylaws which could have the effect of delaying
or preventing a Change in Control of the Company are described above under the
captions "Description of Capital Stock--Common Stock" and "Description of
Capital Stock--Class A Preferred Stock."
Certain Provisions of the PBCL. The Company is governed by certain "anti-
takeover" provisions in the PBCL which include the following: (i) provisions
which prohibit certain business combinations (as defined in the PBCL)
involving a corporation that has voting shares registered under the Exchange
Act and an "interested shareholder" (generally defined to include a person who
beneficially owns shares representing at least 20% of the votes that all
shareholders would be entitled to cast in an election of directors of the
corporation) unless certain conditions are satisfied or an exemption is
applicable; (ii) provisions concerning a "control-share acquisition" in which
the voting rights of certain shareholders of the corporation (specifically, a
shareholder who acquires 20%, 33 1/3% or 50% or more of the voting power of
the corporation) are conditioned upon the consent of a majority vote at a
meeting of the independent shareholders of the corporation after disclosure by
such shareholder of certain information, and with respect to which such
shareholder is effectively deprived of voting rights if consent is not
obtained; (iii) provisions pursuant to which any profit realized by a
"controlling person or group," generally defined as a 20% beneficial owner,
from the disposition of any equity securities within twenty-four months prior
to, and eighteen months succeeding, the acquisition of such control is
recoverable by the corporation; (iv) provisions pursuant to which severance
payments are to be made by the corporation to any eligible employee of a
covered corporation whose employment is terminated, other than for willful
misconduct, with ninety days before, or twenty-four months after, a control-
share acquisition; (v) provisions pursuant to which any holder of voting
shares of a registered corporation who objects to a "control transaction"
(generally defined as the acquisition by a person or group (the "controlling
person or group") that would entitle the holders thereof to cast at least 20%
of the votes that all shareholders would be entitled to cast in an election of
the directors of the corporation) is entitled to make a written demand on the
controlling person or group for payment of the fair value of the voting shares
of the corporation held by the shareholder; (vi) a set of interrelated
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provisions which are designed to support the validity of actions taken by the
Board of Directors in response to takeover bids, including specifically the
Board's authority to "accept, reject or take no action" with respect to a
takeover bid, and permitting the unfavorable disparate treatment of a takeover
bidder; and (viii) provisions which allow the directors broad discretion in
considering the best interests of the corporation, including a provision which
permits the Board to consider various corporate interests including the short
and long-term interests of the corporation and the resources, intent and
conduct of any person seeking to acquire the corporation.
DESCRIPTION OF DEPOSITARY SHARES
General. The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In the event such
option is exercised, the Company will issue to purchasers receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock)
of a share of a particular series of Preferred Stock.
The shares of any series of the Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000 (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name
and address of the Depositary. Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fractional interest in a share of Preferred Stock underlying such
Depositary Share, to all the rights and preferences of the Preferred Stock
underlying such Depositary Share (including dividend, voting, redemption,
conversion and liquidation rights). The Depositary Shares will be evidenced by
Depositary Receipts issued pursuant to the Deposit Agreement.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts
but not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will
be exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Shares is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock
underlying the Depositary Shares evidenced by the surrendered Depositary
Receipts.
Dividends. The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction
of one cent, and any balance not so distributed shall be added to and treated
as part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
Conversion and Exchange. If any Preferred Stock underlying the Depositary
Shares is subject to provisions relating to its conversion or exchange as set
forth in a Prospectus Supplement relating thereto, each record holder of
Depositary Shares will have the right or obligation to convert or exchange
such Depositary Shares into other securities of the Company or rights or
payments pursuant to the terms thereof.
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Redemption. After the date fixed for redemption as may be set forth in any
Prospectus Supplement relating to the Depositary Shares, the Depositary Shares
so called for redemption will no longer be deemed to be outstanding, and all
rights of the holders of the Depositary Shares will cease, except the right to
receive the moneys payable upon such redemption and any money or other
property to which the holders of such redeemed Depositary Shares were entitled
upon surrender to the Depositary of the Depositary Receipts in respect
thereof. Unless otherwise provided in the Prospectus Supplement or in the
Deposit Agreement, the Depositary Shares will not be subject to any
restriction on the repurchase or redemption thereof while there is any
arrearage in the payment of dividends.
Voting Rights. Upon receipt of notice of any meeting at which the holders of
the Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares relating to such Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the
Depositary as to the exercise of the voting rights pertaining to the number of
shares of Preferred Stock underlying such holder's Depositary Shares. The
Depositary will endeavor, insofar as practicable, to vote the number of shares
of Preferred Stock underlying such Depositary Shares in accordance with such
instructions, and the Company will agree to take all action which may be
deemed necessary by the Depositary in order to enable the Depositary to do so.
The Depositary will abstain from voting shares of Preferred Stock to the
extent it does not receive specific instructions from the holders of
Depositary Shares relating to such Preferred Stock.
Other Information. Unless otherwise provided in the Prospectus Supplement or
the Deposit Agreement, the Depositary Shares will not carry any conversion
rights, will not be subject, upon issuance, to any sinking fund provisions,
will not carry any liquidation or preemption rights and will not be, upon
issuance, subject to any further calls. The Depositary Shares will be, when
issued, freely alienable, fully paid and nonassessable. Unless otherwise
provided in the Prospectus Supplement or the Deposit Agreement, and except in
certain circumstances as described above under "Description of Capital Stock--
Anti-Takeover Provisions," the Preferred Stock will not be, upon issuance,
subject to discriminatory provisions based on ownership thresholds.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the existing holders of Depositary Shares will not be effective
unless such amendment has been approved by the record holders of at least a
majority of the Depositary Shares then outstanding. A Deposit Agreement may be
terminated by the Company Depositary only if (i) all outstanding Depositary
Shares relating thereto have been redeemed or (ii) there has been a final
distribution in respect of the Preferred Stock of the relevant series in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of the related
Depositary Shares.
Charges of Depositary. The Company will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. The Company will also pay charges of the Depositary in
connection with the initial deposit of the Preferred Stock and any redemption
of the Preferred Stock. Holders of Depositary Shares will pay transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
Miscellaneous. The Depositary will forward to the holders of Depositary
Shares all reports and communications which are delivered to the Depositary
and which are required to be furnished to the holders of the Preferred Stock.
Neither the Depositary nor the Company will be liable if either is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares
or Preferred Stock unless satisfactory indemnity is furnished. Either may rely
upon written
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advice of its counsel or accountants, or information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Shares or other
persons believed to be competent and on documents believed to be genuine.
Resignation and Removal of Depositary. The Depositary may resign at any time
by delivering to the Company notice of its election to do so, and the Company
may at any time remove the Depositary, any such resignation or removal to take
effect upon the appointment of a successor Depositary and the Company's
acceptance of such appointment. Such successor Depositary must be appointed
within 90 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States
and having a combined capital and surplus of at least $50,000,000.
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby in any of four
ways: (i) directly to purchasers, (ii) through agents, (iii) through
underwriters, and (iv) through dealers. Offers to purchase Securities may be
made by potential investors or their agents on an unsolicited basis or may be
solicited directly by the Company or agents designated by the Company from
time to time. The applicable Prospectus Supplement or Prospectus Supplements
will set forth the terms of the offering of the Securities, including the name
or names of any agents, underwriters or dealers, the purchase price of the
Securities and the proceeds to be received by the Company from such sale, any
underwriting discounts and other items constituting underwriters' compensation
and any discounts and commissions allowed or reallowed or paid to dealers or
agents. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers or agents may be changed from time to
time.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company in the form of underwriting discounts or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters. Underwriters, dealers and agents
participating in the distribution of Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act of 1933, as
amended. Such underwriters, dealers and agents may be entitled under
agreements which may be entered into by the Company to indemnification by the
Company against and contribution toward certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Securities may be distributed in one or more transactions from time to
time at a fixed price or prices, which may be changed, or from time to time at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If so indicated in the applicable Prospectus Supplement or Prospectus
Supplements, the Company will authorize dealers or other persons acting as the
Company's agents to solicit offers by certain institutions to purchase
Securities from the Company at the public offering price set forth in the
applicable Prospectus Supplement or Prospectus Supplements pursuant to delayed
delivery contracts ("Contracts") providing for payment and delivery on the
future date or dates stated in the applicable Prospectus Supplement or
Prospectus Supplements. Each Contract will be for an amount not less than, and
the aggregate amount of Securities sold pursuant to Contracts shall be not
less nor more than, the respective amounts stated in the applicable Prospectus
Supplement or Prospectus Supplements. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the Company. The obligations of any purchaser under any Contract
will not be subject to any conditions except (1) the purchase by an
institution of the Securities covered by its Contract shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject and (2) if Securities are being sold to
underwriters, the Company shall have sold to such underwriters the total
principal amount of such Securities less the principal amount thereof covered
by Contracts. Underwriter and such other persons will not have any
responsibility in respect of the validity or performance of Contracts.
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The Securities (other than Common Stock) will be a new issue of securities
with no established trading market. If so indicated in the applicable
Prospectus Supplement, any underwriters or agents to or through whom
Securities are sold by the Company for public offering and sale may make a
market in such Securities, but such underwriters and agents will not be
obligated to do so and may discontinue any market-making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for any Securities, other than Common Stock.
Certain of the underwriters, dealers and/or agents and their associates may
be customers of, engage in transactions with and perform services for the
Company, including its subsidiaries, in the ordinary course of business.
VALIDITY OF SECURITIES
Unless indicated otherwise in a Prospectus Supplement relating thereto, the
validity of the Securities will be passed upon for Armstrong by Buchanan
Ingersoll Professional Corporation, Pittsburgh, Pennsylvania. With the
exception of the Preferred Stock Purchase Rights, the validity of the
Securities will be passed upon for the underwriters or agents, as the case may
be, by Sullivan & Cromwell, New York, New York. Sullivan & Cromwell will rely
upon the opinion of Buchanan Ingersoll Professional Corporation as to all
matters of Pennsylvania law.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries as of December 31, 1995 and 1994 and for each of the fiscal years
in the three-year period ended December 31, 1995, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick L.L.P., independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended June 30, 1996 and 1995, and, March 31, 1996 and 1995, incorporated by
reference herein, the independent certified public accountants have reported
that they applied limited procedures in accordance with professional standards
for a review of such information. However, their separate reports included in
the Company's quarterly report on Form 10-Q for the quarters ended June 30,
1996 and March 31, 1996, certain portions of which are superseded by the
Company's Current Report on Form 8-K filed on October 18, 1996, and
incorporated by reference herein, state that they did not audit and they do
not express an opinion on the interim financial information. Accordingly, the
degree of reliance on such reports should be restricted in light of the
limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of section 11 of the 1933 Act for their
reports on the unaudited interim financial information because those reports
are not "reports" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of sections 7 and 11 of the
1933 Act.
The consolidated financial statements of Dal-Tile International Inc.
incorporated by reference in the Company's Current Report on Form 8-K, as
amended, for the fiscal year ended December 31, 1994, have been audited by
Ernst & Young L.L.P., independent auditors, as set forth in their report
thereon (which contains an explanatory paragraph with respect to a change in
the method of accounting for income taxes as discussed in Note 8 to the
consolidated financial statements) incorporated therein and herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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