<PAGE> 1
As filed with the Securities and Exchange Commission on July 25, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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OWENS CORNING OWENS CORNING CAPITAL II
(Exact name of Registrant as specified (Exact name of Registrant as specified
in its charter) in its certificate of trust)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
34-4323452 31-6560375
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
C/O OWENS CORNING
OWENS CORNING WORLD HEADQUARTERS OWENS CORNING WORLD HEADQUARTERS
TOLEDO, OHIO 43659 TOLEDO, OHIO 43659
(419) 248-8000 (419) 248-8000
(Address, including zip code, and (Address, including zip code,
telephone number, including area code, and telephone number, including area
of principal executive offices) code, of principal executive offices)
---------------------------
CHRISTIAN L. CAMPBELL, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
OWENS CORNING
OWENS CORNING WORLD HEADQUARTERS
TOLEDO, OHIO 43659
(419) 248-8000
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each Registrant)
---------------------------
Please send copies of all communications to:
RALPH ARDITI, ESQ. JOHN W. OSBORN, ESQ.
DEBEVOISE & PLIMPTON SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
875 THIRD AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 909-6000 (212) 735-3000
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective depending upon
market conditions and other factors.
---------------------------
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box: |_|
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE(1)(3)
TO BE REGISTERED REGISTERED PER UNIT(1)(2) PRICE(1)(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Purchase Units of Owens
Corning (4) $105,000,000(5) 100% $105,000,000 $31,818
- -----------------------------------------------------------------------------------------------------------------
Stock Purchase Contracts of Owens
Corning (4)
- -----------------------------------------------------------------------------------------------------------------
Common Stock, $0.10 par value, of
Owens Corning (6)
- -----------------------------------------------------------------------------------------------------------------
Preferred Securities of Owens
Corning Capital II $345,000,000(7) 100% $345,000,000 $104,546
- -----------------------------------------------------------------------------------------------------------------
Debentures of Owens Corning (8)
- -----------------------------------------------------------------------------------------------------------------
Guarantee and back-up
undertakings by Owens Corning in
connection with Preferred Securities
of Owens Corning Capital II (9)
- -----------------------------------------------------------------------------------------------------------------
Total....................... $450,000,000 100% $450,000,000 $136,364
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. The aggregate public offering price of the Stock
Purchase Units, Stock Purchase Contracts, Common Stock and Debentures of
Owens Corning and the Preferred Securities of Owens Corning Capital II
registered hereby will not exceed $450,000,000.
(2) Exclusive of accrued interest and distributions, if any.
(3) Does not include Stock Purchase Units, Stock Purchase Contracts and Common
Stock of Owens Corning covered by Registration Statement No. 333-24501
that are being carried over to this Registration Statement. Also does not
include the registration fee of $72,727 that was previously paid with
respect to such securities.
(4) Each Stock Purchase Unit of Owens Corning is a unit that consists of (i) a
Stock Purchase Contract of Owens Corning under which the holder, upon
settlement of such Stock Purchase Contract, will purchase an indeterminate
number of shares of Common Stock to be issuable by Owens Corning and (ii)
initially a beneficial interest in Preferred Securities of Owens Corning
Capital II or debt obligations of third parties, including U.S. Treasury
securities, purchased with the proceeds from the sale of the Stock
Purchase Unit and pledged to secure the obligation of such holder to
purchase such shares of Common Stock. No separate consideration will be
received for the Stock Purchase Contracts.
(5) Includes $45,000,000 in Stock Purchase Units of Owens Corning which the
Underwriters will have the right to purchase solely to cover
over-allotments, if any.
(6) Consists of such indeterminate number of shares of Common Stock to be
issuable by Owens Corning upon settlement of the Stock Purchase Contracts
of Owens Corning, including shares of such Common Stock issuable upon
settlement of Deferred Contract Adjustment Payments as further described
in the Registration Statement. Includes Preferred Share Purchase Rights
("Rights"). Prior to the occurrence of certain events, the Rights will not
be exercisable or evidenced separately from the Common Stock of Owens
Corning.
(7) Includes $45,000,000 in Preferred Securities of Owens Corning Capital II
which the Underwriters will have the right to purchase solely to cover
over-allotments, if any.
(8) The Debentures of Owens Corning will be purchased by Owens Corning Capital
II with the proceeds from the sale of the Preferred Securities of Owens
Corning Capital II.
(9) No separate consideration will be received for the Guarantee or back-up
undertakings of Owens Corning. Includes the rights of holders of the
Preferred Securities under such Guarantee and back-up undertakings,
consisting of obligations of Owens Corning as set forth in the Amended and
Restated Declaration of Trust of Owens Corning Capital II (including the
obligation to pay expenses of Owens Corning Capital II) and the Indenture
governing the Debentures of Owens Corning, in each case as further
described in the Registration Statement.
Pursuant to the provisions of Rule 429 under the Securities Act of 1933,
the Prospectus contained in this Registration Statement also relates to
$240,000,000 of unsold Stock Purchase Units, Stock Purchase Contracts and Common
Stock of Owens Corning covered by the Registration Statement on Form S-3
(Registration No. 333-24501) of Owens Corning, Owens Corning Capital II and
Owens Corning Capital III that are being carried forward in connection with this
Registration Statement. Such Registration Statement is accordingly amended to
reflect the information contained herein. In the event that any of such
previously registered securities are offered prior to the effective date of this
Registration Statement, the amount of such securities will not be included in
any Prospectus hereunder. The amount of securities being registered under this
Registration Statement, together with the remaining securities registered under
Registration Statement No. 333-24501, represents the maximum amount of
securities which are expected to be offered for sale.
---------------------------
<PAGE> 3
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 4
EXPLANATORY NOTE
Two forms of prospectus supplement are included in this Registration
Statement: (i) a prospectus supplement covering capital securities of Owens
Corning Capital II ("Capital Securities"), which are referred to as "Preferred
Securities" in the base prospectus, that will be guaranteed by Owens Corning to
the extent described therein, and (ii) a prospectus supplement covering FELINE
PRIDES(sm), which are referred to as "Stock Purchase Units" in the base
prospectus, to be issued by Owens Corning, and which will consist of (A) stock
purchase contracts to purchase shares of common stock of Owens Corning and (B)
beneficial interests in interest-bearing U.S. Treasury securities, or, under
certain circumstances, non-interest-bearing U.S. Treasury securities, that will
be pledged to secure the obligations to purchase such shares under such stock
purchase contracts.
<PAGE> 5
Information Contained Herein Is Subject to Completion or Amendment. A
Registration Statement Relating to These Securities Has Been Filed with the
Securities and Exchange Commission. These Securities May Not Be Sold Nor May
Offers to Buy Be Accepted Prior to the Time the Registration Statement Becomes
Effective. This Prospectus Supplement and the Accompanying Prospectus Shall Not
Constitute an Offer to Sell or the Solicitation of an Offer to Buy Nor Shall
There Be Any Sale of These Securities in Any State in Which Such Offer,
Solicitation or Sale Would Be Unlawful Prior to Registration or Qualification
under the Securities Laws of Any State or Jurisdiction.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated , 1997)
$300,000,000
OWENS CORNING CAPITAL II
% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
guaranteed to the extent set forth herein by
OWENS CORNING
---------------------------
The [ ]% Capital Securities (the "Capital Securities") offered hereby
represent preferred undivided beneficial interests in the assets of Owens
Corning Capital II, a statutory business trust formed under the laws of the
State of Delaware ("OC Capital" or the "Trust"). Owens Corning, a Delaware
corporation ("Owens Corning" or the "Company"), will directly or indirectly own
all the common securities (the "Common Securities" and, together with the
Capital Securities, the "Trust Securities") representing undivided beneficial
interests in the assets of OC Capital. OC Capital exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in an equivalent
amount of [ ]% Junior Subordinated Debentures, due [ ], 2000 (the "Junior
Subordinated Debentures"), of Owens Corning. The Junior Subordinated Debentures
and the Capital Securities in respect of which this Prospectus Supplement is
being delivered shall be referred to herein as the "Offered Securities." The
Junior Subordinated Debentures will mature on [ ], 2000 (the "Stated Maturity").
The Junior Subordinated Debentures when issued will be unsecured obligations of
Owens Corning and will be subordinate and junior in right of payment to Senior
Indebtedness (as defined herein) of the Company. Upon a Declaration Event of
Default (as defined herein), the holders of Capital Securities will have a
preference over the holders of the Common Securities with respect to payments in
respect of distributions and payments upon redemption, liquidation and
otherwise.
(continued on next page)
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE ___ OF THIS PROSPECTUS SUPPLEMENT
FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE CAPITAL SECURITIES MAY BE DEFERRED AND THE RELATED UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
---------------------------
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 ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================================
INITIAL PUBLIC OFFERING UNDERWRITING PROCEEDS TO TRUST(3)(4)
PRICE (1) COMMISSION(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Capital Security....................... $ 1,000 (3) $
- ------------------------------------------------------------------------------------------------------------------------------
Total(5)................................... $ 300,000,000 (3) $
==============================================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from , 1997.
(2) OC Capital and Owens Corning have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Capital
Securities will be invested in the Junior Subordinated Debentures,
Owens Corning has agreed to pay to the Underwriters as compensation
(the "Underwriters' Compensation") for their arranging the investment
therein of such proceeds $ per Capital Security (or $ in the
aggregate); provided, that such compensation for sales of or more
Capital Securities to a single purchaser will be $ per Capital
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by Owens Corning are
estimated to be $ .
(5) The Company and the Trust have granted to the Underwriters a 30-day
option to purchase up to an additional $45,000,000 in liquidation
amount of Capital Securities, to cover over-allotments, if any. If
such option is exercised in full, the total Initial Public Offering
Price, Underwriting Commission and Proceeds to Trust will be
$ , $ and $ , respectively. See
"Underwriting."
---------------------------
The Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Capital Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about , 1997.
---------------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
The date of this Prospectus Supplement is , 1997.
<PAGE> 6
(Continued from previous page)
Holders of the Capital Securities are entitled to receive cumulative
cash distributions ("Distributions") at an annual rate of % of the liquidation
amount of $1,000 per Capital Security, accruing from the date of original
issuance and payable semi-annually in arrears on ________________ and
___________________ of each year, commencing , 1998. The payment of
Distributions out of moneys held by OC Capital and payments on liquidation of OC
Capital or the redemption of Capital Securities, as set forth below, are
guaranteed on a subordinated basis by Owens Corning (the "Capital Securities
Guarantee") to the extent described herein and under "Description of the
Guarantee" in the accompanying Prospectus. The Capital Securities Guarantee
covers payments of Distributions and other payments on the Capital Securities
only if and to the extent that OC Capital has funds available therefor, which
will only occur if Owens Corning has made a payment of interest or principal or
other payments on the Junior Subordinated Debentures held by OC Capital as its
sole asset. The Capital Securities Guarantee, when taken together with the
Company's obligations under the Junior Subordinated Debentures and the Indenture
(as defined herein) and its obligations under the Declaration (as defined
herein), including its liabilities to pay costs, expenses, debts and obligations
of OC Capital (other than with respect to the Trust Securities), have the affect
of providing a full and unconditional guarantee on a subordinated basis of
amounts due on the Capital Securities. See "Risk Factors -- Rights Under the
Capital Securities Guarantee" herein. The obligations of Owens Corning under the
Capital Securities Guarantee rank (i) subordinate and junior in right of payment
to all other liabilities of the Company, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company and (iii) senior
to the Company's common stock. The obligations of Owens Corning under the Junior
Subordinated Debentures are subordinate and junior in right of payment to all
present and future Senior Indebtedness of Owens Corning. There was approximately
$2,324 million of Senior Indebtedness at June 30, 1997. The Junior Subordinated
Debentures purchased by the Trust may be subsequently distributed pro rata to
holders of the Trust Securities in connection with the dissolution of the Trust.
The distribution rate and the distribution payment date and other
payment dates for the Capital Securities will correspond to the interest rate
and interest payment dates and other payment dates on the Junior Subordinated
Debentures, which will be the sole asset of the Trust. As a result, if Owens
Corning does not make principal or interest payments on the Junior Subordinated
Debentures, the Trust will not have sufficient funds to make distributions on
the Capital Securities; in which event, the Capital Securities Guarantee will
not apply to such distributions until the Trust has sufficient funds available
therefor.
So long as Owens Corning is not in default in the payment of interest
on the Junior Subordinated Debentures, it has the right to defer payments of
interest on the Junior Subordinated Debentures by extending the interest payment
period on the Junior Subordinated Debentures (an "Extension Period"), provided
that no Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debentures. If interest payments are so deferred, distributions on
the Capital Securities will also be deferred. During such Extension Period,
distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at an annual rate of % per annum compounded
semi-annually, and during any Extension Period, holders of Capital Securities
will be required to include deferred interest income in their gross income for
United States federal income tax purposes in advance of receipt of the cash
distributions with respect to such deferred interest payments. There could be
multiple Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debentures. See "Risk Factors -- Option to Extend Interest Payment
Period;" "Description of the Junior Subordinated Debentures -- Option to Extend
Interest Payment Period;" and "Certain Federal Income Tax Consequences --
Interest Income and Original Issue Discount."
The Junior Subordinated Debentures may be prepaid by Owens Corning, in
whole but not in part, at any time within 90 days of the occurrence of a Tax
Event or an Investment Company Event (as each such term is defined herein). If
Owens Corning prepays the Junior Subordinated Debentures, the Trust must redeem
Trust Securities on a pro rata basis having an aggregate liquidation amount
equal to the aggregate principal amount of the Junior Subordinated Debentures so
prepaid at a redemption price per Capital Security equal
S-2
<PAGE> 7
to the Make-Whole Amount (as defined herein) plus accrued and unpaid
distributions thereon to the date fixed for redemption. See "Description of the
Junior Subordinated Debentures -- Special Event Prepayment." The Capital
Securities will be redeemed upon maturity of the Junior Subordinated Debentures.
The Company will have the right at any time to dissolve the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. If the Junior Subordinated Debentures are distributed to the
holders of the Capital Securities, the Company will use its best efforts to
cause the Junior Subordinated Debentures to be listed on the New York Stock
Exchange or on such other exchange as the Capital Securities are then listed.
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Capital Securities will be entitled
to receive for each Capital Security a liquidation amount of $1,000 plus accrued
and unpaid distributions thereon (including interest thereon) to the date of
payment, unless, in connection with such dissolution, the Junior Subordinated
Debentures are distributed to the holders of the Capital Securities. See
"Description of the Capital Securities -- Liquidation Distribution Upon
Dissolution."
---------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE CAPITAL SECURITIES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING
TRANSACTIONS, THE PURCHASE OF CAPITAL SECURITIES TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
S-3
<PAGE> 8
THE COMPANY
Owens Corning, a global company incorporated in Delaware in
1938, serves consumers and industrial customers with high-performance glass
fiber composites and building materials systems. These products are used in
industries such as home improvement and repair, new construction,
transportation, marine, aerospace, energy, appliance, packaging and electronics.
The Company operates in two industry segments Building Materials and Composite
Materials - divided into ten businesses. The Company also has affiliate
companies in a number of countries.
Owens Corning's Building Materials products are marketed
through multiple distribution channels, often with the aid of the Company's well
known "spokescritter" the Pink Panther. Over the last several years, the Company
has supplemented its traditional relationships with specialty distributors and
wholesalers with increasing presence among the large "do-it-yourself" home
center retailers. In 1996, 41% of total Company sales were made to the U.S. home
improvement and remodeling markets which these retailers serve.
The Company recently introduced a strategic initiative,
System Thinking for the Home(TM), designed to leverage Owens Corning's broad
product offering and strong brand recognition. This systems approach represents
a shift from product-oriented to systems-driven solutions across all lines of
business. By redefining its role as a provider of insulation, roofing, siding,
windows and accessories and linking all of its products and technology to create
a high-performance building envelope, Company management is targeting an
increased share of the $220 billion building materials and home improvement
industry.
Building Materials operates primarily in North America and
Europe. It also has a growing presence in Latin America and Asia Pacific.
Building Materials sells a variety of building and home improvement products in
three major categories: glass fiber and foam insulation, roofing materials, and
other specialty products for the home, such as housewrap, vinyl windows and
patio doors, and vinyl siding. The businesses responsible for these products and
markets include: Insulation, Building Materials Sales and Distribution North
America, Building Materials - Europe and Africa, Roofing/Asphalt, Specialty and
Foam Products, Western Fiberglass Group, Latin America, and Asia Pacific.
Composite Materials operates in North America, Europe and
Latin America, with affiliates and licensees around the world, including a
growing presence in Asia Pacific. The businesses responsible for these products
include: Composites, Latin America, Engineered Pipe & Fabrication Systems, and
Asia Pacific.
The Company is the world's leading producer of glass fiber
materials used in composites. Composites are fabricated material systems made up
of two or more components (e.g., plastic resin and glass fiber) used in various
applications to replace traditional materials, such as aluminum, wood, and
steel. The global composites industry has expanded to include more than 40,000
end-use applications. Worldwide, the composites industry has relatively few raw
material component suppliers (glass fiber, resin and additives) delivering to
thousands of industrial customers through various channels. Depending on the
end-use application, these raw materials move through different manufacturing
process chains, ultimately finding their way to consumers through myriad markets
worldwide. The primary end use markets that the Company serves are construction,
transportation, and electrical/electronics.
The following table summarizes selected information concerning the Company's
industry segments. The table does not include information concerning Fibreboard
Corporation because the acquisition by the Company of Fibreboard Corporation did
not occur until the end of the quarter ended June 30, 1997. See "--Recent
Developments." For further information, see Notes 1 and 3 of the Notes to
Consolidated Financial Statements of the Company as of June 30, 1997 included in
the Second quarter Form 10-Q and Note 1 of the Notes to Consolidated Financial
Statements of the Company as of December 31, 1996 included in the 1996 Form
10-K, each of which is incorporated herein by reference.
S-4
<PAGE> 9
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- -----------------
1997 1996(a) 1996(b) 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales:
Building Materials ............... $ 1,318 $ 1,221 $ 2,687 $ 2,404
Composite Materials .............. 574 584 1,145 1,208
Consolidated Net Sales ........... $ 1,892 $ 1,805 $ 3,832 $ 3,612
Income (Loss) from Operations:
Building Materials ............... $ 122 $ 89 $ 219 $ 237
Composite Materials .............. 101 116 222 225
General Corporate Expense ........ (41) (895) (945) (50)
Total Income (Loss) from
Operations ................... $ 182 $ (690) $ (504) $ 412
</TABLE>
- ---------------
(a) Income from operations for the six months ended June 30, 1996 includes the
Company's pretax charge of $875 million for asbestos litigation claims to
be received after 1999 and probable additional insurance recovery, all of
which was recorded as an increase in general corporate expense. Income from
operations for the six months ended June 30, 1996 also includes the
Company's pretax gain of $37 million from the sale of its ownership
interest in its Japanese affiliate Asahi Fiber Glass Co. Ltd., all of which
was recorded as a reduction in general corporate expense. Also included are
special charges totaling $42 million, including valuation adjustments
associated with prior divestitures, major product line productivity
initiatives and a contribution to the Owens Corning Foundation. The impact
of these special items was to reduce income from operations for Building
Materials by $22 million and for Composite Materials by $5 million and to
increase general corporate expense by $15 million.
(b) Income from operations for the year ended December 31, 1996 includes a net
pretax charge of $875 million for asbestos litigation claims that may be
received after 1999 and probable additional insurance recovery; charges
totaling $42 million, including valuation adjustments associated with prior
divestitures, major product line productivity initiatives and a
contribution to the Owens-Corning Foundation; a pretax charge of $43
million for restructuring and other actions; and a pretax gain of $37
million from the sale of the Company's ownership interest in its former
Japanese affiliate, Asahi Fiber Glass Co. Ltd. The impact of these special
items was to reduce income from operations for Building Materials by $50
million and for Composite Materials by $12 million, and to increase general
corporate expense by $861 million.
RECENT DEVELOPMENTS
On June 27, 1997, Sierra Corp., a Delaware corporation and a wholly
owned subsidiary of the Company ("Sierra Corp."), completed a tender offer (the
"Fibreboard Tender Offer") for all of the outstanding shares of common stock
(including certain associated preferred stock purchase rights) of Fibreboard
Corporation, a Delaware corporation ("Fibreboard"), by purchasing approximately
92% of such shares for a purchase price of $55.00 per share. On July 3, 1997,
Sierra Corp. was merged with and into Fibreboard (the "Fibreboard Merger" and,
together with the Fibreboard Tender Offer, the "Fibreboard Acquisition"), and,
as a result of the Fibreboard Merger, each outstanding share of Fibreboard's
common stock that was not purchased in the Fibreboard Tender Offer was converted
into a right to receive $55.00 in cash (subject to applicable appraisal rights
pursuant to Delaware law). Fibreboard is a leading producer and distributor of
vinyl siding and other residential and industrial building materials.
The total purchase price for the Fibreboard Acquisition was $657
million, which included an assumption of $138 million of debt. The Fibreboard
Acquisition was financed through loans made under a $2 billion Credit Agreement,
dated as of June 26, 1997 (the "Credit Agreement"), among the Company,
S-5
<PAGE> 10
Sierra Corp., certain other subsidiaries of the Company, the banks party thereto
and Credit Suisse First Boston, as agent for such banks.
The acquisition of Fibreboard provides the Company with a
significant position in vinyl siding and therefore furthers the System Thinking
for the Home(TM) strategy. Fibreboard also manufactures and sells other
produts which Company management believe are complementary to Owens Corning's
existing product and distribution strengths. Through Fibreboard's company-owned
distribution system, the Company also gains additional access to a significant
customer base.
THE TRUST
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of April 2, 1997, executed by
the Company, as sponsor (the "Sponsor"), and the trustees of the Trust (the
"Owens Corning Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on April 2, 1997. Such declaration
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement forms a part. The Declaration will
be qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). Upon issuance of the Capital Securities, the
purchasers thereof will own all of the Capital Securities. See "Description of
the Capital Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." The Company will directly or indirectly acquire Common Securities in
an aggregate liquidation amount equal to 3% of the total capital of the Trust.
The Trust exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the proceeds of the Trust Securities in the Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto. The Trust has a term of approximately five (5) years, but
may terminate earlier as provided in the Declaration.
Pursuant to the Declaration, the number of Owens Corning Trustees
initially is three. Two of the Owens Corning Trustees (the "Regular Trustees")
are persons who are employees or officers of or who are affiliated with the
Company. The third trustee will be a financial institution that is unaffiliated
with the Company, which trustee serves as institutional trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Institutional Trustee"). Initially,
Wilmington Trust Company, a banking organization organized under the laws of the
State of Delaware, will be the Institutional Trustee until removed or replaced
by the holder of the Common Securities. For the purpose of compliance with the
provisions of the Trust Indenture Act, Wilmington Trust Company will also act as
trustee (the "Guarantee Trustee") under the Capital Securities Guarantee and as
Delaware Trustee for the purposes of the Trust Act (as defined herein), until
removed or replaced by the holder of the Common Securities. See "Description
of the Capital Securities Guarantee" and "Description of the Capital
Securities -- Voting Rights."
The Institutional Trustee will hold title to the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture as the holder of the Junior Subordinated
Debentures. In addition, the Institutional Trustee will maintain exclusive
control of a segregated non-interest bearing bank account (the "Property
Account") to hold all payments made in respect of the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the Capital
Securities Guarantee for the benefit of the holders of the Capital Securities.
The Company, as the direct or indirect holder of all the Common Securities, will
have the right to appoint, remove or replace any Owens Corning Trustee and to
increase or decrease the number of Owens Corning Trustees; provided, that the
number of Owens Corning Trustees shall be at least three, a majority of which
shall be Regular Trustees. The Company will pay all fees and expenses related to
the Trust and the offering of the Trust Securities. See "Description of the
Junior Subordinated Debentures -- Miscellaneous."
S-6
<PAGE> 11
The rights of the holders of the Capital Securities, including
economic rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"), and
the Trust Indenture Act. See "Description of the Capital Securities."
The trustee in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. The
principal place of business of the Trust shall be c/o Owens Corning, Owens
Corning World Headquarters, Toledo, Ohio 43659, and its telephone number shall
be (419) 248-8000.
S-7
<PAGE> 12
RISK FACTORS
Prospective purchasers of Capital Securities should consider, in addition
to the other information contained or incorporated by reference in this
Prospectus Supplement, the following matters.
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Capital
Securities. There can be no assurance that an active public market will develop
for the Capital Securities or that, if such market develops, the market price
will equal or exceed the public offering price set forth on the cover page of
this Prospectus Supplement. Prices for the Capital Securities will be determined
in the marketplace and may be influenced by many factors, including the
liquidity of the market for the Capital Securities, investor perceptions of the
Company and general industry and economic conditions.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE CAPITAL SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED DEBENTURES
The Company's obligations under the Capital Securities Guarantee rank (i)
subordinate and junior in right of payment to all other liabilities of the
Company, (ii) pari passu with the most senior preferred or preference stock now
or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock of
any affiliate of the Company; and (iii) senior to the Company's common stock.
The obligations of Owens Corning under the Junior Subordinated Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of Owens Corning and rank pari passu with obligations to or rights
of the Company's other general unsecured creditors. No payment of principal
(including redemption payments, if any) or interest on the Junior Subordinated
Debentures may be made if (i) any Senior Indebtedness is or becomes due and
payable (whether at maturity, for an installment of principal or interest, upon
acceleration, for mandatory prepayment, or otherwise) and remains unpaid: (ii)
any Senior Indebtedness Default (as defined herein) has occurred and has not
been cured or waived in conformity with the terms of the instrument, indenture
or agreement governing such Senior Indebtedness; or (iii) a payment by the
Company with respect to the Junior Subordinated Debentures would, immediately
after giving effect thereto, result in a Senior Indebtedness Default. As of June
30, 1997, Senior Indebtedness of the Company aggregated approximately $2,324
million. There are no terms in the Capital Securities, the Junior Subordinated
Debentures or the Capital Securities Guarantee that limit the Company's ability
to incur additional indebtedness, including indebtedness that ranks senior to
the Junior Subordinated Debentures and the Capital Securities Guarantee. See
"Description of the Capital Securities Guarantee -- Status of the Capital
Securities Guarantee" and "Description of the Junior Subordinated Debentures --
Subordination."
RIGHTS UNDER THE CAPITAL SECURITIES GUARANTEE
The Capital Securities Guarantee will be qualified as an indenture under
the Trust Indenture Act. The Guarantee Trustee will act as indenture trustee
under the Capital Securities Guarantee for the purposes of compliance with the
provisions of the Trust Indenture Act. The Guarantee Trustee will hold the
Capital Securities Guarantee for the benefit of the holders of the Capital
Securities.
The Capital Securities Guarantee guarantees to the holders of the Capital
Securities, on a subordinated basis, the payment of (i) any accrued and unpaid
distributions that are required to be paid on the Capital Securities, to the
extent the Trust has funds available therefor, (ii) the Special Event Redemption
Price (as defined herein), with respect to Capital Securities called for
redemption by the Trust, to the extent the Trust has funds available therefor,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (other than in connection with the distribution of Junior
Subordinated Debentures to the holders of Capital Securities or a redemption of
all the Capital Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid distributions on the Capital Securities to the
date of the payment to the extent the Trust has funds available therefor or (b)
the amount of assets of the Trust remaining available for distribution to
holders of the Capital Securities in liquidation of the
S-8
<PAGE> 13
Trust. The holders of a majority in liquidation amount of the Capital Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the Capital
Securities Guarantee. Notwithstanding the foregoing, any holder of Capital
Securities may institute a legal proceeding directly against Owens Corning to
enforce such holder's rights under the Capital Securities Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity. If Owens Corning were to default on its obligation
to pay amounts payable on the Junior Subordinated Debentures or otherwise, the
Trust would lack funds for the payment of distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities would not be able to rely upon the Capital Securities
Guarantee for payment of such amounts. Instead, holders of the Capital
Securities would rely on the enforcement (1) by the Institutional Trustee of its
rights as registered holder of the Junior Subordinated Debentures against Owens
Corning pursuant to the terms of the Indenture and the Junior Subordinated
Debentures or (2) by such holder of the Institutional Trustee's or such holder's
own rights against Owens Corning to enforce payments on the Junior Subordinated
Debentures. See "Description of the Capital Securities Guarantee," "Description
of the Junior Subordinated Debentures" and "-- Enforcement of Certain Rights by
Holders of Capital Securities." The Declaration provides that each holder of
Capital Securities, by acceptance thereof, agrees to the provisions of the
Capital Securities Guarantee, including the subordination provisions thereof,
and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Declaration Event of Default occurs and is continuing, the holders of
Capital Securities would rely on the enforcement by the Institutional Trustee of
its rights as registered holder of the Junior Subordinated Debentures against
Owens Corning. In addition, the holders of a majority in liquidation amount of
the Capital Securities will have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as the holder of
the Junior Subordinated Debentures. The Indenture provides that the Debt Trustee
(as defined herein) shall give holders of Junior Subordinated Debentures notice
of all defaults or events of default within 30 days after occurrence. However,
except in the cases of a default or an event of default in payment on the Junior
Subordinated Debentures, the Debt Trustee is protected in withholding such
notice if its officers or directors in good faith determine that withholding of
such notice is in the interest of such holders.
If the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debentures in respect of an Indenture Event of Default after a
holder of record of Capital Securities has made a written request, such holder
of record of Capital Securities may institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures. In addition, if Owens Corning fails to pay interest or
principal on the Junior Subordinated Debentures (a "Debt Payment Failure") on
the date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), and such Debt Payment Failure is
continuing, a holder of Capital Securities may directly institute a proceeding
for enforcement of payment to such holder of the principal of or interest on the
Junior Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such holder (a "Direct Action")
after the respective due date specified in the Junior Subordinated Debentures.
In connection with such a Direct Action, the Company shall have the right under
the Indenture to set off any payment made to such holder by the Company. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures. See
"Description of the Capital Securities -- Declaration Events of Default."
LIMITED RIGHTS OF ACCELERATION
The Institutional Trustee, as holder of the Junior Subordinated
Debentures, may accelerate payment of the principal and accrued and unpaid
interest on the Junior Subordinated Debentures only upon the occurrence and
continuation of a Declaration Event of Default or Indenture Event of Default,
which
S-9
<PAGE> 14
generally are limited to payment defaults, breaches of certain covenants,
certain events of bankruptcy, insolvency and reorganization of the Company and
certain events of dissolution, winding-up or termination of the Trust. See
"Description of the Capital Securities -- Declaration Events of Default."
Accordingly, there is no right to acceleration upon default by the Company of
its payment obligations under the Capital Securities Guarantee.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture to defer payments of
interest on the Junior Subordinated Debentures by extending the interest payment
period at any time, and from time to time, on the Junior Subordinated
Debentures. As a consequence of such an extension, semi-annual distributions on
the Capital Securities would be deferred by the Trust during any such Extension
Period (but would continue to accrue, despite such deferral, with interest
thereon compounded semi-annually). Such right to extend the interest payment
period for the Junior Subordinated Debentures is limited such that an Extension
Period may not extend beyond the Stated Maturity of the Junior Subordinated
Debentures. During any such Extension Period, (a) the Company shall not declare
or pay dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of capital stock of the Company in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase capital
stock of the Company, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) dividends or
distributions in capital stock of the Company and (v) redemptions or repurchases
of any rights pursuant to the Rights Agreement, dated as of December 12, 1996
(as amended from time to time, the "Rights Agreement"), between the Company and
The Chase Manhattan Bank, as Rights Agent thereunder, or any successor to the
Rights Agreement, and the declaration thereunder of a dividend of rights in the
future), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Junior Subordinated
Debentures and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Capital Securities
Guarantee or the Common Securities Guarantee (as defined herein). Prior to the
termination of any such Extension Period, Owens Corning may further extend the
interest payment period; provided, that such Extension Period may not extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
Owens Corning may commence a new Extension Period, subject to the above
requirements. See "Description of the Capital Securities -- Distributions" and
"Description of the Junior Subordinated Debentures -- Option to Extend Interest
Payment Period."
The Company believes that, as of the issue date of the Junior Subordinated
Debentures, for United States federal income tax purposes, the terms and
conditions of the Junior Subordinated Debentures make the likelihood that it
will exercise its right to defer payments of interest a remote contingency, and
that, therefore, the Capital Securities should not be considered to be issued
with original issue discount unless the Company were to exercise such deferral
right. There is no assurance that the Internal Revenue Service will agree with
such position. See "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."
If Owens Corning were to exercise its right to defer payments of interest
by extending the interest payment period, each holder of Capital Securities
would be required to include original issue discount in its gross income for
United States federal income tax purposes even though the Company would not make
actual cash payments during an Extension Period. As a result, each holder of
Capital Securities will generally recognize income for United States federal
income tax purposes in advance of the receipt of cash and will not receive the
cash from OC Capital related to such income if such holder disposes of its
Capital Securities prior to the record date for the date on which distributions
of such amounts are made. Owens
S-10
<PAGE> 15
Corning has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debentures. However, should Owens Corning determine to exercise such right in
the future, the market price of the Capital Securities is likely to be affected.
A holder that disposes of its Capital Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder that
continues to hold its Capital Securities. In addition, as a result of the
existence of the Company's right to defer interest payments, the market price of
the Capital Securities (which represent an undivided beneficial interest in the
Junior Subordinated Debentures) may be more volatile than other securities on
which OID accrues that do not have such rights. See "Certain Federal Income Tax
Consequences -Interest Income and Original Issue Discount".
REDEMPTION OR DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company will have the right at any time to dissolve the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. See "Description of the Capital Securities -- Distribution of
the Junior Subordinated Debentures." Under current United States federal income
tax law, a distribution of Junior Subordinated Debentures upon the dissolution
of the Trust would not be a taxable event to holders of the Capital Securities.
See "Certain Federal Income Tax Consequences -Distribution of Junior
Subordinated Debentures to Holders of Capital Securities."
In certain circumstances, the Company shall have the right to prepay the
Junior Subordinated Debentures, in whole but not in part, in which event the
Trust will redeem the Trust Securities to the same extent as the Junior
Subordinated Debentures are repaid by the Company.
There can be no assurance as to the market prices for the Capital
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Capital Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that a holder of Capital Securities may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Capital Securities offered
hereby. Because holders of Capital Securities may receive Junior Subordinated
Debentures in the event the Company exercises its right to dissolve the Trust,
prospective purchasers of Capital Securities are also making an investment
decision with regard to the Junior Subordinated Debentures and should carefully
review all the information regarding the Junior Subordinated Debentures
contained in this Prospectus Supplement and the accompanying Prospectus. See
"Description of the Capital Securities -- Distribution of the Junior
Subordinated Debentures" and "Description of the Junior Subordinated Debentures
- -- General."
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights. Such
holders will not be entitled to vote to appoint, remove or replace, or to
increase or decrease the number of, Regular Trustees. Such voting rights are
vested exclusively in the holder of the Common Securities. See "Description of
Capital Securities -- Voting Rights."
TRADING PRICE
The Capital Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the Junior Subordinated Debentures
are deemed to be issued with OID) and who disposes of his Capital Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income (i.e., interest or,
possibly, OID), and to add such amount to his adjusted tax basis in his pro rata
share of the underlying Junior Subordinated Debentures deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis, a
holder will recognize a capital loss. See "Certain Federal Income
S-11
<PAGE> 16
Consequences -- Interest Income and Original Issue Discount" and "-- Sales or
Redemptions of Capital Securities."
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the
Offered Securities (including the Junior Subordinated Debentures issued to the
Trust in connection with the investment by the Trust of all of the proceeds from
the sale of the Capital Securities) to repay indebtedness under the Credit
Agreement and for general corporate purposes, including, without limitation,
working capital, repurchases or redemptions of the Company's outstanding debt
securities or other reductions of the Company's outstanding borrowings, business
acquisitions, investments in or loans to subsidiaries or capital expenditures.
The average interest rate as of July 22, 1997 borne by the loans then
outstanding under the Credit Agreement was 6.17% per annum. The loan
commitments under the Credit Agreement expire in June 2002.
CONDENSED CONSOLIDATED CAPITALIZATION
The following table summarizes (i) the actual capitalization of the
Company and its consolidated subsidiaries (including Fibreboard) at June 30,
1997 and (ii) such capitalization as adjusted to reflect (a) the sale of the
Capital Securities (based on an assumed aggregate public offering price of
$300,000,000 and after estimated underwriting compensation and estimated
expenses of the offering of the Capital Securities) , (b) the expected
concurrent sale by the Company of 6,000,000 FELINE PRIDES(sm) (based on an
assumed aggregate public offering price of $300,000,000 and after estimated
underwriting commissions and estimated expenses of the offering of such FELINE
PRIDES) and (c) an assumed application of the proceeds of the offering of the
Capital Securities to repay indebtedness under the Credit Agreement. For further
information, see Note 4 of Notes to the Consolidated Financial Statements of the
Company as of June 30, 1997 included in the Second Quarter Form 10-Q,
incorporated in the accompanying Prospectus by reference.
<TABLE>
<CAPTION>
At June 30, 1997
(in Millions)
-------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
Short-term debt, including current portion of long-term debt ... $ 179 $ 23
Long-term debt:
Senior ..................................................... 1,877 1,744
Less: Current portion ................................... 23 23
------- -------
Total long-term debt ....................................... 1,854 1,721
------- -------
Company obligated convertible security of subsidiary
holding solely parent debentures ("MIPS") .................. 194 194
------- -------
Company obligated preferred security of subsidiary holding
solely parent debentures .................................. 300
Stockholders' equity:
Preferred Stock, no par value; 8 million shares authorized;
none issued .............................................. -- --
Common Stock, $.10 par value; 100 million shares authorized;
__________ shares issued and outstanding(a) ............. 653 653
Deficit .................................................... (980) (980)
Foreign currency translation adjustments ................... (8) (8)
Other ...................................................... (18) (18)
------- -------
Total stockholders' equity ................................. (353) (353)
------- -------
Total capitalization ....................................... $ 1,874 $ 1,885
======= =======
</TABLE>
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<PAGE> 17
- ---------------------
(a) Does not include shares of Common Stock issuable or which may be issued
pursuant to various stock compensation plans of the Company (see Note 16 of
Notes to Consolidated Financial Statements of the Company as of December 31,
1996 included in the 1996 Form 10-K, incorporated in the accompanying
Prospectus by reference).
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial
information of the Company (i) for the six months ended June 30, 1997 and 1996,
which has been derived from the unaudited quarterly consolidated financial
statements of the Company for the six months ended June 30, 1997 and 1996, and
(ii) for each of the five fiscal years in the period ended December 31, 1996,
which has been derived from the annual consolidated financial statements of the
Company audited by Arthur Andersen LLP, independent public accountants. This
table should be read in conjunction with those statements, all of which have
been previously filed with the Commission. The financial information presented
below for the six months ended June 30, 1997 and 1996 reflects all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the Company's results. Operating results for the six months ended June 30, 1997
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1997. The following table (other than in respect
of balance sheet data) does not include financial information concerning
Fibreboard because the Fibreboard Acquisition did not occur until the end of the
quarter ended June 30, 1997. See "-- Recent Developments." The following table
is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated financial information and related notes of the
Company included in the documents incorporated in the accompanying prospectus
by reference. See "Incorporation of Certain Documents by Reference" in the
accompanying prospectus.
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31,
----------------------------------------------------------------------------
1997 1996(a) 1996(b) 1995(c) 1994(d) 1993(e) 1992(f)
------ ------ ------ ------ ------ ------ ------
(in millions of dollars, except per share data and where noted)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $1,892 $1,805 $3,832 $3,612 $3,351 $2,944 $2,878
Gross margin..................... 462 471 998 942 815 678 644
Income (loss) from operations.... 182 (690) (504) 412 226 236 213
Cost of borrowed funds........... 42 36 77 87 94 89 110
Net income (loss)................ 105 (434) (284) 231 159 131 73
Net income (loss) per share
(primary)........................ 1.96 (8.43) (5.50) 4.64 3.61 3.00 1.70
Net income (loss) per share (full
diluted) ........................ 1.87 (8.43) (5.50) 4.40 3.35 2.81 1.67
Weighted average number of share
outstanding (in thousands of shar
(primary)........................ 53,619 51,512 51,722 49,711 44,209 43,593 43,013
CASH FLOW DATA:
Net cash flow from operations.... (319) (87) 335 285 233 253 192
Capital expenditures............. 131 167 325 276 258 178 144
BALANCE SHEET DATA:
Total assets..................... 5,076 3,980 3,913 3,261 3,274 3,013 3,162
Total debt....................... 2,033 1,142 934 893 1,212 1,004 1,099
Stockholders' deficit............ (353) (666) (484) (212) (680) (869) (1,008)
RATIO OF EARNINGS TO FIXED
CHARGES(G)........................ 3.02x --- --- 3.67x 2.15x 2.42x 1.88x
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK
DIVIDENDS(G)...................... 3.02x --- --- 3.67x 2.15x 2.42x 1.88x
</TABLE>
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<PAGE> 18
(a) For the six months ended June 30, 1996, the net loss of $434 million,
or $8.43 per share, includes a net after-tax charge of $542 million, or
$10.53 per share, for asbestos litigation claims that may be received
after 1999 and probable additional insurance recovery; after-tax
special charges totaling $27 million or $.52 per share, including
valuation adjustments associated with prior divestitures, major product
line productivity initiatives and a contribution to the Owens-Corning
Foundation; and an after-tax gain of $27 million, or $.52 per share,
from the sale of the Company's ownership interest in its former
Japanese affiliate, Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their anti-dilutive
effect. Consequently, primary and fully diluted earnings per share are
equal for 1996.
(b) In 1996 the net loss of $284 million, or $5.50 per share, includes a
net after-tax charge of $542 million, or $10.49 per share, for asbestos
litigation claims that may be received after 1999 and probable
additional insurance recovery; after-tax special charges totaling $27
million, or $.52 per share, including valuation adjustments associated
with prior divestitures, major product line productivity initiatives
and a contribution to the Owens-Corning Foundation; an after-tax charge
of $26 million, or $.50 per share, for restructuring and other actions;
a $27 million, or $.52 per share, reduction of tax reserves due to
favorable legislation; and an after-tax gain of $27 million, or $.52
per share, from the sale of the Company's ownership interest in its
former Japanese affiliate, Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their anti-dilutive
effect. Consequently, primary and fully diluted earnings per share are
equal for 1996.
(c) Net income for 1995 of $231 million, or $4.64 per share ($4.40 per
share fully diluted), included a one time gain of $8 million or $.16
per share ($.15 per share fully diluted), which was the result of a tax
loss carryback.
(d) Net income for 1994 of $159 million, or $3.61 per share ($3.35 per
share fully diluted), included the following offsetting special items:
an after-tax gain of $123 million, or $2.78 per share ($2.45 per share
fully diluted), reflecting a change to the capital method of accounting
for the rebuilding of glass melting facilities; an after-tax charge of
$85 million, or $1.92 per share ($1.69 per share fully diluted), for
productivity initiatives and other actions; a non-cash, after-tax
charge of $10 million, or $.23 per share ($.20 per share fully
diluted), to reflect adoption of Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" for the Company's non-U.S. plans; and a
non-cash, after-tax charge of $28 million, or $.63 per share ($.56 per
share fully diluted), to reflect adoption of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits."
(e) Net income for 1993 of $131 million, or $3.00 per share ($2.81 per
share fully diluted), included a credit of $26 million, or $.60 per
share ($.53 per share fully diluted), for the cumulative effect of
adopting the new accounting standard for income taxes; a one-time gain
of $14 million, or $.33 per share ($.29 per share fully diluted),
reflecting a tax benefit resulting from a revaluation of deferred taxes
necessitated by the new federal tax law; an $8 million pre-tax charge,
or $.11 per share ($.10 per share fully diluted), for the writedown of
the Company's hydrocarbon ventures; and a $23 million charge, or $.53
per share ($.47 per share fully diluted), for the restructuring of the
Company's European operations.
(f) Net income for 1992 was $73 million, or $1.70 per share ($1.67 per
share fully diluted), and included a pre-tax reorganization charge of
$16 million, or $.25 per share ($.22 per share fully diluted).
S-14
<PAGE> 19
(g) For purposes of the calculation of these ratios, earnings represent net
income before fixed charges, provision for taxes on income,
undistributed earnings of equity basis investments, extraordinary
losses from early retirement of debt and the cumulative effect of
accounting changes. Fixed charges include interest expense and the
portion (one-third) of rental expenses deemed to be representative of
interest. Preferred stock dividends represent only the distributions on
the MIPS securities. The Company's earnings for the six months ended
June 30, 1996 and the year ended December 31, 1996 were insufficient to
cover fixed charges by approximately $720 and $600 million,
respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(All per share information in this Section is on a fully diluted basis. All
references to results from ongoing operations exclude the impact of special
items reported for the relevant period.)
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997
Net sales were $1,017 million for the quarter ended June 30, 1997, a
six percent increase from the 1996 level of $956 million. The growth is
attributable to increased volumes in the Building Materials and Composite
Materials segments, worldwide. In Building Materials, niche acquisitions and the
integration of their products into the Company's existing channels of
distribution continue to grow the Company's volumes, particularly in the U.S.
and Europe. These volume increases were offset in large part by a decline in
worldwide composites pricing, most notably in Europe, the effects of a stronger
dollar on sales made in foreign currencies, and a decline in insulation prices
in North America. Gross margin for the quarter ended June 30, 1997 was 24%, a
decline from the second quarter 1996 level of 27%, primarily resulting from
declining prices and a change in the mix of product sales in Building Materials
to lower margin products.
Net income for the quarter ended June 30, 1997 was $63 million, or
$1.11 per share, compared to a net loss of $473 million, or $9.19 per share, for
the quarter ended June 30, 1996. Income from operations of $105 million in the
second quarter of 1997 was negatively impacted by the price declines described
above. This impact was partially offset by volume increases experienced in the
Company's roofing, foam and composites businesses. Additionally, income from
operations benefited by $15 million from the modification of certain employee
benefits in the U.S. Earnings in the second quarter of 1997 were also affected
by increased cost of borrowed funds resulting from increased borrowing to fund
working capital and certain acquisitions, and the improved performance of the
Company's unconsolidated affiliates.
Included in the quarter ended June 30, 1996 was the net after-tax
charge of $542 million, or $10.53 per share, for asbestos litigation claims that
may be received after 1999 and probable additional insurance recovery. The net
loss created by this item caused common stock equivalents and convertible
securities to be excluded from the number of fully diluted shares reported in
the second quarter of 1996 due to their anti-dilutive effect. Had these
anti-dilutive shares been included in the calculation of earnings per share,
such amount for the second quarter of 1996 would have been $.09 lower.
Net sales for the six months ended June 30, 1997, were $1,892
million, a five percent increase over the $1,805 million reported for the first
six months of 1996. This increase reflects the strength of the Company's roofing
and foam businesses in the Building Materials segment, coupled with the
Company's continued expansion through strategic niche acquisitions.
For the six months ended June 30, 1997, the Company reported net
income of $105 million, or $1.87 per share, compared to a net loss of $434
million, or $8.43 per share, for the comparable period in 1996. When compared to
the earlier year period, net income for the six months ended June 30, 1997 was
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<PAGE> 20
negatively impacted by price declines, partially offset by the benefit of
increased volumes and productivity gains, particularly in the insulation
business.
In addition to the net asbestos charge recorded in the second quarter
of 1996, results for the six months ended June 30, 1996 included a $37 million
pretax gain from the sale of the Company's minority interest in Asahi Fiber
Glass Co. Ltd. in Japan and several one-time special charges, including
valuation adjustments associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens-Corning Foundation. The
impact of the gain on net income was reduced to near zero by these special
items.
Marketing and administrative expenses were $122 million for the
quarter ended June 30, 1997, compared to $115 million in the same period in
1996. The increase is primarily the result of incremental administrative
expenses from acquisitions.
In the Building Materials segment, sales increased 8% for the quarter
and six months ended June 30, 1997 compared to 1996. This growth reflects the
incremental sales from acquisitions as well as an increase in volume,
particularly in the roofing and foam businesses. Income from operations for
Building Materials increased to $122 million for the six months ended June 30,
1997. This improvement is primarily the result of volume increases, productivity
gains and incremental amounts derived from acquisitions offset in part by the
continuing costs of the Company's expansion program in the Asia Pacific region.
On June 27, the Company acquired 92% of the outstanding stock of
Fibreboard through the Fibreboard Tender Offer, which was commenced in May for
all of the outstanding shares of Fibreboard at $55 per share. In early July,
Fibreboard became a wholly owned subsidiary as a result of the Fibreboard
Merger consummated at the same price as the Fibreboard Tender Offer. The
purchase price of Fibreboard was $657 million, including $138 million of debt
assumed, the majority of which was financed through borrowings under the
Credit Agreement long-term credit facility early in the third quarter of 1997.
Fibreboard is one of the five largest producers in North America of vinyl
siding and accessories, marketing products under the brand names Norandex and
Vytec. The business has plants in the U.S. and Canada and also operates more
than 130 company-owned distribution centers in 32 states. Fibreboard is also
the leading producer of manufactured stone used in home building construction.
On July 15, the Company announced plans to sell the Pabco business of
Fibreboard. Pabco is a producer of calcium silicate insulation used for
industrial pipe applications and metal jacketing for pipe insulation.
As the Fibreboard Acquisition was completed at the end of the
quarter, the reported results do not include the results of operations of
Fibreboard. To enhance comparability, certain information below is presented on
a "pro forma" basis and reflects the acquisition of Fibreboard (excluding Pabco
and operations that were discontinued by Fibreboard prior to the Fibreboard
Acquisition) as though it had occurred at the beginning of the respective
periods presented. The pro forma results include certain adjustments, primarily
for depreciation and amortization, interest and other expenses directly
attributable to the Fibreboard Acquisition and are not necessarily indicative of
the combined results that would have occurred had the Fibreboard Acquisition
occurred at the beginning of those periods.
<TABLE>
<CAPTION>
Pro Forma As Reported
Six Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ ------
(In millions of dollars, except share date)
<S> <C> <C> <C> <C>
Net Sales $2,223 $2,092 $1,892 $1,805
Income from continuing operations 99 (443) 105 (434)
Fully diluted earnings per share from $ 1.76 $(8.59) $ 1.87 $(8.43)
continuing operations
</TABLE>
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<PAGE> 21
Additionally, during the first quarter of 1997, the Company acquired
Polypan Nord S.P.A., a manufacturer of extruded polystyrene foam (XPS)
insulation products based in Italy and Falcon Manufacturing of California, Inc.,
a U.S. producer of expanded polystyrene (EPS) foam insulation products.
In the Composite Materials segment, sales increased four percent for
the quarter ended June 30, 1997, but were down two percent for the six months
then ended, when compared to the comparable 1996 periods. While composites sales
showed improvement in overall volume, the business continued to experience
significant price decline during the quarter, particularly in Europe where
weakening currencies compounded the sales decline. Composite Materials income
from operations in the quarter and six months ended June 30, 1997, of $52 and
$101 million, respectively, declined from the equivalent prior year periods. The
declines are primarily attributable to the pricing weakness being experienced in
Europe. The Company does not expect to see significant improvement in the
Composite Materials segment in 1997. However, the Company now believes pricing
is stabilizing in both the U.S. and Europe and has implemented a price increase
effective during the second half of the year.
During the second quarter of 1997, the Company completed the
acquisition of the assets of The Stewart Group, Inc., a manufacturer and
marketer of a composite central strength member for telecommunication cable
using a proprietary technology. With this addition, the Company now markets a
complete line of glass fiber products that protect and reinforce fiber optic and
copper telecommunications cable.
In the first quarter of 1997, the Company completed the previously
announced acquisition of Knytex Company, a manufacturer of specialty glass fiber
fabrics.
The Company's cost of borrowed funds for the quarter ended June 30,
1997 was $5 million higher than during second quarter 1996, due to increased
borrowings used to fund growth in working capital and certain acquisitions.
Years Ended December 31, 1996, 1995 and 1994
Net sales were $3.832 billion for the year ended December 31, 1996,
reflecting a 6% increase from the 1995 level of $3.612 billion. Net sales in
1994 were $3.351 billion. Most of the 1996 growth is attributable
to volume increases in the Building Materials segment, particularly in North
America, as well as incremental sales growth resulting from 1995 and 1996
acquisitions. See Notes 1 and 5 to the Consolidated Financial Statements of the
Company included in the 1996 Form 10-K, which is incorporated herein by
reference. Sales outside the U.S. represented 25% of total sales for the year
ended December 31, 1996, compared to 27% and 24% for the years 1995 and 1994,
respectively. The strength of U.S. Building Materials sales in combination with
sluggish European Composites business contributed to the slightly lower
percentage of sales outside the U.S. when compared to 1995. Gross margin for
each of the years ended December 31, 1996 and 1995 was 26%, up from 24% in 1994.
Gross margin in 1996 was adversely impacted by the lower sales volume in the
European Composites business.
For the year ended December 31, 1996, the Company reported a net loss
of $284 million, or $5.50 per share, compared to net income of $231 million, or
$4.40 per share, and net income of $159 million, or $3.35 per share, for the
years ended December 31, 1995 and 1994, respectively. The 1996 net loss reflects
a net after-tax charge of $542 million, or $10.49 per share, for asbestos
litigation claims that may be received after 1999 and probable additional
insurance recovery; after-tax special charges totaling $27 million, or $.52 per
share, including valuation adjustments associated with prior divestitures, major
product line productivity initiatives and a contribution to the Owens-Corning
Foundation; an after-tax charge of $26 million, or $.50 per share, for
restructuring and other actions; a $27 million, or $.52 per share reduction of
tax reserves due to favorable legislation; and an after-tax gain of $27 million,
or $.52 per share from the sale of the Company's interest in its former Japanese
affiliate, Asahi Fiber Glass Co. Ltd. The net loss created by the special items
mentioned above caused common stock equivalents and convertible securities to be
excluded from the number of fully diluted shares reported in 1996 due to their
anti-dilutive effect. For comparative purposes, these anti-dilutive shares have
been included in the
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<PAGE> 22
calculation of fully diluted net income per share from ongoing operations in
1996 and represent a difference of $.32 per share. Net income from ongoing
operations was $257 million, or $4.65 per share, for the year ended December 31,
1996, compared to $223 million, or $4.25 per share in 1995, discussed below. The
15% increase in net income from ongoing operations in 1996 over 1995 reflects
the benefits of acquisitions, strong results from Building Materials in North
America, particularly in the roofing and foam businesses, and a favorable
litigation settlement with a former supplier, offset in part by increased
administrative costs from regional expansion into Asia Pacific and globally
within the engineered pipe systems business. See Notes, 8, 12, 18 and 21 to the
Consolidated Financial Statements of the Company included in the 1996 Form 10-K,
which is incorporated in the accompanying prospectus by reference.
Net income of $231 million, or $4.40 per share, for the year ended
December 31, 1995 reflects a one time gain of $8 million, or $.15 per share,
resulting from a tax loss carryback. Net income from ongoing operations for the
year ended December 31, 1995 was $223 million, or $4.25 per share. See Note 8 to
the Consolidated Financial Statements of the Company included in the 1996 Form
10-K, which is incorporated in the accompanying prospectus by reference.
Net income of $159 million for the year ended December 31, 1994
included the following special items: an after-tax gain of $123 million, or
$2.45 per share, reflecting a change to the capital method of accounting for the
rebuilding of glass melting facilities; an after-tax charge of $85 million, or
$1.69 per share, for productivity initiatives and other actions; a non-cash,
after-tax charge of $10 million, or $.20 per share, to reflect adoption of
Statement of Financial Accounting Standards (SFAS) No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, for plans outside
the United States; and a non-cash, after-tax charge of $28 million, or $.56 per
share, to reflect adoption of SFAS No. 112, Employers' Accounting for
Postemployment Benefits. See Notes 6, 18 and 19 to the Consolidated Financial
Statements of the Company included in the 1996 Form 10-K, which is incorporated
in the accompanying prospectus by reference.
In the Building Materials segment, sales increased 12% for the year
ended December 31, 1996 compared to 1995. This growth reflects volume increases,
particularly in North America, as well as incremental sales from 1995 and 1996
acquisitions offset by a slight decline in prices, particularly in Canada.
Income from ongoing operations for Building Materials increased 14% from 1995
levels due to acquisitions, increased sales volumes and the improving
performance in the Company's Asia Pacific operations.
Building Materials sales in the U.S. increased 11% and Canada also
posted improvement in 1996. This improvement in the North American markets is
being driven by the Company's integration of its expanded product line from
acquisitions and branded products into the Company's well established channels
of distribution. The expanded product line includes Luminess(TM) vinyl windows,
Transitions(R) vinyl siding and FOAMULAR(R) rigid polystyrene foam insulation.
The third quarter 1996 acquisition of Celfortec, a Canadian producer of
FOAMULAR(R) insulation, also contributed to Building Materials growth in North
America. Building Materials Europe sales increased 11% over 1995, primarily from
the second quarter 1996 acquisition of the extruded polystyrene foam business of
Linpac Insulation, with production facilities in the U.K. and Spain. With these
acquisitions in the extruded polystyrene foam operations in Europe and Canada
and the joint venture announced in 1996 to produce foam insulation in China, the
Company has significantly expanded its global position in the foam insulation
business as part of the Company's global building systems strategy.
In 1996, the Company's roofing business continued to increase sales
and improve margins through volume increases and productivity initiatives. The
window business also continued to experience significant sales growth and
productivity improvements during the year. Additionally, in the second quarter
of 1996 the Company acquired the U.S. assets of Partek Insulation, a producer of
rock mineral wool insulation, which has expanded the Company's insulation
product offering into the high temperature insulation market. The Company
further expanded its Building Materials multi-product offering in 1996 with the
introduction of the branded products, Build-R-Tape(R) used to seal sheathing
joints and PinkSeal(TM) foam sealant.
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<PAGE> 23
In the Composite Materials segment, sales decreased 5% for the year
ended December 31, 1996. This sales decrease is primarily the result of sluggish
European reinforcements business as well as a decline in the Canadian market,
while in the U.S., composites sales remained relatively flat. Income from
ongoing operations posted a 4% increase over the prior year, reflecting improved
operating performance and productivity improvements, particularly in the U.S.
In 1996, the Company announced three new large diameter glass
reinforced plastic ("GRP") pipe joint ventures, one in Colombia, Egypt and
Turkey. GRP pipe is used primarily in water and wastewater systems. In addition
to these ventures, the Company also formed an application development center in
India and announced plans for similar such centers in Brazil and China, to
develop and promote the use of composite materials as a replacement for more
traditional materials.
At the end of 1996, the Company announced the acquisition of the
remainder of the equity interest in Knytex(R), a manufacturer of specialty glass
fiber fabrics. This business, which knits, weaves, stitches or bonds glass fiber
to provide value-added performance characteristics, will be combined with the
Company's existing European specialty fabrics business to form Owens Corning
Fabrics.
The Company's cost of borrowed funds for the year ended December 31,
1996 was $77 million, $10 million lower than 1995. The average total debt
outstanding during the year decreased substantially in 1996 compared to 1995 as
the result of the mid-year 1995 conversion of $173 million of the Company's 8%
convertible junior subordinated debentures into shares of common stock, combined
with the issuance of $200 million of convertible preferred securities. In 1996,
the Company averaged short-term debt of $129 million, approximately $55 million
lower than in 1995. The average debt reduction, together with lower average
short-term interest rates, contributed to the lower cost of borrowed funds in
1996. Additionally, due to several large construction projects, interest
capitalized in 1996 increased about $4 million over 1995. See Notes 2 and 3 to
the Consolidated Financial Statements of the Company included in the 1996 Form
10-K, which is incorporated in the accompanying prospectus by reference.
At December 31, 1996, certain of the Company's foreign subsidiaries
and state tax jurisdictions have combined tax net operating loss carryforwards
the benefit of which is approximately $63 million. The Company has $580 million
in net deferred tax assets at December 31, 1996, all of which management expects
will be realized through future income from operations. See Note 8 to the
Consolidated Financial Statements of the Company included in the 1996 Form 10-K,
which is incorporated in the accompanying prospectus by reference.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Six Months Ended June 30, 1997
Cash flow from operations, excluding asbestos-related activities, was
negative $6 million for the second quarter of 1997, compared to $73 million for
second quarter 1996. The decline from 1996 to 1997 is primarily attributable to
a reduction in accounts payable and accrued liabilities, and an increase in
accounts receivable. Excluding Fibreboard inventories of approximately $110
million, inventories at June 30, 1997 increased 26% over December 31, 1996
levels due to the Company's seasonal inventory build in the first half of the
year. See Notes 6 and 7 to the Consolidated Financial Statements of the Company
as of June 30, 1997, included in the Second Quarter Form 10-Q, which is
incorporated in the accompanying prospectus by reference.
At June 30, 1997, the Company's net working capital was $260 million
and its current ratio was 1.22, as compared to negative $163 million and .85,
respectively at December 31, 1996. The increase in 1997 is the result of
increased working capital, driven by higher seasonal inventories and
receivables, as well as a decline in accounts payable and accrued liabilities.
The Company's total borrowings at June 30, 1997 were $2,033 million,
$1,099 million higher than at year-end 1996. The June 30, 1997 long-term debt
balance includes $519 million payable, as well as $138 million of debt assumed,
for the acquisition of Fibreboard. The acquisition amounts were drawn
S-19
<PAGE> 24
from the Company's new credit facility in early July. Since the cash was not
exchanged until July, the Consolidated Statement of Cash Flows, for the quarter
and six months ended June 30, 1997, does not reflect the acquisition of
Fibreboard. Typically, the Company reports greater cash usage during the first
half of the year as the Company builds inventories and other working capital.
As of June 30, 1997, the Company had unused lines of credit of $736
million available under long-term bank loan facilities and an additional $37
million under short-term facilities, after the exclusion of the amount utilized
in early July to fund the acquisition of Fibreboard, compared to $440 million
and $195 million, respectively, at year-end 1996. The increase in available
lines of credit is the result of the new $2 billion credit facility established
to fund the acquisition of Fibreboard. Letters of credit issued under the
Company's new long-term loan facility, most of which support appeals from
asbestos trials, reduce the available credit of that facility. The impact of
such reduction is reflected in the unused lines of credit discussed above. See
Notes 3 and 4 of the Consolidated Financial Statements of the Company as of June
30, 1997, included in the Second Quarter Form 10-Q, which is incorporated in
the accompanying prospectus by reference.
Capital spending for property, plant and equipment, excluding
acquisitions and investments in affiliates, was $131 million for the first six
months of 1997. For the year 1997, the Company anticipates capital spending,
exclusive of acquisitions and investments in affiliates, to be approximately
$250 million, the majority of which is committed. The Company expects that
funding for these expenditures will be from the Company's operations and
external sources as required.
Gross payments for asbestos litigation claims against Owens Corning
during the second quarter of 1997, including $11 million in defense costs and $2
million for appeal bond and other costs, were $90 million. Proceeds from
insurance were $24 million, resulting in a net pretax cash outflow of $66
million, or $40 million after-tax. During the second quarter of 1997, Owens
Corning received approximately 9,700 new asbestos personal injury cases and
closed approximately 3,200 cases. Over the next twelve months, Owens Corning's
total payments for asbestos litigation claims, including defense costs, are
expected to be approximately $300 million. Proceeds from insurance of $50
million are expected to be available to cover Owens Corning's costs, resulting
in a net pretax cash outflow of $250 million, or $150 million after-tax. See
Note 8 Item A to the Consolidated Financial Statements of the Company as of June
30, 1997, incorporated in the accompanying prospectus by reference.
During the next twelve months, any payments for asbestos claims
against Fibreboard are expected to be paid by Fibreboard's insurers. See Note 8
Item B to the Consolidated Financial Statements of the Company as of June 30,
1997, included in the Second Quarter Form 10-Q, which is incorporated in the
accompanying prospectus by reference.
The Company expects funds generated from operations, together with
funds available under long and short term bank loan facilities, to be sufficient
to satisfy its debt service obligations under its existing indebtedness, as well
as its contingent liabilities for uninsured asbestos personal injury claims.
The Company has been deemed by the Environmental Protection Agency
(EPA) to be a potentially responsible party (PRP) with respect to certain sites
under the Comprehensive Environmental Response, Compensation and Liability Act
(Superfund). The Company has also been deemed a PRP under similar state or local
laws, including two state Superfund sites where the Company is the primary
generator. In other instances, other PRPs have brought suits or claims against
the Company as a PRP for contribution under such federal, state or local laws.
During the second quarter of 1997, the Company was designated a PRP in such
federal, state, local or private proceedings for one additional site. At June
30, 1997, a total of 42 such PRP designations remained unresolved by the
Company, some of which designations the Company believes to be erroneous. The
Company is also involved with environmental investigation or remediation at a
number of other sites at which it has not been designated a PRP. The Company has
established a $30 million reserve, of which $15 million relates to Fibreboard,
for its Superfund (and similar state, local and private action) contingent
liabilities. Based upon information presently available to the Company, and
without regard to the application of insurance, the Company believes that,
considered in the aggregate, the additional costs associated with such
contingent liabilities, including any related litigation costs, will
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<PAGE> 25
not have a materially adverse effect on the Company's results of operations,
financial condition or long-term liquidity.
The 1990 Clean Air Act Amendments (Act) provide that the EPA will
issue regulations on a number of air pollutants over a period of years. Until
these regulations are developed, the Company cannot determine the extent to
which the Act will affect it. The Company anticipates that its sources to be
regulated will include glass fiber manufacturing and asphalt processing
activities. The EPA's announced schedule is to issue regulations covering glass
fiber manufacturing by late 1997 and asphalt processing activities by late 2000,
with implementation as to existing sources up to three years thereafter. Based
on information now known to the Company, including the nature and limited number
of regulated materials it emits, the Company does not expect the Act to have a
materially adverse effect on the Company's results of operations, financial
condition or long-term liquidity.
Years Ended December 31, 1996, 1995 and 1994
Cash flow from operations, excluding proceeds from insurance and
payments for asbestos litigation claims, was $501 million for 1996, compared to
$342 million for 1995. The increase in cash flow from operations in 1996 relates
to an increase in accounts payable and accrued liabilities offset in part by an
increase in inventory. Additionally, 1995 cash flow from operations was reduced
by $64 million for the December 1995 funding of a Voluntary Employee's
Beneficiary Association (VEBA) trust. The 1996 cash flow from operations
reflects the disbursements for benefits from the VEBA trust and collection of a
tax receivable. See Note 6 to the Consolidated Financial Statements of the
Company included in the 1996 Form 10K which is incorporated in the accompanying
prospectus by reference.
At December 31, 1996, the Company's net working capital and current
ratio were negative $163 million and .85, compared to negative $9 million and
.99 at December 31, 1995, and negative $143 million and .87 at December 31,
1994, respectively. The decrease in 1996 was primarily due to increased accounts
payable and accrued liabilities, and also a larger current asbestos liability,
offset somewhat by increased inventories. Excluding the impact of short-term
borrowings used to finance a $110 million U.K. acquisition in June 1994, the
Company's net working capital was negative $33 million and its current ratio was
.97 at December 31, 1994.
During 1995, virtually all of the Company's $173 million issue of 8%
convertible junior subordinated debentures were converted. Debentures not
converted were redeemed for cash. The conversion resulted in the issuance of 5.8
million new shares of common stock. Also in 1995, Owens-Corning Capital, L.L.C.,
a Delaware limited liability company, of which all of the common limited company
interests are indirectly owned by the Company, issued $200 million of 6.5%
cumulative convertible preferred securities. The proceeds from the issuance were
loaned to the Company and partially used to repay a short-term credit facility.
See Note 4 to the Consolidated Financial Statements of the Company included in
the 1996 Form 10K which is incorporated in the accompanying prospectus by
reference.
Capital spending for property, plant and equipment, excluding
acquisitions, was $325 million during 1996.
Gross payments for asbestos litigation claims during 1996, including
$44 million in defense costs and $11 million for appeal bond and other costs,
were $267 million. Proceeds from insurance were $101 million resulting in a net
pretax cash outflow of $166 million, or $100 million after-tax. During 1996, the
Company received approximately 36,400 new asbestos personal injury cases and
closed approximately 22,700 cases. See Note 21 to the Consolidated Financial
Statements of the Company included in the 1996 Form 10K which is incorporated
in the accompanying prospectus by reference.
In June 1996 the Company filed a lawsuit in federal court in New
Orleans alleging a massive scheme to defraud the Company in connection with
asbestos litigation cases. The suit alleges that medical test results in tens of
thousands of asbestos litigation claims were falsified by the owners and
operators of certain pulmonary function testing laboratories. A second lawsuit,
alleging similar practices, was filed
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<PAGE> 26
against the owner and operator of an additional testing laboratory in January
1997. The Company believes that at least 40,000 claims in its current backlog
involve plaintiffs whose pulmonary function tests were improperly administered
or manipulated by the testing laboratories or otherwise inconsistent with proper
medical practice.
FUTURE REQUIRED ACCOUNTING CHANGES
On June 30, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS No. 130). This statement establishes standards for reporting and
display of comprehensive income and its components in financial statements. The
adoption of this standard will not impact results from operations, financial
condition, or long-term liquidity, but will require the Company to classify
items of other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately in the
equity section of the balance sheet. The Company is required to adopt the new
standard for periods beginning after December 15, 1997.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS
No.128). This statement introduces new methods for calculating earnings per
share. The adoption of this standard will not impact results from operations,
financial condition, or long-term liquidity, but will require the Company to
restate earnings per share reported in prior periods to conform with this
statement. The Company is required to adopt the new standard for periods ending
after December 15, 1997. The Company believes that the adoption of this standard
will result in essentially the same earnings per share when comparing the
current fully diluted earnings per share calculation to the calculation of
diluted earnings per share required by SFAS No. 128.
ASBESTOS AND OTHER LITIGATION
The following is a discussion of the status of the asbestos and other
litigation as of June 30, 1997; see also " Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity, Capital Resources
and Other Related Matters."
ASBESTOS LIABILITIES
Owens Corning (Excluding Fibreboard)
Owens Corning is a co-defendant with other former manufacturers,
distributors and installers of products containing asbestos and with miners and
suppliers of asbestos fibers (collectively, the "Producers") in personal injury
and property damage litigation. The personal injury claimants generally allege
injuries to their health caused by inhalation of asbestos fibers from Owens
Corning's products. Most of the claimants seek punitive damages as well as
compensatory damages. The property damage claims generally allege property
damage to school, public and commercial buildings resulting from the presence of
products containing asbestos. Virtually all of the asbestos-related lawsuits
against Owens Corning arise out of its manufacture, distribution, sale or
installation of an asbestos-containing calcium silicate, high temperature
insulation product, the manufacture of which was discontinued in 1972.
Status. As of June 30, 1997, approximately 165,700 asbestos personal
injury claims were pending against Owens Corning, of which 16,700 were received
in the first six months of 1997. Owens Corning received approximately 36,400
such claims in 1996 and 55,900 in 1995.
Many of the recent claims appear to be the product of mass screening
programs and not to involve malignancies or other significant asbestos related
impairment. Owens Corning believes that at least 40,000 of the recent claims
involve plaintiffs whose pulmonary function tests ("PFTs") were improperly
administered or manipulated by the testing laboratory or otherwise inconsistent
with proper medical practice, and it is investigating a number of testing
organizations and their methods. In 1996 Owens Corning filed suit in federal
court in New Orleans, Louisiana against the owners and operators of certain
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<PAGE> 27
pulmonary function testing laboratories in the southeastern U.S. challenging
such improper testing practices. This matter is now in active pre-trial
discovery. In January 1997, Owens Corning filed a similar suit in federal court
in Jackson, Mississippi against the owner of an additional testing laboratory.
During 1996 Owens Corning engaged in discussions with a group of
approximately 30 leading plaintiffs' law firms to explore approaches toward
resolution of its asbestos liability. Agreements with the various firms not to
file claims against Owens Corning except for those involving malignancies, most
of which agreements expired on or before January 1, 1997, may have impacted the
number of cases received by Owens Corning during 1996 and the first two quarters
of 1997.
Through June 30, 1997, Owens Corning had resolved (by settlement or
otherwise) approximately 192,100 asbestos personal injury claims. This number
includes cases resolved by two orders of dismissal for lack of medical proof,
covering approximately 18,900 federal maritime cases which named Owens Corning
as a defendant, resulting in a 15,600 case reduction in the backlog after
reduction for duplicate cases and cases previously settled. Of these cases,
approximately 11,700 were dismissed in 1996, with the remaining 3,900 being
dismissed in the first quarter of 1997. During 1996, 1995 and 1994, Owens
Corning resolved approximately 60,600 asbestos personal injury claims, over 99%
without trial, and incurred total indemnity payments of $626 million (an average
of about $10,300 per case).
Owens Corning's indemnity payments have varied considerably over time
and from case to case, and are affected by a multitude of factors. These include
the type and severity of the disease sustained by the claimant (i.e.,
mesothelioma, lung cancer, other types of cancer, asbestosis or pleural
changes); the occupation of the claimant; the extent of the claimant's exposure
to asbestos-containing products manufactured, sold or installed by Owens
Corning; the extent of the claimant's exposure to asbestoscontaining products
manufactured, sold or installed by other Producers; the number and financial
resources of other Producer defendants; the jurisdiction of suit; the presence
or absence of other possible causes of the claimant's illness; the availability
or not of legal defenses such as the statute of limitations or state of the art;
whether the claim was resolved on an individual basis or as part of a group
settlement; and whether the claim proceeded to an adverse verdict or judgment.
Insurance. As of June 30, 1997, Owens Corning had approximately $265
million in unexhausted insurance coverage (net of deductibles and self-insured
retentions and excluding coverage issued by insolvent carriers) under its
liability insurance policies applicable to asbestos personal injury claims. This
insurance, which is substantially confirmed, includes both products hazard
coverage and primary level non-products coverage. Portions of this coverage are
not available until 1998 and beyond under agreements with the carriers
confirming such coverage. All of Owens Corning's liability insurance policies
cover indemnity payments and defense fees and expenses subject to applicable
policy limits.
In addition to its confirmed primary level non-products insurance,
Owens Corning has a significant amount of unconfirmed potential non-products
coverage with excess level carriers. For purposes of calculating the amount of
insurance applicable to asbestos liabilities, Owens Corning has estimated its
probable recoveries in respect of this additional non-products coverage at $225
million, which amount was recorded in the second quarter of 1996. This coverage
is unconfirmed and the amount and timing of recoveries from these excess level
policies will depend on subsequent negotiations or proceedings.
Reserve. The Company's financial statements include a reserve for the
estimated cost associated with Owens Corning's asbestos personal injury claims.
This reserve was established principally through a charge to income in 1991 for
the costs of asbestos claims expected to be received through 1999 and an
additional $1.1 billion non-recurring, noncash charge to income (before taking
into account the probable nonproducts insurance recoveries) during the second
quarter of 1996 for cases that may be received subsequent to 1999. In
establishing the reserve, Owens Corning took into account, among other things,
the effect of federal court decisions relating to punitive damages and the
certification of class actions in asbestos cases, the discussions with the group
of plaintiffs' law firms referred to above, the results of its continuing
investigations of medical screening practices of the kind at issue in the
federal PFT lawsuits, recent developments as to the prospects for federal and
state tort reform, the continued rate of case filings
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at historically high levels, additional information on filings received during
the 1993-1995 period and other factors. The combined effect of the $1.1 billion
charge and the $225 million probable additional non-products insurance recovery
was an $875 million charge in the second quarter of 1996.
Owens Corning's estimated total liabilities in respect of indemnity
and defense costs associated with pending and unasserted asbestos personal
injury claims that may be received in the future, and its estimated insurance
recoveries in respect of such claims, are reported separately as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- --------
(In millions of dollars)
<S> <C> <C>
Reserve for asbestos
litigation claims
Current $ 300 $ 300
Other 1,485 1,670
---------- --------
Total Reserve 1,785 1,970
---------- --------
Insurance for asbestos
litigation claims
Current 50 100
Other 440 454
---------- --------
Total Insurance 490 554
---------- --------
Net Owens Corning Asbestos Liability $ 1,295 $ 1,416
========== ========
</TABLE>
Owens Corning cautions that such factors as the number of future
asbestos personal injury claims received by it, the rate of receipt of such
claims, and the indemnity and defense costs associated with asbestos personal
injury claims, as well as the prospects for confirming additional insurance,
including the additional $225 million in non-products coverage referenced above,
are influenced by numerous variables that are difficult to predict, and that
estimates, such as Owens Corning's, which attempt to take account of such
variables, are subject to considerable uncertainty. Owens Corning believes that
its estimate of liabilities and insurance will be sufficient to provide for the
costs of all pending and future asbestos personal injury claims that involve
malignancies or significant asbestos-related functional impairment. While such
estimates cover unimpaired claims, the number and cost of unimpaired claims are
much harder to predict and such estimates reflect Owens Corning's belief that
such claims have little or no value. Owens Corning will continue to review the
adequacy of its estimate of liabilities and insurance on a periodic basis and
make such adjustments as may be appropriate.
Management Opinion. Although any opinion is necessarily judgmental
and must be based on information now known to Owens Corning, in the opinion of
management, while any additional uninsured and unreserved costs which may arise
out of pending personal injury and property damage asbestos claims and
additional similar asbestos claims filed in the future may be substantial over
time, management believes that any such additional costs will not impair the
ability of the Company to meet its obligations, to reinvest in its businesses or
to take advantage of attractive opportunities for growth.
Fibreboard (Excluding Owens Corning)
Prior to 1972, Fibreboard manufactured insulation products containing
asbestos. Fibreboard has since been named as a defendant in many thousands of
personal injury claims for injuries allegedly caused by asbestos exposure as
well as in asbestos property damage cases.
As of June 30, 1997, approximately 97,600 asbestos personal injury
claims were pending against Fibreboard, of which 21,200 were received in the
first six months of 1997. Fibreboard received approximately 32,900 such claims
in 1996 and 20,700 in 1995. These claims and most of the pending claims are made
against the Fibreboard Global Settlement Trust and are subject to the Global
Settlement
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<PAGE> 29
injunction discussed below. In the first six months of 1997, Fibreboard resolved
approximately 1,800 asbestos personal injury claims at an average cost of
$22,000 per claim. Approximately 2,700 such claims were resolved in 1996 at an
approximate average cost of $34,000 per claim and 14,500 were resolved in 1995
at an approximate average cost of $12,000 per claim.
The average cost per claim has increased recently from the historical
average cost of $11,000 per claim. This is due to the absence of group
settlements, where large numbers of low value cases are traditionally settled
along with higher value cases, and due to the fact that in 1996 and 1997 a
relatively small number of individual cases involving more seriously injured
plaintiffs were settled as exigent claims (all of which are malignancy claims)
during the pendency of the Global Settlement injunction discussed below.
As of June 30, 1997, amounts payable under various asbestos claim
settlement agreements were $88 million. These amounts are payable either from
the Settlement Trust discussed below or directly by the insurers. Amounts due
from insurers in payment of these or past claims paid directly by Fibreboard, as
of June 30, 1997 are $110 million.
The asbestos-related long-term debt of $26 million consists of
amounts advanced under a reimbursement agreement; interest accrues at prime
minus 2%.
Fibreboard has unique insurance coverage of personal injury claims.
During 1993, Fibreboard and its insurers, Continental Casualty Company
(Continental) and Pacific Indemnity Company (Pacific), entered into the
Insurance Settlement, and Fibreboard, its insurers and representatives of a
nationwide class of future asbestos plaintiffs entered into the Global
Settlement. These agreements are interrelated and require final court approval.
On July 26, 1996, the U.S. Fifth Circuit Court of Appeals affirmed the Global
Settlement by a majority decision and the Insurance Settlement by a unanimous
decision.
The parties opposing the Global Settlement filed petitions seeking
review with the U.S. Supreme Court. On June 27, 1997, the Supreme Court granted
the petition, vacated the judgment and remanded the case to the Fifth Circuit
for further consideration in light of the Supreme Court's decision in the
GEORGINE class action involving asbestos claims filed against members of the
Center for Claims Resolution. In light of this ruling, final resolution of the
Global Settlement may not be known until 1998 or later.
On October 24, 1996, the statutory time period for objectors to seek
further judicial review of the Insurance Settlement lapsed with no petition for
review having been filed with the U.S. Supreme Court. Therefore, the Insurance
Settlement is now final and not subject to further appeal.
The parties will continue to seek approval of the Global Settlement.
If the Global Settlement becomes effective, all asbestos-related personal injury
liabilities of Fibreboard will be resolved through insurance funds and existing
corporate reserves. A permanent injunction barring the filing of any further
claims against Fibreboard or its insurers is included as part of the Global
Settlement. Upon final approval, Fibreboard's insurers are required to pay
existing settlements and assume full responsibility for any claims filed before
August 27, 1993, the date the settling parties reached agreement on the terms of
the Global Settlement. A court-supervised claims processing trust ("Settlement
Trust") will be responsible for resolving claims which were not filed against
Fibreboard before August 27, 1993, and any further claims that might otherwise
be asserted against Fibreboard in the future.
The Settlement Trust will be funded principally by Continental and
Pacific. These insurers have placed $1,525 million in an interest-bearing escrow
account pending court approval of the settlements. Fibreboard is responsible for
contributing $10 million plus accrued interest toward the Settlement Trust,
which it will obtain from other remaining insurance sources and existing
reserves. The Home Insurance Company has already paid $9.9 million into the
escrow account on behalf of Fibreboard, in satisfaction of an earlier settlement
agreement. The balance of the escrow account was $1,691 million at June 30,
1997, after payment of interim expenses and exigent claims associated with the
Global Settlement.
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<PAGE> 30
If the Global Settlement becomes effective, Fibreboard would have no
on-going or future liabilities for asbestos personal injury claims in excess of
the $10 million currently reserved in other long term liabilities.
The Insurance Settlement is structured as an alternative solution in
the event the Global Settlement fails to receive final approval. Under the
Insurance Settlement, Continental and Pacific will pay in full settlements
reached as of August 27, 1993 and provide Fibreboard with the remaining balance
of the Global Settlement escrow account for claims filed after August 27, 1993,
plus an additional $475 million for claims which were pending but not settled at
August 27, 1993, less amounts paid for those claims since August 27, 1993. Under
the Insurance Settlement, Fibreboard will manage the defense and resolution of
asbestosrelated personal injury claims and will remain subject to suit by
asbestos personal injury claimants.
The Insurance Settlement will not be fully implemented or funded
until such time as the Global Settlement has been finally resolved. In the event
the Global Settlement is finally approved, the Insurance Settlement will not be
implemented.
While there are various uncertainties regarding whether the Global
Settlement or the Insurance Settlement will be in effect, and these may
ultimately impact Fibreboard's liability for asbestos personal injury claims,
the Company believes the amounts available under the Insurance Settlement will
be adequate to fund the ongoing defense and indemnity costs associated with
asbestos-related personal injury claims for the foreseeable future.
The Company anticipates reevaluating and updating its estimates of
the Fibreboard liability for asbestos personal injury claims once it is
determined which of the Global Settlement or the Insurance Settlement is
ultimately implemented.
NON-ASBESTOS LIABILITIES
Various other lawsuits and claims arising in the normal course of
business are pending against the Company, some of which allege substantial
damages. Management believes that the outcome of these lawsuits and claims will
not have a materially adverse effect on the Company's financial position or
results of operations.
ACCOUNTING TREATMENT
The financial statements the Trust will be reflected in the Company's
consolidated financial statements, with the Capital Securities shown as
Company-obligated preferred securities of the Trust. The financial statement
footnotes to the Company's consolidated financial statements will reflect that
the sole asset of the Trust will be $___________ principal amount of the ___%
Junior Subordinated Debentures due ____________, 2000 of the Company.
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<PAGE> 31
DESCRIPTION OF THE CAPITAL SECURITIES
The Capital Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, Wilmington Trust Company, an
independent trustee, will act as indenture trustee for the Capital Securities
under the Declaration for purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the Capital Securities will include those
stated in the Declaration and those made part of the Declaration by the Trust
Indenture Act. The following summary of the material terms and provisions of the
Capital Securities and the Declaration does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Declaration
(including the definitions therein of certain terms), a copy of which is filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
is a part, the Trust Act and the Trust Indenture Act. Wherever particular
defined terms are referred to in this Prospectus Supplement, such defined terms
are incorporated herein by reference.
GENERAL
The Declaration authorizes the Owens Corning Trustees to issue on behalf
of the Trust the Trust Securities, which represent undivided beneficial
interests in the assets of the Trust. All of the Common Securities will be
owned, directly or indirectly, by the Company. The Common Securities rank pari
passu, and payments will be made thereon on a pro rata basis, with the Capital
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Capital Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Institutional
Trustee will own the Junior Subordinated Debentures purchased by the Trust for
the benefit of the holders of the Trust Securities. The payment of distributions
out of money held by the Trust, and payments upon redemption of the Capital
Securities or liquidation of the Trust, are guaranteed by the Company to the
extent described under "Description of the Capital Securities Guarantee". The
Capital Securities Guarantee will be held by Wilmington Trust Company, the
Guarantee Trustee, for the benefit of the holders of the Capital Securities. The
Capital Securities Guarantee does not cover payment of distributions when the
Trust does not have sufficient available funds to pay such distributions. In
such event, the remedy of a holder of Capital Securities is to vote to direct
the Institutional Trustee to enforce the Institutional Trustee's rights under
the Junior Subordinated Debentures. See "Description of the Capital Securities
- -- Voting Rights."
DISTRIBUTIONS
Distributions on the Capital Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $1,000 per Capital Security.
Distributions in arrears for more than one payment period will bear interest
thereon at the rate per annum of % thereof compounded semi-annually. The term
"distribution" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Capital Securities will be cumulative, will accrue
from , 1997, and will be payable semi-annually in arrears on
and of each year, commencing , 1997,
when, as and if available for payment. Distributions will be made by the
Institutional Trustee, except as otherwise described below.
The Company has the right under the Indenture to defer payments of
interest on the Junior Subordinated Debentures by extending the interest payment
period from time to time on the Junior Subordinated Debentures, which, if
exercised, would defer distributions on the Capital Securities (though such
distributions would continue to accrue with interest) during any such extended
interest payment period. Such right to extend the interest payment period for
the Junior Subordinated Debentures is limited to a period not extending beyond
the maturity date of the Junior Subordinated Debentures. In the event that
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<PAGE> 32
the Company exercises this right, then (a) the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of capital stock of the Company in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase capital
stock of the Company, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) dividends or
distributions in capital stock of the Company and (v) redemptions or purchases
of any rights pursuant to the Rights Agreement, or any successor to the Rights
Agreement, and the declaration thereunder of a dividend of rights in the
future), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Junior Subordinated
Debentures, and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Capital Securities
Guarantee or the Common Securities Guarantee). Prior to the termination of any
such Extension Period, the Company may further extend the interest payment
period; provided, that such Extension Period, together with all such previous
and further extensions thereof, may not extend beyond the maturity date of the
Junior Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may select a new Extension
Period, subject to the above requirements. See "Description of the Junior
Subordinated Debentures -- Interest" and "-- Option to Extend Interest Payment
Period." If distributions are deferred, the deferred distributions and accrued
interest thereon shall be paid to holders of record of the Capital Securities as
they appear on the books and records of the Trust on the record date next
following the termination of such deferral period.
Distributions on the Capital Securities must be paid on the dates payable
to the extent that the Trust has funds available in the Property Account for the
payment of such distributions. The Trust's funds available for distribution to
the holders of the Capital Securities will be limited to payments received from
the Company on the Junior Subordinated Debentures. See "Description of the
Junior Subordinated Debentures." The payment of distributions out of moneys held
by the Trust is guaranteed by the Company to the extent set forth under
"Description of the Capital Securities Guarantee".
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which will be the or prior to the relevant payment
dates. Such distributions will be paid through the Institutional Trustee who
will hold amounts received in respect of the Junior Subordinated Debentures in
the Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "Book-Entry Only
Issuance -- The Depository Trust Company" below. In the event that any date on
which distributions are to be made on the Capital Securities is not a Business
Day, then payment of the distributions payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such record date. A "Business Day" shall mean any day other than
Saturday, Sunday or any other day on which banking institutions in New York
City (in the State of New York) are permitted or required by any applicable
law to close.
MATURITY; MANDATORY REDEMPTION
The Junior Subordinated Debentures will mature on , 2000. The
Junior Subordinated Debentures may be prepaid in whole (but not in part) at any
time within 90 days of the occurrence of a Special Event (as defined herein).
See "Description of the Junior Subordinated Debentures -- Special Event
Prepayment." Upon the repayment of the Junior Subordinated Debentures, whether
at maturity or as a result of the occurrence of a Special Event, the proceeds
from such repayment shall simultaneously be applied to
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<PAGE> 33
redeem Capital Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Junior Subordinated Debentures so repaid.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. As of the date of any distribution of Junior Subordinated
Debentures upon dissolution of the Trust, (i) the Capital Securities will no
longer be deemed to be outstanding, (ii) the Depositary (as defined herein) or
its nominee, as the record holder of the Capital Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution, and (iii) any
certificate representing Capital Securities not held by the Depositary or its
nominee will be deemed to represent Junior Subordinated Debentures having an
aggregate principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, such Capital
Securities until such certificates are presented to the Company or its agent for
transfer or reissuance.
There can be no assurance as to the market prices for either the Capital
Securities or the Junior Subordi- nated Debentures that may be distributed in
exchange for the Capital Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Capital Securities or such Junior
Subordinated Debentures may trade at a discount to the price that an investor
paid to purchase the Capital Securities offered hereby.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Capital Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $1,000 per
Capital Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Junior Subordinated Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Capital Securities have been
distributed on a pro rata basis to the holders of the Capital Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Capital Securities, except that if
a Declaration Event of Default (as defined herein) has occurred and is
continuing, the Capital Securities shall have a preference over the Common
Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on , 2002,
the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company, (iii) upon the filing of a certificate of dissolution or its equivalent
with respect to the Company, the filing of a certificate of cancellation with
respect to the Trust [after written direction from the Company to dissolve the
Trust] after obtaining the consent of the holders of at least a majority in
liquidation amount of the Trust Securities affected thereby voting together as a
single class to file such certificate of cancellation], or the revocation of the
charter of the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) upon the distribution of Junior
Subordinated Debentures, (v) upon the entry of a decree of a judicial
dissolution of the holder of the Common Securities, the Company or the Trust, or
(vi) upon the redemption of all the Trust Securities.
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<PAGE> 34
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Capital Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Capital Securities have been so cured, waived, or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the holders of the Capital Securities and only the holders of the
Capital Securities will have the right to direct the Institutional Trustee with
respect to certain matters under the Declaration, and therefore the Indenture.
If the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debentures in respect of an Indenture Event of Default after a
holder of record of Capital Securities has made a written request, such holder
of record of Capital Securities may institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures. Notwithstanding the foregoing, if a Declaration Event
of Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable, then a
holder of Capital Securities may directly institute a proceeding after the
respective due date specified in the Junior Subordinated Debentures for
enforcement of payment to such holder directly of the principal of or interest
on the Junior Subordinated Debentures having a principal amount equal to the
aggregate liquidation amount of the Capital Securities of such holder. In
connection with such a direct action by a holder of Capital Securities, the
Company shall have the right under the Indenture to set off any payment made to
such holder by the Company. The holders of Capital Securities will not be able
to exercise directly any other remedy available to the holders of the Junior
Subordinated Debentures.
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debentures will have the
right under the Indenture to declare the principal of and interest on the Junior
Subordinated Debentures to be immediately due and payable. The Company and the
Trust are each required to file annually with the Institutional Trustee an
officer's certificate as to its compliance with all conditions and covenants
under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Capital Securities Guarantee -- Modification of
the Capital Securities Guarantee; Assignment," and as otherwise required by law
and the Declaration, the holders of the Capital Securities will have no voting
rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Junior Subordinated Debentures, to (i) exercise the
remedies available under the Indenture with respect to the Junior Subordinated
Debentures, (ii) waive any past Indenture Event of Default that is waivable
under Section ___ of the Indenture, (iii) exercise any right to rescind or annul
a declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or termination
of the Indenture or the Junior Subordinated Debentures where such consent shall
be required; provided, however, that, where a consent or action under the
Indenture would require the consent or act of holders of more than a majority in
principal amount of the Junior Subordinated Debentures (a "Super-Majority")
affected thereby, only the holders of at least such Super-Majority in aggregate
liquidation amount of the Capital Securities may direct the Institutional
Trustee to give such consent or take such action. The Institutional Trustee
shall notify all holders of the Capital Securities of any notice of default
received from the Debt Trustee with respect to the Junior Subordinated
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<PAGE> 35
Debentures. Such notice shall state that such Indenture Event of Default also
constitutes a Declaration Event of Default. Except with respect to directing the
time, method and place of conducting a proceeding for a remedy, the
Institutional Trustee shall not take any of the actions described in clauses
(i), (ii) or (iii) above unless the Institutional Trustee has obtained an
opinion of tax counsel experienced in such matters to the effect that, as a
result of such action, the Trust will not fail to be classified as a grantor
trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of
the Junior Subordinated Debentures, is required under the Indenture with respect
to any amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Institutional Trustee shall request the direction
of the holders of the Trust Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount of
the Trust Securities voting together as a single class; provided, however, that
where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the holders of at least the proportion in liquidation amount of the
Trust Securities which the relevant Super-Majority represents of the aggregate
principal amount of the Junior Subordinated Debentures outstanding. The
Institutional Trustee shall not take any such action in accordance with the
directions of the holders of the Trust Securities unless the Institutional
Trustee has obtained an opinion of tax counsel experienced in such matters to
the effect that, as a result of such action, the Trust will not fail to be
classified as a grantor trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Capital Securities may be
given at a separate meeting of holders of Capital Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be mailed to
each holder of record of Capital Securities. Each such notice will include a
statement setting forth the following information: (i) the date of such meeting
or the date by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Capital Securities will be required for the Trust to redeem
and cancel Capital Securities or distribute Junior Subordinated Debentures in
accordance with the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circum- stances described above, any of the Capital
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Capital Securities
were not outstanding.
The procedures by which holders of Capital Securities may exercise their
voting rights are described below. See "-- Book-Entry Only Issuance -- The
Depository Trust Company" below.
Holders of the Capital Securities will have no rights to appoint or remove
the Owens Corning Trustees, who may be appointed, removed or replaced solely by
the Company as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee or the Delaware
Trustee), provided that, if any proposed amendment provides for (i) any action
that would adversely affect the powers, preferences or special rights
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of the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the Trust
Securities voting together as a single class will be entitled to vote on such
amendment and such amendment shall not be effective except with the approval of
at least a majority in liquidation amount of the Trust Securities affected
thereby; provided, that, if any amendment referred to in clause (i) above would
adversely affect only the Capital Securities or the Common Securities, then only
the affected class will be entitled to vote on such amendment and such amendment
or proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act of
1940 (the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) if the Trust is not the
surviving entity, such successor entity either (x) expressly assumes all of the
obligations of the Trust under the Trust Securities or (y) substitutes for the
Trust Securities other securities having substantially the same terms as the
Trust Securities (the "Successor Securities"), so long as the Successor
Securities rank the same as the Trust Securities rank with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) the
Company expressly acknowledges a trustee of such successor entity possessing the
same powers and duties as the Institutional Trustee as the holder of the Junior
Subordinated Debentures, (iii) the Capital Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the Capital Securities are then listed or quoted, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Capital Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (vi) such successor entity
has a purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, the Company has received an opinion
of a nationally recognized independent counsel to the Trust experienced in such
matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will be
required to register as an investment company under the 1940 Act and (C)
following such merger, consolidation, amalgamation or replacement, the Trust (or
the successor entity) will continue to be classified as a grantor trust for
United States federal income tax purposes, and (viii) the Company guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Capital Securities Guarantee and the Common
Securities Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause the Trust or the Successor Entity to be classified as
other than a grantor trust for United States federal income tax purposes.
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BOOK-ENTRY ONLY ISSUANCE-THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Capital Securities. The Capital Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Capital Securities certificates,
representing the total aggregate number of Capital Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Capital
Securities as represented by a global certificate (a "Global Certificate").
DTC 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 Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC 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 include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Capital Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Capital
Securities on DTC's records. The ownership interest of each actual purchaser of
each Capital Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Capital Securities.
Transfers of ownership interests in the Capital Securities 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 interests in the Capital Securities, except in the event that
use of the book-entry system for the Capital Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Capital Securities are credited, which may or may not be
the Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Capital Securities represented thereby for all
purposes under the Declaration and the Capital Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Capital Securities (including the presentation of Capital
Securities for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in the Global Certificates are
credited and only in respect of such portion of the aggregate liquidation amount
of Capital Securities as to which such Participant or Participants has or have
given such direction. However, if there is a
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Declaration Event of Default, DTC will exchange the Global Certificates for
certificated securities, which it will distribute to its Participants.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by 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.
Although voting with respect to the Capital Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Capital Securities. Under its usual procedures,
DTC would mail an Omnibus Proxy to the Trust as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights
to those Participants to whose accounts the Capital Securities are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Distributions on the Capital Securities held in book-entry form will be
made to DTC in immediately avail- able funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to DTC is the responsibility of the
Trust, disbursement of such payments to Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants, DTC is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company, the Trust nor
any Owens Corning Trustee will have any responsibility for the performance by
DTC or its Participants or Indirect Participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depositary with respect to the Capital Securities at any time by giving notice
to the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Capital Security certificates are required to be
printed and delivered. Additionally, the Trust (with the consent of the Company)
may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor depositary). In that event, certificates for the Capital
Securities will be printed and delivered. In each of the above circumstances,
the Company will appoint a paying agent with respect to the Capital Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates, or, in the case of certificated
securities, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Register. The Paying
Agent shall initially be the Institutional Trustee. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Owens
Corning Trustees. In the event that the Institutional Trustee shall no longer be
the Paying Agent, the Regular Trustees shall appoint a successor to act as
Paying Agent (which shall be a bank or trust company).
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INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with
respect to the Trust Securities and after the curing of any defaults that may
have occurred, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Institutional Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at the
request of any holder of Capital Securities, unless offered reasonable indemnity
by such holder against the costs, expenses and liabilities which might be
incurred thereby. The holders of Capital Securities will not be required to
offer such indemnity in the event such holders, by exercising their voting
rights, direct the Institutional Trustee to take any action it is empowered to
take under the Declaration following a Declaration Event of Default. The
Institutional Trustee also serves as trustee under the Capital Securities
Guarantee.
PAYING AGENT
In addition, in the event that the Capital Securities do not remain in
book-entry only form, the following provisions would apply:
The Institutional Trustee will act as paying agent for the Capital
Securities and may designate an additional or substitute paying agent at any
time. Registration of transfers of Capital Securities will be effected without
charge by or on behalf of the Trust, but only upon payment (with the giving of
such indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it. The Trust will
not be required to register or cause to be registered the transfer of Capital
Securities after such Capital Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Capital Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or be characterized as other than a grantor trust
for United States federal income tax purposes. The Company is authorized and
directed to conduct its affairs so that the Junior Subordinated Debentures will
be treated as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company and the Regular Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the certificate of incorporation of the
Company, that each of the Company and the Regular Trustees determine in their
discretion to be necessary or desirable to achieve such end, as long as such
action does not adversely affect the interests of the holders of the Capital
Securities or vary the terms thereof.
Holders of the Capital Securities have no preemptive rights.
DESCRIPTION OF THE CAPITAL SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Capital
Securities Guarantee which will be executed and delivered by the Company for the
benefit of the holders from time to time of Capital Securities. The Capital
Securities Guarantee will be qualified as an indenture under the Trust Indenture
Act. Wilmington Trust Company, an independent trustee, will act as indenture
trustee under the Capital Securities Guarantee (the "Capital Guarantee Trustee")
for the purposes of compliance with the provisions of the Trust Indenture Act.
The terms of the Capital Securities Guarantee will be those set forth in the
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Capital Securities Guarantee and those made part of the Capital Securities
Guarantee by the Trust Indenture Act. Wherever particular defined terms of the
Capital Securities Guarantee are defined in this Prospectus Supplement, such
defined terms are incorporated herein by reference. The following summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the form of Capital Securities
Guarantee (including the definitions therein of certain terms), which is filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
forms a part, and the Trust Indenture Act. The Capital Securities Guarantee will
be held by the Capital Guarantee Trustee for the benefit of the holders of the
Capital Securities.
GENERAL
Pursuant to the Capital Securities Guarantee, the Company will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full on a
subordinated basis, to the holders of the Capital Securities issued by the
Trust, the Guarantee Payments (as defined herein)(except to the extent paid by
the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which the Trust may have or assert. The following payments or
distributions with respect to Capital Securities issued by the Trust to the
extent not paid by or on behalf of the Trust (the "Guarantee Payments"), will be
subject to the Capital Securities Guarantee (without duplication): (i) any
accrued and unpaid distributions which are required to be paid on the Capital
Securities, to the extent the Trust shall have funds available therefor; (ii)
with respect to any Capital Securities called for redemption by the Trust, the
redemption price (the "Redemption Price") and all accrued and unpaid
distributions to the date of redemption, to the extent the Trust has funds
available therefor and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Debentures to the holders of Capital
Securities or the redemption of all of the Capital Securities), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Capital Securities to the date of payment, to the extent
the Trust has funds available therefor, and (b) the amount of assets of the
Trust remaining available for distribution to holders of the Capital Securities
in liquidation of the Trust. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of Capital Securities or by causing the Trust to pay such
amounts to such holders.
The Capital Securities Guarantee will be a full and unconditional
guarantee on a subordinated basis of the Guarantee Payments with respect to the
Capital Securities, but will not apply to any payment of distributions except to
the extent the Trust shall have funds available therefor. If the Company does
not make interest payments on the Junior Subordinated Debentures purchased by
the Trust, the Trust will not pay distributions on the Capital Securities issued
by the Trust and will not have funds available therefor. The Capital Securities
Guarantee, when taken together with the Company's obligations under the
Indenture and the Declaration, will have the effect of providing a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Capital Securities.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Capital Securities
Guarantee, except that upon an Indenture Event of Default, holders of Capital
Securities shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Capital Securities Guarantee, the Company will covenant that, so
long as any Capital Securities issued by the Trust remain outstanding, if there
shall have occurred any event that would constitute an event of default under
the Capital Securities Guarantee or the Declaration, then (a) the Company shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than (i) purchases or acquisitions of capital stock of
the Company in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any
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contract or security outstanding on the date of such event requiring the Company
to purchase capital stock of the Company, (ii) as a result of a reclassification
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock, (iii) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (iv) dividends
or distributions in capital stock of the Company and (v) redemptions or
purchases of any rights pursuant to the Rights Agreement, or any successor to
the Rights Agreement, and the declaration thereunder of a dividend of rights in
the future), (b) the Company shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Company which rank pari passu with or junior to the Junior Subordinated
Debentures and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Capital Securities
Guarantee or the Common Securities Guarantee).
MODIFICATION OF THE CAPITAL SECURITIES GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect the
rights of holders of Capital Securities (in which case no vote will be
required), the Capital Securities Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation amount of the
outstanding Capital Securities issued by the Trust. All guarantees and
agreements contained in the Capital Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company and
shall inure to the benefit of the holders of the Capital Securities then
outstanding.
TERMINATION
The Capital Securities Guarantee will terminate as to the Capital
Securities (a) upon full payment of the Redemption Price of all Capital
Securities then outstanding, (b) upon distribution of the Junior Subordinated
Debentures held by the Trust to the holders of the Capital Securities of the
Trust or (c) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Trust. The Capital Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Capital Securities issued by the Trust must restore payment
of any sums paid under such Capital Securities or the Capital Securities
Guarantee.
EVENTS OF DEFAULT
An event of default under the Capital Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Capital Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Capital Guarantee Trustee in respect of the
Capital Securities Guarantee or to direct the exercise of any trust or power
conferred upon the Capital Guarantee Trustee under the Capital Securities
Guarantee. If the Capital Guarantee Trustee fails to enforce the Capital
Securities Guarantee, any holder of Capital Securities may institute a legal
proceeding directly against the Company to enforce such holder's rights under
the Capital Securities Guarantee, without first instituting a legal proceeding
against the Trust, the Capital Guarantee Trustee or any other person or entity.
The Company waives any right or remedy to require that any action be brought
first against the Trust or any other person or entity before proceeding directly
against the Company.
STATUS OF THE CAPITAL SECURITIES GUARANTEE
The Capital Securities Guarantee will constitute an unsecured obligation
of the Company and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Company, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company; and (iii) senior
to the Company's common stock. The terms of the Capital
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Securities provide that each holder of Capital Securities issued by the Trust by
acceptance thereof agrees to the subordination provisions and other terms of the
Capital Securities Guarantee.
The Capital Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
INFORMATION CONCERNING THE CAPITAL GUARANTEE TRUSTEE
The Capital Guarantee Trustee, prior to the occurrence of a default with
respect to the Capital Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in the Capital Securities Guarantee and,
after default, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Capital Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by the Capital Securities Guarantee at the request of
any holder of Capital Securities, unless offered reasonable indemnity against
the costs, expenses and liabilities which might be incurred thereby; but the
foregoing shall not relieve the Capital Guarantee Trustee, upon the occurrence
of an event of default under the Capital Securities Guarantee, from exercising
the rights and powers vested in it by the Capital Securities Guarantee.
GOVERNING LAW
The Capital Securities Guarantee will be governed by and construed in
accordance with the internal laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Junior
Subordinated Debentures in which the Trust will invest the proceeds from the
issuance and sale of the Trust Securities. The following description does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture to be entered into between the Company and
Wilmington Trust Company, as trustee (the "Debt Trustee"), as supplemented or
amended from time to time (as so supplemented and amended, the "Indenture"), the
form of which is filed as an exhibit to the Registration Statement of which this
Prospectus Supplement forms a part, and to the Trust Indenture Act. Certain
capitalized terms used herein are defined in the Indenture.
GENERAL
The Junior Subordinated Debentures will be issued as unsecured,
subordinated debt under the Indenture. The Junior Subordinated Debentures will
be limited in aggregate principal amount to $ , such amount being the sum of the
aggregate stated liquidation amount of the Capital Securities and the capital
contributed by the Company in exchange for the Common Securities (the "Owens
Corning Payment").
The Junior Subordinated Debentures are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debentures
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compound Interest (as defined herein) and Additional
Interest (as defined herein), if any, on , 2000.
The Company will have the right at any time to dissolve the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. If Junior Subordinated Debentures are distributed to holders
of Trust Securities in liquidation of such holders' interests in the Trust, such
Junior Subordinated Debentures will initially be issued as a Global Security (as
defined herein). As described herein, under certain limited circumstances,
Junior Subordinated Debentures may be issued in certificated form in exchange
for a Global Security. See "--Book-Entry and Settlement" below. In the event
that Junior
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Subordinated Debentures are issued in certificated form, such Junior
Subordinated Debentures will be in denominations of $1,000 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Junior Subordinated Debentures issued as a Global Security
will be made to DTC, a successor depositary or, in the event that no depositary
is used, to a Paying Agent for the Junior Subordinated Debentures. In the event
Junior Subordinated Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Junior Subordinated Debentures
will be registrable and Junior Subordinated Debentures will be exchangeable for
Junior Subordinated Debentures of other denominations of a like aggregate
principal amount at the corporate trust office of the Institutional Trustee in
, Delaware; provided, that at the option of the Company payment of
interest may be made by check mailed to the address of the holder entitled
thereto or by wire transfer to an account appropriately designated by the holder
entitled thereto. Notwithstanding the foregoing, so long as the holder of any
Junior Subordinated Debentures is the Institutional Trustee, the payment of
principal and interest on the Junior Subordinated Debentures held by the
Institutional Trustee will be made at such place and to such account as may be
designated by the Institutional Trustee.
The Indenture does not contain provisions that afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. In the event of any dissolution, winding-up, liquidation or
reorganization of the Company (whether voluntary or involuntary and whether in
bankruptcy, insolvency or receivership proceedings, or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise), all Senior Indebtedness will first be paid in full
before any payment or distribution may be made in respect of the principal of
(and premium, if any) of interest, if any, on the Junior Subordinated
Debentures.
The Company may not make any payment with respect to the Junior
Subordinated Debentures if and for so long as (i) any Senior Indebtedness is or
becomes due and payable (whether at maturity, for an installment of principal or
interest, upon acceleration, for mandatory prepayment, or otherwise) and remains
unpaid, (ii) any Senior Indebtedness Default has occurred and has not been cured
or waived in conformity with the terms of the instrument, indenture or agreement
governing such Senior Indebtedness; or (iii) a payment by the Company with
respect to the Junior Subordinated Debentures would, immediately after giving
effect thereto, result in a Senior Indebtedness Default.
A payment with respect to the Junior Subordinated Debentures shall
include, without limitation, payment of principal of, premium, if any, and
interest on the Junior Subordinated Debentures, the purchase of Junior
Subordinated Debentures by the Company and any other payment other than a
payment in stock or any equity securities.
The term "Senior Indebtedness" means all indebtedness incurred, assumed or
guaranteed, directly or indirectly, by the Company, either before, on, or after
the date of the Indenture without any limitation as to the amount or terms
thereof, and whether such indebtedness (including, but not limited to, interest
on any such indebtedness) arises or accrues before or after the commencement of
any bankruptcy, insolvency or receivership proceedings, and whether or not such
indebtedness (including, but not limited to, interest thereon) is an allowable
claim under the Bankruptcy Code or is otherwise enforceable against the Company
and including, in any event, interest and other liabilities accruing or arising
after the filing by or against the Company of a petition under the Bankruptcy
Code or that would have so accrued or arisen but for the filing of such
petition, (i) which arises for borrowed money, securities sold, funds provided,
assets or services purchased or any other transaction whether not in the
ordinary course of business and which is evidenced by a promissory note, bond,
debenture, writing or other instrument of indebtedness or reflected on the
accounting records of the Company as a payable (but expressly excluding (A)
amounts owed for
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compensation to employees, (B) obligations owing under judgments arising out of
obligations that are not indebtedness for borrowed money (other than any such
obligations arising from obligations which are otherwise Senior Indebtedness),
(C) any indebtedness which by the terms of the instrument creating or evidencing
the same is not superior in right of payment to or is junior in right of payment
to the Junior Subordinated Debentures, (D) any liability for federal, state,
local or other taxes owed or owing by the Company, (E) any liability in respect
of any employee benefit plan (including, without limitation, any liability to
the Pension Benefit Guaranty Corporation or any successor thereto), (F)
indebtedness or obligations to a subsidiary of the Company, (G) the Company's 6
1/2% Convertible Subordinated Debentures due 2025 and (H) indebtedness to trade
creditors or monetary obligations to trade creditors incurred or assumed by the
Company or any of its subsidiaries in the ordinary course of business); (ii) for
principal of and interest on all loans and other extensions of credit under the
Credit Agreement, as in effect and as amended, renewed, extended or supplemented
from time to time, and any document, instrument or agreement executed and
delivered in connection therewith and all fees, expenses, reimbursements,
indemnities, premiums and other amounts payable under the Credit Agreement;
(iii) for principal of (and premium, if any) and interest on the Company's
5.375% Swiss Franc Bonds due November 26, 2000 and the Company's 7.25% DM Bonds
of 1985/2000 and all fees, expenses, reimbursements, indemnities, premiums and
other amounts payable thereunder; (iv) for any amounts payable with respect to
any lease, conditional sale or installment sale agreement or other financing
instrument or agreement which in accordance with generally accepted accounting
principles is, at the date of the Indenture or at the time the lease,
conditional sale or installment sale agreement or other financing instrument or
agreement is entered into, assumed or guaranteed, directly or indirectly, by the
Company, required to be reflected as a liability on the face of the balance
sheet of the Company; (v) for all principal of and interest on all loans and
other extensions of credit under any lines of credit, credit agreements or
promissory notes from a bank or other financial institution (including, without
limitation, any letters of credit, bankers' acceptances, performance bonds and
other credit facilities under such borrowing arrangements). and all fees,
expenses, reimbursements, indemnities, premiums and other amounts payable under
such borrowing arrangements; (vi) for any amounts payable in respect of any
interest rate exchange agreement, ceiling rate agreement, currency exchange
agreement or similar agreement; and (vii) for renewals, deferrals, amendments,
modifications, supplements, extensions or refunding of any of the indebtedness
described in clauses (i) through (vi), inclusive, or evidences of indebtedness
issued in exchange for such Senior Indebtedness. Senior Indebtedness shall
constitute Senior Indebtedness for all purposes of the Junior Subordinated
Debentures, and the provisions of Article of the Indenture shall continue to
apply to such Senior Indebtedness, notwithstanding the fact that such Senior
Indebtedness or any claim in respect thereof shall be disallowed, avoided or
subordinated pursuant to the provisions of the United States Bankruptcy Code of
1978, as amended, or other applicable law.
The term "Senior Indebtedness Default" means the failure to make any
payment of Senior Indebtedness when due or the happening of an event of default
with respect to any Senior Indebtedness, as defined therein or in the instrument
under which the same is outstanding, which, by its terms, if occurring prior to
the stated maturity of such Senior Indebtedness, permits or with the giving of
notice or lapse of time (or both) would permit any holder thereof, any group of
such holders or any trustee or representative for such holders thereupon to
accelerate the maturity thereof or which results in such acceleration,
including, without limitation, a "Default" under the Credit Agreement, dated as
of June 26, 1997 (the "Credit Agreement"), by and among the Company, the several
financial institutions listed on Annex A thereof and Credit Suisse First Boston,
as Agent, as in effect and as amended, renewed or extended or supplemented from
time to time, and any document, instrument or agreement executed and delivered
in connection therewith, whether or not such Senior Indebtedness or instrument
has been avoided, disallowed or subordinated.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company. The Company expects from time
to time to incur additional indebtedness constituting Senior Debt.
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SPECIAL EVENT PREPAYMENT
If a Special Event shall occur and be continuing, the Company may, at its
option and subject to receipt of any required regulatory approval, prepay the
Junior Subordinated Debentures in whole (but not in part) at any time within 90
days of the occurrence of such Special Event, at a prepayment price (the
"Special Event Prepayment Price") equal to, for each Junior Subordinated
Debenture, the Make-Whole Amount. The Make-Whole Amount" shall be equal to the
greater of (i) 100% of the principal amount of the Junior Subordinated
Debentures to be prepaid or (ii) the sum, as determined by a Quotation Agent, of
the present values of the scheduled payments of principal and interest on the
Junior Subordinated Debentures from the prepayment date to the Maturity Date,
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in
the case of each of clauses (i) and (ii), accrued and unpaid interest thereon,
including Compound Interest and Additional Interest (as hereinafter defined), if
any, to the date of prepayment. If, following the occurrence of a Special Event,
the Company exercises its option to prepay the Junior Subordinated Debentures,
then the proceeds of that prepayment must be applied to redeem Trust Securities
having a liquidation amount equal to the principal amount of Junior Subordinated
Debentures to be paid in accordance with their terms, at the Special Event
Redemption Price (equal to the Special Event Prepayment Price in respect of the
Junior Subordinated Debentures).
A "Special Event" means a Tax Event or an Investment Company Event.
"Tax Event" means the receipt by the Trust of an opinion of a nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of (a) any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, (b) any amendment to or change in an interpretation or
application of such laws or regulations by any legislative body, court,
governmental agency or regulatory authority or (c) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the generally accepted position on the date the
Capital Securities are issued, which amendment or change is effective or which
interpretation or pronouncement is announced on or after the date of issuance of
the Capital Securities under the Declaration, there is more than an
insubstantial risk that (i) within 90 days of the date thereof, the Trust would
be subject to U.S. federal income tax with respect to income received or accrued
on the Junior Subordinated Debentures, (ii) within 90 days of the date thereof,
interest payable by the Company on the Junior Subordinated Debentures would not
be deductible, in whole or in part, by the Company for federal income tax
purposes or (iii) within 90 days of the date thereof, the Trust would be subject
to more than a de minimis amount of other taxes, duties or other governmental
charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in such practice under
the 1940 Act to the effect that, as a result of the occurrence of a change in
law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus Supplement, there is more than
an insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the 1940 Act .
"Adjusted Treasury Rate" means, with respect to any Special Event
prepayment date, the Treasury Rate plus (i) % if such prepayment date
occurs prior to , 1998 and (ii) % in all other cases.
"Treasury Rate" means (i) the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or
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extrapolated from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not published
during the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date. The Treasury Rate shall be
calculated on the third Business Day preceding the prepayment date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term to maturity of the Junior Subordinated Debentures (the "Remaining Life") to
be prepaid that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the Remaining Life. If no United States
Treasury security has a maturity which is within a period from three months
before to three months after , 2000, the two most closely corresponding United
States Treasury securities as selected by the Quotation Agent shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Comparable Treasury Price" means with respect to any Special Event
prepayment date: (i) the average of the Reference Treasury Dealer Quotations for
such prepayment date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Debt Trustee (after consultation with
the Company) obtains fewer than three such Reference Treasury Dealer Quotations,
the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer selected by the Debt
Trustee. "Reference Treasury Dealer" means: Merrill Lynch Government Securities,
Inc. and its respective successors, provided, however, that if the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by
the Debt Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Special Event prepayment date, the average, as
determined by the Debt Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Debt Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such prepayment
date.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the prepayment date to each registered holder of Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Company defaults in payment of the Special Event Prepayment Price, on and after
the prepayment date interest shall cease to accrue on such Junior Subordinated
Debentures called for prepayment.
INTEREST
Each Junior Subordinated Debenture shall bear interest at the rate of %
per annum from the original date of issuance, payable semi-annually in arrears
on and of each year (each an "Interest Payment Date"),
commencing , 1997, to the person in whose name such Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the and next preceding
such Interest Payment Date.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. The amount of interest payable
for any period shorter than a full semi-annual period for which
interest is computed, will be computed on the basis of the actual number of days
elapsed per 30-day month. In the event that any date on which interest is
payable on the Junior Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the
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next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time,
during the term of the Junior Subordinated Debentures to defer payments of
interest by extending the interest payment period for a period not extending
beyond the maturity of the Junior Subordinated Debentures, at the end of which
Extension Period, the Company shall pay all interest then accrued and unpaid
(including any Additional Interest, as herein defined) together with interest
thereon compounded semi-annually at the rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law ("Compound
Interest"); provided, that during any such Extension Period, (a) the Company
shall not declare or pay dividends on, make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock (other than (i) purchases or acquisitions of capital stock of
the Company in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security outstanding on the date
of such event requiring the Company to purchase capital stock of the Company,
(ii) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) dividends or distributions in capital stock of the
Company and (v) redemptions or purchases of any rights pursuant to the Rights
Agreement or any successor to the Rights Agreement, and the declaration
thereunder of a dividend of rights in the future), (b) the Company shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Company that rank pari
passu with or junior to the Junior Subordinated Debentures, and (c) the Company
shall not make any guarantee payments with respect to the foregoing (other than
payments pursuant to the Capital Securities Guarantee or the Common Securities
Guarantee). Prior to the termination of any such Extension Period, the Company
may further defer payments of interest by extending the interest payment period;
provided, however, that, such Extension Period, including all such previous and
further extensions, may not extend beyond the maturity of the Junior
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may commence a new Extension
Period, subject to the terms set forth in this section. No interest during an
Extension Period, except at the end thereof, shall be due and payable, but the
Company, at its option, may prepay on any Interest Payment Date all the of the
interest accrued during the then elapsed portion of an Extension Period. The
Company has no present intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debentures. If the Institutional Trustee shall be the sole holder of the Junior
Subordinated Debentures, the Company shall give the Regular Trustees and the
Institutional Trustee notice of its selection of such Extension Period one
Business Day prior to the earlier of (i) the date distributions on the Capital
Securities are payable or (ii) the date the Regular Trustees are required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Capital Securities of the record or payment
date of such distribution. The Regular Trustees shall give notice of the
Company's selection of such Extension Period to the holders of the Capital
Securities. If the Institutional Trustee shall not be the sole holder of the
Junior Subordinated Debentures, the Company shall give the holders of the Junior
Subordinated Debentures notice of its selection of such Extension Period ten
Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the
date upon which the Company is required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders of the
Junior Subordinated Debentures of the record or payment date of such related
interest payment.
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ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Junior Subordinated Debentures such additional amounts as shall be
required so that the net amounts received and retained by the Trust after paying
any such taxes, duties, assessments or other governmental charges will be not
less than the amounts the Trust would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Junior Subordinated Debentures, will
have the right to declare the principal of and the interest on the Junior
Subordinated Debentures (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Events of Default" in the accompanying Prospectus for
a description of the Events of Default. An Indenture Event of Default also
constitutes a Declaration Event of Default. The holders of Capital Securities in
certain circumstances have the right to direct the Institutional Trustee to
exercise its rights as the holder of the Junior Subordinated Debentures. See
"Description of the Capital Securities -- Declaration Events of Default" and "--
Voting Rights." If the Institutional Trustee fails to enforce its rights under
the Junior Subordinated Debentures in respect of an Indenture Event of Default
after a holder of record of Capital Securities has made a written request, such
holder of record of Capital Securities may institute a legal proceeding against
the Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Junior Subordinated Debentures
on the date such interest or principal is otherwise payable, the Company
acknowledges that a holder of Capital Securities may then institute a Direct
Action for payment after the respective due date specified in the Junior
Subordinated Debentures. In connection with such a Direct Action by a holder of
Capital Securities, the Company shall have the right under the Indenture to set
off any payment made to such holder by the Company. The holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debentures.
MODIFICATION OF INDENTURE; WAIVER
The Indenture may be modified by the Company and the Debt Trustee without
the consent of any holders of the Junior Subordinated Debentures with respect to
certain matters, including (i) to cure any ambiguity, defect or inconsistency or
to correct or supplement any provision which may be inconsistent with any other
provision of the Indenture, (ii) to qualify, or maintain the qualification of,
the Indenture under the Trust Indenture Act and (iii) to make any change that
does not materially adversely affect the interests of any holder of Junior
Subordinated Debentures. In addition, under the Indenture, certain rights and
obligations of the Company and the rights of holders of the Junior Subordinated
Debentures may be modified by the Company and the Debt Trustee with the written
consent of the holders of at least a majority in aggregate principal amount of
the outstanding Junior Subordinated Debentures; but no extension of the maturity
of Junior Subordinated Debentures, reduction in the interest rate or extension
of the time for payment of interest, change in the optional redemption or
repurchase provisions in a manner adverse to any holder of Junior Subordinated
Debentures, other modification in the terms of payment of the principal of, or
interest on, the Junior Subordinated Debentures, or reduction of the percentage
required for modification, will be effective against any holder of any
outstanding Junior Subordinated Debentures without the holder's consent.
The holders of a majority in aggregate principal amount of the outstanding
Junior Subordinated Debentures may on behalf of the holders of all Junior
Subordinated Debentures waive compliance by the
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Company with certain restrictive covenants of the Indenture. The holders of not
less than a majority in aggregate principal amount of the outstanding Junior
Subordinated Debentures may on behalf of the holders of all Junior Subordinated
Debentures waive any past Indenture Event of Default or Default under the
Indenture, except an Indenture Event of Default or a Default in the payment of
the principal of, or premium, if any, or any interest on any Junior Subordinated
Debenture or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding Junior
Subordinated Debenture affected.
DEFEASANCE
The Company will not have the ability to redeem the Junior Subordinated
Debentures prior to the stated maturity date other than in the circumstances
described in "-- Special Event Prepayment." However, the Company will be able to
defease the Junior Subordinated Debentures by making an irrevocable deposit with
the Debt Trustee of money and/or U.S. governmental obligations that will provide
money in an amount sufficient, in the opinion of a nationally recognized
independent accounting firm, to pay each payment of principal and interest on
the Junior Subordinated Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Capital Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust as
a result of the occurrence of a Special Event, the Junior Subordinated
Debentures will be issued in the form of one or more global certificates (each a
"Global Security") registered in the name of the Depositary or its nominee.
Except under the limited circumstances described below, Junior Subordinated
Debentures represented by the Global Security will not be exchangeable for, and
will not otherwise be issuable as, Junior Subordinated Debentures in
certificated form. The Global Securities described above may not be transferred
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in certificated form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the Depositary or if such person is not a Participant,
on the procedures of the Participant through which such person owns its interest
to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Junior Subordinated Debentures are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, DTC will act
as securities depositary for the Junior Subordinated Debentures. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Capital Securities -- Book-Entry Only Issuance -- The
Depository Trust Company." As of the date of this Prospectus Supplement, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the Capital
Securities apply in all material respects to any debt obligations represented by
one or more Global Securities held by the Company. The Company may appoint a
successor to DTC or any successor depositary in the event DTC or such successor
depositary is unable or unwilling to continue as a depositary for the Global
Securities.
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None of the Company, the Trust, the Institutional Trustee, any paying
agent and any other agent of the Company or the Debt Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Junior Subordinated Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed, (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Indenture Event of Default with respect to such Junior
Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Junior Subordinated Debentures
registered in such names as the Depositary shall direct. It is expected that
such instructions will be based upon directions received by the Depositary from
its Participants with respect to ownership of beneficial interests in such
Global Security.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Company will pay all fees and expenses related to (i) the offering of
the Trust Securities and the Junior Subordinated Debentures, (ii) the
organization, maintenance and dissolution of the Trust, (iii) the retention of
the Owens Corning Trustees and (iv) the enforcement by the Institutional Trustee
of the rights of the holders of the Capital Securities. The payment of such fees
and expenses will be fully and unconditionally guaranteed by the Company.
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBENTURES AND THE CAPITAL SECURITIES
GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the Junior
Subordinated Debentures.
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Junior Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Capital Securities; (iii) the
Company shall pay, and the Trust shall not be obligated to pay, directly or
indirectly, all costs, expenses, debts and obligations of the Trust (other than
with respect to the Trust Securities); and (iv) the Declaration further provides
that the Owens Corning Trustees shall not take or cause or permit the Trust to,
among other things, engage in any activity that is not consistent with the
purposes of the Trust.
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Payments of distributions (to the extent funds therefor are available) and
other payments due on the Capital Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of the Capital Securities Guarantee". If the Company does not make
interest payments on the Junior Subordinated Debentures purchased by the Trust,
it is expected that the Trust will not have sufficient funds to pay
distributions on the Capital Securities. The Guarantee does not apply to any
payment of distributions unless and until the Trust has sufficient funds for the
payment of such distributions.
If the Company fails to make interest or other payments on the Junior
Subordinated Debentures when due (taking account of any Extension Period), the
Declaration provides a mechanism whereby the holders of the Capital Securities,
using the procedures described in "Description of the Capital Securities -- Book
- - Entry Only Issuance -- The Depository Trust Company" and "-- Voting Rights,"
may direct the Institutional Trustee to enforce its rights under the Junior
Subordinated Debentures. If the Institutional Trustee fails to enforce its
rights under the Indenture in respect of an Event of Default, such holder of
record of Capital Securities may institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures without first instituting any legal proceeding against
the Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable, then a holder of Capital Securities may
directly institute a proceeding against the Company for payment. The Company,
under the Capital Securities Guarantee, acknowledges that the Guarantee Trustee
shall enforce the Capital Securities Guarantee on behalf of the holders of the
Capital Securities. If the Company fails to make payments under the Capital
Securities Guarantee, the Capital Securities Guarantee provides a mechanism
whereby the holders of the Capital Securities may direct the Guarantee Trustee
to enforce its rights thereunder. Notwithstanding the foregoing, if the Company
has failed to make a payment under the Capital Securities Guarantee, any holder
of Capital Securities may institute a legal proceeding directly against the
Company to enforce its rights under the Capital Securities Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee,
or any other person or entity.
The Capital Securities Guarantee, when taken together with the Company's
obligations under the Junior Subordinated Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), has the effect of providing a full and unconditional
guarantee on a subordinated basis of amounts due on the Capital Securities. See
"Description of the Capital Securities Guarantee -- General."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of Capital
Securities by a beneficial owner acquiring Capital Securities on their original
issuance at their original offering price who is for United States federal
income tax purposes (i) an individual citizen or resident of the United States,
(ii) a corporation created or organized in or under the laws of the United
States or any state thereof or the District of Columbia, (iii) a domestic
partnership, (iv) an estate the income of which is subject to United States
federal income taxation, regardless of its source, or (v) a trust if a court
within the United States is able to exercise primary supervision over the
administration of such trust and one or more United States fiduciaries have the
authority to control all substantial decisions of such trust, in each case
holding Capital Securities as a capital asset (a "U.S. Securityholder"). The
statements of law or legal conclusion set forth in this summary represent the
opinion of Debevoise & Plimpton, special tax counsel to the Company ("Tax
Counsel"). This summary does not address potential tax consequences applicable
to a prospective purchaser that is not a U.S. Securityholder. Prospective
investors in Capital Securities that are not U.S. Securityholders should consult
their tax advisors as to the United States federal income tax consequences of
the purchase, ownership and disposition of Capital Securities.
S-47
<PAGE> 52
This summary does not address all potential tax consequences that may be
applicable to a particular U.S. Securityholder and is not intended to be wholly
applicable to all categories of U.S. Securityholders (including, for example,
(a) insurance companies, banks, tax-exempt organizations or dealers, (b) persons
holding Capital Securities as a part of a straddle, hedge, conversion
transaction or other integrated investment or (c) persons whose functional
currency is not the United States dollar), some of which may be subject to
special rules, nor does it address alternative minimum taxes or state, local or
foreign taxes. This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations (including proposed Treasury
regulations) issued thereunder, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied retroactively in a manner that
could adversely affect a beneficial owner of Capital Securities. These
authorities are subject to various interpretations and it is therefore possible
that the United States federal income tax treatment of the Capital Securities
may differ from the treatment described below.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL OR FOREIGN TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel
will render its opinion to the effect that, under current law and assuming
compliance with the terms of the Declaration, and based on certain assumptions
contained in such opinion, the Trust will be classified as a grantor trust and
not as an association taxable as a corporation for United States federal income
tax purposes. Accordingly, each U.S. Securityholder will be considered the owner
of an undivided interest in the Junior Subordinated Debentures and will take
into account its pro rata share of all items of income, gain, loss or deduction
of the Trust. Any amount included in a U.S. Securityholder's gross income will
increase such U.S. Securityholder's tax basis in its Capital Securities, and the
amount of distributions to a U.S. Securityholder will reduce such U.S.
Securityholder's tax basis in its Capital Securities.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company, the Trust and, by acquiring Capital Securities, each holder
of Capital Securities agree to treat the Junior Subordinated Debentures as
indebtedness for all United States tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, the Company has the right to defer payments of
interest on the Junior Subordinated Debentures. The Company's right to defer
payments of interest could cause the Junior Subordinated Debentures to be
subject to the "original issue discount" ("OID") rules. The Company, however,
believes, and intends to take the position, that as of the issue date, the terms
and conditions of the Junior Subordinated Debentures (in particular the
restrictions on the Company's ability to pay dividends during an Extension
Period) make the likelihood that the Company would exercise its right to defer
payments of interest a "remote" contingency for these purposes. If so treated,
the Junior Subordinated Debentures would not be subject to the OID rules, and a
U.S. Securityholder generally would include stated interest in income as
ordinary income when paid to the Trust or accrued, in accordance with such U.S.
Securityholder's regular method of accounting, unless the Company were to defer
the payment of interest.
If the Company were to exercise its right to defer payments of interest,
the Junior Subordinated Debentures would at that time be treated, solely for
purposes of the OID rules, as reissued with OID. In such event, all of a U.S.
Securityholder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such U.S. Securityholder's method of tax accounting, and actual
distributions of stated interest would not be reported
S-48
<PAGE> 53
as taxable income. Consequently, each U.S. Securityholder (including those using
the cash basis of accounting) would be required to include OID in its gross
income daily even though the Company would not make actual cash payments during
an Extension Period.
The IRS could take the position that the likelihood that the Company would
exercise its option to defer the payment of interest is not a "remote"
contingency for these purposes, in which case U.S. Securityholders would be
required to accrue OID on the Junior Subordinated Debentures on an economic
accrual basis under the OID rules described in the preceding paragraph.
Corporate U.S. Securityholders will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF CAPITAL SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Capital
Securities--Distribution of the Junior Subordinated Debentures" will be
non-taxable and will result in a U.S. Securityholder receiving directly his pro
rata share of the Junior Subordinated Debentures previously held indirectly
through the Trust, with a holding period and aggregate tax basis equal to the
holding period and the aggregate tax basis such U.S. Securityholder had in its
Capital Securities before such distribution. A U.S. Securityholder will continue
to include interest (or OID) in respect of Junior Subordinated Debentures
received from the Trust in the manner described above under "Interest Income and
Original Issue Discount."
SALES OR REDEMPTIONS OF CAPITAL SECURITIES
Gain or loss will be recognized by a Securityholder on a sale of a Capital
Security (including a redemption for cash) in an amount equal to the difference
between the amount realized by the U.S. Securityholder on the sale or redemption
and the U.S. Securityholder's adjusted tax basis in the Capital Security sold or
redeemed. Gain or loss recognized by a U.S. Securityholder on Capital Securities
held for more than one year generally will be taxable as long-term capital gain
or loss (except to the extent attributable to accrued interest, which will be
taxable as ordinary income to the extent not previously included in income).
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
In general, information reporting requirements on Form 1099 will apply to
payments on Capital Securities to a noncorporate U.S. Securityholder. "Backup"
withholding at a rate of 31% will apply to such payments if such U.S.
Securityholder fails to provide an accurate taxpayer identification number or
certain other conditions are met.
Payment of the proceeds from the disposition of Capital Securities to or
through the United States office of a broker are subject to information
reporting and backup withholding unless the holder or beneficial owner
establishes an exemption from information reporting and backup withholding.
Any amounts withheld from a U.S. Securityholder under the backup
withholding rules will be allowed as a refund or credit against such U.S.
Securityholder's United States federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
S-49
<PAGE> 54
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Trust and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation and
Goldman, Sachs & Co. (the "Underwriters"), the Company and the Trust have agreed
to sell to the Underwriters, and each of the Underwriters severally has agreed
to purchase from the Company and the Trust, the number of Capital Securities set
forth opposite each Underwriter's name. In the Underwriting Agreement, the
several Underwriters severally have agreed, subject to the terms and conditions
set forth therein, to purchase all of the Capital Securities offered hereby if
any of the Capital Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
the purchase commitments of the nondefaulting Underwriters may be increased or
the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
Number of
Underwriters Capital Securities
------------ ------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
Credit Suisse First Boston Corporation......................................
Goldman, Sachs & Co. ....................................................... ------------
Total..................................................... ============
</TABLE>
The Underwriters have advised the Company and the Trust that they propose
initially to offer the Capital Securities to the public at the public offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price less a concession not in excess of $ per Capital Security.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per Capital Security on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
In view of the fact that the proceeds of the sale of the Capital Securities
will be used to purchase the Junior Subordinated Debentures, the Underwriting
Agreement provides that the Company will agree to pay as compensation
("Underwriters' Compensation") to the Underwriters for the Underwriters'
arranging the investment therein of such proceeds, an amount in New York
Clearing House (same day) funds of $ per Capital Security (or $ in the
aggregate) for the accounts of the several Underwriters, provided, that such
compensation for sales of or more Capital Securities to a single purchaser will
be $ per Capital Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence.
Until the distribution of the Capital Securities is completed, rules of the
Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the Capital Securities or shares of the
Company's common stock. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Capital Securities or such common stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Capital Securities or such common stock.
If the Underwriters create a short position in the Capital Securities in
connection with this offering, i.e., if they sell more Capital Securities than
are set forth on the cover page of this Prospectus Supplement, the Underwriters
may reduce that short position by purchasing Capital Securities in the open
market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Capital
Securities in the open market to reduce the Underwriters' short position or to
stabilize the price of the Capital Securities, they may reclaim the amount of
the selling concession from any Underwriter and any selling group members who
sold those Capital Securities as part of this offering.
S-50
<PAGE> 55
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company, the Trust nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Capital Securities
or the Company's common stock. In addition, neither the Company, the Trust nor
any of the Underwriters makes any representation that the Underwriters will
engage in such transaction or that such transactions, once commenced, will not
be discontinued without notice.
The Company and the Trust have granted to the Underwriters an option,
exercisable for 30 days following the date of this Prospectus Supplement, to
purchase up to an aggregate of an additional $45,000,000 in liquidation amount
of Capital Securities from the Trust at the price to the public set forth on the
cover page of this Prospectus Supplement. The Underwriters may exercise this
option only to cover over-allotments, if any, made on the sale of the Capital
Securities offered hereby. If the Underwriters exercise their over-allotment
option, each of the Underwriters has severally agreed, subject to certain
conditions, to effect the foregoing transactions, with respect to approximately
the same percentage of such Capital Securities that the respective number of
Capital Securities set forth opposite its name in the foregoing table bears to
the Capital Securities offered hereby.
The Company and the Trust have agreed, for a period of days after the date
of this Prospectus Supplement, to not, without the prior written consent of
Merrill Lynch, Pierce, Fenner and Smith Incorporated, directly or indirectly,
sell, offer to sell, grant any option for the sale of, or otherwise dispose of,
or enter into any agreement to sell, any Capital Securities or Junior
Subordinated Debentures as the case may be, or any securities of the Company
similar to the Capital Securities or Junior Subordinated Debentures or any
security convertible into or exchangeable or exercisable for Capital Securities
or Junior Subordinated Debentures (except for the Junior Subordinated Debentures
and Capital Securities offered hereby) other than to the Underwriters pursuant
to the Underwriting Agreement.
The Company and the Trust have been advised by the Underwriters that they
presently intend to make a market for the Capital Securities; however, they are
not obligated to do so and any market making may be discontinued at any time.
There can be no assurance that an active trading market will develop for the
Capital Securities or that the Capital Securities will trade in the public
market subsequent to the offering at or above the initial public offering price.
The Company and the Trust have agreed to indemnify the Underwriters against,
or to contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act
of 1933, as amended.
Each of the Underwriters engage in transactions with, and from time to time,
have performed services for, the Company and its subsidiaries in the ordinary
course of business.
LEGAL OPINIONS
The validity of the Junior Subordinated Debentures will be passed upon for
the Company by Debevoise & Plimpton, New York, New York, and certain matters of
Delaware law with respect to the validity of the Capital Securities offered
hereby will be passed upon for the Company by Morris, Nichols, Arsht & Tunnell,
special Delaware counsel to the Company. The validity of the Securities offered
hereby will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York.
S-51
<PAGE> 56
================================================================================
No dealer, salesperson or other individual 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 Prospectus in
connection with the offer made by this Prospectus Supplement and the Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by Owens Corning, Owens Corning Capital II or the
Underwriters. Neither the delivery of this Prospectus Supplement or the
Prospectus, nor any sale made hereunder and thereunder, shall under any
circumstances, create an implication that there has been no change in the
affairs of Owens Corning or Owens Corning Capital II since the date hereof. This
Prospectus Supplement and the Prospectus shall not constitute an offer or
solicitation by anyone in any state in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
------------------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company................................................S-4
The Trust..................................................S-6
Risk Factors...............................................S-8
Use of Proceeds...........................................S-12
Condensed Consolidated Capitalization.....................S-12
Selected Consolidated Financial Information...............S-13
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............S-15
Asbestos and Other Litigation.............................S-22
Accounting Treatment......................................S-26
Description of the Capital Securities.....................S-27
Description of the Capital Securities Guarantee...........S-35
Description of the Junior Subordinated
Debentures................................................S-38
Effect of Obligations under the Junior
Subordinated Debentures and the
Capital Securities Guarantee..............................S-46
Certain Federal Income Tax Consequences...................S-47
Underwriting..............................................S-50
Legal Opinions............................................S-51
Prospectus
Available Information........................................4
Incorporation of Certain Documents by Reference..............5
The Company..................................................6
The Trust....................................................7
Use of Proceeds..............................................8
Selected Consolidated Financial Information..................8
Description of Junior Subordinated Debentures...............11
Description of Preferred Securities.........................21
Description of the Guarantee................................32
Relationship Among the Preferred Securities, the
Junior Subordinated Debentures
and the Guarantee.........................................35
Description of Capital Stock................................36
Description of Stock Purchase Contracts and
Stock Purchase Units......................................40
Book-Entry Issuance.........................................40
Plan of Distribution........................................41
Legal Opinions..............................................43
Experts.....................................................43
</TABLE>
================================================================================
Owens Corning Capital II
% Capital Securities
guaranteed to the extent
set forth herein by
Owens Corning
-----------------
PROSPECTUS SUPPLEMENT
-----------------
Merrill Lynch & Co.
Credit Suisse First Boston
Goldman, Sachs & Co.
, 1997
S-52
<PAGE> 57
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED , 1997)
6,000,000 FELINE PRIDES(SM)
OWENS CORNING
The securities offered hereby are 6,000,000 FELINE PRIDES(sm) ("FELINE
PRIDES" or the "Securities") of Owens Corning, a Delaware corporation ("OC" or
the "Company"). Each FELINE PRIDES offered hereby initially will consist of a
unit (referred to as an Income PRIDES(sm)) with a Stated Amount of $50 (the
"Stated Amount") comprised of (a) a stock purchase contract (a "Purchase
Contract") under which (i) the holder will purchase from the Company on _____,
2000 (the "Purchase Contract Settlement Date"), for an amount in cash equal to
the Stated Amount, a number of newly issued shares of common stock, $.10 par
value per share (the "Common Stock"), of the Company equal to the Settlement
Rate described herein, and (ii) the Company will pay the holder unsecured,
subordinated contract adjustment payments ("Contract Adjustment Payments"), and
(b) a 1/20 undivided beneficial ownership interest in a __% United States
Treasury Note (collectively, "Treasury Notes") having a principal amount equal
to $1,000 and maturing on the Purchase Contract Settlement Date. As long as the
FELINE PRIDES are in the form of Income PRIDES, the related Treasury Notes will
be pledged to the Collateral Agent (as defined herein) to secure the holder's
obligation to purchase Common Stock under the related Purchase Contract.
(continued on next page)
------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE __ OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE SECURITIES, INCLUDING THE
PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF CERTAIN
DISTRIBUTIONS ON THE SECURITIES MAY BE DEFERRED.
Prior to the offering made hereby there has been no public market for the
Securities. Application will be made to list the Income PRIDES on the New York
Stock Exchange ("NYSE") under the symbol "[OC_]", subject to official notice of
issuance. On ________, 1997, the last reported sale price of the Common Stock on
the NYSE was $__ per share.
---------------------------
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 PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================================
PRICE TO UNDERWRITING PURCHASE RICE OF PROCEEDS (DEFICIT) TO
PUBLIC(1) COMMISSION(2) TREASURY NOTES THE COMPANY(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Security ............. $50.00 $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
Total(4) ................. $300,000,000 $ $ $
==============================================================================================================================
<FN>
(1) Plus accrued interest on the related Treasury Notes and Contract Adjustment
Payments, if any, from ____________, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securites Act of 1933, as amended. See
"Underwriting."
(3) Before deducting estimated expenses payable by the Company estimated at
$______. Does not include proceeds per Security and total proceeds of
$_____ and $_____, respectively ($______ and $_______, respectively, if the
Underwriters' over-allotment option is exercised in full), receivable by
the Company upon settlement of Purchase Contracts.
(4) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 900,000 Securities, to cover over-allotments, if any. If
such option is exercised in full, the total Price to the Public,
Underwriting Commission and Proceeds (Deficit) to the Company will be
$_______, $_______ and $_______, respectively. See "Underwriting."
</TABLE>
------------------------------------
The Securities are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Securities offered hereby will be made in New York, New York on
or about _____, 1997.
---------------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
---------------------------
The date of this Prospectus Supplement is , 1997.
- ------------
(SM)SERVICE MARK OF MERRILL LYNCH & CO. INC.
<PAGE> 58
Payments of __% of the Stated Amount per annum will be made or accrue
on each Income PRIDES semi-annually in arrears on _____ and ________ of each
year, commencing _______, 1997, until the Purchase Contract Settlement Date.
These payments will consist of interest on the related Treasury Notes payable by
the United States Government at the rate of ___% of the Stated Amount per annum,
and Contract Adjustment Payments payable by the Company at the rate of __% of
the Stated Amount per annum. The Company has the right at any time, and from
time to time, limited to a period not extending beyond the Purchase Contract
Settlement Date, to defer Contract Adjustment Payments. Any such deferred
Contract Adjustment Payments would accrue interest thereon compounded
semi-annually.
Each holder will have the right, at any time after ____________, 1997,
to substitute for the related Treasury Notes held by the Collateral Agent
zero-coupon U.S. Treasury Securities (CUSIP No. ________), which are principal
strips of the ____ % U.S. Treasury Securities which mature on Purchase Contract
Settlement Date (the "Treasury Securities"), in a principal amount per Purchase
Contract equal to the Stated Amount per Income PRIDES. Holders may make such
substitution only in integral multiples of 20 Income PRIDES. Such Treasury
Securities will be pledged with the Collateral Agent to secure the holder's
obligation to purchase Common Stock under the related Purchase Contracts.
Securities with respect to which Treasury Securities have been substituted for
the related Treasury Notes as collateral to secure a holder's obligation under
the related Purchase Contracts are referred to herein as Growth PRIDES(sm). Each
Growth PRIDES will consist of a unit with a Stated Amount of $50 comprised of
(a) a Purchase Contract under which (i) the holder will purchase from the
Company on the Purchase Contract Settlement Date, for an amount in cash equal to
the Stated Amount, a number of newly issued shares of Common Stock equal to the
Settlement Rate described herein, and (ii) the Company will pay the holder
Contract Adjustment Payments, and (b) a 1/20 undivided beneficial ownership
interest in a Treasury Security having a principal amount at maturity equal to
$1,000 and maturing on the Purchase Contract Settlement Date. Upon the
substitution of Treasury Securities for the related Treasury Notes as
collateral, such Treasury Notes will be released to the holder as described
herein. Contract Adjustment Payments will be payable by the Company on the
Growth PRIDES on _______ and ________ of each year. In addition, imputed
interest will accrete on the underlying Treasury Securities. A holder of Growth
PRIDES will have the right to subsequently recreate Income PRIDES by delivering
20 Growth PRIDES to the Purchase Contract Agent plus a Treasury Note having a
principal amount of $1,000 to the Collateral Agent in exchange for 20 Income
PRIDES and the release of the underlying Treasury Security to such holder. Such
Treasury Note will be pledged with the Collateral Agent to secure the holder's
obligation to purchase the Common Stock under the related Purchase Contracts.
On the Purchase Contract Settlement Date, unless a holder of the Income
PRIDES or Growth PRIDES has settled the related Purchase Contracts through the
early delivery of cash to the Purchase Contract Agent in the manner described
herein, or an event described herein has occurred that would cause the Purchase
Contracts to terminate, the principal amount of the related Treasury Notes or
Treasury Securities, as applicable, when paid at maturity, will automatically be
applied to satisfy in full such holder's obligation to purchase Common Stock
under the related Purchase Contracts. In the event that a holder of either an
Income PRIDES or Growth PRIDES effects the early settlement of a related
Purchase Contract through the delivery of cash, the related Treasury Notes or
Treasury Securities, as the case may be, will be released to the holder as
described herein.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SECURITIES TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE> 59
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information and Consolidated Financial Statements of the Company
appearing elsewhere in the accompanying Prospectus, this Prospectus Supplement
or in the documents incorporated herein or in the accompanying Prospectus by
reference. Except as otherwise noted, all information in this Prospectus
Supplement assumes no exercise of the Underwriters' over-allotment option.
Owens Corning, a global company incorporated in Delaware in 1938,
serves consumers and industrial customers with high-performance glass fiber
composites and building materials systems. These products are used in industries
such as home improvement, new construction, transportation, marine, aerospace,
energy, appliance, packaging and electronics. The Company operates in two
industry segments - Building Materials and Composite Materials - divided into
ten businesses. The Company also has affiliate companies in a number of
countries.
Owens Corning's Building Materials products are marketed through
multiple distribution channels, often with the aid of the Company's well known
"spokescritter" the Pink Panther. Over the last several years, the Company has
supplemented its traditional relationships with specialty distributors and
wholesalers with increasing presence among the large "do-it-yourself" home
center retailers. In 1996, 41% of total Company sales were made to the U.S. home
improvement and remodeling markets which these retailers serve.
The Company recently introduced a strategic initiative, System Thinking
for the Home(TM), designed to leverage Owens Corning's broad product offering
and strong brand recognition. This systems approach represents a shift from
product-oriented to systems-driven solutions across all lines of business. By
redefining its role as a provider of insulation, roofing, siding, windows and
accessories and linking all of its products and technology to create a
high-performance building envelope, Company management is targeting an increased
share of the $220 billion building materials and home improvement industry.
Building Materials operates primarily in North America and Europe. It
also has a growing presence in Latin America and Asia Pacific. Building
Materials sells a variety of building and home improvement products in three
major categories: glass fiber and foam insulation, roofing materials, and other
specialty products for the home, such as housewrap, vinyl windows and patio
doors, and vinyl siding. The businesses responsible for these products and
markets include: Insulation, Building Materials Sales and Distribution - North
America, Building Materials - Europe and Africa, Roofing/Asphalt, Specialty and
Foam Products, Western Fiberglass Group, Latin America, and Asia Pacific.
Composite Materials operates in North America, Europe and Latin
America, with affiliates and licensees around the world, including a growing
presence in Asia Pacific. The businesses responsible for these products include:
Composites, Latin America, Engineered Pipe & Fabrication Systems, and Asia
Pacific.
The Company is the world's leading producer of glass fiber materials
used in composites. Composites are fabricated material systems made up of two or
more components (e.g., plastic resin and glass fiber) used in various
applications to replace traditional materials, such as aluminum, wood, and
steel. The global composites industry has expanded to include more than 40,000
end-use applications. Worldwide, the composites industry has relatively few raw
material component suppliers (glass fiber, resin and additives) delivering to
thousands of industrial customers through various channels. Depending on the
end-use application, these raw materials move through different manufacturing
process chains, ultimately finding their way to consumers through myriad markets
worldwide. The primary end use markets that the Company serves are construction,
transportation, and electrical/electronics.
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SUMMARY FINANCIAL INFORMATION
The following summary consolidated financial data have been derived from the
Consolidated Financial Statements of the Company and should be read in
conjunction with "Selected Consolidated Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus Supplement, and the Consolidated
Financial Statements of the Company and the Notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the
"1996 Form 10-K") and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 (the "Second Quarter Form 10-Q"), each of which is
incorporated in the accompanying Prospectus by reference. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus. The following
summary consolidated financial data (other than in respect of balance sheet
data) does not include financial information concerning Fibreboard Corporation
because the acquisition by the Company of Fibreboard Corporation did not occur
until the end of the quarter ended June 30, 1997. See "The Company-- Recent
Developments."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------------
1997 1996(a) 1996(b) 1995(c) 1994(d) 1993(e) 1992(f)
---- ------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA AND WHERE NOTED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $1,892 $1,805 $3,832 $3,612 $3,351 $2,944 $2,878
Gross margin................... 462 471 998 942 815 678 644
Income (loss) from operations.. 182 (690) (504) 412 226 236 213
Cost of borrowed funds......... 42 36 77 87 94 89 110
Net income (loss).............. 105 (434) (284) 231 159 131 73
Net income (loss) per share
(primary)...................... 1.96 (8.43) (5.50) 4.64 3.61 3.00 1.70
Net income (loss) per share
(fully diluted) ............... 1.87 (8.43) (5.50) 4.40 3.35 2.81 1.67
Weighted average number of
shares outstanding (in thousands
of shares) (primary)........... 53,619 51,512 51,722 49,711 44,209 43,593 43,013
CASH FLOW DATA:
Net cash flow from operations.. (319) (87) 335 285 233 253 192
Capital expenditures........... 131 167 325 276 258 178 144
BALANCE SHEET DATA:
Total assets................... 5,076 3,980 3,913 3,261 3,274 3,013 3,162
Total debt..................... 2,033 1,142 934 893 1,212 1,004 1,099
Stockholders' deficit.......... (353) (666) (484) (212) (680) (869) (1,008)
</TABLE>
(a) For the six months ended June 30, 1996, the net loss of $434 million, or
$8.43 per share, includes a net after-tax charge of $542 million, or $10.53
per share, for asbestos litigation claims that may be received after 1999
and probable additional insurance recovery; after-tax special charges
totaling $27 million or $.52 per share, including valuation adjustments
associated with prior divestitures, major product line productivity
initiatives and a contribution to the Owens-Corning Foundation; and an
after-tax gain of $27 million, or $.52 per share, from the sale of the
Company's ownership interest in its former Japanese affiliate, Asahi Fiber
Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their anti-dilutive
effect. Consequently, primary and fully diluted earnings per share are
equal for 1996.
(b) In 1996 the net loss of $284 million, or $5.50 per share, includes a net
after-tax charge of $542 million, or $10.49 per share, for asbestos
litigation claims that may be received after 1999 and
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probable additional insurance recovery; after-tax special charges totaling
$27 million, or $.52 per share, including valuation adjustments associated
with prior divestitures, major product line productivity initiatives and a
contribution to the Owens-Corning Foundation; an after-tax charge of $26
million, or $.50 per share, for restructuring and other actions; a $27
million, or $.52 per share, reduction of tax reserves due to favorable
legislation; and an after-tax gain of $27 million, or $.52 per share, from
the sale of the Company's ownership interest in its former Japanese
affiliate, Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their anti-dilutive
effect. Consequently, primary and fully diluted earnings per share are
equal for 1996.
(c) Net income for 1995 of $231 million, or $4.64 per share ($4.40 per share
fully diluted), included a one time gain of $8 million or $.16 per share
($.15 per share fully diluted), which was the result of a tax loss
carryback.
(d) Net income for 1994 of $159 million, or $3.61 per share ($3.35 per share
fully diluted), included the following offsetting special items: an
after-tax gain of $123 million, or $2.78 per share ($2.45 per share fully
diluted), reflecting a change to the capital method of accounting for the
rebuilding of glass melting facilities; an after-tax charge of $85 million,
or $1.92 per share ($1.69 per share fully diluted), for productivity
initiatives and other actions; a non-cash, after-tax charge of $10 million,
or $.23 per share ($.20 per share fully diluted), to reflect adoption of
Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" for the
Company's non-U.S. plans; and a non-cash, after-tax charge of $28 million,
or $.63 per share ($.56 per share fully diluted), to reflect adoption of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
(e) Net income for 1993 of $131 million, or $3.00 per share ($2.81 per share
fully diluted), included a credit of $26 million, or $.60 per share ($.53
per share fully diluted), for the cumulative effect of adopting the new
accounting standard for income taxes; a one-time gain of $14 million, or
$.33 per share ($.29 per share fully diluted), reflecting a tax benefit
resulting from a revaluation of deferred taxes necessitated by the new
federal tax law; an $8 million pre-tax charge, or $.11 per share ($.10 per
share fully diluted), for the writedown of the Company's hydrocarbon
ventures; and a $23 million charge, or $.53 per share ($.47 per share fully
diluted), for the restructuring of the Company's European operations.
(f) Net income for 1992 was $73 million, or $1.70 per share ($1.67 per share
fully diluted), and included a pre-tax reorganization charge of $16
million, or $.25 per share ($.22 per share fully diluted).
(g) For purposes of the calculation of these ratios, earnings represent net
income before fixed charges, provision for taxes on income, undistributed
earnings of equity basis investments, extraordinary losses from early
retirement of debt and the cumulative effect of accounting changes. Fixed
charges include interest expense and the portion (one-third) of rental
expenses deemed to be representative of interest. Preferred stock dividends
represent only the distributions on the MIPS securities. The Company's
earnings for the six months ended June 30, 1996 and the year ended December
31, 1996 were insufficient to cover fixed charges by approximately $720 and
$600 million, respectively.
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THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................... 6,000,000 Income PRIDES.
Issuer................................ Owens Corning (the "Company").
Stated Amount......................... $50 per Income PRIDES.
Components of FELINE
PRIDES............................. Each FELINE PRIDES offered hereby initially will consist of a unit (re-
ferred to as an Income PRIDES(sm)) comprised of (a) a Purchase Con-
tract under which (i) the holder will purchase from the Company on
the Purchase Contract Settlement Date for an amount of cash equal
to the Stated Amount, a number of newly issued shares of Common
Stock equal to the Settlement Rate (as defined herein) and (ii) the
Company will pay Contract Adjustment Payments to the holder, and
(b) a 1/20 undivided beneficial ownership interest in a related %
United States Treasury Note having a principal amount at maturity
equal to $1,000 and maturing on the Purchase Contract Settlement
Date. Pursuant to the Purchase Contract Agreement (as defined
herein), the Purchase Contract Agent (as defined herein), as agent of
the holders of Income PRIDES, will purchase from the Treasury Notes
Seller (as defined herein) the Treasury Notes (excluding Pre-Purchase
Accrued Interest (as defined herein)) required to be purchased under
the Purchase Contract Agreement, for a purchase price equal to the
aggregate purchase price of the Treasury Notes set forth on the cover
page hereof. Such purchase price may exceed the aggregate principal
amount of the Treasury Notes, in which case the Company shall, for
the benefit of holders of the FELINE PRIDES and as a payment under
the Purchase Contracts, provide to the Treasury Notes Seller the
amount of such excess (such amounts, "Initial Premium Payments").
Holders will not directly receive any cash as a result of any Initial
Premium Payments. In the event that the aggregate purchase price
of the Treasury Notes set forth on the cover page hereof is less than
their aggregate principal amount, the Purchase Contract Agent shall
provide to the Company the amount of such shortfall as a payment
under the Purchase Contracts.
As long as a FELINE PRIDES is in the form of an Income PRIDES, the
related Treasury Note will be pledged with The Chase Manhattan
Bank, as collateral agent for the Company (together with any
successor thereto in such capacity, the "Collateral Agent"), to secure
the holders' obligations to purchase Common Stock under the related
Purchase Contract. See "Risk Factors."
Purchase Contract
Agreement.......................... The FELINE PRIDES will be issued under a Purchase Contract
Agreement, dated as of , 1997 (the "Purchase Contract Agree-
ment"), among the Company, The Bank of New York, as agent for the
holders of the FELINE PRIDES (together with any successor thereto in
such capacity, the "Purchase Contract Agent"), and Merrill Lynch,
</TABLE>
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<TABLE>
<S> <C>
Pierce, Fenner & Smith Incorporated, as the seller of the Treasury
Notes (the "Treasury Notes Seller").
Substitution of Pledged
Securities......................... Each holder of an Income PRIDES will have the right, at any time after
_______ __, 1997 to substitute for the related Treasury Note held by
the Collateral Agent zero-coupon U.S. Treasury Securities (CUSIP No.
), which are principal strips of the % U.S. Treasury
Securities which mature on the Purchase Contract Settlement Date,
in a principal amount per Income PRIDES equal to the Stated Amount
of such Income PRIDES. Because Treasury Notes and Treasury
Securities are issued in integral multiples of $1,000, holders of
Income Prides may make such substitution only in integral multiples
of 20 Income PRIDES. Such Treasury Securities will be pledged with
the Collateral Agent to secure the holder's obligation to purchase
Common Stock under the related Purchase Contracts. FELINE PRIDES
with respect to which Treasury Securities have been substituted for
the related Treasury Notes as collateral to secure such obligation will
be referred to as Growth PRIDES(sm). Each Growth PRIDES will consist
of a unit with a face amount of $50 comprised of (a) a Purchase
Contract under which (i) the holder will purchase from the Company
on the Purchase Contract Settlement Date for an amount of cash
equal to the Stated Amount of such Growth PRIDES, a number of
newly issued shares of Common Stock equal to the Settlement Rate
(as defined herein), and (ii) the Company will pay the holder Contract
Adjustment Payments, and (b) a 1/20 undivided beneficial ownership
interest in a related Treasury Security having a principal amount at
maturity equal to $1,000 and maturing on the Purchase Contract
Settlement Date. Upon the substitution of Treasury Securities for the
related Treasury Notes as collateral, such Treasury Notes will be
released to the holder as described herein and thereafter may be
disposed of by such holder free and clear of any security interest
under the related Purchase Contracts. See "Description of the FELINE
PRIDES -- Substitution of Pledged Securities."
Holders who elect to substitute Pledged Securities (as defined in
"Description of the Purchase Contracts -- Pledged Securities and
Pledge Agreement"), thereby creating Growth PRIDES or recreating
Income PRIDES (as discussed below), will be responsible for any fees
or expenses payable in connection with such substitution. See
"Certain Provisions of the Purchase Contract Agreement and the
Pledge Agreement -- Miscellaneous."
Recreating Income PRIDES.............. A holder of 20 Growth PRIDES will have the right to subsequently
recreate 20 Income PRIDES by delivering 20 Purchase Contracts to
the Purchase Contract Agent plus a Treasury Note having an
aggregate principal amount of $1,000 to the Collateral Agent in
exchange for 20 Income PRIDES and the release of the related
Treasury Note to such holder. Such Treasury Note will be pledged
with the Collateral Agent to secure the holder's obligation to purchase
the Common Stock under the related Purchase Contracts. See
"Description of the FELINE PRIDES -- Recreating Income PRIDES."
</TABLE>
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<PAGE> 64
<TABLE>
<S> <C>
Current Payments...................... Holders of Income PRIDES are entitled to receive aggregate cash
distributions at a rate of % of the Stated Amount per annum from
and after _______, 1997, payable semi-annually in arrears, consisting
of interest on the related Treasury Notes payable by the United States
Government at the rate of ____% of the Stated Amount per annum
and unsecured, subordinated contract adjustment payments ("Con-
tract Adjustment Payments") payable semi-annually by the Company
at the rate of ____% of the Stated Amount per annum, subject to the
Company's right to defer Contract Adjustment Payments. See
"Description of the Purchase Contract-- Contract Adjustment
Payments" and "Risk Factors-- Right to Defer Contract Adjustment
Payments." The Company's obligations with respect to Contract
Adjustment Payments are subordinated and junior in right of payment
to all liabilities of the Company and pari passu with the most senior
preferred stock directly issued, from time to time, if any, by the
Company. Amounts payable on the first Payment Date (as defined
below) will be adjusted as described under "Description of the FELINE
PRIDES -- General."
In the event that a holder of Income PRIDES elects to substitute
Treasury Securities for the related Treasury Notes, such holder would
receive on the resulting Growth PRIDES only the semi-annual
distributions of Contract Adjustment Payments, subject to the
Company's rights of deferral described herein. In addition, imputed
interest would continue to accrete on the related Treasury Securities.
See "Risk Factors -- Right to Defer Current Payments."
Option to Extend Distribution
Payment Periods.................... The Company has the right at any time, and from time to time, to
defer the payment of Contract Adjustment Payments on the Purchase
Contracts until no later than the Purchase Contract Settlement Date;
however, deferred Contract Adjustment Payments will bear additional
Contract Adjustment Payments at the rate of % per annum
(such deferred installments of Contract Adjustment Payments
together with the additional Contract Adjustment Payments shall be
referred to as the "Deferred Contract Adjustment Payments"). See
"Description of the Purchase Contracts-- Contract Adjustment Pay-
ments." If the Contract Adjustment Payments are deferred, the
Company has agreed, among other things, with certain exceptions,
not to declare or pay any dividend on or repurchase its capital stock
during the period of such deferral.
In the event that the Company elects to defer the payment of
Contract Adjustment Payments on the related Purchase Contracts
until the Purchase Contract Settlement Date, each holder of the
related Income PRIDES or Growth PRIDES will receive on the Purchase
Contract Settlement Date in respect of such Deferred Contract
Adjustment Payments, in lieu of a cash payment, a number of shares
of Common Stock equal to (x) the aggregate amount of Deferred
Contract Adjustment Payments payable to such holder divided by (y)
the Applicable Market Value (as defined herein). See "Description of
the Purchase Contracts -- Option to Defer Contract Adjustment
Payments."
</TABLE>
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<TABLE>
<S> <C>
Payment Dates......................... and of each year, commencing , 1998, through
and including the Purchase Contract Settlement Date (each, a "Payment Date").
Purchase Contract Settlement
Date............................... On the Purchase Contract Settlement Date, unless a holder of Income
PRIDES or Growth PRIDES has settled the related Purchase Contract
through the early delivery of cash to the Purchase Contract Agent in
the manner described herein, or an event described under "Description
of the Purchase Contracts -- Termination" has occurred, the principal
amount of the related Treasury Notes or Treasury Securities, as
applicable, when paid at maturity, will automatically be applied to
satisfy in full such holder's obligation to purchase Common Stock
under the related Purchase Contract.
In the event that a holder of either an Income PRIDES or Growth
PRIDES effects the early settlement of a related Purchase Contract
through the delivery of cash, the related Treasury Notes or Treasury
Securities, as the case may be, will be released to such holder as
described herein.
Settlement Rate....................... The number of new shares of Common Stock issuable upon settle-
ment of each Purchase Contract through the application on the
Purchase Contract Settlement Date of the principal amount of the
related Treasury Notes or Treasury Securities, as applicable, when
paid at maturity, to satisfy a holder's obligation to purchase Common
Stock under such Purchase Contract (the "Settlement Rate"), will be
calculated as follows (subject to adjustment under certain circum-
stances): (a) if the Applicable Market Value is equal to or greater than
$ (the "Threshold Appreciation Price"), the Settlement Rate
will be , (b) if the Applicable Market Value is less than the
Threshold Appreciation Price, but greater than $ , the Settlement
Rate will equal the Stated Amount divided by the Applicable Market
Value, and (c) if the Applicable Market Value is less than or equal to
$ , the Settlement Rate will be . "Applicable Market Value"
means the average of the Closing Price (as defined) per share of
Common Stock on each of the thirty consecutive Trading Days (as
defined) ending on the second Trading Day immediately preceding the
Purchase Contract Settlement Date.
Early Settlement ..................... A holder of Income PRIDES or Growth PRIDES may settle (an "Early
Settlement") the related Purchase Contracts prior to the Purchase
Contract Settlement Date in the manner described herein, but only in
integral multiples of 20 Income PRIDES or Growth PRIDES. Upon such
Early Settlement, (a) the holder will pay to the Company through the
Purchase Contract Agent in immediately available funds an amount
equal to the Stated Amount for each Purchase Contract so to be
settled and deliver the Income PRIDES or Growth PRIDES, as the case
may be, to the Purchase Contract Agent, (b) the related Treasury
Notes or Treasury Securities, as applicable, will, within three Business
Days of the date of Early Settlement, be transferred to the holder free
and clear of the Company's security interest therein, and (c) the
Company will, within three Business Days of the date of Early
</TABLE>
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<TABLE>
<S> <C>
Settlement, deliver newly issued shares of Common Stock to the
holder for each Purchase Contract so settled. Upon Early Settlement,
(i) the holder's rights to receive Deferred Contract Adjustment
Payments, if any, on the Purchase Contracts being settled will be
forfeited, (ii) the holder's right to receive additional Contract
Adjustment Payments in respect of such Purchase Contracts will
terminate and (iii) no adjustment will be made to or for the holder on
account of Deferred Contract Adjustment Payments or amounts
accrued in respect of Contract Adjustment Payments.
Termination........................... The Purchase Contracts (including the right thereunder to receive
accrued or Deferred Contract Adjustment Payments and the obligation
to purchase Common Stock) will automatically terminate upon the
occurrence of certain events of bankruptcy, insolvency or reorganiza-
tion with respect to the Company. Upon such termination, the
Collateral Agent will release the related Treasury Notes, or if
substituted, the related Treasury Securities, held by it to the Purchase
Contract Agent for distribution to the holders, although there may be
a limited delay before such release and distribution.
Voting Rights......................... Holders of the Purchase Contracts forming part of the Income PRIDES
or Growth PRIDES in their capacity as such holders will have no
voting or other rights in respect of the Common Stock.
Listing of the Income
PRIDES............................. Application will be made to list the Income PRIDES on the New York
Stock Exchange (the "NYSE") under the symbol " ", subject to
official notice of issuance. The Growth PRIDES will not be listed or
traded on any securities exchange. See "Underwriting."
NYSE Symbol of Common
Stock............................... "OWC"
Federal Income Tax
Consequences....................... In general, a Holder (as defined in "Certain Federal Income Tax
Consequences") will include interest on the Treasury Notes (other
than Pre-Purchase Accrued Interest (as defined herein)) in income
when received or accrued, in accordance with such Holder's method
of accounting. The Company believes Contract Adjustment Payments
and Deferred Contract Adjustment Payments (whether payable in
cash or in additional shares of Common Stock), if any, may constitute
taxable income to a Holder when received or accrued, in accordance
with such Holder's method of accounting, and similarly, that the Initial
Premium Payments, if any, may constitute taxable income to a Holder
at the time the Income PRIDES are purchased, although a direct cash
payment is not received by such Holder. Holders should consult their
advisors concerning the treatment of Contract Adjustment Payments,
Deferred Contract Adjustment Payments and Initial Premium
Payments, including the possibility that any such payment may be
treated as a loan, purchase price adjustment, rebate or payment
analogous to an option premium, rather than being includible in
income on a current basis. A Holder of Growth PRIDES will continue
to include in income any interest, original issue discount or market
</TABLE>
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<TABLE>
<S> <C>
discount or amortize any bond premium otherwise includible or
deductible, respectively, with respect to Treasury Securities held by
the Collateral Agent. See "Certain Federal Income Tax
Consequences."
Use of Proceeds....................... Substantially all of the proceeds from the sale of the Income PRIDES
will be used by the Purchase Contract Agent (as agent for the holders
of the Income PRIDES) to purchase the related Treasury Notes from
the Treasury Notes Seller pursuant to the terms of the Purchase
Contract Agreement, and the Company will receive no proceeds from
such sale unless the purchase price paid by the Purchase Contract
Agent for such Treasury Notes is less than their aggregate principal
amount, in which case the Purchase Contract Agent shall pay such
shortfall to the Company. The amount of any such shortfall and
amounts received by the Company upon settlement of Purchase
Contracts are expected to be used for general corporate purposes,
including, without limitation, working capital, repurchases or
redemptions of the Company's outstanding debt securities or other
reductions of the Company's outstanding borrowings, business
acquisitions, investments in or loans to subsidiaries or capital
expenditures. See "Use of Proceeds."
</TABLE>
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<PAGE> 68
RISK FACTORS
Prospective purchasers of Securities should consider, in addition to the other
information contained or incorporated by reference in this Prospectus
Supplement, the following characteristics of the Securities.
INVESTMENT IN THE SECURITIES WILL BECOME INVESTMENT IN COMMON STOCK; RISK OF
DECLINE IN EQUITY VALUE
Although holders of the Securities will be the beneficial owners of the
related Treasury Notes or Treasury Securities, as the case may be, prior to the
Purchase Contract Settlement Date, unless a holder of Securities settles the
related Purchase Contracts through the early delivery of cash to the Purchase
Contract Agent in the manner described below or the Purchase Contracts are
terminated (upon the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company), principal of the related Treasury
Notes or Treasury Securities, as the case may be, when paid at maturity, will
automatically be applied to the purchase of a specified number of shares of
Common Stock on behalf of such holder. Thus, following the Purchase Contract
Settlement Date, holders will own shares of Common Stock rather than a
beneficial interest in Treasury Notes or Treasury Securities. See "Description
of the Purchase Contracts -- General." There can be no assurance that the market
value of the Common Stock receivable by the holder on the Purchase Contract
Settlement Date will be equal to or greater than the Stated Amount of the
Securities held by such holder. If the Applicable Market Value of the Common
Stock is less than the closing price of the Common Stock on the date hereof, the
market value of the Common Stock receivable by the holder on the Purchase
Contract Settlement Date will be less than the Stated Amount paid for the
Securities, in which case an investment in the Securities will result in a loss.
Accordingly, a holder of the Securities assumes the risk that the market value
of the Common Stock may decline, and that such decline could be substantial.
LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION
The opportunity for equity appreciation afforded by an investment in the
Securities is less than the opportunity for equity appreciation afforded by a
direct investment in the Common Stock, because the market value of the Common
Stock to be received by a holder of Purchase Contracts on the Purchase Contract
Settlement Date will only exceed the Stated Amount if the Applicable Market
Value of the Common Stock exceeds the Threshold Appreciation Price (which
represents an appreciation of __% over the closing price of the Common Stock on
the date hereof). Moreover, holders of the Securities will only be entitled to
receive on the Purchase Contract Settlement Date ___% (the percentage equal to
the closing price of the Common Stock on the date hereof divided by the
Threshold Appreciation Price) of any appreciation of the value of the Common
Stock in excess of the Threshold Appreciation Price.
FACTORS AFFECTING TRADING PRICES
The trading prices of the Income PRIDES and the Growth PRIDES in the
secondary market will be directly affected by the trading prices of the Common
Stock in the secondary market, the general level of interest rates and the
credit quality of the Company. It is impossible to predict whether the price of
Common Stock or interest rates will rise or fall. Trading prices of Common Stock
will be influenced by the Company's operating results and prospects and by
economic, financial and other factors and market conditions that can affect the
capital markets generally, including the level of, and fluctuations in, the
trading prices of stocks generally and sales of substantial amounts of Common
Stock in the market subsequent to the offering of the Securities or the
perception that such sales could occur. Fluctuations in interest rates may give
rise to opportunities of arbitrage based upon changes in the relative value of
the Common Stock underlying the Purchase Contracts and of the other components
of the FELINE PRIDES.
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Any such arbitrage could, in turn, affect the trading prices of the Income
PRIDES, Growth PRIDES and Common Stock.
NO SHAREHOLDER RIGHTS
Holders of the Securities will not be entitled to any rights with respect
to the Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time as the Company shall have delivered shares of Common Stock for
Securities on the Purchase Contract Settlement Date or as a result of Early
Settlement, as the case may be, and unless the applicable record date, if any,
for the exercise of such rights occurs after such date. For example, in the
event that an amendment is proposed to the Articles of Incorporation or By-Laws
of the Company and the record date for determining the stockholders of record
entitled to vote on such amendment occurs prior to such delivery, holders of the
Securities will not be entitled to vote on such amendment.
DILUTION OF COMMON STOCK
The number of shares of Common Stock that holders of the FELINE PRIDES are
entitled to receive on the Purchase Contract Settlement Date or as a result of
Early Settlement is subject to adjustment for certain events arising from stock
splits and combinations, stock dividends and certain other actions of the
Company that modify its capital structure. See "Description of the Purchase
Contracts -- Anti-Dilution Adjustments." Such number of shares of Common Stock
to be received by such holders on the Purchase Contract Settlement Date or as a
result of Early Settlement will not be adjusted for other events, such as
offerings of Common Stock for cash or in connection with acquisitions. The
Company is not restricted from issuing additional Common Stock during the term
of the Securities and has no obligation to consider the interests of the holders
of the Securities for any reason. Additional issuances may materially and
adversely affect the price of the Common Stock and, because of the relationship
of the number of shares to be received on the Purchase Contract Settlement Date
to the price of the Common Stock, such other events may adversely affect the
trading price of the Income PRIDES or Growth PRIDES.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the Securities will trade in the
secondary market or whether such market will be liquid or illiquid. The Income
PRIDES and the Growth PRIDES are novel securities and there is currently no
secondary market for either the Income PRIDES or Growth PRIDES. Application will
be made to list the Income PRIDES on the NYSE. The Growth PRIDES will not be
listed or traded on any securities exchange. The Company has been advised by the
Underwriters that they presently intend to make a market for the Growth PRIDES;
however, they are not obligated to do so and any market making may be
discontinued at any time. There can be no assurance as to the liquidity of any
market that may develop for the Income PRIDES or the Growth PRIDES, the ability
of holders to sell such Securities, the price at which holders would be able to
sell such Securities or whether a trading market, if it develops, will continue.
In addition, in the event that holders of Income PRIDES were to substitute
Treasury Securities for Treasury Notes, thereby converting their Income PRIDES
to Growth PRIDES, the liquidity of Income PRIDES could be adversely affected.
There can be no assurance that the Income PRIDES will not be delisted from the
NYSE or that trading in the Income PRIDES will not be suspended as a result of
the election by holders to create Growth PRIDES through the substitution of
collateral, which could cause the number of Income PRIDES to fall below the
minimum requirements for listing securities on the NYSE.
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<PAGE> 70
PLEDGED SECURITIES ENCUMBERED
Although holders of FELINE PRIDES will be beneficial owners of the related
Treasury Notes or Treasury Securities (together, the "Pledged Securities"), as
applicable, those Pledged Securities will be pledged with the Collateral Agent
to secure the obligations of the holders under the related Purchase Contracts.
Thus, rights of the holders to their Pledged Securities will be subject to the
Company's security interest. Additionally, upon the automatic termination of the
Purchase Contracts in the event that the Company becomes the subject of a case
under the United States Bankruptcy Code (the "Bankruptcy Code"), the delivery of
the Pledged Securities to holders of the FELINE PRIDES may be delayed by the
imposition of the automatic stay of Section 362 of the Bankruptcy Code. During
the period of any such delay, the Treasury Notes will continue to accrue
interest payable by the United States Government, for the account of the holders
of FELINE PRIDES, until their maturity.
SUBORDINATION OF CONTRACT ADJUSTMENT PAYMENTS
The Company's obligations with respect to Contract Adjustment Payments are
subordinate and junior in right of payment to all liabilities of the Company and
pari passu with the most senior preferred stock directly issued from time to
time, if any, by the Company. There are no terms in the Purchase Contract
Agreement or the Purchase Contracts that limit the Company's ability to incur
obligations that rank senior to the Contract Adjustment Payments.
RIGHT TO DEFER CONTRACT ADJUSTMENT PAYMENTS
The Company may, at its option, defer the payment of Contract Adjustment
Payments on the Purchase Contracts until the Purchase Contract Settlement Date.
However, deferred installments of Contract Adjustment Payments will bear
additional Contract Adjustment Payments at the rate of _____% per annum
(compounding on each succeeding Payment Date) until paid (such deferred
installments of Contract Adjustment Payments together with such additional
Contract Adjustment Payments shall be referred to herein as the "Deferred
Contract Adjustment Payments"). If the related Purchase Contracts are settled
early or terminated (upon the occurrence of certain events of bankruptcy,
insolvency or reorganization with respect to the Company), the right to receive
Contract Adjustment Payments (other than any accrued but unpaid Contract
Adjustment Payments that have not been deferred) and Deferred Contract
Adjustment Payments will terminate.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, each holder will receive on the Purchase Contract Settlement
Date in respect of the related Deferred Contract Adjustment Payments, in lieu of
a cash payment, a number of shares of Common Stock equal to (x) the aggregate
amount of Deferred Contract Adjustment Payments payable to such holder divided
by (y) the Applicable Market Value. See "Description of the Purchase Contracts
- -- Contract Adjustment Payments."
PURCHASE CONTRACT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF PURCHASE CONTRACT AGENT
The Purchase Contract Agreement will not be qualified as an indenture
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),
and the Purchase Contract Agent will not be required to qualify as a trustee
thereunder. Accordingly, holders of FELINE PRIDES will not have the benefit of
the protections of the Trust Indenture Act. The protections generally afforded
the holder of a security issued under an indenture that has been qualified under
the Trust Indenture Act include disqualification of the indenture trustee for
"conflicting interests" as defined under the Trust Indenture Act, provisions
preventing a trustee that is also a creditor of the issuer from improving its
own credit position at the expense of the
S-14
<PAGE> 71
security holders immediately prior to or after a default under such indenture
and the requirement that the indenture trustee deliver reports at least annually
with respect to certain matters concerning the indenture trustee and the
securities. Under the terms of the Purchase Contract Agreement, the Purchase
Contract Agent will have only limited obligations to the holders of the FELINE
PRIDES. See "Certain Provisions of the Purchase Contract Agreement and the
Pledge Agreement -- Information Concerning the Purchase Contract Agent."
S-15
<PAGE> 72
THE COMPANY
Owens Corning, a global company incorporated in Delaware in 1938,
serves consumers and industrial customers with high-performance glass fiber
composites and building materials systems. These products are used in industries
such as home improvement and repair, new construction, transportation, marine,
aerospace, energy, appliance, packaging and electronics. The Company operates in
two industry segments - Building Materials and Composite Materials - divided
into ten businesses. The Company also has affiliate companies in a number of
countries.
Owens Corning's Building Materials products are marketed through
multiple distribution channels, often with the aid of the Company's well known
"spokescritter" the Pink Panther. Over the last several years, the Company has
supplemented its traditional relationships with specialty distributors and
wholesalers with increasing presence among the large "do-it-yourself" home
center retailers. In 1996, 41% of total Company sales were made to the U.S. home
improvement and remodeling markets which these retailers serve.
The Company recently introduced a strategic initiative, System
Thinking for the Home(TM), designed to leverage Owens Corning's broad product
offering and strong brand recognition. This systems approach represents a shift
from product-oriented to systems-driven solutions across all lines of business.
By redefining its role as a provider of insulation, roofing, siding, windows and
accessories and linking all of its products and technology to create a
high-performance building envelope, Company management is targeting an increased
share of the $220 billion building materials and home improvement industry.
Building Materials operates primarily in North America and Europe. It
also has a growing presence in Latin America and Asia Pacific. Building
Materials sells a variety of building and home improvement products in three
major categories: glass fiber and foam insulation, roofing materials, and other
specialty products for the home, such as housewrap, vinyl windows and patio
doors, and vinyl siding. The businesses responsible for these products and
markets include: Insulation, Building Materials Sales and Distribution - North
America, Building Materials - Europe and Africa, Roofing/Asphalt, Specialty and
Foam Products, Western Fiberglass Group, Latin America, and Asia Pacific.
Composite Materials operates in North America, Europe and Latin
America, with affiliates and licensees around the world, including a growing
presence in Asia Pacific. The businesses responsible for these products include:
Composites, Latin America, Engineered Pipe & Fabrication Systems, and Asia
Pacific.
The Company is the world's leading producer of glass fiber materials
used in composites. Composites are fabricated material systems made up of two or
more components (e.g., plastic resin and glass fiber) used in various
applications to replace traditional materials, such as aluminum, wood, and
steel. The global composites industry has expanded to include more than 40,000
end-use applications. Worldwide, the composites industry has relatively few raw
material component suppliers (glass fiber, resin and additives) delivering to
thousands of industrial customers through various channels. Depending on the
end-use application, these raw materials move through different manufacturing
process chains, ultimately finding their way to consumers through myriad markets
worldwide. The primary end use markets that the Company serves are construction,
transportation, and electrical/electronics.
The following table summarizes selected information concerning the Company's
industry segments. The table does not include information concerning Fibreboard
Corporation because the acquisition by the Company of Fibreboard Corporation did
not occur until the end of the quarter ended June 30, 1997. See " -- Recent
Developments." For further information, see Notes 1 and 3 of the Notes to
Consolidated
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<PAGE> 73
Financial Statements of the Company as of June 30, 1997 included in the Second
Quarter Form 10-Q and Note 1 of the Notes to Consolidated Financial Statements
of the Company as of December 31, 1996 included in the 1996 Form 10-K, each of
which is incorporated in the accompanying Prospectus by reference.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------------------------
1997 1996(A) 1996(B) 1995
------------------------------------------
(in millions)
NET SALES:
<S> <C> <C> <C> <C>
Building Materials ............... $ 1,318 $ 1,221 $ 2,687 $ 2,404
Composite Materials .............. 574 584 1,145 1,208
Consolidated Net Sales ........... $ 1,892 $ 1,805 $ 3,832 $ 3,612
INCOME (LOSS) FROM OPERATIONS:
Building Materials ............... $ 122 $ 89 $ 219 $ 237
Composite Materials .............. 101 116 222 225
General Corporate Expense ........ (41) (895) (945) (50)
Total Income (Loss) from ....... $ 182 $ (690) $ (504) $ 412
Operations
</TABLE>
- ---------------
(a) Income from operations for the six months ended June 30, 1996 includes the
Company's pretax charge of $875 million for asbestos litigation claims to
be received after 1999 and probable additional insurance recovery, all of
which was recorded as an increase in general corporate expense. Income
from operations for the six months ended June 30, 1996 also includes the
Company's pretax gain of $37 million from the sale of its ownership
interest in its Japanese affiliate Asahi Fiber Glass Co. Ltd., all of
which was recorded as a reduction in general corporate expense. Also
included are special charges totaling $42 million, including valuation
adjustments associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens Corning
Foundation. The impact of these special items was to reduce income from
operations for Building Materials by $22 million and for Composite
Materials by $5 million and to increase general corporate expense by $15
million.
(b) Income from operations for the year ended December 31, 1996 includes a net
pretax charge of $875 million for asbestos litigation claims that may be
received after 1999 and probable additional insurance recovery; charges
totaling $42 million, including valuation adjustments associated with
prior divestitures, major product line productivity initiatives and a
contribution to the Owens-Corning Foundation; a pretax charge of $43
million for restructuring and other actions; and a pretax gain of $37
million from the sale of the Company's ownership interest in its former
Japanese affiliate, Asahi Fiber Glass Co. Ltd. The impact of these special
items was to reduce income from operations for Building Materials by $50
million and for Composite Materials by $12 million, and to increase
general corporate expense by $861 million.
RECENT DEVELOPMENTS
On June 27, 1997, Sierra Corp., a Delaware corporation and a wholly
owned subsidiary of the Company ("Sierra Corp."), completed a tender offer (the
"Fibreboard Tender Offer") for all of the outstanding shares of common stock
(including certain associated preferred stock purchase rights) of Fibreboard
Corporation, a Delaware corporation ("Fibreboard"), by purchasing approximately
92% of such
S-17
<PAGE> 74
shares for a purchase price of $55.00 per share. On July 3, 1997, Sierra Corp.
was merged with and into Fibreboard (the "Fibreboard Merger" and, together with
the Fibreboard Tender Offer, the "Fibreboard Acquisition"), and, as a result of
the Fibreboard Merger, each outstanding share of Fibreboard's common stock that
was not purchased in the Fibreboard Tender Offer was converted into a right to
receive $55.00 in cash (subject to applicable appraisal rights pursuant to
Delaware law). Fibreboard is a leading producer and distributor of vinyl siding
and other residential and industrial building materials.
The total purchase price for the Fibreboard Acquisition was $657
million, which included an assumption of $138 million of debt. The Fibreboard
Acquisition was financed through loans made under a $2 billion Credit Agreement,
dated as of June 26, 1997 (the "Credit Agreement"), among the Company, Sierra
Corp., certain other subsidiaries of the Company, the banks party thereto and
Credit Suisse First Boston, as agent for such banks.
The acquisition of Fibreboard provides the Company with a
significant position in vinyl siding and therefore furthers the System Thinking
for the Home(TM) strategy. Fibreboard also manufactures and sells other
produts which Company management believe are complementary to Owens Corning's
existing product and distribution strengths. Through Fibreboard's company-owned
distribution system, the Company also gains additional access to a significant
customer base.
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Income PRIDES
will be used by the Purchase Contract Agent (as agent of the holders of Income
PRIDES) to purchase the related Treasury Notes from the Treasury Notes Seller
pursuant to the terms of the Purchase Contract Agreement, and the Company will
receive no proceeds from such sale unless the purchase price paid by the
Purchase Contract Agent for such Treasury Notes is less than their aggregate
principal amount, in which case the Purchase Contract Agent shall pay such
shortfall to the Company as a payment under the Purchase Contracts. The amount
of any such shortfall and amounts received by the Company upon settlement of
Purchase Contracts are expected to be used for general corporate purposes,
including, without limitation, working capital, repurchases or redemptions of
the Company's outstanding debt securities or other reductions of the Company's
outstanding borrowings, business acquisitions, investments in or loans to
subsidiaries or capital expenditures.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed and traded on the NYSE and the Toronto
Stock Exchange (the "TSE") under the symbol "OWC." The following table sets
forth, for the periods indicated, the high and low sales prices in dollars per
share of the Common Stock as reported in the NYSE Composite Transactions Tape.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1995
First Quarter............................................................ 36 1/4 30 1/4
Second Quarter........................................................... 40 34 5/8
Third Quarter............................................................ 47 1/8 36 1/2
Fourth Quarter........................................................... 46 3/4 40 3/8
1996
First Quarter............................................................ 46 39 3/4
Second Quarter........................................................... 43 1/8 37 5/8
Third Quarter............................................................ 43 36
Fourth Quarter........................................................... 43 1/2 36 1/4
1997
First Quarter........................................................... 49 7/8 40
Second Quarter.......................................................... 45 36 7/8
Third Quarter (through July 24, 1997)................................... 44 40 5/8
</TABLE>
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<PAGE> 75
A recent closing sale price for the Common Stock as reported on the
NYSE Composite Transactions Tape is set forth on the cover page of this
Prospectus Supplement.
In June 1996, the Board of Directors of the Company approved an
annual dividend policy. The Company had not previously declared any dividends
since 1986. The Company has declared dividends of $.0625 per share of Common
Stock for each of the third and fourth quarters of 1996 and the first and second
quarter of 1997, and $.075 per share for the third quarter of 1997.
CONDENSED CONSOLIDATED CAPITALIZATION
The following table summarizes (i) the actual capitalization of the
Company and its consolidated subsidiaries (including Fibreboard) at June 30,
1997 and (ii) such capitalization as adjusted to reflect (a) the sale of the
FELINE PRIDES (based on an assumed aggregate public offering price of $50 per
Security and after estimated underwriting commissions and estimated expenses of
the offering of the FELINE PRIDES), (b) the expected concurrent sale by Owens
Corning Capital II, a Delaware statutory business trust organized by the
Company, of $300,000,000 in liquidation amount of its _____% Capital Securities
(the "Capital Securities") (based on an assumed aggregate offering price of
$300,000,000 and after estimated underwriting compensation and estimated
expenses of the offering of the Capital Securities) and (c) an assumed
application of the proceeds from the offering of the Capital Securities to repay
indebtedness. For further information, see Note 4 of Notes to the Consolidated
Financial Statements of the Company as of June 30, 1997 included in the Second
Quarter Form 10-Q, incorporated in the accompanying Prospectus by reference.
<TABLE>
<CAPTION>
At June 30, 1997
(in Millions)
-----------------------------
Actual As Adjusted
------ ------------
<S> <C> <C>
Short-term debt, including current portion of long-term debt.................... $ 179 $ 23
Long-term debt:
Senior......................................................................... 1,877 1,744
Less: Current portion....................................................... 23 23
------ ------
Total long-term debt........................................................... 1,854 1,721
------ ------
Company obligated convertible security of subsidiary
holding solely parent debentures ("MIPS")...................................... 194 194
------ ------
Company obligated preferred security of subsidiary
holding solely parent debentures............................................. 300
Stockholders' equity:
Preferred Stock, no par value; 8 million shares authorized;
none issued . . . . ......................................................... -- --
Common Stock, $.10 par value; 100 million shares authorized;
__________ shares issued and outstanding(a)................................. 653 653
Deficit........................................................................ (980) (980)
Foreign currency translation adjustments....................................... (8) (8)
Other.......................................................................... (18) (18)
---- ----
Total stockholders' equity..................................................... (353) (353)
----- -----
Total capitalization............................................................... $ 1,874 $ 1,885
======= =======
</TABLE>
- ---------------------
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<PAGE> 76
(a) Does not include shares of Common Stock issuable or which may be issued
pursuant to various stock compensation plans of the Company (see Note
16 of Notes to Consolidated Financial Statements of the Company as of
December 31, 1996 included in the 1996 Form 10-K, incorporated in the
accompanying Prospectus by reference).
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial
information of the Company (i) for the six months ended June 30, 1997 and 1996,
which has been derived from the unaudited quarterly consolidated financial
statements of the Company for the six months ended June 30, 1997 and 1996, and
(ii) for each of the five fiscal years in the period ended December 31, 1996,
which has been derived from the annual consolidated financial statements of the
Company audited by Arthur Andersen LLP, independent public accountants. This
table should be read in conjunction with those statements, all of which have
been previously filed with the Securities and Exchange Commission (the
"Commission"). The financial information presented below for the six months
ended June 30, 1997 and 1996 reflects all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the Company's results.
Operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1997. The following table (other than in respect of balance sheet
data) does not include financial information concerning Fibreboard because the
Fibreboard Acquisition did not occur until the end of the quarter ended June 30,
1997. See "The Company -- Recent Developments." The following table is qualified
in its entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the consolidated financial information and related notes of the Company included
in the documents incorporated in the accompanying Prospectus by reference. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------------
1997 1996(a) 1996(b) 1995(c) 1994(d) 1993(e) 1992(f)
---------- --------- --------- -------- -------- --------- ---------
(in millions of dollars, except per share data and where noted)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ................................... $ 1,892 $ 1,805 $ 3,832 $ 3,612 $ 3,351 $ 2,944 $ 2,878
Gross margin ................................ 462 471 998 942 815 678 644
Income (loss) from operations ............... 182 (690) (504) 412 226 236 213
Cost of borrowed funds ...................... 42 36 77 87 94 89 110
Net income (loss) ........................... 105 (434) (284) 231 159 131 73
Net income (loss) per share .................
(primary) ................................... 1.96 (8.43) (5.50) 4.64 3.61 3.00 1.70
Net income (loss) per share (fully ..........
diluted) .................................... 1.87 (8.43) (5.50) 4.40 3.35 2.81 1.67
Weighted average number of
shares outstanding (in thousands ............
of shares) (primary)......................... 53,619 51,512 51,722 49,711 44,209 43,593 43,013
CASH FLOW DATA:
Net cash flow from operations ............... (319) (87) 335 285 233 253 192
Capital expenditures ........................ 131 167 325 276 258 178 144
BALANCE SHEET DATA:
Total assets ................................ 5,076 3,980 3,913 3,261 3,274 3,013 3,162
Total debt .................................. 2,033 1,142 934 893 1,212 1,004 1,099
Stockholders' deficit ....................... (353) (666) (484) (212) (680) (869) (1,008)
</TABLE>
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<PAGE> 77
(a) For the six months ended June 30, 1996, the net loss of $434 million,
or $8.43 per share, includes a net after-tax charge of $542 million,
or $10.53 per share, for asbestos litigation claims that may be
received after 1999 and probable additional insurance recovery;
after-tax special charges totaling $27 million or $.52 per share,
including valuation adjustments associated with prior divestitures,
major product line productivity initiatives and a contribution to the
Owens-Corning Foundation; and an after-tax gain of $27 million, or
$.52 per share, from the sale of the Company's ownership interest in
its former Japanese affiliate, Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their
anti-dilutive effect. Consequently, primary and fully diluted
earnings per share are equal for 1996.
(b) In 1996 the net loss of $284 million, or $5.50 per share, includes a
net after-tax charge of $542 million, or $10.49 per share, for
asbestos litigation claims that may be received after 1999 and
probable additional insurance recovery; after-tax special charges
totaling $27 million, or $.52 per share, including valuation
adjustments associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens-Corning
Foundation; an after-tax charge of $26 million, or $.50 per share,
for restructuring and other actions; a $27 million, or $.52 per
share, reduction of tax reserves due to favorable legislation; and an
after-tax gain of $27 million, or $.52 per share, from the sale of
the Company's ownership interest in its former Japanese affiliate,
Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their
anti-dilutive effect. Consequently, primary and fully diluted
earnings per share are equal for 1996.
(c) Net income for 1995 of $231 million, or $4.64 per share ($4.40 per
share fully diluted), included a one time gain of $8 million or $.16
per share ($.15 per share fully diluted), which was the result of a
tax loss carryback.
(d) Net income for 1994 of $159 million, or $3.61 per share ($3.35 per
share fully diluted), included the following offsetting special
items: an after-tax gain of $123 million, or $2.78 per share ($2.45
per share fully diluted), reflecting a change to the capital method
of accounting for the rebuilding of glass melting facilities; an
after-tax charge of $85 million, or $1.92 per share ($1.69 per share
fully diluted), for productivity initiatives and other actions; a
non-cash, after-tax charge of $10 million, or $.23 per share ($.20
per share fully diluted), to reflect adoption of Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" for the
Company's non-U.S. plans; and a non-cash, after-tax charge of $28
million, or $.63 per share ($.56 per share fully diluted), to reflect
adoption of SFAS No. 112, "Employers' Accounting for Postemployment
Benefits."
(e) Net income for 1993 of $131 million, or $3.00 per share ($2.81 per
share fully diluted), included a credit of $26 million, or $.60 per
share ($.53 per share fully diluted), for the cumulative effect of
adopting the new accounting standard for income taxes; a one-time
gain of $14 million, or $.33 per share ($.29 per share fully
diluted), reflecting a tax benefit resulting from a revaluation of
deferred taxes necessitated by the new federal tax law; an $8 million
pre-tax charge, or $.11 per share ($.10 per share fully diluted), for
the writedown of the Company's hydrocarbon ventures; and a $23
million charge, or $.53 per share ($.47 per share fully diluted), for
the restructuring of the Company's European operations.
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<PAGE> 78
(f) Net income for 1992 was $73 million, or $1.70 per share ($1.67 per
share fully diluted), and included a pre-tax reorganization charge of
$16 million, or $.25 per share ($.22 per share fully diluted).
(g) For purposes of the calculation of these ratios, earnings represent
net income before fixed charges, provision for taxes on income,
undistributed earnings of equity basis investments, extraordinary
losses from early retirement of debt and the cumulative effect of
accounting changes. Fixed charges include interest expense and the
portion (one-third) of rental expenses deemed to be representative of
interest. Preferred stock dividends represent only the distributions
on the MIPS securities. The Company's earnings for the six months
ended June 30, 1996 and the year ended December 31, 1996 were
insufficient to cover fixed charges by approximately $720 and $600
million, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(All per share information in this Section is on a fully diluted basis. All
references to results from ongoing operations exclude the impact of special
items reported for the relevant period.)
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997
Net sales were $1,017 million for the quarter ended June 30, 1997, a
six percent increase from the 1996 level of $956 million. The growth is
attributable to increased volumes in the Building Materials and Composite
Materials segments, worldwide. In Building Materials, niche acquisitions and the
integration of their products into the Company's existing channels of
distribution continue to grow the Company's volumes, particularly in the U.S.
and Europe. These volume increases were offset in large part by a decline in
worldwide composites pricing, most notably in Europe, the effects of a stronger
dollar on sales made in foreign currencies, and a decline in insulation prices
in North America. Gross margin for the quarter ended June 30, 1997 was 24%, a
decline from the second quarter 1996 level of 27%, primarily resulting from
declining prices and a change in the mix of product sales in Building Materials
to lower margin products.
Net income for the quarter ended June 30, 1997 was $63 million, or
$1.11 per share, compared to a net loss of $473 million, or $9.19 per share, for
the quarter ended June 30, 1996. Income from operations of $105 million in the
second quarter of 1997 was negatively impacted by the price declines described
above. This impact was partially offset by volume increases experienced in the
Company's roofing, foam and composites businesses. Additionally, income from
operations benefited by $15 million from the modification of certain employee
benefits in the U.S. Earnings in the second quarter of 1997 were also affected
by increased cost of borrowed funds resulting from increased borrowing to fund
working capital and certain acquisitions, and the improved performance of the
Company's unconsolidated affiliates.
Included in the quarter ended June 30, 1996 was the net after-tax
charge of $542 million, or $10.53 per share, for asbestos litigation claims that
may be received after 1999 and probable additional insurance recovery. The net
loss created by this item caused common stock equivalents and convertible
securities to be excluded from the number of fully diluted shares reported in
the second quarter of 1996 due to their anti-dilutive effect. Had these
anti-dilutive shares been included in the calculation of earnings per share,
such amount for the second quarter of 1996 would have been $.09 lower.
S-22
<PAGE> 79
Net sales for the six months ended June 30, 1997, were $1,892
million, a five percent increase over the $1,805 million reported for the first
six months of 1996. This increase reflects the strength of the Company's roofing
and foam businesses in the Building Materials segment, coupled with the
Company's continued expansion through strategic niche acquisitions.
For the six months ended June 30, 1997, the Company reported net
income of $105 million, or $1.87 per share, compared to a net loss of $434
million, or $8.43 per share, for the comparable period in 1996. When compared to
the earlier year period, net income for the six months ended June 30, 1997 was
negatively impacted by price declines, partially offset by the benefit of
increased volumes and productivity gains, particularly in the insulation
business.
In addition to the net asbestos charge recorded in the second quarter
of 1996, results for the six months ended June 30, 1996 included a $37 million
pretax gain from the sale of the Company's minority interest in Asahi Fiber
Glass Co. Ltd. in Japan and several one-time special charges, including
valuation adjustments associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens-Corning Foundation. The
impact of the gain on net income was reduced to near zero by these special
items.
Marketing and administrative expenses were $122 million for the
quarter ended June 30, 1997, compared to $115 million in the same period in
1996. The increase is primarily the result of incremental administrative
expenses from acquisitions.
In the Building Materials segment, sales increased 8% for the quarter
and six months ended June 30, 1997 compared to 1996. This growth reflects the
incremental sales from acquisitions as well as an increase in volume,
particularly in the roofing and foam businesses. Income from operations for
Building Materials increased to $122 million for the six months ended June 30,
1997. This improvement is primarily the result of volume increases, productivity
gains and incremental amounts derived from acquisitions offset in part by the
continuing costs of the Company's expansion program in the Asia Pacific region.
On June 27, the Company acquired 92% of the outstanding stock of
Fibreboard through the Fibreboard Tender Offer, which was commenced in May, for
all of the outstanding shares of Fibreboard at $55 per share. In early July,
Fibreboard became a wholly owned subsidiary of the Company as a result of the
Fibreboard Merger, which was consummated at the same price as the Fibreboard
Tender Offer. The purchase price of Fibreboard was $657 million, including the
assumption of $138 million of indebtedness, the majority of which was financed
through borrowings under the Credit Agreement. Fibreboard is one of the five
largest producers in North America of vinyl siding and accessories, marketing
products under the brand names Norandex and Vytec. The business has plants in
the U.S. and Canada and also operates more than 130 company-owned distribution
centers in 32 states. Fibreboard is also the leading producer of manufactured
stone used in home building construction. On July 15, the Company announced
plans to sell the Pabco business of Fibreboard. Pabco is a producer of calcium
silicate insulation used for industrial pipe applications and metal jacketing
for pipe insulation.
As the Fibreboard Acquisition was completed at the end of the
quarter, the reported results do not include the results of operations of
Fibreboard. To enhance comparability, certain information below is presented on
a "pro forma" basis and reflects the acquisition of Fibreboard (excluding Pabco
and operations that were discontinued by Fibreboard prior to the Fibreboard
Acquisition) as though it had occurred at the beginning of the respective
periods presented. The pro forma results include certain adjustments, primarily
for depreciation and amortization, interest and other expenses directly
attributable to the Fibreboard Acquisition and are not necessarily indicative of
the combined results that would have occurred had the Fibreboard Acquisition
occurred at the beginning of those periods.
S-23
<PAGE> 80
<TABLE>
<CAPTION>
PRO FORMA AS REPORTED
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------
1997 1996 1997 1996
------ --------- ------ -------
(in millions of dollars, except share date)
<S> <C> <C> <C> <C>
Net Sales $2,223 $2,092 $1,892 $1,805
Income from continuing operations 99 (443) 105 (434)
Fully diluted earnings per share from $1.76 $(8.59) $ 1.87 $(8.43)
continuing operations
</TABLE>
Additionally, during the first quarter of 1997, the Company acquired
Polypan Nord S.P.A., a manufacturer of extruded polystyrene foam (XPS)
insulation products based in Italy and Falcon Manufacturing of California, Inc.,
a U.S. producer of expanded polystyrene (EPS) foam insulation products.
In the Composite Materials segment, sales increased four percent for
the quarter ended June 30, 1997, but were down two percent for the six months
then ended, when compared to the comparable 1996 periods. While composites sales
showed improvement in overall volume, the business continued to experience
significant price decline during the quarter, particularly in Europe where
weakening currencies compounded the sales decline. Composite Materials income
from operations in the quarter and six months ended June 30, 1997, of $52 and
$101 million, respectively, declined from the equivalent prior year periods. The
declines are primarily attributable to the pricing weakness being experienced in
Europe. The Company does not expect to see significant improvement in the
Composite Materials segment in 1997. However, the Company now believes pricing
is stabilizing in both the U.S. and Europe and has implemented a price increase
effective during the second half of the year.
During the second quarter of 1997, the Company completed the
acquisition of the assets of The Stewart Group, Inc., a manufacturer and
marketer of a composite central strength member for telecommunication cable
using a proprietary technology. With this addition, the Company now markets a
complete line of glass fiber products that protect and reinforce fiber optic and
copper telecommunications cable.
In the first quarter of 1997, the Company completed the previously
announced acquisition of Knytex Company, a manufacturer of specialty glass fiber
fabrics.
The Company's cost of borrowed funds for the quarter ended June 30,
1997 was $5 million higher than during second quarter 1996, due to increased
borrowings used to fund growth in working capital and certain acquisitions.
Years Ended December 31, 1996, 1995 and 1994
Net sales were $3.832 billion for the year ended December 31, 1996,
reflecting a 6% increase from the 1995 level of $3.612 billion. Net sales in
1994 were $3.351 billion. Most of the 1996 growth is attributable to volume
increases in the Building Materials segment, particularly in North America, as
well as incremental sales growth resulting from 1995 and 1996 acquisitions. See
Notes 1 and 5 to the Consolidated Financial Statements of the Company included
in the 1996 Form 10-K, which is incorporated in the accompanying Prospectus by
reference. Sales outside the U.S. represented 25% of total sales for the year
ended December 31, 1996, compared to 27% and 24% for the years 1995 and 1994,
respectively. The strength of U.S. Building Materials sales in combination with
sluggish European Composites business contributed to the slightly lower
percentage of sales outside the U.S. when compared
S-24
<PAGE> 81
to 1995. Gross margin for each of the years ended December 31, 1996 and 1995 was
26%, up from 24% in 1994. Gross margin in 1996 was adversely impacted by the
lower sales volume in the European Composites business.
For the year ended December 31, 1996, the Company reported a net loss
of $284 million, or $5.50 per share, compared to net income of $231 million, or
$4.40 per share, and net income of $159 million, or $3.35 per share, for the
years ended December 31, 1995 and 1994, respectively. The 1996 net loss reflects
a net after-tax charge of $542 million, or $10.49 per share, for asbestos
litigation claims that may be received after 1999 and probable additional
insurance recovery; after-tax special charges totaling $27 million, or $.52 per
share, including valuation adjustments associated with prior divestitures, major
product line productivity initiatives and a contribution to the Owens-Corning
Foundation; an after-tax charge of $26 million, or $.50 per share, for
restructuring and other actions; a $27 million, or $.52 per share reduction of
tax reserves due to favorable legislation; and an after-tax gain of $27 million,
or $.52 per share from the sale of the Company's interest in its former Japanese
affiliate, Asahi Fiber Glass Co. Ltd. The net loss created by the special items
mentioned above caused common stock equivalents and convertible securities to be
excluded from the number of fully diluted shares reported in 1996 due to their
anti-dilutive effect. For comparative purposes, these anti-dilutive shares have
been included in the calculation of fully diluted net income per share from
ongoing operations in 1996 and represent a difference of $.32 per share. Net
income from ongoing operations was $257 million, or $4.65 per share, for the
year ended December 31, 1996, compared to $223 million, or $4.25 per share in
1995, discussed below. The 15% increase in net income from ongoing operations in
1996 over 1995 reflects the benefits of acquisitions, strong results from
Building Materials in North America, particularly in the roofing and foam
businesses, and a favorable litigation settlement with a former supplier, offset
in part by increased administrative costs from regional expansion into Asia
Pacific and globally within the engineered pipe systems business. See Notes, 8,
12, 18 and 21 to the Consolidated Financial Statements of the Company included
in the 1996 Form 10-K, which is incorporated in the accompanying Prospectus by
reference.
Net income of $231 million, or $4.40 per share, for the year ended
December 31, 1995 reflects a one time gain of $8 million, or $.15 per share,
resulting from a tax loss carryback. Net income from ongoing operations for the
year ended December 31, 1995 was $223 million, or $4.25 per share. See Note 8 to
the Consolidated Financial Statements of the Company included in the 1996 Form
10-K, which is incorporated in the accompanying Prospectus by reference.
Net income of $159 million for the year ended December 31, 1994
included the following special items: an after-tax gain of $123 million, or
$2.45 per share, reflecting a change to the capital method of accounting for the
rebuilding of glass melting facilities; an after-tax charge of $85 million, or
$1.69 per share, for productivity initiatives and other actions; a non-cash,
after-tax charge of $10 million, or $.20 per share, to reflect adoption of
Statement of Financial Accounting Standards (SFAS) No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, for plans outside
the United States; and a non-cash, after-tax charge of $28 million, or $.56 per
share, to reflect adoption of SFAS No. 112, Employers' Accounting for
Postemployment Benefits. See Notes 6, 18 and 19 to the Consolidated Financial
Statements of the Company included in the 1996 Form 10-K, which is incorporated
in the accompanying Prospectus by reference.
In the Building Materials segment, sales increased 12% for the year
ended December 31, 1996 compared to 1995. This growth reflects volume increases,
particularly in North America, as well as incremental sales from 1995 and 1996
acquisitions offset by a slight decline in prices, particularly in Canada.
Income from ongoing operations for Building Materials increased 14% from 1995
levels due to acquisitions, increased sales volumes and the improving
performance in the Company's Asia Pacific operations.
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<PAGE> 82
Building Materials sales in the U.S. increased 11% and Canada also
posted improvement in 1996. This improvement in the North American markets is
being driven by the Company's integration of its expanded product line from
acquisitions and branded products into the Company's well established channels
of distribution. The expanded product line includes Luminess(TM) vinyl windows,
Transitions(R) vinyl siding and FOAMULAR(R) rigid polystyrene foam insulation.
The third quarter 1996 acquisition of Celfortec, a Canadian producer of
FOAMULAR(R) insulation, also contributed to Building Materials growth in North
America. Building Materials Europe sales increased 11% over 1995, primarily from
the second quarter 1996 acquisition of the extruded polystyrene foam business of
Linpac Insulation, with production facilities in the U.K. and Spain. With these
acquisitions in the extruded polystyrene foam operations in Europe and Canada
and the joint venture announced in 1996 to produce foam insulation in China, the
Company has significantly expanded its global position in the foam insulation
business as part of the Company's global building systems strategy.
In 1996, the Company's roofing business continued to increase sales
and improve margins through volume increases and productivity initiatives. The
window business also continued to experience significant sales growth and
productivity improvements during the year. Additionally, in the second quarter
of 1996 the Company acquired the U.S. assets of Partek Insulation, a producer of
rock mineral wool insulation, which has expanded the Company's insulation
product offering into the high temperature insulation market. The Company
further expanded its Building Materials multi-product offering in 1996 with the
introduction of the branded products, Build-R-Tape(R) used to seal sheathing
joints and PinkSeal(TM) foam sealant.
In the Composite Materials segment, sales decreased 5% for the year
ended December 31, 1996. This sales decrease is primarily the result of sluggish
European reinforcements business as well as a decline in the Canadian market,
while in the U.S., composites sales remained relatively flat. Income from
ongoing operations posted a 4% increase over the prior year, reflecting improved
operating performance and productivity improvements, particularly in the U.S.
In 1996, the Company announced three new large diameter glass
reinforced plastic ("GRP") pipe joint ventures, one in Colombia, Egypt and
Turkey. GRP pipe is used primarily in water and wastewater systems. In addition
to these ventures, the Company also formed an application development center in
India and announced plans for similar such centers in Brazil and China, to
develop and promote the use of composite materials as a replacement for more
traditional materials.
At the end of 1996, the Company announced the acquisition of the
remainder of the equity interest in Knytex(R), a manufacturer of specialty glass
fiber fabrics. This business, which knits, weaves, stitches or bonds glass fiber
to provide value-added performance characteristics, will be combined with the
Company's existing European specialty fabrics business to form Owens Corning
Fabrics.
The Company's cost of borrowed funds for the year ended December 31,
1996 was $77 million, $10 million lower than 1995. The average total debt
outstanding during the year decreased substantially in 1996 compared to 1995 as
the result of the mid-year 1995 conversion of $173 million of the Company's 8%
convertible junior subordinated debentures into shares of common stock, combined
with the issuance of $200 million of convertible preferred securities. In 1996,
the Company averaged short-term debt of $129 million, approximately $55 million
lower than in 1995. The average debt reduction, together with lower average
short-term interest rates, contributed to the lower cost of borrowed funds in
1996. Additionally, due to several large construction projects, interest
capitalized in 1996 increased about $4 million over 1995. See Notes 2 and 3 to
the Consolidated Financial Statements of the Company included in the 1996 Form
10-K, which is incorporated in the accompanying Prospectus by reference.
S-26
<PAGE> 83
At December 31, 1996, certain of the Company's foreign subsidiaries
and state tax jurisdictions have combined tax net operating loss carryforwards
the benefit of which is approximately $63 million. The Company has $580 million
in net deferred tax assets at December 31, 1996, all of which management expects
will be realized through future income from operations. See Note 8 to the
Consolidated Financial Statements of the Company included in the 1996 Form 10-K,
which is incorporated in the accompanying Prospectus by reference.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Six Months Ended June 30, 1997
Cash flow from operations, excluding asbestos-related activities, was
negative $6 million for the second quarter of 1997, compared to $73 million for
second quarter 1996. The decline from 1996 to 1997 is primarily attributable to
a reduction in accounts payable and accrued liabilities, and an increase in
accounts receivable. Excluding Fibreboard inventories of approximately $110
million, inventories at June 30, 1997 increased 26% over December 31, 1996
levels due to the Company's seasonal inventory build in the first half of the
year. See Notes 6 and 7 to the Consolidated Financial Statements of the Company
as of June 30, 1997, included in the Second Quarter Form 10-Q, which is
incorporated in the accompanying Prospectus by reference.
At June 30, 1997, the Company's net working capital was $260 million
and its current ratio was 1.22, as compared to negative $163 million and .85,
respectively at December 31, 1996. The increase in 1997 is the result of
increased working capital, driven by higher seasonal inventories and
receivables, as well as a decline in accounts payable and accrued liabilities.
The Company's total borrowings at June 30, 1997 were $2,033 million,
$1,099 million higher than at year-end 1996. The June 30, 1997 long-term debt
balance includes $519 million payable, as well as $138 million of debt assumed,
for the acquisition of Fibreboard. The acquisition amounts were drawn from the
Company's new credit facility in early July. Since the cash was not exchanged
until July, the Consolidated Statement of Cash Flows, for the quarter and six
months ended June 30, 1997, does not reflect the acquisition of Fibreboard.
Typically, the Company reports greater cash usage during the first half of the
year as the Company builds inventories and other working capital.
As of June 30, 1997, the Company had unused lines of credit of $736
million available under long-term bank loan facilities and an additional $37
million under short-term facilities, after the exclusion of the amount utilized
in early July to fund the acquisition of Fibreboard, compared to $440 million
and $195 million, respectively, at year-end 1996. The increase in available
lines of credit is the result of the new $2 billion credit facility established
to fund the acquisition of Fibreboard. Letters of credit issued under the
Company's new long-term loan facility, most of which support appeals from
asbestos trials, reduce the available credit of that facility. The impact of
such reduction is reflected in the unused lines of credit discussed above. See
Notes 3 and 4 of the Consolidated Financial Statements of the Company as of June
30, 1997, included in the Second Quarter Form 10-Q, which is incorporated in the
accompanying Prospectus by reference.
Capital spending for property, plant and equipment, excluding
acquisitions and investments in affiliates, was $131 million for the first six
months of 1997. For the year 1997, the Company anticipates capital spending,
exclusive of acquisitions and investments in affiliates, to be approximately
$250 million, the majority of which is committed. The Company expects that
funding for these expenditures will be from the Company's operations and
external sources as required.
S-27
<PAGE> 84
Gross payments for asbestos litigation claims against Owens Corning
during the second quarter of 1997, including $11 million in defense costs and $2
million for appeal bond and other costs, were $90 million. Proceeds from
insurance were $24 million, resulting in a net pretax cash outflow of $66
million, or $40 million after-tax. During the second quarter of 1997, Owens
Corning received approximately 9,700 new asbestos personal injury cases and
closed approximately 3,200 cases. Over the next twelve months, Owens Corning's
total payments for asbestos litigation claims, including defense costs, are
expected to be approximately $300 million. Proceeds from insurance of $50
million are expected to be available to cover Owens Corning's costs, resulting
in a net pretax cash outflow of $250 million, or $150 million after-tax. See
Note 8 Item A to the Consolidated Financial Statements of the Company as of June
30, 1997, incorporated in the accompanying Prospectus by reference.
During the next twelve months, any payments for asbestos claims
against Fibreboard are expected to be paid by Fibreboard's insurers. See Note 8
Item B to the Consolidated Financial Statements of the Company as of June 30,
1997, included in the Second Quarter Form 10-Q, which is incorporated in the
accompanying Prospectus by reference.
The Company expects funds generated from operations, together with
funds available under long and short term bank loan facilities, to be sufficient
to satisfy its debt service obligations under its existing indebtedness, as well
as its contingent liabilities for uninsured asbestos personal injury claims.
The Company has been deemed by the Environmental Protection Agency
(EPA) to be a potentially responsible party (PRP) with respect to certain sites
under the Comprehensive Environmental Response, Compensation and Liability Act
(Superfund). The Company has also been deemed a PRP under similar state or local
laws, including two state Superfund sites where the Company is the primary
generator. In other instances, other PRPs have brought suits or claims against
the Company as a PRP for contribution under such federal, state or local laws.
During the second quarter of 1997, the Company was designated a PRP in such
federal, state, local or private proceedings for one additional site. At June
30, 1997, a total of 42 such PRP designations remained unresolved by the
Company, some of which designations the Company believes to be erroneous. The
Company is also involved with environmental investigation or remediation at a
number of other sites at which it has not been designated a PRP. The Company has
established a $30 million reserve, of which $15 million relates to Fibreboard,
for its Superfund (and similar state, local and private action) contingent
liabilities. Based upon information presently available to the Company, and
without regard to the application of insurance, the Company believes that,
considered in the aggregate, the additional costs associated with such
contingent liabilities, including any related litigation costs, will not have a
materially adverse effect on the Company's results of operations, financial
condition or long-term liquidity.
The 1990 Clean Air Act Amendments (Act) provide that the EPA will
issue regulations on a number of air pollutants over a period of years. Until
these regulations are developed, the Company cannot determine the extent to
which the Act will affect it. The Company anticipates that its sources to be
regulated will include glass fiber manufacturing and asphalt processing
activities. The EPA's announced schedule is to issue regulations covering glass
fiber manufacturing by late 1997 and asphalt processing activities by late 2000,
with implementation as to existing sources up to three years thereafter. Based
on information now known to the Company, including the nature and limited number
of regulated materials it emits, the Company does not expect the Act to have a
materially adverse effect on the Company's results of operations, financial
condition or long-term liquidity.
Years Ended December 31, 1996, 1995 and 1994
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<PAGE> 85
Cash flow from operations, excluding proceeds from insurance and
payments for asbestos litigation claims, was $501 million for 1996, compared to
$342 million for 1995. The increase in cash flow from operations in 1996 relates
to an increase in accounts payable and accrued liabilities offset in part by an
increase in inventory. Additionally, 1995 cash flow from operations was reduced
by $64 million for the December 1995 funding of a Voluntary Employee's
Beneficiary Association (VEBA) trust. The 1996 cash flow from operations
reflects the disbursements for benefits from the VEBA trust and collection of a
tax receivable. See Note 6 to the Consolidated Financial Statements of the
Company included in the 1996 Form 10K which is incorporated in the accompanying
Prospectus by reference.
At December 31, 1996, the Company's net working capital and current
ratio were negative $163 million and .85, compared to negative $9 million and
.99 at December 31, 1995, and negative $143 million and .87 at December 31,
1994, respectively. The decrease in 1996 was primarily due to increased accounts
payable and accrued liabilities, and also a larger current asbestos liability,
offset somewhat by increased inventories. Excluding the impact of short-term
borrowings used to finance a $110 million U.K. acquisition in June 1994, the
Company's net working capital was negative $33 million and its current ratio was
.97 at December 31, 1994.
During 1995, virtually all of the Company's $173 million issue of 8%
convertible junior subordinated debentures were converted. Debentures not
converted were redeemed for cash. The conversion resulted in the issuance of 5.8
million new shares of common stock. Also in 1995, Owens-Corning Capital, L.L.C.,
a Delaware limited liability company, of which all of the common limited company
interests are indirectly owned by the Company, issued $200 million of 6.5%
cumulative convertible preferred securities. The proceeds from the issuance were
loaned to the Company and partially used to repay a short-term credit facility.
See Note 4 to the Consolidated Financial Statements of the Company included in
the 1996 Form 10K, which is incorporated in the accompanying Prospectus by
reference.
Capital spending for property, plant and equipment, excluding
acquisitions, was $325 million during 1996.
Gross payments for asbestos litigation claims during 1996, including
$44 million in defense costs and $11 million for appeal bond and other costs,
were $267 million. Proceeds from insurance were $101 million resulting in a net
pretax cash outflow of $166 million, or $100 million after-tax. During 1996, the
Company received approximately 36,400 new asbestos personal injury cases and
closed approximately 22,700 cases. See Note 21 to the Consolidated Financial
Statements of the Company included in the 1996 Form 10K, which is incorporated
in the accompanying Prospectus by reference.
In June 1996 the Company filed a lawsuit in federal court in New
Orleans alleging a massive scheme to defraud the Company in connection with
asbestos litigation cases. The suit alleges that medical test results in tens of
thousands of asbestos litigation claims were falsified by the owners and
operators of certain pulmonary function testing laboratories. A second lawsuit,
alleging similar practices, was filed against the owner and operator of an
additional testing laboratory in January 1997. The Company believes that at
least 40,000 claims in its current backlog involve plaintiffs whose pulmonary
function tests were improperly administered or manipulated by the testing
laboratories or otherwise inconsistent with proper medical practice.
FUTURE REQUIRED ACCOUNTING CHANGES
On June 30, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS No. 130). This statement establishes standards for reporting and
display of comprehensive income and its components in financial
S-29
<PAGE> 86
statements. The adoption of this standard will not impact results from
operations, financial condition, or long-term liquidity, but will require the
Company to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately in the equity section of the balance sheet. The Company is
required to adopt the new standard for periods beginning after December 15,
1997.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS
No.128). This statement introduces new methods for calculating earnings per
share. The adoption of this standard will not impact results from operations,
financial condition, or long-term liquidity, but will require the Company to
restate earnings per share reported in prior periods to conform with this
statement. The Company is required to adopt the new standard for periods ending
after December 15, 1997. The Company believes that the adoption of this standard
will result in essentially the same earnings per share when comparing the
current fully diluted earnings per share calculation to the calculation of
diluted earnings per share required by SFAS No. 128.
ASBESTOS AND OTHER LITIGATION
The following is a discussion of the status of the asbestos and other
litigation as of June 30, 1997; see also " Management's Discussion and Analysis
of Financial Condition and Results of Operations --Liquidity, Capital Resources
and Other Related Matters."
ASBESTOS LIABILITIES
Owens Corning (Excluding Fibreboard)
Owens Corning is a co-defendant with other former manufacturers,
distributors and installers of products containing asbestos and with miners and
suppliers of asbestos fibers (collectively, the "Producers") in personal injury
and property damage litigation. The personal injury claimants generally allege
injuries to their health caused by inhalation of asbestos fibers from Owens
Corning's products. Most of the claimants seek punitive damages as well as
compensatory damages. The property damage claims generally allege property
damage to school, public and commercial buildings resulting from the presence of
products containing asbestos. Virtually all of the asbestos-related lawsuits
against Owens Corning arise out of its manufacture, distribution, sale or
installation of an asbestos-containing calcium silicate, high temperature
insulation product, the manufacture of which was discontinued in 1972.
Status. As of June 30, 1997, approximately 165,700 asbestos personal
injury claims were pending against Owens Corning, of which 16,700 were received
in the first six months of 1997. Owens Corning received approximately 36,400
such claims in 1996 and 55,900 in 1995.
Many of the recent claims appear to be the product of mass screening
programs and not to involve malignancies or other significant asbestos related
impairment. Owens Corning believes that at least 40,000 of the recent claims
involve plaintiffs whose pulmonary function tests ("PFTs") were improperly
administered or manipulated by the testing laboratory or otherwise inconsistent
with proper medical practice, and it is investigating a number of testing
organizations and their methods. In 1996 Owens Corning filed suit in federal
court in New Orleans, Louisiana against the owners and operators of certain
pulmonary function testing laboratories in the southeastern U.S. challenging
such improper testing practices. This matter is now in active pre-trial
discovery. In January 1997, Owens Corning filed a similar suit in federal court
in Jackson, Mississippi against the owner of an additional testing laboratory.
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<PAGE> 87
During 1996 Owens Corning engaged in discussions with a group of
approximately 30 leading plaintiffs' law firms to explore approaches toward
resolution of its asbestos liability. Agreements with the various firms not to
file claims against Owens Corning except for those involving malignancies, most
of which agreements expired on or before January 1, 1997, may have impacted the
number of cases received by Owens Corning during 1996 and the first two quarters
of 1997.
Through June 30, 1997, Owens Corning had resolved (by settlement or
otherwise) approximately 192,100 asbestos personal injury claims. This number
includes cases resolved by two orders of dismissal for lack of medical proof,
covering approximately 18,900 federal maritime cases which named Owens Corning
as a defendant, resulting in a 15,600 case reduction in the backlog after
reduction for duplicate cases and cases previously settled. Of these cases,
approximately 11,700 were dismissed in 1996, with the remaining 3,900 being
dismissed in the first quarter of 1997. During 1996, 1995 and 1994, Owens
Corning resolved approximately 60,600 asbestos personal injury claims, over 99%
without trial, and incurred total indemnity payments of $626 million (an average
of about $10,300 per case).
Owens Corning's indemnity payments have varied considerably over time
and from case to case, and are affected by a multitude of factors. These include
the type and severity of the disease sustained by the claimant (i.e.,
mesothelioma, lung cancer, other types of cancer, asbestosis or pleural
changes); the occupation of the claimant; the extent of the claimant's exposure
to asbestos-containing products manufactured, sold or installed by Owens
Corning; the extent of the claimant's exposure to asbestos-containing products
manufactured, sold or installed by other Producers; the number and financial
resources of other Producer defendants; the jurisdiction of suit; the presence
or absence of other possible causes of the claimant's illness; the availability
or not of legal defenses such as the statute of limitations or state of the art;
whether the claim was resolved on an individual basis or as part of a group
settlement; and whether the claim proceeded to an adverse verdict or judgment.
Insurance. As of June 30, 1997, Owens Corning had approximately $265
million in unexhausted insurance coverage (net of deductibles and self-insured
retentions and excluding coverage issued by insolvent carriers) under its
liability insurance policies applicable to asbestos personal injury claims. This
insurance, which is substantially confirmed, includes both products hazard
coverage and primary level non-products coverage. Portions of this coverage are
not available until 1998 and beyond under agreements with the carriers
confirming such coverage. All of Owens Corning's liability insurance policies
cover indemnity payments and defense fees and expenses subject to applicable
policy limits.
In addition to its confirmed primary level non-products insurance,
Owens Corning has a significant amount of unconfirmed potential non-products
coverage with excess level carriers. For purposes of calculating the amount of
insurance applicable to asbestos liabilities, Owens Corning has estimated its
probable recoveries in respect of this additional non-products coverage at $225
million, which amount was recorded in the second quarter of 1996. This coverage
is unconfirmed and the amount and timing of recoveries from these excess level
policies will depend on subsequent negotiations or proceedings.
Reserve. The Company's financial statements include a reserve for the
estimated cost associated with Owens Corning's asbestos personal injury claims.
This reserve was established principally through a charge to income in 1991 for
the costs of asbestos claims expected to be received through 1999 and an
additional $1.1 billion non-recurring, noncash charge to income (before taking
into account the probable non-products insurance recoveries) during the second
quarter of 1996 for cases that may be received subsequent to 1999. In
establishing the reserve, Owens Corning took into account, among other things,
the effect of federal court decisions relating to punitive damages and the
certification of class actions in asbestos cases, the discussions with the group
of plaintiffs' law firms referred to above, the results of its continuing
investigations of medical screening practices of the kind at issue in the
federal PFT lawsuits,
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<PAGE> 88
recent developments as to the prospects for federal and state tort reform, the
continued rate of case filings at historically high levels, additional
information on filings received during the 1993-1995 period and other factors.
The combined effect of the $1.1 billion charge and the $225 million probable
additional non-products insurance recovery was an $875 million charge in the
second quarter of 1996.
Owens Corning's estimated total liabilities in respect of indemnity
and defense costs associated with pending and unasserted asbestos personal
injury claims that may be received in the future, and its estimated insurance
recoveries in respect of such claims, are reported separately as follows:
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<PAGE> 89
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Reserve for asbestos
litigation claims
- -----------------
Current $ 300 $ 300
Other 1,485 1,670
---------- --------
Total Reserve 1,785 1,970
---------- --------
Insurance for asbestos
litigation claims
- -----------------
Current 50 100
Other 440 454
---------- --------
Total Insurance 490 554
---------- --------
Net Owens Corning Asbestos Liability $ 1,295 $ 1,416
========== ========
</TABLE>
Owens Corning cautions that such factors as the number of future
asbestos personal injury claims received by it, the rate of receipt of such
claims, and the indemnity and defense costs associated with asbestos personal
injury claims, as well as the prospects for confirming additional insurance,
including the additional $225 million in non-products coverage referenced above,
are influenced by numerous variables that are difficult to predict, and that
estimates, such as Owens Corning's, which attempt to take account of such
variables, are subject to considerable uncertainty. Owens Corning believes that
its estimate of liabilities and insurance will be sufficient to provide for the
costs of all pending and future asbestos personal injury claims that involve
malignancies or significant asbestos-related functional impairment. While such
estimates cover unimpaired claims, the number and cost of unimpaired claims are
much harder to predict and such estimates reflect Owens Corning's belief that
such claims have little or no value. Owens Corning will continue to review the
adequacy of its estimate of liabilities and insurance on a periodic basis and
make such adjustments as may be appropriate.
Management Opinion. Although any opinion is necessarily judgmental
and must be based on information now known to Owens Corning, in the opinion of
management, while any additional uninsured and unreserved costs which may arise
out of pending personal injury and property damage asbestos claims and
additional similar asbestos claims filed in the future may be substantial over
time, management believes that any such additional costs will not impair the
ability of the Company to meet its obligations, to reinvest in its businesses or
to take advantage of attractive opportunities for growth.
Fibreboard (Excluding Owens Corning)
Prior to 1972, Fibreboard manufactured insulation products containing
asbestos. Fibreboard has since been named as a defendant in many thousands of
personal injury claims for injuries allegedly caused by asbestos exposure as
well as in asbestos property damage cases.
As of June 30, 1997, approximately 97,600 asbestos personal injury
claims were pending against Fibreboard, of which 21,200 were received in the
first six months of 1997. Fibreboard received approximately 32,900 such claims
in 1996 and 20,700 in 1995. These claims and most of the pending claims are made
against the Fibreboard Global Settlement Trust and are subject to the Global
Settlement injunction discussed below. In the first six months of 1997,
Fibreboard resolved approximately 1,800 asbestos personal injury claims at an
average cost of $22,000 per claim. Approximately 2,700 such claims
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were resolved in 1996 at an approximate average cost of $34,000 per claim and
14,500 were resolved in 1995 at an approximate average cost of $12,000 per
claim.
The average cost per claim has increased recently from the historical
average cost of $11,000 per claim. This is due to the absence of group
settlements, where large numbers of low value cases are traditionally settled
along with higher value cases, and due to the fact that in 1996 and 1997 a
relatively small number of individual cases involving more seriously injured
plaintiffs were settled as exigent claims (all of which are malignancy claims)
during the pendency of the Global Settlement injunction discussed below.
As of June 30, 1997, amounts payable under various asbestos claim
settlement agreements were $88 million. These amounts are payable either from
the Settlement Trust discussed below or directly by the insurers. Amounts due
from insurers in payment of these or past claims paid directly by Fibreboard, as
of June 30, 1997 are $110 million.
The asbestos-related long-term debt of $26 million consists of
amounts advanced under a reimbursement agreement; interest accrues at prime
minus 2%.
Fibreboard has unique insurance coverage of personal injury claims.
During 1993, Fibreboard and its insurers, Continental Casualty Company
(Continental) and Pacific Indemnity Company (Pacific), entered into the
Insurance Settlement, and Fibreboard, its insurers and representatives of a
nationwide class of future asbestos plaintiffs entered into the Global
Settlement. These agreements are interrelated and require final court approval.
On July 26, 1996, the U.S. Fifth Circuit Court of Appeals affirmed the Global
Settlement by a majority decision and the Insurance Settlement by a unanimous
decision.
The parties opposing the Global Settlement filed petitions seeking
review with the U.S. Supreme Court. On June 27, 1997, the Supreme Court granted
the petition, vacated the judgment and remanded the case to the Fifth Circuit
for further consideration in light of the Supreme Court's decision in the
GEORGINE class action involving asbestos claims filed against members of the
Center for Claims Resolution. In light of this ruling, final resolution of the
Global Settlement may not be known until 1998 or later.
On October 24, 1996, the statutory time period for objectors to seek
further judicial review of the Insurance Settlement lapsed with no petition for
review having been filed with the U.S. Supreme Court. Therefore, the Insurance
Settlement is now final and not subject to further appeal.
The parties will continue to seek approval of the Global Settlement.
If the Global Settlement becomes effective, all asbestos-related personal injury
liabilities of Fibreboard will be resolved through insurance funds and existing
corporate reserves. A permanent injunction barring the filing of any further
claims against Fibreboard or its insurers is included as part of the Global
Settlement. Upon final approval, Fibreboard's insurers are required to pay
existing settlements and assume full responsibility for any claims filed before
August 27, 1993, the date the settling parties reached agreement on the terms of
the Global Settlement. A court-supervised claims processing trust ("Settlement
Trust") will be responsible for resolving claims which were not filed against
Fibreboard before August 27, 1993, and any further claims that might otherwise
be asserted against Fibreboard in the future.
The Settlement Trust will be funded principally by Continental and
Pacific. These insurers have placed $1,525 million in an interest-bearing escrow
account pending court approval of the settlements. Fibreboard is responsible for
contributing $10 million plus accrued interest toward the Settlement Trust,
which it will obtain from other remaining insurance sources and existing
reserves. The Home Insurance Company has already paid $9.9 million into the
escrow account on behalf of Fibreboard, in satisfaction of
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an earlier settlement agreement. The balance of the escrow account was $1,691
million at June 30, 1997, after payment of interim expenses and exigent claims
associated with the Global Settlement.
If the Global Settlement becomes effective, Fibreboard would have no
on-going or future liabilities for asbestos personal injury claims in excess of
the $10 million currently reserved in other long term liabilities.
The Insurance Settlement is structured as an alternative solution in
the event the Global Settlement fails to receive final approval. Under the
Insurance Settlement, Continental and Pacific will pay in full settlements
reached as of August 27, 1993 and provide Fibreboard with the remaining balance
of the Global Settlement escrow account for claims filed after August 27, 1993,
plus an additional $475 million for claims which were pending but not settled at
August 27, 1993, less amounts paid for those claims since August 27, 1993. Under
the Insurance Settlement, Fibreboard will manage the defense and resolution of
asbestos-related personal injury claims and will remain subject to suit by
asbestos personal injury claimants.
The Insurance Settlement will not be fully implemented or funded
until such time as the Global Settlement has been finally resolved. In the event
the Global Settlement is finally approved, the Insurance Settlement will not be
implemented.
While there are various uncertainties regarding whether the Global
Settlement or the Insurance Settlement will be in effect, and these may
ultimately impact Fibreboard's liability for asbestos personal injury claims,
the Company believes the amounts available under the Insurance Settlement will
be adequate to fund the ongoing defense and indemnity costs associated with
asbestos-related personal injury claims for the foreseeable future.
The Company anticipates reevaluating and updating its estimates of
the Fibreboard liability for asbestos personal injury claims once it is
determined which of the Global Settlement or the Insurance Settlement is
ultimately implemented.
NON-ASBESTOS LIABILITIES
Various other lawsuits and claims arising in the normal course of
business are pending against the Company, some of which allege substantial
damages. Management believes that the outcome of these lawsuits and claims will
not have a materially adverse effect on the Company's financial position or
results of operations.
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DESCRIPTION OF THE FELINE PRIDES
The following descriptions of certain terms of the FELINE PRIDES offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the FELINE PRIDES set forth
in the accompanying Prospectus, to which reference is hereby made. The summaries
of certain provisions of documents described below do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of such documents (including the definitions therein of certain
terms), forms of which are on file with the Commission. Wherever particular
Sections of, or terms defined in, such documents are referred to herein, such
Sections or defined terms are incorporated by reference herein. Capitalized
terms not defined herein have the meanings assigned to such terms in the
accompanying Prospectus.
Each FELINE PRIDES will be issued under the Purchase Contract Agreement
between the Company, the Purchase Contract Agent and the Treasury Notes Seller.
Each FELINE PRIDES offered hereby initially will consist of a unit (referred to
as an Income PRIDE) with a Stated Amount of $50 comprised of (a) a Purchase
Contract under which (i) the holder will purchase from the Company on the
Purchase Contract Settlement Date, for an amount of cash equal to the Stated
Amount, a number of newly issued shares of Common Stock equal to the Settlement
Rate described below under "Description of the Purchase Contracts--General," and
(ii) the Company will pay Contract Adjustment Payments to the holder, and (b)
(i) a 1/20 undivided beneficial ownership interest in a related % Treasury
Note having a principal amount at maturity equal to $1,000 and maturing on the
Purchase Contract Settlement Date. Pursuant to the Purchase Contract Agreement,
the Purchase Contract Agent (as agent of the holders of Income PRIDES) will
purchase the related Treasury Notes (excluding Pre-Purchase Accrued Interest)
from the Treasury Notes Seller for a purchase price equal to the aggregate
purchase price of the Treasury Notes set forth on the cover page hereof. Such
purchase price may exceed the aggregate principal amount of the Treasury Notes,
in which case, the Company shall, for the benefit of the holders of the FELINE
PRIDES and as a payment under the Purchase Contracts, provide to the Treasury
Notes Seller the amount of such excess (such amounts, "Initial Premium
Payments"). Holders will not directly receive any cash as a result of any
Initial Premium Payments. In the event that such aggregate purchase price of the
Treasury Notes is less than their aggregate principal amount, the Purchase
Contract Agent shall provide to the Company the amount of such shortfall as a
payment under the Purchase Contracts. As long as the FELINE PRIDES are in the
form of Income PRIDES, the related Treasury Notes will be pledged to the
Collateral Agent to secure the holder's obligation to purchase Common Stock
under the related Purchase Contracts.
SUBSTITUTION OF PLEDGED SECURITIES
Each holder of an Income PRIDES will have the right, at any time after
August __, 1997, to substitute for the related Treasury Notes held by the
Collateral Agent Treasury Securities, in a principal amount per Income PRIDES
equal to the Stated Amount and maturing on the Purchase Contract Settlement
Date; provided, however, that a holder may make such substitution only in
integral multiples of 20 Income PRIDES. FELINE PRIDES with respect to which
Treasury Securities have been substituted for the related Treasury Notes as
collateral to secure a holder's obligation under the related Purchase Contracts
will be referred to as Growth PRIDES(sm). To create 20 Growth PRIDES, the Income
PRIDES holder will (a) deposit with the Collateral Agent a Treasury Security
having a principal amount at maturity of $1,000 and (b) transfer 20 Income
PRIDES to the Purchase Contract Agent accompanied by a notice stating that the
Income PRIDES holder has deposited a Treasury Security with the Collateral Agent
and requesting that the Purchase Contract Agent instruct the Collateral Agent to
release to such holder the Treasury Note relating to such 20 Income PRIDES. Upon
such deposit and receipt of an instruction from the Purchase Contract Agent, the
Collateral Agent will effect the release of the related Treasury Note from the
pledge under the
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Pledge Agreement free and clear of the Company's security interest therein to
the Purchase Contract Agent, which will (i) cancel the 20 Income PRIDES, (ii)
transfer the related Treasury Note to such holder and (iii) deliver 20 Growth
PRIDES to the holder. The substituted Treasury Security will be pledged with the
Collateral Agent to secure the holder's obligation to purchase Common Stock
under the related Purchase Contracts. Each Growth PRIDES will consist of a unit
with a Stated Amount of $50 comprised of (a) a Purchase Contract with respect to
which (i) the holder will purchase from the Company on the Purchase Contract
Settlement Date, for an amount of cash equal to the Stated Amount, a number of
newly issued shares of Common Stock equal to the Settlement Rate described
herein, and (ii) the Company will pay the holder Contract Adjustment Payments,
and (b) a 1/20 beneficial ownership interest in a related Treasury Security
having a principal amount at maturity equal to $1,000. The related Treasury
Notes released to the holder thereafter may be disposed of by such holder free
and clear of any security interest under the related Purchase Contracts.
Contract Adjustment Payments will be payable by the Company on the Growth PRIDES
on each Payment Date from the later of __________, 1997 and the last Payment
Date on which Contract Adjustment Payments were paid. In addition, imputed
interest would accrete on the underlying Treasury Securities.
Holders who elect to substitute Pledged Securities, thereby creating
Growth PRIDES or recreating Income PRIDES (as discussed below), shall be
responsible for any fees or expenses payable in connection with such
substitution. See "Certain Provisions of the Purchase Contract Agreement and the
Pledge Agreement-- Miscellaneous."
RECREATING INCOME PRIDES
A holder of 20 Growth PRIDES may recreate 20 Income PRIDES by (a)
depositing with the Collateral Agent $1,000 principal amount of Treasury Notes
and (b) transferring 20 Growth PRIDES to the Purchase Contract Agent accompanied
by a notice stating that the Growth PRIDES holder has deposited such amount of
Treasury Notes with the Collateral Agent and requesting that the Purchase
Contract Agent instruct the Collateral Agent to release to such holder the
related Treasury Security. Upon such deposit and receipt of instructions from
the Purchase Contract Agent, the Collateral Agent will effect the release of the
related Treasury Security from the pledge of the Pledge Agreement free and clear
of the Company's security interest therein to the Purchase Contract Agent, which
will (i) cancel the Growth PRIDES, (ii) transfer such Treasury Security to such
holder and (iii) deliver 20 Income PRIDES to such holder. The substituted
Treasury Note will be pledged with the Collateral Agent to secure the holder's
obligation to purchase Common Stock under the related Purchase Contracts.
CURRENT PAYMENTS
The semi-annual payments on the Income PRIDES will consist of interest on
the related Treasury Notes payable by the United States Government for periods
from and after _______, 1997 at the rate of ___% of the Stated Amount per annum
and unsecured, subordinated Contract Adjustment Payments payable semi-annually
on each Payment Date by the Company for periods from and after _______, 1997,
subject to the Company's rights of deferral as described herein, at the rate of
___% of the Stated Amount per annum. The Company's obligations with respect to
Contract Adjustment Payments are subordinated and junior in right of payment to
all liabilities of the Company and pari passu with the most senior preferred
stock directly issued, from time to time, if any, by the Company.
The semi-annual interest payment due on the related Treasury Notes on
August ___, 1997 will be remitted by the Collateral Agent to the Purchase
Contract Agent, who will remit such amount to the Treasury Note Seller, except
for an amount representing accrued interest on such Treasury Notes from the date
of issuance of the Income PRIDES until August ___, 1997 (such accrued interest,
the "Holders'
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Accrued Interest", and the amount of such interest payment that is remitted to
the Treasury Note Seller, the "Pre-Purchase Accrued Interest"). Holders' Accrued
Interest will be remitted by the Collateral Agent to the Purchase Contract
Agent, who will invest such amount, on behalf of the holders, in a permitted
investment maturing on the first Payment Date, at which time such
amount and any reinvestment income thereon, net of expenses associated
therewith, will be paid to holders, together with the regularly scheduled
semi-annual interest payment on the Treasury Notes. The Contract Adjustment
Payments payable on the First Payment Date will be adjusted so that the Contract
Adjustment Payments payable on such date will be the equivalent of ___% of the
Stated Amount per annum accruing from ___________, 1997 to _____________, 1998.
The semi-annual payments on the Growth PRIDES will consist of unsecured,
subordinated Contract Adjustment Payments, payable on each Payment Date by the
Company from the later of _____, 1997 and the last Payment Date on which the
Contract Adjustment Payments were paid, subject to the Company's right of
deferral as described herein. In addition, imputed interest will accrete on the
related Treasury Securities.
The Company has the right to defer the payment of Contract Adjustment
Payments on the related Purchase Contracts until the Purchase Contract
Settlement Date; however, deferred Contract Adjustment Payments will bear
additional Contract Adjustment Payments at the rate of % per annum (such
deferred installments of Contract Adjustment Payments together with the
additional Contract Adjustment Payments shall be referred to as the "Deferred
Contract Adjustment Payments") until paid. See "Description of the Purchase
Contracts--Contract Adjustment Payments and "--Option to Defer Contract
Adjustment Payments."
VOTING RIGHTS
Holders of Purchase Contracts underlying the Income PRIDES or Growth
PRIDES, in their capacity as such holders, will have no voting or other rights
in respect of the Common Stock.
LISTING OF THE SECURITIES
Application will be made to list the Income PRIDES on the NYSE under the
symbol "[ ]," subject to official notice of issuance. The Growth PRIDES will
not be listed or traded on any securities exchange.
NYSE SYMBOL OF COMMON STOCK
The Common Stock is listed on the NYSE under the symbol "OWC."
DESCRIPTION OF THE PURCHASE CONTRACTS
GENERAL
Each Purchase Contract underlying a FELINE PRIDES (unless earlier
terminated, or earlier settled at the holder's option) will obligate the holder
of such Purchase Contract to purchase, and the Company to sell, on the Purchase
Contract Settlement Date, for an amount in cash equal to the Stated Amount of
such FELINE PRIDES, a number of newly issued shares of Common Stock equal to the
Settlement Rate. The Settlement Rate will be calculated as follows (subject to
adjustment under certain circumstances): (a) if the Applicable Market Value is
equal to or greater than the Threshold Appreciation Price, the Settlement Rate
will be , (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but
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greater than $ , the Settlement Rate will equal the Stated Amount divided by
the Applicable Market Value, and (c) if the Applicable Market Value is less than
or equal to $ , the Settlement Rate will be . "Applicable Market
Value" means the average of the Closing Prices (as defined) per share of Common
Stock on each of the thirty consecutive Trading Days (as defined) ending on the
second Trading Day immediately preceding the Purchase Contract Settlement Date.
No fractional shares of Common Stock will be issued by the Company
pursuant to the Purchase Contracts. In lieu of fractional shares otherwise
issuable (calculated on an aggregate basis) in respect of Purchase Contracts
being settled by a holder of Income PRIDES or Growth PRIDES, the holder will be
entitled to receive an amount of cash equal to such fraction of a share times
the Applicable Market Value.
On the Purchase Contract Settlement Date, unless a holder of Income PRIDES
or Growth PRIDES has settled the related Purchase Contracts prior to the
Purchase Contract Settlement Date through the early delivery of cash to the
Purchase Contract Agent in the manner described under "--Early Settlement", or
an event described under "--Termination" has occurred, the principal amount of
the Treasury Notes or Treasury Securities, as the case may be, related to such
Income PRIDES or Growth PRIDES, when paid at maturity, will be automatically
applied to satisfy in full the holder's obligation to purchase Common Stock
under the related Purchase Contracts. Such Common Stock will then be issued and
delivered to such holder or such holder's designee, upon presentation and
surrender of the certificate evidencing such FELINE PRIDES (a "FELINE PRIDES
Certificate") and payment by the holder of any transfer or similar taxes payable
in connection with the issuance of the Common Stock to any person other than
such holder. In the event that a holder of either an Income PRIDES or Growth
PRIDES effects the early settlement of a Purchase Contract through the delivery
of cash, the related Treasury Notes or Treasury Securities, as the case may be,
will be released to the holder as described herein.
Prior to the date on which shares of Common Stock are issued in settlement
of Purchase Contracts, the Common Stock underlying the related Purchase
Contracts will not be deemed to be outstanding for any purpose and the holders
of such Purchase Contracts will not have any voting rights, rights to dividends
or other distributions or other rights or privileges of a stockholder of the
Company by virtue of holding such Purchase Contracts.
Each holder of Income PRIDES or Growth PRIDES, by acceptance thereof, will
under the terms of the Purchase Contract Agreement and the related Purchase
Contracts be deemed to have (a) irrevocably agreed to be bound by the terms of
the related Purchase Contracts and the Pledge Agreement for so long as such
holder remains a holder of such FELINE PRIDES, and (b) duly appointed the
Purchase Contract Agent as such holder's attorney-in-fact to enter into and
perform the related Purchase Contracts on behalf of and in the name of such
holder. In addition, each beneficial owner of Income PRIDES or Growth PRIDES, by
acceptance of such interest, will under the terms of the Purchase Contract
Agreement and the related Purchase Contracts be deemed to have agreed to treat
itself as the owner of the related Treasury Notes or Treasury Securities, as the
case may be, for United States federal, state and local income and franchise tax
purposes.
EARLY SETTLEMENT
A holder of Income PRIDES or Growth PRIDES may settle the related Purchase
Contracts prior to the Purchase Contract Settlement Date by presenting and
surrendering the FELINE PRIDES certificate evidencing such Income PRIDES or
Growth PRIDES at the offices of the Purchase Contract Agent with the form of
"Election to Settle Early" on the reverse side of the certificate completed and
executed as indicated, accompanied by payment (in the form of a certified or
cashier's check payable to the order of the Company or in immediately available
funds) of an amount equal to the Stated Amount times the
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number of Purchase Contracts being settled. So long as the FELINE PRIDES are
evidenced by one or more global security certificates deposited with the
Depositary (as defined below), procedures for early settlement will also be
governed by standing arrangements between the Depositary and the Purchase
Contract Agent. HOLDERS MAY SETTLE PURCHASE CONTRACTS EARLY ONLY IN INTEGRAL
MULTIPLES OF 20 INCOME PRIDES or 20 GROWTH PRIDES.
Upon Early Settlement of the Purchase Contracts related to any Income
PRIDES or Growth PRIDES, (a) the holder will receive ___ newly issued shares of
Common Stock per Income PRIDES or Growth PRIDES having a Stated Amount of $50
(regardless of the market price of the Common Stock on the date of such Early
Settlement), subject to adjustment under certain circumstances, (b) the Treasury
Notes or Treasury Securities, as the case may be, related to such Income PRIDES
or Growth PRIDES, will thereupon be transferred to the holder free and clear of
the Company's security interest therein, (c) the holder's right to receive
Deferred Contract Adjustment Payments, if any, on the related Purchase Contracts
being settled will be forfeited, (d) the holder's right to receive future
Contract Adjustment Payments will terminate and (e) no adjustment will be made
to or for the holder on account of Deferred Contract Adjustment Payments or
amounts accrued in respect of Contract Adjustment Payments.
If the Purchase Contract Agent receives a FELINE PRIDES Certificate,
accompanied by the completed "Election to Settle Early" and requisite check or
immediately available funds, from a holder of FELINE PRIDES by 5:00 p.m., New
York City time, on a Business Day, that day will be considered the settlement
date. If the Purchase Contract Agent receives the foregoing after 5:00 p.m., New
York City time, on a Business Day or at any time on a day that is not a Business
Day, the next Business Day will be considered the settlement date.
Upon Early Settlement of Purchase Contracts in the manner described above,
presentation and surrender of the FELINE PRIDES Certificate evidencing the
related Income PRIDES or Growth PRIDES and payment of any transfer or similar
taxes payable by the holder in connection with the issuance of the underlying
Common Stock to any person other than the holder of such Income PRIDES or Growth
PRIDES, the Company will cause the shares of Common Stock being purchased to be
issued, and the related Treasury Notes or Treasury Securities, as the case may
be, securing such Purchase Contracts, to be released from the pledge under the
Pledge Agreement (described in "--Pledged Securities and Pledge Agreement") and
transferred, within three Business Days following the settlement date, to the
purchasing holder or such holder's designee.
CONTRACT ADJUSTMENT PAYMENTS
Contract Adjustment Payments will be fixed at a rate per annum of % of the
Stated Amount per Purchase Contract. Contract Adjustment Payments that are not
paid when due (after giving effect to any permitted deferral thereof) will bear
interest thereon at the rate per annum of % thereof, compounded semi-annually,
until paid. Contract Adjustment Payments payable for any period will be computed
on the basis of actual days elapsed in a year of 365 or 366 days, as the case
may be. Contract Adjustment Payments will accrue from [ ], 1997 and will be
payable semi-annually in arrears on [ ] and [ ] of each year,
commencing [ ], 1998.
Contract Adjustment Payments will be payable to the holders of Purchase
Contracts as they appear on the books and records of the Purchase Contract Agent
on the relevant record dates, which, as long as the Income PRIDES or Growth
PRIDES remain in book-entry only form, will be one Business Day prior to the
relevant payment dates. Such distributions will be paid through the Purchase
Contract Agent who will hold amounts received in respect of the Contract
Adjustment Payments for the benefit of the holders of the Purchase Contracts
related to such Income PRIDES or Growth PRIDES. Subject to any applicable laws
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and regulations, each such payment will be made as described under "Book-Entry
System" below. In the event that the Income PRIDES or Growth PRIDES do not
continue to remain in book-entry only form, the Company shall have the right to
select relevant record dates, which shall be more than one Business Day but less
than 60 Business Days prior to the relevant payment dates. In the event that any
date on which Contract Adjustment Payments are to be made on the Purchase
Contracts related to the Income PRIDES or Growth PRIDES is not a Business Day,
then payment of the Contract Adjustment Payments payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such payment date. A "Business Day" shall mean any day
other than Saturday, Sunday or any other day on which banking institutions in
New York City (in the State of New York) are permitted or required by any
applicable law to close.
The Company's obligations with respect to Contract Adjustment Payments are
subordinate and junior in right of payment to all liabilities of the Company.
See "Risk Factors--Ranking of Contract Adjustment Payments."
OPTION TO DEFER CONTRACT ADJUSTMENT PAYMENTS
The Company may, at its option and upon prior written notice to the
holders of the FELINE PRIDES and the Purchase Contract Agent, defer the payment
of Contract Adjustment Payments on the Purchase Contracts until no later than
the Purchase Contract Settlement Date. However, Deferred Contract Adjustment
Payments will bear additional Contract Adjustment Payments at the rate of % per
annum (compounding on each succeeding Payment Date) until paid. If the Purchase
Contracts are terminated (upon the occurrence of certain events of bankruptcy,
insolvency or reorganization with respect to the Company), the right to receive
Contract Adjustment Payments (other than any accrued but unpaid Contract
Adjustment Payments that have not been deferred) and Deferred Contract
Adjustment Payments will also terminate.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, each holder of FELINE PRIDES will receive on the Purchase
Contract Settlement Date in respect of the Deferred Contract Adjustment
Payments, in lieu of a cash payment, a number of shares of Common Stock equal to
(x) the aggregate amount of Deferred Contract Adjustment Payments payable to
such holder divided by (y) the Applicable Market Value.
No fractional shares of Common Stock will be issued by the Company with
respect to the payment of Deferred Contract Adjustment Payments on the Purchase
Contract Settlement Date. In lieu of fractional shares otherwise issuable
(calculated on an aggregate basis after taking into account all of the FELINE
PRIDES held by a particular holder) with respect to such payment of Deferred
Contract Adjustment Payments, the holder will be entitled to receive an amount
in cash equal to such fraction of a share times the Applicable Market Value.
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then, until the Deferred Contract Adjustment
Payments have been paid, the Company shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or make guarantee
payments with respect to the foregoing (other than (i) purchases or acquisitions
of capital stock of the Company in connection with the satisfaction by the
Company of its obligations under any employee benefit plans or the satisfaction
by the Company of its obligations pursuant to any contract or security
outstanding on the date of such event requiring the Company to purchase capital
stock of the Company, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital
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stock for another class or series of the Company's capital stock, (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (iv) dividends or distributions in
capital stock of the Company or (v) redemptions or purchases of any rights
pursuant to the Rights Agreement, dated as of December 12, 1996, between the
Company and The Chase Manhattan Bank, as Rights Agent, or any successor to such
Rights Agreement, and the declaration thereunder of a dividend of rights in the
future).
ANTI-DILUTION ADJUSTMENTS
The formula for determining the Settlement Rate will be subject to
adjustment (without duplication) upon the occurrence of certain events,
including: (a) the payment of dividends (and other distributions) of Common
Stock on Common Stock; (b) the issuance to all holders of Common Stock of
rights, warrants or options entitling them, for a period of up to 45 days, to
subscribe for or purchase Common Stock at less than the Current Market Price (as
defined in the Purchase Contract Agreement) thereof; (c) subdivisions, splits
and combinations of Common Stock; (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock,
securities, cash or property (excluding any dividend or distribution covered by
clause (a) or (b) above and any dividend or distribution paid exclusively in
cash); (e) distributions consisting exclusively of cash to all holders of Common
Stock in an aggregate amount that, together with (i) other all-cash
distributions made within the preceding 12 months and (ii) any cash and the fair
market value, as of the expiration of the tender or exchange offer referred to
below, of consideration payable in respect of any tender or exchange offer by
the Company or a subsidiary thereof for the Common Stock concluded within the
preceding 12 months, exceeds 15% of the Company's aggregate market
capitalization (such aggregate market capitalization being the product of the
Current Market Price of the Common Stock multiplied by the number of shares of
Common Stock then outstanding) on the date of such distribution; and (f) the
successful completion of a tender or exchange offer made by the Company or any
subsidiary thereof for the Common Stock which involves an aggregate
consideration that, together with (i) any cash and the fair market value of
other consideration payable in respect of any tender or exchange offer by the
Company or a subsidiary thereof for the Common Stock concluded within the
preceding 12 months and (ii) the aggregate amount of any all-cash distributions
to all holders of the Common Stock made within the preceding 12 months, exceeds
15% of the Company's aggregate market capitalization on the expiration of such
tender or exchange offer.
In the case of certain reclassifications, consolidations, mergers, sales
or transfers of assets or other transactions pursuant to which the Common Stock
is converted into the right to receive other securities, cash or property, each
Purchase Contract then outstanding would, without the consent of the holders of
the related Income PRIDES or Growth PRIDES, as the case may be, become a
contract to purchase only the kind and amount of securities, cash and other
property receivable upon consummation of the transaction by a holder of the
number of shares of Common Stock which would have been received by the holder of
the related Income PRIDES or Growth PRIDES immediately prior to the date of
consummation of such transaction if such holder had then settled such Purchase
Contract.
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
United States federal income tax purposes (i.e., distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe to capital stock) and, pursuant to the Settlement Rate
adjustment provisions of the Purchase Contract Agreement, the Settlement Rate is
increased, such increase may give rise to a taxable dividend to holders of
FELINE PRIDES. See "Certain Federal Income Tax Consequences--Adjustment of
Settlement Rate."
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In addition, the Company may make such increases in the Settlement Rate as
the Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of its capital stock resulting from any dividend or
distribution of capital stock (or rights to acquire capital stock) or from any
event treated as such for income tax purposes or for any other reasons.
Adjustments to the Settlement Rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the Settlement Rate shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the Settlement Rate: provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
The Company will be required, within ten Business Days following the
occurrence of an event that requires or permits an adjustment in the Settlement
Rate, to provide written notice to the Purchase Contract Agent of the occurrence
of such event and a statement in reasonable detail setting forth the method by
which the adjustment to the Settlement Rate was determined and setting forth the
revised Settlement Rate.
Each adjustment to the Settlement Rate will result in a corresponding
adjustment to the number of shares of Common Stock issuable upon Early
Settlement of a Purchase Contract.
TERMINATION
The Purchase Contracts, and the rights and obligations of the Company and
of the holders of the FELINE PRIDES thereunder (including the right to receive
accrued Contract Adjustment Payments or Deferred Contract Adjustment Payments
and the right and obligation to purchase Common Stock), will automatically
terminate upon the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company. Upon such termination, the
Collateral Agent will release the related Treasury Notes or Treasury Securities,
as the case may be, held by it to the Purchase Contract Agent for distribution
to the holders. Upon such termination, however, such release and termination may
be subject to a limited delay. In the event that the Company becomes the subject
of a case under the Bankruptcy Code, such delay may occur as a result of the
automatic stay under the Bankruptcy Code and continue until such automatic stay
has been lifted. During the period of any such delay, the related Treasury Notes
will continue to accrue interest, payable by the United States Government, until
their maturity.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The Treasury Notes related to the Income PRIDES or, if substituted, the
Treasury Securities related to the Growth PRIDES (together, the "Pledged
Securities") will be pledged to the Collateral Agent, for the benefit of the
Company, pursuant to a pledge agreement, to be dated as of , 1997 (the "Pledge
Agreement"), to secure the obligations of the holders of the FELINE PRIDES to
purchase Common Stock under the related Purchase Contracts. The rights of
holders of FELINE PRIDES to the related Pledged Securities will be subject to
the Company's security interest therein created by the Pledge Agreement. No
holder of Income PRIDES or Growth PRIDES will be permitted to withdraw the
Pledged Securities related to such Income PRIDES or Growth PRIDES from the
pledge arrangement except (i) to substitute Treasury Securities for the related
Treasury Notes, (ii) to substitute Treasury Notes for the related Treasury
Securities (for both (i) and (ii), as provided for under "Description of the
FELINE PRIDES--Substitution of Pledged Securities") or (iii) upon the
termination or Early Settlement of the related Purchase Contracts. Subject to
such security interest and the terms of the Purchase Contract Agreement and the
Pledge Agreement, however, each holder of an Income PRIDES will retain
beneficial ownership of the related Treasury Notes, and each holder of a Growth
PRIDES will retain beneficial ownership of the related
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Treasury Securities, pledged in respect of such Purchase Contracts. The Company
will have no interest in the Pledged Securities other than its security
interest.
Except as described in "Description of the FELINE PRIDES -- Current
Payments" and "Description of the Purchase Contracts -- General," the Collateral
Agent will, upon receipt of distributions on the Pledged Securities, distribute
such payments to the Purchase Contract Agent, which will in turn distribute
those payments, together with Contract Adjustment Payments received from the
Company, to the persons in whose names the related Income PRIDES or Growth
PRIDES are registered at the close of business on the Record Date immediately
preceding the date of such distribution.
THE RELATED TREASURY NOTES AND TREASURY SECURITIES WHICH ARE PLEDGED
SECURITIES WILL BE OBLIGATIONS OF THE UNITED STATES GOVERNMENT AND NOT OF THE
COMPANY.
BOOK-ENTRY SYSTEM
The Depository Trust Company (the "Depositary") will act as securities
depositary for the FELINE PRIDES. The FELINE PRIDES will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global security certificates
("Global Security Certificates"), representing the total aggregate number of
FELINE PRIDES, will be issued and will be deposited with the Depositary and will
bear a legend regarding the restrictions on exchanges and registration of
transfer thereof referred to below.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the FELINE PRIDES so
long as such FELINE PRIDES are represented by Global Security Certificates.
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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary holds
securities that its participants ("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 include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
The Depositary is owned by a number of its Direct Participants and by the NYSE,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary system is also available to others, such
as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants are
on file with the Commission.
No FELINE PRIDES represented by Global Security Certificates may be
exchanged in whole or in part for FELINE PRIDES registered, and no transfer of
Global Security Certificates in whole or in part may be registered, in the name
of any person other than the Depositary or any nominee of the Depositary unless
the Depositary has notified the Company that it is unwilling or unable to
continue as depositary for such Global Security Certificates or has ceased to be
qualified to act as such as required by the Purchase Contract Agreement or there
shall have occurred and be continuing a default by the Company in respect of its
obligations under one or more Purchase Contracts. All FELINE PRIDES represented
by one or more
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Global Security Certificates or any portion thereof will be registered in such
names as the Depositary may direct.
As long as the Depositary or its nominee is the registered owner of the
Global Security Certificates, such Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the Global Security
Certificates and all FELINE PRIDES represented thereby for all purposes under
the FELINE PRIDES and the Purchase Contract Agreement. Except in the limited
circumstances referred to above, owners of beneficial interests in Global
Security Certificates will not be entitled to have such Global Security
Certificates or the FELINE PRIDES represented thereby registered in their names,
will not receive or be entitled to receive physical delivery of FELINE PRIDES
Certificates in exchange therefor and will not be considered to be owners or
holders of such Global Security Certificates or any FELINE PRIDES represented
thereby for any purpose under the FELINE PRIDES or the Purchase Contract
Agreement. All payments on the FELINE PRIDES represented by the Global Security
Certificates and all transfers and deliveries of related Treasury Notes,
Treasury Securities and Common Stock with respect thereto will be made to the
Depositary or its nominee, as the case may be, as the holder thereof.
Ownership of beneficial interests in the Global Security Certificates will
be limited to Participants or persons that may hold beneficial interests through
institutions that have accounts with the Depositary or its nominee. Ownership of
beneficial interests in Global Security Certificates will be shown only on, and
the transfer of those ownership interests will be effected only through, records
maintained by the Depositary or its nominee (with respect to Participants'
interests) or any such Participant (with respect to interests of persons held by
such Participants on their behalf). Procedures for settlement of Purchase
Contracts on the Purchase Contract Settlement Date or upon Early Settlement will
be governed by arrangements among the Depositary, Participants and persons that
may hold beneficial interests through Participants designed to permit such
settlement without the physical movement of certificates. Payments, transfers,
deliveries, exchanges and other matters relating to beneficial interests in
Global Security Certificates may be subject to various policies and procedures
adopted by the Depositary from time to time. None of the Company, the Purchase
Contract Agent or any agent of the Company or the Purchase Contract Agent 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 Global Security Certificates, or for maintaining,
supervising or reviewing any of the Depositary's records or any Participant's
records relating to such beneficial ownership interests.
CERTAIN PROVISIONS OF THE PURCHASE CONTRACT
AGREEMENT AND THE PLEDGE AGREEMENT
GENERAL
Distributions on the FELINE PRIDES will be payable, Purchase Contracts
(and documents related thereto) will be settled and transfers of the FELINE
PRIDES will be registrable at the office of the Purchase Contract Agent in the
Borough of Manhattan, The City of New York. In addition, in the event that the
FELINE PRIDES do not remain in book-entry form, payment of distributions on the
FELINE PRIDES may be made, at the option of the Company, by check mailed to the
address of the person entitled thereto as shown on the Security Register.
Shares of Common Stock will be delivered on the Purchase Contract
Settlement Date, or, if the Purchase Contracts have terminated, the related
Pledged Securities will be delivered potentially after a limited delay (see
"Description of the Purchase Contracts--Termination"), in each case upon
presentation and surrender of the FELINE PRIDES Certificate at the office of the
Purchase Contract Agent.
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If a holder of outstanding Income PRIDES or Growth PRIDES fails to present
and surrender the FELINE PRIDES Certificate evidencing such Income PRIDES or
Growth PRIDES to the Purchase Contract Agent on the Purchase Contract Settlement
Date, the shares of Common Stock issuable in settlement of the related Purchase
Contract and in payment of any Deferred Contract Adjustment Payments will be
registered in the name of the Purchase Contract Agent and, together with any
distributions thereon, shall be held by the Purchase Contract Agent as agent for
the benefit of such holder, until such FELINE PRIDES Certificate is presented
and surrendered or the holder provides satisfactory evidence that such
certificate has been destroyed, lost or stolen, together with any indemnity that
may be required by the Purchase Contract Agent and the Company.
If the Purchase Contracts have terminated prior to the Purchase Contract
Settlement Date, the related Pledged Securities have been transferred to the
Purchase Contract Agent for distribution to the holders entitled thereto and a
holder fails to present and surrender the FELINE PRIDES Certificate evidencing
such holder's Income PRIDES or Growth PRIDES to the Purchase Contract Agent, the
related Pledged Securities delivered to the Purchase Contract Agent and payments
thereon shall be held by the Purchase Contract Agent as agent for the benefit of
such holder, until such FELINE PRIDES Certificate is presented or the holder
provides the evidence and indemnity described above.
Except as described in "Description of the FELINE PRIDES -- Current
Payments," the Purchase Contract Agent will have no obligation to invest or to
pay interest on any amounts held by the Purchase Contract Agent pending
distribution, as described above.
No service charge will be made for any registration of transfer or
exchange of the FELINE PRIDES, except for any tax or other governmental charge
that may be imposed in connection therewith.
MODIFICATION
The Purchase Contract Agreement and the Pledge Agreement will contain
provisions permitting the Company and the Purchase Contract Agent or Collateral
Agent, as the case may be, with the consent of the holders of not less than
66 2/3% of the Purchase Contracts at the time outstanding, to modify the terms
of the Purchase Contracts, the Purchase Contract Agreement and the Pledge
Agreement, except that no such modification may, without the consent of the
holder of each outstanding Purchase Contract affected thereby, (a) change any
Payment Date, (b) change the amount or type of Pledged Securities related to
such Purchase Contract, impair the right of the holder of any Pledged
Securities to receive distributions on such Pledged Securities (except for the
rights of holders of Income PRIDES to substitute Treasury Securities for the
related Treasury Notes or the rights of holders of Growth PRIDES to substitute
Treasury Notes for the related Treasury Securities) or otherwise adversely
affect the holder's rights in or to such Pledged Securities, (c) change the
place or currency of payment or reduce any Contract Adjustment Payments or any
Deferred Contract Adjustment Payments, (d) impair the right to institute suit
for the enforcement of such Purchase Contract, (e) reduce the amount of Common
Stock purchasable under such Purchase Contract, increase the price to purchase
Common Stock on settlement of such Purchase Contract, change the Purchase
Contract Settlement Date or otherwise adversely affect the holder's rights
under such Purchase Contract or (f) reduce the above-stated percentage of
outstanding Purchase Contracts the consent of whose holders is required for the
modification or amendment of the provisions of the Purchase Contracts, the
Purchase Contract Agreement or the Pledge Agreement; provided, that if any
amendment or proposal referred to above would adversely affect only the Income
PRIDES or the Growth PRIDES, then only the affected class of holder will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the consent of the holders of not less than
66-2/3% of such class.
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NO CONSENT TO ASSUMPTION
Each holder of Income PRIDES or Growth PRIDES, by acceptance thereof, will
under the terms of the Purchase Contract Agreement and the Income PRIDES or
Growth PRIDES, as applicable, be deemed expressly to have withheld any consent
to the assumption (i.e., affirmance) of the related Purchase Contracts by the
Company or its trustee in the event that the Company becomes the subject of a
case under the Bankruptcy Code.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Company will covenant in the Purchase Contract Agreement that it will
not merge or consolidate with any other entity or sell, assign, transfer, lease
or convey all or substantially all of its properties and assets to any person,
firm or corporation unless the Company is the continuing corporation or the
successor corporation is a corporation organized under the laws of the United
States of America or a state thereof and such corporation expressly assumes the
obligations of the Company under the Purchase Contracts, the Purchase Contract
Agreement and the Pledge Agreement, and the Company or such successor
corporation is not, immediately after such merger, consolidation, sale,
assignment, transfer, lease or conveyance, in default in the performance of any
of its obligations thereunder.
TITLE
The Company, the Purchase Contract Agent and the Collateral Agent may
treat the registered owner of any FELINE PRIDES as the absolute owner thereof
for the purpose of making payment and settling the related Purchase Contracts
and for all other purposes.
REPLACEMENT OF FELINE PRIDES CERTIFICATES
In the event that physical certificates have been issued, any mutilated
FELINE PRIDES Certificate will be replaced by the Company at the expense of the
holder upon surrender of such certificate to the Purchase Contract Agent. FELINE
PRIDES Certificates that become destroyed, lost or stolen will be replaced by
the Company at the expense of the holder upon delivery to the Company and the
Purchase Contract Agent of evidence of the destruction, loss or theft thereof
satisfactory to the Company and the Purchase Contract Agent. In the case of a
destroyed, lost or stolen FELINE PRIDES Certificate, an indemnity satisfactory
the Purchase Contract Agent and the Company may be required at the expense of
the holder of the FELINE PRIDES evidenced by such certificate before a
replacement will be issued.
Notwithstanding the foregoing, the Company will not be obligated to issue
any Income PRIDES or Growth PRIDES on or after the Purchase Contract Settlement
Date or after the Purchase Contracts have terminated. The Purchase Contract
Agreement will provide that in lieu of the delivery of a replacement FELINE
PRIDES Certificate following the Purchase Contract Settlement Date, the Purchase
Contract Agent, upon delivery of the evidence and indemnity described above,
will deliver the Common Stock issuable pursuant to the Purchase Contracts
included in the Income PRIDES or Growth PRIDES evidenced by such certificate,
or, if the Purchase Contracts have terminated prior to the Purchase Contract
Settlement Date, transfer the principal amount of the Pledged Securities
included in the Income PRIDES or Growth PRIDES evidenced by such certificate.
GOVERNING LAW
The Purchase Contract Agreement, the Pledge Agreement and the Purchase
Contracts will be governed by, and construed in accordance with, the laws of the
State of New York.
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INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT
The Bank of New York will be the Purchase Contract Agent. The Purchase
Contract Agent will act as the agent for the holders of Income PRIDES and Growth
PRIDES from time to time. The Purchase Contract Agreement will not obligate the
Purchase Contract Agent to exercise any discretionary actions in connection with
a default under the terms of the Income PRIDES and Growth PRIDES or the Purchase
Contract Agreement.
The Purchase Contract will contain provisions limiting the liability of
the Purchase Contract Agent. The Purchase Contract Agreement will contain
provisions under which the Purchase Contract Agent may resign or be replaced.
Such resignation or replacement would be effective upon the appointment of a
successor.
INFORMATION CONCERNING THE COLLATERAL AGENT
The Chase Manhattan Bank will be the Collateral Agent. The Collateral
Agent will act solely as the agent of the Company and will not assume any
obligation or relationship of agency or trust for or with any of the holders of
the Income PRIDES and Growth PRIDES except for the obligations owed by a pledgee
of property to the owner thereof under the Pledge Agreement and applicable law.
The Pledge Agreement will contain provisions limiting the liability of the
Collateral Agent. The Pledge Agreement will contain provisions under which the
Collateral Agent may resign or be replaced. Such resignation or replacement
would be effective upon the appointment of a successor.
MISCELLANEOUS
The Purchase Contract Agreement will provide that the Company will pay all
fees and expenses related to (i) the offering of the FELINE PRIDES, (ii) the
retention of the Collateral Agent and (iii) the enforcement by the Purchase
Contract Agent of the rights of the holders of the FELINE PRIDES; provided,
however, that holders who elect to substitute the related Pledged Securities,
thereby creating Growth PRIDES or recreating Income PRIDES, shall be responsible
for any fees or expenses payable in connection with such substitution, as well
as any commissions, fees or other expenses incurred in acquiring the Pledged
Securities to be substituted, and the Company shall not be responsible for any
such fees or expenses.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income
tax consequences of the purchase, ownership and disposition of FELINE PRIDES and
Common Stock acquired under a Purchase Contract. This summary applies only to a
beneficial owner of FELINE PRIDES that acquires Income PRIDES at the closing of
the initial offering for an amount equal to the Stated Amount thereof and that
is for United States federal income tax purposes (i) an individual citizen or
resident of the United States, (ii) a corporation created or organized in or
under the laws of the United States or any state thereof or the District of
Columbia, (iii) a domestic partnership, (iv) an estate the income of which is
subject to United States federal income taxation, regardless of its source, or
(v) a trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust, in each case holding FELINE PRIDES or Common Stock acquired under a
Purchase Contract as a capital asset (for purposes of this
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summary, a "Holder"). The statements of law or legal conclusion in this summary
represent the opinion of Debevoise & Plimpton, special counsel to the Company
("Special Counsel").
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations (including proposed Treasury regulations)
issued thereunder, Internal Revenue Service ("IRS") rulings and pronouncements
and judicial decisions now in effect, all of which are subject to change at any
time. Such changes may be applied retroactively in a manner that could adversely
affect a Holder. This summary does not address all potential tax consequences
that may be applicable to a particular Holder, and is not intended to be wholly
applicable to all categories of Holders (including, for example, (a) insurance
companies, banks, tax-exempt organizations or dealers, (b) persons holding
FELINE PRIDES or Common Stock as a part of a straddle, hedge, conversion
transaction or other integrated investment or (c) persons whose functional
currency is not the U.S. Dollar), some of which may be subject to special rules,
nor does it address alternative minimum taxes or state, local or foreign taxes.
PROSPECTIVE INVESTORS THAT ARE NOT UNITED STATES PERSONS (WITHIN THE MEANING OF
SECTION 7701(A)(30) OF THE CODE) ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN
FELINE PRIDES, INCLUDING THE POTENTIAL APPLICATION OF UNITED STATES WITHHOLDING
TAXES.
No statutory, judicial or administrative authority directly addresses the
treatment of FELINE PRIDES or instruments similar to FELINE PRIDES for United
States federal income tax purposes. As a result, no assurance can be given that
the IRS will agree with the tax consequences described herein. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE FELINE PRIDES IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES, AS WELL AS THE
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
OWNERSHIP OF TREASURY NOTES AND TREASURY SECURITIES
A Holder will be treated as owning the Treasury Notes or Treasury
Securities constituting a part of the FELINE PRIDES. The Company and each
Holder, by acquiring FELINE PRIDES, agree to treat such Holder as the owner, for
United States federal, state and local income and franchise tax purposes, of the
Treasury Notes or Treasury Securities constituting a part of the FELINE PRIDES
beneficially owned by such Holder. The remainder of this summary will assume
that Holders of FELINE PRIDES will be treated as the owners of the Treasury
Notes or Treasury Securities constituting a part of such FELINE PRIDES for
United States federal income tax purposes.
ACQUISITION OF INCOME PRIDES; INITIAL BASIS IN TREASURY NOTES AND PURCHASE
CONTRACTS
A Holder's acquisition of Income PRIDES will be treated as an acquisition
of the Treasury Notes and Purchase Contract constituting such Income PRIDES. In
general, a Holder's initial tax basis in the Treasury Notes should equal the
price paid by the Purchase Contract Agent to acquire such Treasury Notes
(including any Initial Premium Payments applied toward such purchase price).
If the purchase price of the Treasury Notes is less than the Stated Amount
of the Income PRIDES, the difference will be paid by the Purchase Contract Agent
to the Company as a payment under the Purchase Contracts and should constitute
the Holder's initial tax basis in the Purchase Contract. If the purchase price
of the Treasury Notes (including any Initial Premium Payments applied toward
such purchase price) is greater than or equal to the Stated Amount of the Income
PRIDES the Purchase Contract Agent will not
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make any payment to the Company under the Purchase Contract and a Holder's
initial tax basis in the Purchase Contract should be zero.
INCOME FROM TREASURY NOTES
In general, a Holder will include interest on the Treasury Notes (other
than Pre-Purchase Accrued Interest) in income when received or accrued, in
accordance with the Holder's method of accounting. For United States federal
income tax purposes, a Holder will be deemed to receive an interest payment on
the Treasury Notes when such payment is made to the Collateral Agent, even if
such interest payment is not distributed to the Holder until a later date, as
will be the case for the interest paid on the Treasury Notes with respect to the
first interest payment date on the Treasury Notes following the issuance date of
the Securities (i.e., Holders' Accrued Interest).
Because the Holders, when acquiring the Treasury Notes, are not acquiring
the right to receive Pre-Purchase Accrued Interest, the Treasury Notes will
likely be subject to the special rules applicable to "stripped bonds." Under
those rules, a Holder, for purposes of the original issue discount rules and
market discount rules, will be treated as having purchased the Treasury Notes
(without Pre-Purchase Accrued Interest) as part of an original issuance of such
Treasury Notes. Accordingly, if the purchase price for such Treasury Notes is
less than the principal amount of such Treasury Notes, such difference will be
treated as original issue discount, unless it is less than l/4 of one percent of
such principal amount multiplied by the number of complete years remaining to
maturity, in which case the original issue discount will be treated as zero.
Generally, a Holder (including a cash basis Holder) of a Treasury Note treated
as issued with original issue discount must include such original issue discount
in income as it accrues, using a constant yield method, without regard to the
receipt of cash attributable to such income. It is possible that, in the case of
a Treasury Note issued with original issue discount, as described above, the IRS
might take the view that the excess of (i) the sum of the principal amount of
the Treasury Note and all of the remaining interest payments due on the Treasury
Note (other than Pre-Purchase Accrued Interest) over (ii) the purchase price of
the Treasury Note constitutes original issue discount.
In addition, a Holder will include in income when received (by the
Collateral Agent) or accrued, in accordance with such Holder's regular method of
accounting, such Holder's share of any earnings with respect to the investment
of Holders' Accrued Interest by the Collateral Agent.
INCOME FROM CONTRACT ADJUSTMENT PAYMENTS, DEFERRED CONTRACT ADJUSTMENT PAYMENTS
AND INITIAL PREMIUM PAYMENTS
There is no direct authority addressing the treatment of the Contract
Adjustment Payments, Deferred Contract Adjustment Payments and Initial Premium
Payments under current law, and such treatment is unclear. The Company believes
Contract Adjustment Payments and Deferred Contract Adjustment Payments (whether
payable in cash or in additional shares of Common Stock), if any, may constitute
taxable income to Holders when received or accrued, in accordance with the
Holder's method of accounting and, similarly, that the Initial Premium Payments,
if any, may constitute taxable income to Holders when made (i.e., the day the
FELINE PRIDES are purchased, although a direct cash payment is not received by
the Holder). To the extent the Company is required to file information returns
with respect to Contract Adjustment Payments and Deferred Contract Adjustment
Payments, it intends to treat such payments as taxable income to each Holder.
Holders should consult their tax advisors concerning the treatment of Contract
Adjustment Payments, Deferred Contract Adjustment Payments and Initial Premium
Payments, including the possibility that any such payment may be treated as a
loan, purchase price adjustment, rebate or payment analogous to an option
premium, rather than being includible in income on a current basis. The Company
does not intend to deduct the Contract Adjustment Payments, Deferred
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Contract Adjustment Payments or Initial Premium Payments because it views them
as a cost of issuing the Common Stock.
BOND PREMIUM ON TREASURY NOTES
If a Holder's initial tax basis in the Treasury Notes exceeds the
principal amount of the Treasury Notes (as would be the case if the Company
makes any Initial Premium Payments), such excess will be treated as bond
premium. A Holder may elect to amortize any such bond premium over the term of
the Treasury Notes. If the election is made, bond premium generally will reduce
interest income on the Treasury Notes on a constant yield basis over the
remaining term of the Treasury Notes and will reduce the Holder's tax basis in
the Treasury Notes by the amount so amortized. An election to amortize bond
premium generally applies to all bonds with bond premium owned by a Holder
(other than certain tax-exempt obligations). Accordingly, a Holder should
consult its tax advisor in connection with making any such election.
MATURITY OF TREASURY NOTES
Upon payment of the principal amount of the Treasury Notes at their
maturity, a Holder generally will recognize gain or loss equal to the difference
between such principal amount and such Holder's adjusted tax basis in the
Treasury Notes. Such gain or loss generally will be capital gain or loss and
will be long-term capital gain or loss if the Holder held the Treasury Notes for
more than one year at the time of repay ment.
ACQUISITION OF COMMON STOCK UNDER A PURCHASE CONTRACT
A Holder generally will not recognize gain or loss on the purchase of
Common Stock under a Purchase Contract, except with respect to any cash paid in
lieu of a fractional share of Common Stock. Subject to the following discussion,
a Holder's aggregate initial tax basis in the Common Stock received under a
Purchase Contract (including any Common Stock received as a Deferred Contract
Adjustment Payment) generally should equal the purchase price paid for such
Common Stock (i.e., the Stated Amount) plus such Holder's tax basis in the
Purchase Contract (if any), less the portion of such purchase price and basis
allocable to the fractional share. Payments of Contract Adjustment Payments,
Deferred Contract Adjustment Payments or Initial Premium Payments that have been
received in cash by a Holder but not included in income by such Holder should
reduce such Holder's tax basis in the Purchase Contract or the Common Stock to
be received thereunder. Any Contract Adjustment Payments or Deferred Contract
Adjustment Payments included in a Holder's income but not paid in cash should
increase such Holder's tax basis in the Purchase Contract or the Common Stock
(see "Income from Contract Adjustment Payments, Deferred Contract Adjustment
Payments and Initial Premium Payments" above). The holding period for Common
Stock received under a Purchase Contract will commence on the day after the
acquisition of such Common Stock.
SUBSTITUTION OF TREASURY SECURITIES TO CREATE GROWTH PRIDES
A Holder of an Income PRIDES that delivers Treasury Securities to the
Collateral Agent in substitution for Treasury Notes generally will not recognize
gain or loss upon the delivery of such Treasury Securities or the release of the
Treasury Notes to such Holder. Such Holder will continue to include in income
any interest, original issue discount or market discount or amortize any bond
premium otherwise includible or deductible, respectively, by such Holder with
respect to such Treasury Securities and Treasury Notes, and such Holder's tax
basis in the Treasury Securities, the Treasury Notes and the Purchase Contract
will not be affected by such delivery and release. Holders should consult their
tax advisors concerning the tax consequences of purchasing, owning and disposing
of Treasury Securities.
S-51
<PAGE> 108
SUBSTITUTION OF TREASURY NOTES TO RECREATE INCOME PRIDES
A Holder of a Growth PRIDES that delivers Treasury Notes to the Collateral
Agent to recreate an Income PRIDES generally will not recognize gain or loss
upon the delivery of such Treasury Notes or the release of the Treasury
Securities to the Holder. Such Holder will continue to include in income any
interest, original issue discount or market discount or amortize any bond
premium otherwise includible or deductible, respectively, by such Holder with
respect to such Treasury Securities and Treasury Notes, and such Holder's tax
basis in the Treasury Securities, the Treasury Notes and the Purchase Contract
will not be affected by such delivery and release.
SALE OR DISPOSITION OF FELINE PRIDES
If a Holder sells, exchanges or otherwise disposes of FELINE PRIDES, such
Holder will be treated as having sold, exchanged or disposed of the Purchase
Contract and Treasury Notes or, in the case of Growth PRIDES, the Treasury
Securities, that constitute such FELINE PRIDES and generally will recognize gain
or loss equal to the difference between the portion of the proceeds to such
Holder allocable to the Purchase Contract and the Treasury Notes or Treasury
Securities, as the case may be, and such Holder's respective adjusted tax bases
in the Purchase Contract and the Treasury Notes or Treasury Securities. Such
gain or loss generally will be capital gain or loss, except to the extent that
such Holder is treated as having received an amount with respect to accrued
interest on the Treasury Notes, which will be treated as ordinary interest
income, or to the extent such Holder is treated as having received an amount
with respect to accrued Contract Adjustment Payments or Deferred Contract
Adjustment Payments, which may be treated as ordinary income, in each case to
the extent not previously included in income. Such capital gain or loss will be
long-term capital gain or loss if the Holder held the FELINE PRIDES (or, in the
case of gain or loss with respect to the Treasury Notes or Treasury Securities,
such Treasury Notes or Treasury Securities) for more than one year at the time
of disposition. If the sale, exchange or other disposition of FELINE PRIDES
occurs when the Purchase Contract constituting a part of such FELINE PRIDES has
negative value, the Holder might be considered to have received additional
consideration for the Treasury Notes or Treasury Securities in an amount equal
to such negative value, and to have paid such amount to be released from the
Holder's obligation under the Purchase Contract. Holders should consult their
tax advisors regarding a sale, exchange or other disposition of the FELINE
PRIDES at a time when the Purchase Contract has negative value.
Payments of Contract Adjustment Payments, Deferred Contract Adjustment
Payments or Initial Premium Payments that have been received by a Holder but not
included in income by such Holder should either reduce such Holder's tax basis
in the Purchase Contract or result in an increase in the amount realized on the
disposition of the Purchase Contract. Any Contract Adjustment Payments or
Deferred Contract Adjustment Payments included in a Holder's income but not paid
should increase such Holder's tax basis in the Purchase Contract (see "Income
from Contract Adjustment Payments, Deferred Contract Adjustment Payments and
Initial Premium Payments" above).
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT
Any dividend on Common Stock paid by the Company out of its current or
accumulated earnings and profits (as determined for federal income tax purposes)
will be includable in income by the Holder when received. Any such dividend will
be eligible for the dividends received deduction if received by an otherwise
qualifying corporate Holder that meets the holding period and other requirements
for the dividends received deduction.
S-52
<PAGE> 109
SALE OR DISPOSITION OF COMMON STOCK
Upon a sale, exchange or other disposition of Common Stock, a Holder
generally will recognize gain or loss equal to the difference between the amount
realized and such Holder's adjusted tax basis in the Common Stock. Such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
the Holder held the Common Stock for more than one year at the time of such
disposition.
EARLY SETTLEMENT OF PURCHASE CONTRACT
A Holder will not recognize gain or loss on the receipt of such Holder's
proportionate share of the Treasury Notes or Treasury Securities upon Early
Settlement of a Purchase Contract and will have the same tax basis in such
Treasury Notes or Treasury Securities as before such Early Settlement.
TERMINATION OF PURCHASE CONTRACT
If a Purchase Contract terminates, a Holder will recognize gain or loss
equal to the difference between the amount realized (if any) upon such
termination and such Holder's adjusted tax basis (if any) in the Purchase
Contract at the time of such termination. Payments of Contract Adjustment
Payments, Deferred Contract Adjustment Payments or Initial Premium Payments
received by a Holder but not included in income by such Holder should either
reduce such Holder's tax basis in the Purchase Contract or result in an amount
realized on the termination of the Purchase Contract. Any Contract Adjustment
Payments or Deferred Contract Adjustment Payments included in a Holder's income
but not paid should increase such Holder's tax basis in the Purchase Contract
(see "Income from Contract Adjustment Payments, Deferred Contract Adjustment
Payments and Initial Premium Payments" above). Any such gain or loss should be
capital gain or loss and should be long-term capital loss if the Holder held
such Purchase Contract for more than one year at the time of such termination. A
Holder will not recognize gain or loss on the receipt of such Holder's
proportionate share of the Treasury Notes or Treasury Securities upon
termination of a Purchase Contract and will have the same tax basis in such
Treasury Notes or Treasury Securities as before such distribution.
ADJUSTMENT TO SETTLEMENT RATE
Holders of FELINE PRIDES might be treated as receiving a constructive
distribution from the Company if (i) the Settlement Rate is adjusted and as a
result of such adjustment the proportionate interest of Holders of FELINE PRIDES
in the assets, earnings and profits of the Company is increased and (ii) the
adjustment is not made pursuant to a bona fide, reasonable anti-dilution
formula. An adjustment in the Settlement Rate would not be considered made
pursuant to such a formula if the adjustment were made to compensate Holders for
certain taxable distributions with respect to the Common Stock. Thus, under
certain circumstances, an increase in the Settlement Rate might give rise to a
taxable dividend to Holders of FELINE PRIDES even though such Holders would not
receive any cash related thereto.
SECONDARY HOLDERS OF FELINE PRIDES
Holders should be aware that certain United States federal income tax
consequences of the purchase, ownership and disposition of FELINE PRIDES to an
investor that does not acquire Income PRIDES in the initial offering (a
"Secondary Holder") are not clear. In particular, if the Purchase Contract
constituting a part of the FELINE PRIDES has negative value at the time of such
purchase, it is not clear whether a Secondary Holder's tax basis in the Treasury
Securities or Treasury Notes constituting a part of such FELINE PRIDES will be
limited to its cash purchase price or whether it will also include an amount
equal
S-53
<PAGE> 110
to such negative value. Holders should consult their tax advisors regarding the
United States federal income tax consequences to Secondary Holders of the
purchase, ownership and disposition of FELINE PRIDES.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments under the FELINE PRIDES or Common Stock acquired under a Purchase
Contract, the proceeds received with respect to a fractional share of Common
Stock upon the settlement of the Purchase Contract, and the sale of FELINE
PRIDES or Common Stock acquired under a Purchase Contract may be subject to
information reporting and United States federal backup withholding tax at the
rate of 31% if the Holder thereof fails to supply an accurate taxpayer
identification number or otherwise fails to comply with applicable United States
information reporting or certification requirements. Any amounts so withheld
will be allowed as a credit against such Holder's United States federal income
tax liability.
S-54
<PAGE> 111
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement (the "Underwriting Agreement") among the Company and Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. (the
"Underwriters"), the Company has agreed to sell to the Underwriters, and each of
the Underwriters severally has agreed to purchase from the Company, the number
of Income PRIDES set forth opposite each Underwriter's name. In the Underwriting
Agreement, the several Underwriters severally have agreed, subject to the terms
and conditions set forth therein, to purchase all of the Income PRIDES offered
hereby if any of the Income PRIDES are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
the purchase commitments of the nondefaulting Underwriters may be increased or
the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS INCOME PRIDES
------------ -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
Goldman, Sachs & Co. .......................................................
--------------
Total.....................................................
==============
</TABLE>
The Underwriters have advised the Company that they propose initially
to offer the Income PRIDES to the public at the public offering price set forth
on the cover page of this Prospectus Supplement and to certain dealers at such
price less a concession not in excess of $. per Income PRIDES. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of $. per
Income PRIDES on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of the Underwriters and any selling group
members to bid for and purchase the Securities or shares of Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Securities or the Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Securities or the Common Stock.
If the Underwriters create a short position in the Securities in
connection with this offering, i.e., if they sell more Securities than are set
forth on the cover page of this Prospectus, the Underwriters may reduce that
short position by purchasing Securities in the open market. The Underwriters may
also elect to reduce any short position by exercising all or part of the
over-allotment option described below.
The Underwriters may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Underwriters
purchase Securities in the open market to reduce the Underwriters' short
position or to stabilize the price of the Securities, they may reclaim the
amount of the selling concession from any Underwriter and any selling group
members who sold those Securities as part of this offering.
S-55
<PAGE> 112
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Securities or the
Common Stock. In addition, neither the Company nor any of the Underwriters makes
any representation that the Underwriters will engage in such transaction or that
such transactions, once commenced, will not be discontinued without notice.
The Company has granted to the Underwriters an option, exercisable
for 30 days following the date of this Prospectus Supplement, to purchase
up to an aggregate of an additional 900,000 Income PRIDES from the Company at
the Price to Public set forth on the cover page of this Prospectus Supplement.
In the event that such option is exercised, the Company will pay to the
Underwriters the Underwriting Commission per Income PRIDES set forth on the
cover page of this Prospectus Supplement. The Underwriters may exercise this
option only to cover over-allotments, if any, made on the sale of the Income
PRIDES offered hereby. If the Underwriters exercise their over-allotment
option, each of the Underwriters has severally agreed, subject to certain
conditions, to effect the foregoing transactions, with respect to approximately
the same percentage of such Income PRIDES that the respective number of Income
PRIDES set forth opposite its name in the foregoing table bears to the Income
PRIDES offered hereby. If Purchase Contracts relating to any such additional
Income PRIDES are entered into, the Purchase Contract Agent, as agent for the
holders of such Income PRIDES, would purchase and pledge under the Pledge
Agreement the Treasury Notes (excluding Pre-Purchase Accrued Interest) required
under the Purchase Contract Agreement to be purchased in respect of such Income
PRIDES, at the purchase price per Treasury Note set forth on the cover page of
this Prospectus Supplement. The price paid by the Treasury Notes Seller for the
Treasury Notes relating to Income PRIDES with respect to which an
over-allotment option is exercised may be different from that set forth on the
cover page of this Prospectus Supplement. Any such difference will be for the
account of the Underwriters and will not affect the amount of the proceeds
(deficit) to the Company in respect of such Securities as shown on the cover
page of this Prospectus Supplement. The Underwriters may enter into certain
hedge transactions for its own account to reduce or eliminate its risk in this
regard.
The Company has agreed, for a period of days after the date of
this Prospectus Supplement, to not, without the prior written consent of Merrill
Lynch, Pierce, Fenner and Smith Incorporated, directly or indirectly, sell,
offer to sell, grant any option for the sale of, or otherwise dispose of, or
enter into any agreement to sell, any Income PRIDES, Purchase Contracts or
Common Stock, as the case may be, or any securities of the Company similar to
the Income PRIDES, Purchase Contracts or Common Stock or any security
convertible into or exchangeable or exercisable for Income PRIDES, Purchase
Contracts or Common Stock other than to the Underwriters pursuant to the
Underwriting Agreement, other than shares of Common Stock or options for shares
of Common Stock issued pursuant to or sold in connection with any employee
benefit, dividend reinvestment and stock option and stock purchase plans of the
Company and its subsidiaries and other than the Growth PRIDES or shares of
Common Stock issuable upon early settlement of the Income PRIDES or Growth
PRIDES or exercise of stock options.
Prior to this offering, there has been no public market for the
Income PRIDES. The public offering price for the Income PRIDES was determined in
negotiations between the Company and the Underwriters. In determining the terms
of the Income PRIDES, including the public offering price, the Company and the
Underwriters considered the market price of the Common Stock and also considered
the Company's recent results of operations, the future prospects of the Company
and the industry in general, market prices and
S-56
<PAGE> 113
terms of, and yields on, securities of other companies considered to be
comparable to the Company and prevailing conditions in the securities markets.
Application will be made to list the Income PRIDES on the NYSE under the symbol
" ", subject to official notice of issuance. The Growth PRIDES will not be
listed or traded on any securities exchange. The Company has been advised by the
Underwriters that they presently intend to make a market for the Growth PRIDES;
however, they are not obligated to do so and any market making may be
discontinued at any time. There can be no assurance that an active trading
market will develop for the Income PRIDES or the Growth PRIDES or that the
Income PRIDES will trade in the public market subsequent to the offering at or
above the initial public offering price.
The Company has agreed to indemnify the Underwriters against, or to
contribute to payments that the Underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
Each of the Underwriters engage in transactions with, and from time
to time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Purchase Contracts and the Common Stock issuable
upon settlement thereof will be passed upon for the Company by Debevoise &
Plimpton, New York, New York. The validity of the Purchase Contracts and the
Common Stock issuable upon settlement thereof will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
S-57
<PAGE> 114
==============================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL 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 PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY OWENS CORNING OR
THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, NOR ANY SALE MADE HEREUNDER AND
THEREUNDER, SHALL UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
OWENS CORNING SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS SHALL NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
-------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.........................................S-3
Risk Factors..............................................S-12
The Company...............................................S-16
Use of Proceeds...........................................S-18
Price Range of Common Stock
and Dividends............................................S-18
Condensed Consolidated Capitalization.....................S-19
Selected Consolidated Financial Information...............S-20
Management's Discussion and Analysis of
Financial Condition and Results of Operations...........S-22
Asbestos and Other Litigation.............................S-30
Description of the Feline Prides..........................S-36
Description of the Purchase Contracts.....................S-38
Certain Provisions of the Purchase Contract
Agreement and the Pledge Agreement......................S-45
Certain Federal Income Tax Consequences...................S-48
Underwriting..............................................S-55
Legal Opinions............................................S-57
PROSPECTUS
Available Information........................................4
Incorporation of Certain Documents by Reference..............5
The Company..................................................6
The Trust....................................................7
Use of Proceeds..............................................8
Selected Consolidated Financial Information..................8
Description of Junior Subordinated Debentures...............11
Description of Preferred Securities.........................21
Description of the Guarantee................................32
Relationship Among the Preferred Securities, the
Junior Subordinated Debentures
and the Guarantee.........................................35
Description of Capital Stock................................36
Description of Stock Purchase Contracts and
Stock Purchase Units......................................40
Book-Entry Issuance.........................................40
Plan of Distribution........................................41
Legal Opinions..............................................43
Experts.....................................................43
</TABLE>
==============================================================
==============================================================
6,000,000 FELINE PRIDES(SM)
OWENS CORNING
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
, 1997
(SM)SERVICE MARK OF MERRILL LYNCH & CO. INC.
==============================================================
<PAGE> 115
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State or other jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such State or jurisdiction.
PROSPECTUS
SUBJECT TO COMPLETION, DATED ________ __, 1997
U.S.$690,000,000
OWENS CORNING
STOCK PURCHASE CONTRACTS,
STOCK PURCHASE UNITS AND
JUNIOR SUBORDINATED DEBENTURES
OWENS CORNING CAPITAL II
PREFERRED SECURITIES
GUARANTEED AS SET FORTH HEREIN BY
OWENS CORNING
---------------------------
Owens Corning (the "Company") may from time to time offer together or
separately (i) Stock Purchase Contracts ("Stock Purchase Contracts") to purchase
shares of common stock, $0.10 par value per share ("Common Stock"), of the
Company, (ii) Stock Purchase Units, each representing ownership of a Stock
Purchase Contract and Preferred Securities (as defined below) or debt
obligations of third parties, including U.S. Treasury securities, securing the
holder's obligation to purchase Common Stock under the Stock Purchase Contracts
("Stock Purchase Units"), and (iii) its junior subordinated debentures (the
"Junior Subordinated Debentures"). Owens Corning Capital II, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"), may
offer, from time to time, preferred securities ("Preferred Securities"),
representing preferred undivided beneficial interests in the assets of the
Trust. The Stock Purchase Contracts, Stock Purchase Units, Junior Subordinated
Debentures and Preferred Securities are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to U.S.$690,000,000 aggregate
public offering price (or, in the case of Junior Subordinated Debentures, its
equivalent (based on the applicable exchange rate at the time of issue) if
issued with principal amounts denominated in one or more foreign currencies, or
such greater amount if issued at an original issue discount, as shall result in
aggregate proceeds of U.S.$690,000,000). Certain specific terms of the
particular Securities in respect of which this Prospectus is being delivered are
set forth in the accompanying Prospectus Supplement (the "Prospectus
Supplement"), including, where applicable, (i) in the case of Stock Purchase
Contracts, the number of shares of Common Stock issuable thereunder, the
purchase price of the Common Stock, the date or dates on which the Common Stock
is required to be purchased by the holders of the Stock Purchase Contracts, any
periodic payments required to be made by the Company to the holders of the Stock
Purchase Contracts or vice versa, and the terms of the offering and sale
thereof, (ii) in the case of Stock Purchase Units, the specific terms of the
Stock Purchase Contracts and any Preferred Securities or debt obligations of
third parties securing the holder's obligation to purchase the Common Stock
under the Stock Purchase Contracts, and the terms of the offering and sale
thereof, (iii) in the case of Junior Subordinated Debentures, the specific
designation, aggregate principal amount, denominations, maturity, interest
payment dates, interest rate (which may be fixed or variable) or method of
calculating interest, if any, applicable Extension Period (as defined below) or
interest deferral terms, if any, place or places where principal, premium, if
any, and interest, if any, will be payable, any terms of redemption, any sinking
fund provisions, terms for any conversion or exchange into other securities,
initial offering or purchase price, methods of distribution and any other
special terms, and (iv) in the case of Preferred Securities, the specific title,
aggregate amount, stated liquidation preference, number of securities, the rate
of payment of periodic cash distributions ("Distributions") or method of
calculating such rate, applicable Extension Period or Distribution deferral
terms, if any, place or places where Distributions will be payable, any terms of
redemption, initial offering or purchase price, methods of distribution and any
other special terms. If so specified in the applicable Prospectus Supplement,
the Securities offered thereby may be issued in whole or in part in the form of
one or more temporary or permanent global securities ("Global Securities").
The Junior Subordinated Debentures will be unsecured and subordinate and
junior in right of payment to Senior Indebtedness (as defined in "Description of
Junior Subordinated Debentures - Subordination") of the Company. If provided in
an accompanying Prospectus Supplement, the Company will have the right to defer
payments of interest on any series of Junior Subordinated Debentures by
extending the interest payment period thereon at any time or from time to time
for such number of consecutive interest payment periods (which shall not extend
beyond the maturity of the Junior Subordinated Debentures) with respect to each
deferral period as
<PAGE> 116
may be specified in such Prospectus Supplement (each, an "Extension Period").
See "Description of Junior Subordinated Debentures - Option to Defer Interest
Payments."
The Company will be the owner of the common securities (the "Common
Securities," and, together with the Preferred Securities, the "Trust
Securities") of the Trust. The payment of Distributions with respect to the
Preferred Securities and payments on liquidation or redemption with respect to
the Preferred Securities, in each case out of funds held by the Trust, will be
irrevocably guaranteed by the Company to the extent described herein (the
"Guarantee"). Certain payments in respect of the Common Securities may also be
guaranteed by the Company. See "Description of the Guarantee." The obligations
of the Company under the Guarantee will be subordinate and junior in right of
payment to all Senior Indebtedness of the Company. Concurrently with the
issuance by the Trust of the Preferred Securities, the Trust will invest the
proceeds thereof and any contributions made in respect of the Common Securities
in the Junior Subordinated Debentures, which will have terms corresponding to
the terms of the Preferred Securities. The Junior Subordinated Debentures will
be the sole assets of the Trust, and payments under the Junior Subordinated
Debentures and those made by the Company in respect of fees and expenses
incurred by the Trust will be the only revenue of the Trust. Upon the occurrence
of certain events as are described herein and in the accompanying Prospectus
Supplement, the Company may redeem the Junior Subordinated Debentures and cause
the redemption of the Trust Securities. In addition, if provided in the
applicable Prospectus Supplement, the Company may dissolve the Trust at any time
and, after satisfaction of the liabilities to creditors of the Trust as provided
by applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Preferred Securities in liquidation of their interest in the
Trust. See "Description of Preferred Securities--Redemption--Distribution of
Junior Subordinated Debentures" and "--Liquidation Distribution Upon
Termination."
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash Distributions accruing from the date of original
issuance and payable periodically as specified in an accompanying Prospectus
Supplement. If provided in an accompanying Prospectus Supplement, the Company
will have the right to defer payments of interest on the Junior Subordinated
Debentures by extending the interest payment period thereon at any time or from
time to time for one or more Extension Periods (which shall not extend beyond
the maturity of the Junior Subordinated Debentures). If interest payments are so
deferred, Distributions on the Preferred Securities will also be deferred and
the Company will not be permitted, subject to certain exceptions set forth
herein, to declare or pay any cash distributions with respect to the Company's
capital stock or debt securities that rank pari passu with or junior to the
Junior Subordinated Debentures. During an Extension Period, Distributions will
continue to accumulate (and the Preferred Securities will accumulate additional
Distributions thereon at the rate per annum if and as specified in the related
Prospectus Supplement). See "Description of Preferred Securities -
Distributions."
Taken together, the Company's obligations under the Junior Subordinated
Debentures, the Indenture (as defined herein), the Declaration (as defined
herein) and the Guarantee, in the aggregate, have the effect of providing a
full, irrevocable and unconditional guarantee of payments of Distributions and
other amounts due on the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee."
The Common Stock is listed on the New York Stock Exchange and the
Toronto Stock Exchange under the trading symbol "OWC." The Prospectus Supplement
will state whether any Securities offered thereby will be listed on any national
securities exchange. If such Securities are not listed on any national
securities exchange, there can be no assurance that there will be a secondary
market for any such Securities.
---------------------------
<PAGE> 117
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 to or through underwriters, through
dealers or agents, directly to purchasers or through a combination of such
methods. See "Plan of Distribution." The accompanying Prospectus Supplement sets
forth the names of any underwriters, dealers or agents, if any, involved in the
sale of the Securities in respect of which this Prospectus is being delivered
and any applicable fee, commission or discount arrangements with them.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------------------
THE DATE OF THIS PROSPECTUS IS ____________, 1997.
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<PAGE> 118
No dealer, salesperson or other person has been authorized to give any
information or make any representations, other than those contained or
incorporated by reference in this Prospectus and the applicable Prospectus
Supplement, and if given or made such information or representations must not be
relied upon as having been authorized by the Company or the Trust or any agent,
underwriter or dealer. This Prospectus and the applicable Prospectus Supplement
do not constitute an offer of any securities other than those to which they
relate, or an offer to sell or a solicitation of an offer to buy those to which
they relate in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. The delivery of this Prospectus
and/or the applicable Prospectus Supplement at any time does not imply that the
information herein or therein is correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a site on the world wide web at http://www.sec.gov that contains
reports, proxy and information statements and other information filed
electronically by the Company. In addition, such reports, proxy statements and
other information may be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, upon which the Common Stock
is traded.
This Prospectus constitutes a part of a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and the Trust with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus and
any accompanying Prospectus Supplement do not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company, the Trust and the Securities offered
hereby, reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission, at the addresses set forth above.
Statements made in this Prospectus and any Prospectus Supplement concerning the
contents of any documents referred to herein are not necessarily complete, and
in each instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission.
No separate financial statements of the Trust have been included
herein. The Company and the Trust do not consider that such financial statements
would be material to holders of the Preferred Securities because the Trust is a
newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than its holding as trust assets the Junior Subordinated Debentures and
the issuance of the Trust Securities. See "The Trust," "Description of Junior
Subordinated Debentures," "Description of Preferred Securities" and "Description
of the Guarantee."
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<PAGE> 119
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K (File No. 1-3660) for the year
ended December 31, 1996, filed on March 20,1997 (the "1996 Form 10-K").
(2) The Company's Quarterly Report on Form 10-Q (File No. 1-3660) for the
quarter ended March 31, 1997, filed on May 1, 1997.
(3) The Company's Quarterly Report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1997, filed on July 24, 1997 (the "Second Quarter
Form 10-Q").
(4) The Company's Current Report on Form 8-K (File No. 1-3660), filed on May
14, 1997.
(5) The Company's Current Report on Form 8-K (File No. 1-3660), filed on May
28, 1997.
(6) The Company's Current Report on Form 8-K (File No. 1-3660), filed on July
15, 1997.
(7) Description of the Common Stock contained in the Company's Registration
Statement on Form 8-A, filed on October 16, 1986.
(8) Description of the Company's 1996 Preferred Share Purchase Rights
associated with the Common Stock contained in the Company's Registration
Statement on Form 8-A, filed on December 19, 1996.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the Securities shall
hereby be deemed to be incorporated by reference into this Prospectus and to be
a part of this Prospectus from the date of filing of such documents. Any
statement contained herein, or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
any statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein or in any
accompanying Prospectus Supplement modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Registration Statement or
this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents described above and incorporated by reference
herein (not including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents). Written or telephone
requests should be directed to: Owens Corning, Owens Corning World Headquarters,
Toledo, Ohio 43659, Attention: Secretary's Office (telephone: (419) 248-8000).
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<PAGE> 120
THE COMPANY
Owens Corning, a global company incorporated in Delaware in 1938,
serves consumers and industrial customers with high-performance glass fiber
composites and building materials systems. These products are used in industries
such as home improvement and repair, new construction, transportation, marine,
aerospace, energy, appliance, packaging and electronics. The Company operates in
two industry segments - Building Materials and Composite Materials - divided
into ten businesses. The Company also has affiliate companies in a number of
countries.
Owens Corning's Building Materials products are marketed through
multiple distribution channels, often with the aid of the Company's well known
"spokescritter" the Pink Panther. Over the last several years, the Company has
supplemented its traditional relationships with specialty distributors and
wholesalers with increasing presence among the large "do-it-yourself" home
center retailers. In 1996, 41% of total Company sales were made to the U.S. home
improvement and remodeling markets which these retailers serve.
The Company recently introduced a strategic initiative, System Thinking
for the Home(TM), designed to leverage Owens Corning's broad product offering
and strong brand recognition. This systems approach represents a shift from
product-oriented to systems-driven solutions across all lines of business. By
redefining its role as a provider of insulation, roofing, siding, windows and
accessories and linking all of its products and technology to create a
high-performance building envelope, Company management is targeting an increased
share of the $220 billion building materials and home improvement industry.
Building Materials operates primarily in North America and Europe. It
also has a growing presence in Latin America and Asia Pacific. Building
Materials sells a variety of building and home improvement products in three
major categories: glass fiber and foam insulation, roofing materials, and other
specialty products for the home, such as housewrap, vinyl windows and patio
doors, and vinyl siding. The businesses responsible for these products and
markets include: Insulation, Building Materials Sales and Distribution - North
America, Building Materials - Europe and Africa, Roofing/Asphalt, Specialty and
Foam Products, Western Fiberglass Group, Latin America, and Asia Pacific.
Composite Materials operates in North America, Europe and Latin
America, with affiliates and licensees around the world, including a growing
presence in Asia Pacific. The businesses responsible for these products include:
Composites, Latin America, Engineered Pipe & Fabrication Systems, and Asia
Pacific.
The Company is the world's leading producer of glass fiber materials
used in composites. Composites are fabricated material systems made up of two or
more components (e.g., plastic resin and glass fiber) used in various
applications to replace traditional materials, such as aluminum, wood, and
steel. The global composites industry has expanded to include more than 40,000
end-use applications. Worldwide, the composites industry has relatively few raw
material component suppliers (glass fiber, resin and additives) delivering to
thousands of industrial customers through various channels. Depending on the
end-use application, these raw materials move through different manufacturing
process chains, ultimately finding their way to consumers through myriad markets
worldwide. The primary end use markets that the Company serves are construction,
transportation, and electrical/electronics.
The Company's principal executive offices are located at Owens Corning
World Headquarters, Toledo, Ohio 43659, and its telephone number is (419)
248-8000. Unless the context indicates otherwise, references in this Prospectus
to the "Company" include Owens Corning and its consolidated subsidiaries.
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<PAGE> 121
THE TRUST
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of April 2, 1997, executed by
the Company, as sponsor (the "Sponsor"), and the trustees of the Trust (the
"Owens Corning Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on April 2, 1997. Such declaration
of trust will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The
Declaration will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Company will directly or
indirectly acquire Common Securities in an aggregate liquidation amount equal to
3% of the total capital of the Trust. The Trust exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in its assets, (ii) investing the proceeds of the Trust Securities in
the Junior Subordinated Debentures and (iii) engaging in only those other
activities necessary or incidental thereto. Unless otherwise specified in the
applicable Prospectus Supplement, the Trust has a term of approximately five
years, but may terminate earlier as provided in the Declaration.
Pursuant to the Declaration, the number of Owens Corning Trustees
initially is three. Two of the Owens Corning Trustees (the "Regular Trustees")
are persons who are employees or officers of or who are affiliated with the
Company. The third trustee is a financial institution that is unaffiliated with
the Company, which trustee serves as institutional trustee under the Declaration
and as indenture trustee for the purposes of compliance with the provisions of
the Trust Indenture Act (the "Institutional Trustee"). Initially, Wilmington
Trust Company, a banking organization duly organized under the laws of the State
of Delaware, will be the Institutional Trustee until removed or replaced by the
holder of the Common Securi ties. For the purpose of compliance with the
provisions of the Trust Indenture Act, Wilmington Trust Company will also act as
trustee (the "Guarantee Trustee") under the Guarantee and as the trustee in the
State of Delaware (the "Delaware Trustee") for the purposes of the Trust Act (as
defined herein), until removed or replaced by the holder of the Common
Securities. See "Description of the Guarantee" and "Description of Preferred
Securities -- Voting Rights; Amendment of Declaration."
The Institutional Trustee will hold title to the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture (as defined herein) as the holder of the Junior
Subordinated Debentures. In addition, the Institutional Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Junior
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The
Company, as the direct or indirect holder of all the Common Securities, will
have the right to appoint, remove or replace any Owens Corning Trustee and to
increase or decrease the number of Owens Corning Trustees; PROVIDED, that the
number of Owens Corning Trustees shall be at least three, a majority of which
shall be Regular Trustees. The Company will pay all fees and expenses related to
the Trust and the offering of the Trust Securities. See "Description of the
Guarantee - Expenses of the Trust."
The rights of the holders of the Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"), and
the Trust Indenture Act. See "Description of Preferred Securities."
The Delaware Trustee is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890. The principal place of
business of the Trust is c/o Owens Corning, Owens Corning World Headquarters,
Toledo, Ohio, 43659 and its telephone number is (419) 248-8000.
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<PAGE> 122
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the
Securities (including Junior Subordinated Debentures issued to the Trust in
connection with the investment by the Trust of all of the proceeds from the sale
of Preferred Securities) for general corporate purposes, including, without
limitation, working capital, repurchases or redemptions of the Company's
outstanding debt securities or other reductions of the Company's outstanding
borrowings, business acquisitions, investments in or loans to subsidiaries,
capital expenditures or for such other purposes as may be specified in the
applicable Prospectus Supplement.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial
information of the Company (i) for the six months ended June 30, 1997 and 1996,
which has been derived from the unaudited quarterly consolidated financial
statements of the Company for the six months ended June 30, 1997 and 1996, and
(ii) for each of the five fiscal years in the period ended December 31, 1996,
which has been derived from the annual consolidated financial statements of the
Company audited by Arthur Andersen LLP, independent public accountants. This
table should be read in conjunction with those statements, all of which have
been previously filed with the Commission. The financial information presented
below for the six months ended June 30, 1997 and 1996 reflects all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the Company's results. Operating results for the six months ended June 30, 1997
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1997. The following table (other than in respect
of balance sheet data) does not include financial information concerning
Fibreboard because the Fibreboard Acquisition did not occur until the end of the
quarter ended June 30, 1997. See "-- Recent Developments." The following table
is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated financial information and related notes of the
Company included in the documents incorporated herein by reference. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------- -----------------------------------------------
1997 1996(a) 1996(b) 1995(c) 1994(d) 1993(e) 1992(f)
------- -------- -------- ------- ------- ------- ------
(in milions of dollars, except per share data and where noted)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales.............................. $1,892 $1,805 $3,832 $3,612 $3,351 $2,944 $2,878
Gross margin........................... 462 471 998 942 815 678 644
Income (loss) from operations.......... 182 (690) (504) 412 226 236 213
Cost of borrowed funds................. 42 36 77 87 94 89 110
Nat income (loss)...................... 105 (434) (284) 231 159 131 73
Net income (loss) per share (primary).. 1.96 (8.43) (5.50) 4.64 3.61 3.00 1.70
Net income (loss) per share (fully
diluted)............................... 1.87 (8.43) (5.50) 4.40 3.35 2.81 1.67
Weighted average number of shares
outstanding (in thousands of shares)
(primary).............................. 53,619 51,512 51,722 49,711 44,209 43,593 43,013
Cash Flow Data:
Net cash flow from operations.......... (319) (87) 335 285 233 253 192
Capital expenditures................... 131 167 325 276 258 178 144
Balance Sheet Data:
Total assets........................... 5,076 3,980 3,913 3,261 3,274 3,013 3,162
Total debt............................. 2,033 1,142 934 893 1,212 1,004 1,099
Stockholders' deficit.................. (353) (666) (484) (212) (680) (869) (1,008)
Ratio of Earnings to Fixed Charges(f) 3.02x - - 3.67x 2.15x 2.42x 1.88x
</TABLE>
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<TABLE>
<CAPTION>
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK
<S> <C> <C> <C> <C> <C>
Dividends(f)........................ 3.02x -- -- 3.67x 2.15x 2.42x 1.88x
</TABLE>
(a) For the six months ended June 30, 1996, the net loss of $434 million, or
$8.43 per share, includes a net after-tax charge of $542 million, or
$10.53 per share, for asbestos litigation claims that may be received
after 1999 and probable additional insurance recovery; after-tax special
charges totaling $27 million or $.52 per share, including valuation
adjustments associated with prior divestitures, major product line
productivity initiatives and a contribution to the Owens-Corning
Foundation; and an after-tax gain of $27 million, or $.52 per share, from
the sale of the Company's ownership interest in its former Japanese
affiliate, Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their anti-dilutive
effect. Consequently, primary and fully diluted earnings per share are
equal for 1996.
(b) In 1996 the net loss of $284 million, or $5.50 per share, includes a net
after-tax charge of $542 million, or $10.49 per share, for asbestos
litigation claims that may be received after 1999 and probable additional
insurance recovery; after-tax special charges totaling $27 million, or
$.52 per share, including valuation adjustments associated with prior
divestitures, major product line productivity initiatives and a
contribution to the Owens-Corning Foundation; an after-tax charge of $26
million, or $.50 per share, for restructuring and other actions; a $27
million, or $.52 per share, reduction of tax reserves due to favorable
legislation; and an after-tax gain of $27 million, or $.52 per share, from
the sale of the Company's ownership interest in its former Japanese
affiliate, Asahi Fiber Glass Co. Ltd.
Pursuant to generally accepted accounting principles, common stock
equivalents and convertible securities have been excluded from the
calculations of earnings per share in 1996, due to their anti-dilutive
effect. Consequently, primary and fully diluted earnings per share are
equal for 1996.
(c) Net income for 1995 of $231 million, or $4.64 per share ($4.40 per share
fully diluted), included a one time gain of $8 million or $.16 per share
($.15 per share fully diluted), which was the result of a tax loss
carryback.
(d) Net income for 1994 of $159 million, or $3.61 per share ($3.35 per share
fully diluted), included the following offsetting special items: an
after-tax gain of $123 million, or $2.78 per share ($2.45 per share fully
diluted), reflecting a change to the capital method of accounting for the
rebuilding of glass melting facilities; an after-tax charge of $85
million, or $1.92 per share ($1.69 per share fully diluted), for
productivity initiatives and other actions; a non-cash, after-tax charge
of $10 million, or $.23 per share ($.20 per share fully diluted), to
reflect adoption of Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" for the Company's non-U.S. plans; and a non-cash, after-tax
charge of $28 million, or $.63 per share ($.56 per share fully diluted),
to reflect adoption of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits."
(e) Net income for 1993 of $131 million, or $3.00 per share ($2.81 per share
fully diluted), included a credit of $26 million, or $.60 per share ($.53
per share fully diluted), for the cumulative effect of adopting the new
accounting standard for income taxes; a one-time gain of $14 million, or
$.33 per share ($.29 per share fully diluted), reflecting a tax benefit
resulting from a revaluation of deferred taxes necessitated by the new
federal tax law; an $8 million pre-tax charge, or $.11 per share ($.10 per
share fully diluted), for the writedown of the Company's hydrocarbon
ventures; and a $23 million charge, or $.53 per share ($.47 per share
fully diluted), for the restructuring of the Company's European
operations.
(f) Net income for 1992 was $73 million, or $1.70 per share ($1.67 per share
fully diluted), and included a pre-tax reorganization charge of $16
million, or $.25 per share ($.22 per share fully diluted).
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<PAGE> 124
(g) For purposes of the calculation of these ratios, earnings represent net
income before fixed charges, provision for taxes on income, undistributed
earnings of equity basis investments, extraordinary losses from early
retirement of debt and the cumulative effect of accounting changes. Fixed
charges include interest expense and the portion (one-third) of rental
expenses deemed to be representative of interest. Preferred stock
dividends represent only the distributions on the MIPS securities. The
Company's earnings for the six months ended June 30, 1996 and the year
ended December 31, 1996 were insufficient to cover fixed charges by
approximately $720 and $600 million, respectively.
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<PAGE> 125
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more
series under an Indenture, as supplemented or amended from time to time (as so
supplemented or amended, the "Indenture"), between the Company and Wilmington
Trust Company, as trustee (the "Debt Trustee"). This summary of certain terms
and provisions of the Junior Subordinated Debentures and the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and to the Trust
Indenture Act. Whenever particular defined terms of the Indenture are referred
to in this Section or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference.
GENERAL
Each series of Junior Subordinated Debentures will rank pari passu
with the Company's Convertible Subordinated Debentures due 2025 (the
"Convertible Subordinated Debentures") and with all other series of Junior
Subordinated Debentures, and will be unsecured and subordinate and junior in
right of payment to the extent and in the manner set forth in the Indenture to
all Senior Indebtedness (as defined below) of the Company. See "--
Subordination." Except as otherwise provided in the applicable Prospectus
Supplement, the Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, whether under the Indenture, any other
indenture that the Company may enter into in the future or otherwise. See "--
Subordination" and the Prospectus Supplement relating to any offering of
Securities.
The Junior Subordinated Debentures will be issuable in one or more
series pursuant to an indenture supplemental to the Indenture or a resolution of
the Company's Board of Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Junior Subordinated Debentures: (i) the
title of the Junior Subordinated Debentures; (ii) any limit upon the aggregate
principal amount of the Junior Subordinated Debentures; (iii) the date or dates
on which the principal of the Junior Subordinated Debentures is payable or the
method of determination thereof; (iv) the rate or rates, if any, at which the
Junior Subordinated Debentures shall bear interest, the Interest Payment Dates
on which any such interest shall be payable, the right, if any, of the Company
to defer or extend an Interest Payment Date, and the Regular Record Date for any
interest payable on any Interest Payment Date or the method by which any of the
foregoing shall be determined; (v) the place or places where, subject to the
terms of the Indenture as described below under "-- Payment and Paying Agents,"
the principal of and premium, if any, and interest, if any, on the Junior
Subordinated Debentures will be payable and where, subject to the terms of the
Indenture as described below under "-- Denominations, Registration and
Transfer," the Junior Subordinated Debentures may be presented for registration
of transfer or exchange and the place or places where notices and demands to or
upon the Company in respect of the Junior Subordinated Debentures and the
Indenture may be made ("Place of Payment"); (vi) any period or periods within,
or date or dates on which, the price or prices at which and the terms and
conditions upon which Junior Subordinated Debentures may be redeemed, in whole
or in part, at the option of the Company or a holder thereof; (vii) the
obligation or the right, if any, of the Company or a holder thereof to redeem,
purchase or repay the Junior Subordinated Debentures and the period or periods
within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Junior Subordinated Debentures shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (viii) the
denominations in which any Junior Subordinated Debentures shall be issuable if
other than denominations of $1,000 and any integral multiple thereof; (ix) if
other than in U.S. Dollars, the currency or currencies (including currency unit
or units) in which the principal of (and premium, if any) and interest, if any,
on the Junior Subordinated Debentures shall be payable, or in which the Junior
Subordinated Debentures shall be denominated; (x) any additions, modifications
or deletions in the Events of Default or covenants of the Company specified in
the Indenture with respect to the Junior Subordinated Debentures; (xi) if other
than
11
<PAGE> 126
the principal amount thereof, the portion of the principal amount of Junior
Subordinated Debentures that shall be payable upon declaration of acceleration
of the maturity thereof; (xii) any additions or changes to the Indenture with
respect to a series of Junior Subordinated Debentures as shall be necessary to
permit or facilitate the issuance of such series in bearer form, registrable or
not registrable as to principal, and with or without interest coupons; (xiii)
any index or indices used to determine the amount of payments of principal of
and premium, if any, on the Junior Subordinated Debentures and the manner in
which such amounts will be determined; (xiv) the terms and conditions relating
to the issuance of a temporary Global Security representing all of the Junior
Subordinated Debentures of such series and exchange of such temporary Global
Security for definitive Junior Subordinated Debentures of such series; (xv)
subject to the terms described under "-- Global Junior Subordinated Debentures,"
whether the Junior Subordinated Debentures of the series shall be issued in
whole or in part in the form of one or more Global Securities and, in such case,
the depositary for such Global Securities, which depositary shall be a clearing
agency registered under the Exchange Act; (xvi) the appointment of any paying
agent or agents; (xvii) the terms and conditions of any obligation or right of
the Company or a holder to convert or exchange Junior Subordinated Debentures
into Preferred Securities or other securities; (xviii) the relative degree, if
any, to which such Junior Subordinated Debentures of the series shall be senior
to or be subordinated to other series of such Junior Subordinated Debentures or
other indebtedness of the Company in right of payment, whether such other series
of Junior Subordinated Debentures or other indebtedness are outstanding or not;
and (xix) any other terms of the Junior Subordinated Debentures not inconsistent
with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Certain material U.S.
federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any, on
any Junior Subordinated Debentures is payable in one or more foreign currencies
or currency units, the restrictions, elections, certain material U.S. federal
income tax considerations, specific terms and other information with respect to
such issue of Junior Subordinated Debentures and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal
of, premium, if any, or interest on any series of Junior Subordinated
Debentures, certain material U.S. federal income tax, accounting and other
considerations applicable thereto will be described in the applicable Prospectus
Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement,
the Junior Subordinated Debentures will be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
Junior Subordinated Debentures of any series will be exchangeable for other
Junior Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same Original Issue
Date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Junior Subordinated Debentures and referred to in the
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. The Company
will appoint the Debt Trustee as Securities Registrar under the Indenture. If
the applicable Prospectus Supplement refers to any transfer agents (in addition
to the Securities Registrar) initially
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designated by the Company with respect to any series of Junior Subordinated
Debentures, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, provided that the Company maintains a transfer agent in
each Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Junior Subordinated
Debentures.
In the event of any redemption, neither the Company nor the Debt
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of Junior
Subordinated Debentures of that series and ending at the close of business on
the day of mailing of the relevant notice of redemption or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole
or in part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, a depositary identified in the
Prospectus Supplement relating to such series. Global Junior Subordinated
Debentures may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Junior Subordinated Debentures represented thereby, a Global Junior
Subordinated Debenture may not be transferred except as a whole by the
depositary for such Global Junior Subordinated Debenture to a nominee of such
depositary or by a nominee of such depositary to such depositary or another
nominee of such depositary or by the depositary or any nominee to a successor
depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a
series of Junior Subordinated Debentures will be described in the Prospectus
Supplement relating to such series. The Company anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
applicable depositary, the depositary for such Global Junior Subordinated
Debenture or its nominee will credit on its book-entry registration and transfer
system, the respective principal amounts of the individual Junior Subordinated
Debentures represented by such Global Junior Subordinated Debenture to the
accounts of persons that have accounts with such depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Junior Subordinated Debentures or by the Company if such Junior
Subordinated Debentures are offered and sold directly by the Company. Ownership
of beneficial interests in a Global Junior Subordinated Debenture will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Junior Subordinated Debenture
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the applicable depositary or its nominee (with
respect to interests of Participants) and the records of Participants (with
respect to interests of persons who hold through Participants). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Junior Subordinated
Debenture.
So long as the depositary for a Global Junior Subordinated Debenture,
or its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
Global Junior Subordinated Debenture will not be entitled to have any of the
individual Junior Subordinated Debentures of the series represented by such
Global Junior Subordinated Debenture registered in their names, will not receive
or be entitled to receive physical delivery of any such Junior Subordinated
Debentures of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
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Payments of principal of (and premium, if any) and interest on
individual Junior Subordinated Debentures represented by a Global Junior
Subordinated Debenture registered in the name of a depositary or its nominee
will be made to such depositary or its nominee, as the case may be, as the
registered owner of the Global Junior Subordinated Debenture representing such
Junior Subordinated Debentures. None of the Company, the Debt Trustee, any
paying agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership interest
of the Global Junior Subordinated Debenture for such Junior Subordinated
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium or interest in respect of a permanent Global Junior
Subordinated Debenture representing any of such Junior Subordinated Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Junior Subordinated Debenture for such Junior Subordinated
Debentures as shown on the records of such depositary or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Junior Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the applicable Prospectus Supplement,
if the depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue individual Junior Subordinated Debentures of such series in exchange for
the Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, unless otherwise specified in the
applicable Prospectus Supplement, the Company may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Junior Subordinated Debentures, determine not to have any
Junior Subordinated Debentures of such series represented by one or more Global
Junior Subordinated Debentures and, in such event, will issue individual Junior
Subordinated Debentures of such series in exchange for such Global Junior
Subordinated Debentures. Further, if the Company so specifies with respect to
the Junior Subordinated Debentures of a series, an owner of a beneficial
interest in a Global Junior Subordinated Debenture representing Junior
Subordinated Debentures of such series may, on terms acceptable to the Company,
the Debt Trustee and the depositary for such Global Junior Subordinated
Debenture, receive individual Junior Subordinated Debentures of such series in
exchange for such beneficial interests, subject to any limitations described in
the Prospectus Supplement relating to such Junior Subordinated Debentures. In
any such instance, an owner of a beneficial interest in a Global Junior
Subordinated Debenture will be entitled to physical delivery of individual
Junior Subordinated Debentures of the series represented by such Global Junior
Subordinated Debenture equal in principal amount to such beneficial interest and
to have such Junior Subordinated Debentures registered in its name. Individual
Junior Subordinated Debentures of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof. The applicable Prospectus Supplement may specify other
circumstances under which individual Junior Subordinated Debentures may be
issued in exchange for the Global Junior Subordinated Debenture representing any
Junior Subordinated Debentures.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal of (and premium, if any) and any interest on Junior
Subordinated Debentures will be made at the office of the Debt Trustee in
Wilmington, Delaware or at the office of such paying agent or paying agents as
the Company may designate from time to time in the applicable Prospectus
Supplement, except that at the option of the Company payment of any interest may
be made (i) except in the case of Global Junior Subordinated Debentures, by
check mailed to the address of the person or entity entitled thereto as such
address shall appear in the Securities Register or (ii) by transfer to an
account maintained by the person or entity entitled
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thereto as specified in the Securities Register, provided that proper transfer
instructions have been received by the Regular Record Date. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of any interest on
Junior Subordinated Debentures will be made to the person or entity in whose
name such Junior Subordinated Debenture is registered at the close of business
on the Regular Record Date for such interest, except in the case of Defaulted
Interest. The Company may at any time designate additional paying agents or
rescind the designation of any paying agent; however, the Company will at all
times be required to maintain a paying agent in each Place of Payment for each
series of Junior Subordinated Debentures.
Any moneys deposited with the Debt Trustee or any paying agent, or
held by the Company in trust, for the payment of the principal of (and premium,
if any) or interest on any Junior Subordinated Debenture and remaining unclaimed
for two years after such principal (and premium, if any) or interest has become
due and payable shall, at the request of the Company, be repaid to the Company
or released from such trust, as applicable, and the holder of such Junior
Subordinated Debenture shall thereafter look, as a general unsecured creditor,
only to the Company for payment thereof.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement,
Junior Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement,
the Company may, at its option, redeem the Junior Subordinated Debentures of any
series in whole at any time or in part from time to time, at the redemption
price set forth in the applicable Prospectus Supplement plus accrued and unpaid
interest to the date fixed for redemption, and Junior Subordinated Debentures in
denominations larger than $50 may be redeemed in part but only in integral
multiples of $50. If the Junior Subordinated Debentures of any series are so
redeemable only on or after a specified date or upon the satisfaction of
additional conditions, the applicable Prospectus Supplement will specify such
date or describe such conditions.
Except as otherwise specified in the applicable Prospectus
Supplement, if a Special Event (as defined in "Description of Preferred
Securities -- Redemption -- Special Event Redemption" below or in the applicable
Prospectus Supplement) in respect of the Trust shall occur and be continuing,
the Company may, at its option, redeem such series of Junior Subordinated
Debentures, in whole (but not in part), at a redemption price equal to the
amount described in the applicable Prospectus Supplement. See "Description of
Preferred Securities -- Redemption -- Special Event Redemption."
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless the
Company defaults in the payment of the redemption price, on and after the
redemption date interest shall cease to accrue on such Junior Subordinated
Debentures or portions thereof called for redemption.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Junior Subordinated Debentures such additional amounts as shall be
required so that the net amounts received and retained by the Trust after paying
any such taxes, duties, assessments or other governmental charges will be not
less than the amounts the Trust would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable Prospectus Supplement, the Company
shall have the right at any time and from time to time during the term of any
series of Junior Subordinated Debentures to defer the
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payment of interest for such number of consecutive interest payment periods as
may be specified in the applicable Prospectus Supplement (each, an "Extension
Period"), subject to the terms, conditions and covenants, if any, specified in
such Prospectus Supplement, provided that such Extension Period may not extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Certain
material U.S. federal income tax consequences and special considerations
applicable to any such Junior Subordinated Debentures will be described in the
applicable Prospectus Supplement.
At the end of such Extension Period, the Company shall pay all
interest then accrued and unpaid (including any Additional Interest, as herein
defined) together with interest thereon compounded semi-annually at the rate
specified for the Junior Subordinated Debentures to the extent permitted by
applicable law ("Compound Interest"); provided, that during any such Extension
Period, (a) the Company shall not declare or pay dividends on, make any
distribution with respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than (i) purchases or
acquisitions of capital stock of the Company in connection with the satisfaction
by the Company of its obligations under any employee benefit plans or the
satisfaction by the Company of its obligations pursuant to any contract or
security outstanding on the date of such event requiring the Company to purchase
capital stock of the Company, (ii) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) dividends or
distributions in capital stock of the Company and (v) redemptions or purchases
of any rights pursuant to the Rights Agreement, dated as of December 12, 1996
(as amended from time to time, the "Rights Agreement"), between the Company and
The Chase Manhattan Bank, as Rights Agent, or any successor to the Rights
Agreement, and the declaration thereunder of a dividend of rights in the future,
(b) the Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior to the Junior Subordinated Debentures, and
(c) the Company shall not make any guarantee payments with respect to the
foregoing (other than payments pursuant to the Guarantee or the Common
Securities Guarantee). Prior to the termination of any such Extension Period,
the Company may further defer payments of interest by extending the interest
payment period; provided, however, that, such Extension Period, including all
such previous and further extensions, may not extend beyond the maturity of the
Junior Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new Extension
Period, subject to the terms set forth in this section. No interest during an
Extension Period, except at the end thereof, shall be due and payable, but the
Company may prepay at any time all or any portion of the interest accrued during
an Extension Period. The Company has no present intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Junior Subordinated Debentures. If the Institutional Trustee shall be the
sole holder of the Junior Subordinated Debentures, the Company shall give the
Regular Trustees and the Institutional Trustee notice of its selection of such
Extension Period one Business Day prior to the earlier of (i) the date
distributions on the Preferred Securities are payable or (ii) the date the
Regular Trustees are required to give notice to the New York Stock Exchange (or
other applicable self-regulatory organization) or to holders of the Preferred
Securities of the record or payment date of such distribution. The Regular
Trustees shall give notice of the Company's selection of such Extension Period
to the holders of the Preferred Securities. If the Institutional Trustee shall
not be the sole holder of the Junior Subordinated Debentures, the Company shall
give the holders of the Junior Subordinated Debentures notice of its selection
of such Extension Period ten Business Days prior to the earlier of (i) the
Interest Payment Date or (ii) the date upon which the Company is required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Junior Subordinated Debentures of the record
or payment date of such related interest payment.
MODIFICATION OF INDENTURE
From time to time, the Indenture may be modified by the Company and
the Debt Trustee without the consent of any holders of the Junior Subordinated
Debentures with respect to certain matters, including (i) to cure any ambiguity,
defect or inconsistency or to correct or supplement any provision which may be
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inconsistent with any other provision of the Indenture, (ii) to qualify, or
maintain the qualification of, the Indenture under the Trust Indenture Act and
(iii) to make any change that does not materially adversely affect the interests
of any holder of Junior Subordinated Debentures. In addition, under the
Indenture, certain rights and obligations of the Company and the rights of
holders of the Junior Subordinated Debentures may be modified by the Company and
the Debt Trustee with the written consent of the holders of at least a majority
in aggregate principal amount of the outstanding Junior Subordinated Debentures;
but no extension of the maturity of Junior Subordinated Debentures, reduction in
the interest rate or extension of the time for payment of interest, change in
the optional redemption or repurchase provisions in a manner adverse to any
holder of Junior Subordinated Debentures, other modification in the terms of
payment of the principal of, or interest on, the Junior Subordinated Debentures,
or reduction of the percentage required for modification, will be effective
against any holder of any outstanding Junior Subordinated Debentures without the
holder's consent.
In addition, the Company and the Debt Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
Indenture for the purpose of creating any new series of Junior Subordinated
Debentures.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following
described events with respect to a series of Junior Subordinated Debentures that
has occurred and is continuing constitutes an "Indenture Event of Default" with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of the
Junior Subordinated Debentures when due (subject to the deferral of any
due date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series
of Junior Subordinated Debentures when due whether at maturity, upon
redemption, by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written
notice has been given to the Company from the Debt Trustee or the holders
of at least 25% in principal amount of such series of outstanding Junior
Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
the Company.
The holders of a majority in outstanding principal amount of such
series of Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debt Trustee. The Debt Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of such series of Junior Subordinated Debentures
may declare the principal due and payable immediately upon an Indenture Event of
Default. The holders of a majority in aggregate outstanding principal amount of
such series of Junior Subordinated Debentures may annul such declaration and
waive the default if the default (other than the non-payment of the principal of
such series of Junior Subordinated Debentures which has become due solely by
such acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debt Trustee.
The holders of a majority in outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debt Trustee) or a
default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture. The Company is required to file annually with the
Debt Trustee a certificate as to whether or not the Company is in compliance
with all the conditions and covenants applicable to it under the Indenture.
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In case an Indenture Event of Default shall occur and be continuing
as to a series of Junior Subordinated Debentures all of which are held by the
Trust, the Institutional Trustee will have the right to declare the principal of
and the interest on such Junior Subordinated Debentures, and any other amounts
payable under the Indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to such Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an Indenture Event of Default with respect to the Junior
Subordinated Debentures has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Junior Subordinated Debentures on the date such interest or principal is
otherwise payable, a holder of the Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder (a "Direct Action"). The Company may not
amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Preferred
Securities. If the right to bring a Direct Action is removed, the Trust may
become subject to the reporting obligations under the Exchange Act. [Unless
otherwise specified in the applicable Prospectus Supplement, the Company shall
have the right under the Indenture to set-off any payment made to such holder of
Preferred Securities by the Company in connection with a Direct Action.] The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures unless
there shall have been an Event of Default under the Declaration. See
"Description of Preferred Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or
merge into any other person or entity or sell, assign, convey, transfer or lease
its properties and assets substantially as an entirety to any person or entity
unless (i) either the Company is the continuing corporation, or any successor or
purchaser is a corporation, partnership, or trust or other entity organized
under the laws of the United States of America, any State thereof or the
District of Columbia, and any such successor or purchaser expressly assumes the
Company's obligations on the Junior Subordinated Debentures under a supplemental
indenture; and (ii) immediately after giving effect thereto, no Indenture Event
of Default, and no event which, after notice or lapse of time or both, would
become an Indenture Event of Default, shall have happened and be continuing.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debt Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity within one year, and the Company deposits or causes to
be deposited with the Debt Trustee, as trust funds in trust for the purpose, an
amount in the currency or currencies in which the Junior Subordinated Debentures
are payable sufficient to pay and discharge the entire indebtedness on the
Junior Subordinated Debentures not previously delivered to the Debt Trustee for
cancellation, for the principal (and premium, if any) and interest to the date
of the deposit or to the Stated Maturity, as the case may be, then the Indenture
will cease to be of further effect (except as to the Company's obligations to
pay all other sums due pursuant to the Indenture and to provide the officers'
certificates and opinions of counsel described therein), and the Company will be
deemed to have satisfied and discharged the Indenture. The Company will also
have the right to defease the Junior Subordinated Debentures if and to the
extent indicated in the applicable Prospectus Supplement.
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CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus
Supplement, the Junior Subordinated Debentures of any series may be convertible
or exchangeable into Preferred Securities or other securities. The specific
terms on which Junior Subordinated Debentures of any series may be so converted
or exchanged will be set forth in the applicable Prospectus Supplement. Such
terms may include provisions for conversion or exchange, either mandatory, at
the option of the holder, or at the option of the Company, in which case the
number of shares of Preferred Securities or other securities to be received by
the holders of Junior Subordinated Debentures would be calculated as of a time
and in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any
Junior Subordinated Debentures issued thereunder will be subordinate and junior
in right of payment to all Senior Indebtedness to the extent provided in the
Indenture. In the event of any dissolution, winding-up, liquidation or
reorganization of the Company (whether voluntary or involuntary and whether in
bankruptcy, insolvency or receivership proceedings, or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise), all Senior Indebtedness will first be paid in full
before any payment or distribution may be made in respect of the principal of
(and premium, if any) or interest, if any, on the Junior Subordinated
Debentures.
The Company may not make any payment with respect to the Junior
Subordinated Debentures if and for so long as (i) any Senior Indebtedness is or
becomes due and payable (whether at maturity, for an installment of principal or
interest, upon acceleration, for mandatory prepayment, or otherwise) and remains
unpaid; (ii) any Senior Indebtedness Default (as defined below) has occurred and
has not been cured or waived in conformity with the terms of the instrument,
indenture or agreement governing such Senior Indebtedness; or (iii) a payment by
the Company with respect to the Junior Subordinated Debentures would,
immediately after giving effect thereto, result in a Senior Indebtedness
Default.
A payment with respect to the Junior Subordinated Debentures shall
include, without limitation, payment of principal of, premium, if any, and
interest on the Junior Subordinated Debentures, the purchase of Junior
Subordinated Debentures by the Company and any other payment other than a
payment in stock or any equity securities.
"Senior Indebtedness Default" means the failure to make any payment
of any Senior Indebtedness when due or the happening of an event of default with
respect to any Senior Indebtedness, as defined therein or in the instrument
under which the same is outstanding, which, by its terms, if occurring prior to
the stated maturity of such Senior Indebtedness, permits or with the giving of
notice or lapse of time (or both) would permit any holder thereof, any group of
such holders or any trustee or representative for such holders thereupon to
accelerate the maturity thereof or which results in such acceleration,
including, without limitation, a "Default" under the Credit Agreement, as in
effect and as amended, renewed, extended or supplemented from time to time, and
any document, instrument or agreement executed and delivered in connection
therewith, whether or not such Senior Debt or instrument has been avoided,
disallowed or subordinated.
"Senior Indebtedness" means all indebtedness incurred, assumed or
guaranteed, directly or indirectly, by the Company, either before, on, or after
the date of the Indenture without any limitation as to the amount or terms
thereof, and whether such indebtedness (including, but not limited to, interest
on any such indebtedness) arises or accrues before or after the commencement of
any bankruptcy, insolvency or receivership proceedings and whether or not such
indebtedness (including, but not limited to, interest thereon) is an allowable
claim under the Bankruptcy Code or is otherwise enforceable against the Company
and including, in any event, interest and other liabilities accruing or arising
after the filing by or against the Company of a petition under the Bankruptcy
Code or that would have so accrued or arisen but for the filing of such
petition, (i) which arises for borrowed money, securities sold, funds provided,
assets or services purchased or any other transaction whether or not in the
ordinary course of business and which is
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evidenced by a promissory note, bond, debenture, writing or other instrument of
indebtedness or reflected on the accounting records of the Company as a payable
(but expressly excluding (A) amounts owed for compensation to employees, (B)
obligations owing under judgments arising out of obligations that are not
indebtedness for borrowed money (other than any such obligations arising from
obligations which are otherwise Senior Debt), (C) any indebtedness which by the
terms of the instrument creating or evidencing the same is not superior in right
of payment to or is junior in right of payment to the Junior Subordinated
Debentures, (D) any liability for federal, state, local or other taxes owed or
owing by the Company, (E) any liability in respect of any employee benefit plan
(including, without limitation, any liability to the Pension Benefit Guaranty
Corporation or any successor thereto), (F) indebtedness or obligations to a
subsidiary of the Company, (G) the Company's 6 1/2% Convertible Subordinated
Debentures due 2025 and (H) indebtedness to trade creditors or monetary
obligations to trade creditors incurred or assumed by the Company or any of its
subsidiaries in the ordinary course of business); (ii) for principal of and
interest on all loans and other extensions of credit under the Credit Agreement,
as in effect and as amended, renewed, extended or supplemented from time to
time, and any document, instrument or agreement executed and delivered in
connection therewith and all fees, expenses, reimbursements, indemnities,
premiums and other amounts payable under the Credit Agreement; (iii) for
principal of (and premium, if any) and interest on the Company's 5-3/8% Swiss
Franc Bonds due November 26, 2000 and the Company's 7-1/4% DM Bonds of 1985/2000
and all fees, expenses, reimbursements, indemnities, premiums and other amounts
payable thereunder; (iv) for any amount payable with respect to any lease,
conditional sale or installment sale agreement or other financing instrument or
agreement which in accordance with generally accepted accounting principles is,
at the date of the Indenture or at the time the lease, conditional sale or
installment sale agreement or other financing instrument or agreement is entered
into, assumed or guaranteed, directly or indirectly, by the Company, required to
be reflected as a liability on the face of the balance sheet of the Company; (v)
for all principal of and interest on all loans and other extensions of credit
under any lines of credit, credit agreements or promissory notes from a bank or
other financial institution (including, without limitation, any letters of
credit, bankers' acceptances, performance bonds and other credit facilities
under such borrowing arrangements), and all fees, expenses, reimbursements,
indemnities, premiums and other amounts payable under such borrowing
arrangements; (vi) for any amounts payable in respect of any interest rate
exchange agreement, ceiling rate agreement, currency exchange agreement or
similar agreement; and (vii) for renewals, deferrals, amendments, modifications,
supplements, extensions or refundings of any of the indebtedness described in
clauses (i) through (vi), inclusive, or evidences of indebtedness issued in
exchange for such Senior Indebtedness. Senior Indebtedness shall continue to
constitute Senior Indebtedness for all purposes of the Junior Subordinated
Debentures, and the provisions of Article ___ of the Indenture shall continue
to apply to such Senior Indebtedness, notwithstanding the fact that such Senior
Indebtedness or any claim in respect thereof shall be disallowed, avoided or
subordinated pursuant to the provisions of the United States Bankruptcy Code of
1978, as amended, or other applicable law.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Company. The Company expects from time
to time to incur additional indebtedness constituting Senior Indebtedness.
The Indenture provides that the foregoing subordination provisions,
insofar as they relate to any particular issue of Junior Subordinated
Debentures, may be changed prior to such issuance. Any such change would be
described in the Prospectus Supplement relating to such Junior Subordinated
Debentures.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of New York.
MISCELLANEOUS
The Company will pay all fees and expenses related to (i) the offering of
the Trust Securities and the Junior Subordinated Debentures, (ii) the
organization, maintenance and dissolution of the Trust, (iii) the
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retention of the Owens Corning Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the Preferred Securities.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debt Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debt Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debt Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
Wilmington Trust Company, the Debt Trustee, is also Institutional
Trustee and Delaware Trustee under the Declaration and Guarantee Trustee under
the Guarantee. The Company maintains trust and other business relationships in
the ordinary course of business with Wilmington Trust Company. Pursuant to the
provisions of the Trust Indenture Act, upon the occurrence of certain events,
Wilmington Trust Company may be deemed to have a conflicting interest, by virtue
of its acting as the Institutional Trustee, the Delaware Trustee, the Debt
Trustee and the Guarantee Trustee, and its other business relationships with the
Company, and thereby may be required to resign and be replaced by a successor
trustee under the Indenture, the Declaration and the Guarantee.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Declaration, the Owens Corning Trustees
on behalf of the Trust will issue the Preferred Securities and the Common
Securities. The Preferred Securities will represent preferred undivided
beneficial interests in the assets of the Trust and the holders thereof will be
entitled to a preference in certain circumstances with respect to Distributions
and amounts payable on redemption or liquidation over the Common Securities, as
well as other benefits as described in the Declaration. This summary of certain
provisions of the Preferred Securities and the Declaration does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Declaration, including the definitions therein of
certain terms, and the Trust Indenture Act. Wherever particular defined terms of
the Declaration are referred to in this Section or in a Prospectus Supplement,
such defined terms are incorporated herein by reference. The form of Declaration
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Preferred Securities of the Trust will rank pari passu, and
payments will be made thereon pro rata, with the Common Securities of the Trust
except as described under "-- Subordination of Common Securities." Legal title
to the Junior Subordinated Debentures will be held by the Institutional Trustee
in trust for the benefit of the holders of the Preferred Securities and Common
Securities. The Guarantee Agreement executed by the Company for the benefit of
the holders of the Trust's Preferred Securities (the "Guarantee") will be a
guarantee on a subordinated basis with respect to the Preferred Securities but
will not guarantee payment of Distributions or amounts payable on redemption or
liquidation of the Preferred Securities when the Trust does not have funds on
hand available to make such payments. See "Description of the Guarantee."
DISTRIBUTIONS
The Trust's Preferred Securities represent preferred undivided
beneficial interests in the assets of the Trust, and the Distributions on each
Preferred Security will be payable at a rate specified in the Prospectus
Supplement for the Preferred Securities. The amount of Distributions payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the applicable Prospectus Supplement.
Distributions that are in arrears will accumulate additional
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Distributions thereon at the rate per annum if and as specified in the
applicable Prospectus Supplement ("Additional Amounts"). The term
"Distributions" as used herein includes any Additional Amounts unless otherwise
stated.
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
is in the next succeeding calendar year, payment of such Distribution shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are payable
in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall
mean any day other than a Saturday or a Sunday, or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to remain closed or a day on which the corporate trust office of
the Institutional Trustee or the Debt Trustee is closed for business.
If provided in the applicable Prospectus Supplement, the Company has
the right under the Indenture to defer payments of interest on the Junior
Subordinated Debentures by extending the interest payment period thereon from
time to time for a period or periods that will be specified in the applicable
Prospectus Supplement. Such extension right, if exercised, would result in the
deferral of Distributions on the Preferred Securities (though such Distributions
would continue to accumulate additional Distribution thereon at the rate per
annum if and as specified in the applicable Prospectus Supplement) during any
such extended interest payment period. Such right to extend the interest payment
period for the Junior Subordinated Debentures is limited to a period not
extending beyond the stated Maturity of the Junior Subordinated Debentures. In
the event that the Company exercises this right, then (a) the Company shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of capital stock of the
Company in connection with the satisfaction by the Company of its obligations
under any employee benefit plans or the satisfaction by the Company of its
obligations pursuant to any contract or security outstanding on the date of such
event requiring the Company to purchase capital stock of the Company, (ii) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or a series of the Company's capital stock for another
class or a series of the Company's capital stock, (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (iv) dividends or distributions in capital stock of the
Company and (v) redemptions or purchases of any rights pursuant to the Rights
Agreement, and the declaration thereunder of a dividend of rights in the
future), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Junior Subordinated
Debentures, and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than payments pursuant to the Guarantee or the
Common Securities Guarantee (as defined herein)). Prior to the termination of
any such Extension Period, the Company may further extend the interest payment
period; provided, that such Extension Period, together with all such previous
and further extensions thereof, may not extend beyond the stated Maturity of the
Junior Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may select a new Extension
Period, subject to the above requirements. See "Description of the Junior
Subordinated Debentures -- Option to Defer Interest Payments." If Distributions
are deferred, the deferred Distributions and accumulated additional
Distributions thereon shall be paid to holders of record of the Preferred
Securities as they appear on the books and records of the Trust on the record
date next following the termination of such deferral period.
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It is anticipated that the revenue of the Trust available for
distribution to holders of its Preferred Securities will be limited to payments
under the Junior Subordinated Debentures in which the Trust will invest the
proceeds from the issuance and sale of the Preferred Securities and the Common
Securities. See "Description of Junior Subordinated Debentures -- Junior
Subordinated Debentures." If the Company does not make interest payments on such
Junior Subordinated Debentures, the Institutional Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Company on a limited basis as set forth herein under
"Description of the Guarantee."
Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the register of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
form, will be one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the Declaration,
unless otherwise specified in the applicable Prospectus Supplement, each such
payment will be made as described under "Book-Entry Issuance." In the event any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be the date, at least 15 days prior to the
relevant Distribution Date, that is specified in the applicable Prospectus
Supplement.
REDEMPTION
Mandatory Redemption
Unless otherwise specified in the applicable Prospectus Supplement,
upon any repayment or redemption, in whole or in part, of any Junior
Subordinated Debentures that are held by the Trust unless otherwise specified in
the applicable Prospectus Supplement, whether at maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption shall be applied by the Institutional Trustee to redeem a Like Amount
(as defined below) of the related Trust Securities, upon not less than 30 nor
more than 60 days notice, at a redemption price (the "Redemption Price") equal
to the aggregate liquidation amount of such Trust Securities plus accumulated
and unpaid Distributions thereon to the date of redemption (the "Redemption
Date") and the related amount of the premium, if any, paid by the Company upon
the concurrent redemption of such Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures -- Optional Redemption." If less
than all of any series of Junior Subordinated Debentures that are held by the
Trust are to be repaid or redeemed on a Redemption Date, then the proceeds from
such repayment or redemption shall be allocated to the redemption pro rata of
the Preferred Securities and the Common Securities. The amount of premium, if
any, paid by the Company upon the redemption of all or any part of any Junior
Subordinated Debentures held by the Trust shall be allocated pro rata to the
Preferred Securities and the Common Securities.
Distribution of Junior Subordinated Debentures
Unless otherwise specified in the applicable Prospectus Supplement,
the Company will have the right at any time to dissolve the Trust and, after
satisfaction of the liabilities of creditors of the Trust as provided by
applicable law, to cause the Junior Subordinated Debentures in respect of the
Trust Securities issued by the Trust to be distributed to the holders of the
Trust Securities in liquidation of the Trust.
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures held by the Trust, (i) the Preferred Securities will no
longer be deemed to be outstanding, (ii) the depositary (if any) for the
Preferred Securities, as the record holder of the Preferred Securities, will
receive a registered global certificate or certificates representing the Junior
Subordinated Debentures to be delivered upon such distribution and (iii) any
certificates representing such Preferred Securities not held by or on behalf of
such depositary will be deemed to represent the Junior Subordinated Debentures
having a principal amount equal to the liquidation amount of the Preferred
Securities, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on the Preferred Securities, until such
certificates are presented to the Regular Trustees or their agent for transfer
or reissuance.
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There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Junior Subordinated Debentures that the investor may receive on
dissolution or liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
Special Event Redemption
If a Tax Event or an Investment Company Event (each as defined below
or in the applicable Prospectus Supplement, a "Special Event") shall occur and
be continuing, unless otherwise specified in the applicable Prospectus
Supplement, the Company will have the right to redeem the Junior Subordinated
Debentures in whole (but not in part) and therefore cause a mandatory
redemption of the Trust Securities in whole (but not in part) at the Redemption
Price within 90 days following the occurrence of such Special Event.
If provided in the applicable Prospectus Supplement, the Company
shall have the right to extend or shorten the maturity of any series of Junior
Subordinated Debentures held by the Trust at the time that the Company exercises
its right to elect to dissolve the related Trust and, after satisfaction of the
liability to creditors of the Trust as provided by applicable law, cause such
Junior Subordinated Debentures to be distributed to the holders of the Preferred
Securities and Common Securities of the Trust in liquidation of the Trust,
provided that it can extend the maturity only if certain conditions specified in
the applicable Prospectus Supplement are met at the time such election is made
and at the time of such extension.
"Tax Event" means the receipt by the Trust of an opinion of counsel
experienced in such matters to the effect that, as a result of (i) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, (ii) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority or (iii)
any interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the generally accepted position on
the date the Preferred Securities are issued, which amendment or change is
effective or which interpretation or pronouncement is announced on or after the
date of issuance of the Preferred Securities under the Declaration, there is
more than an insubstantial risk that (x) the Trust is, or will be within 90 days
of the date thereof, subject to U.S. federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures, (y) interest payable
by the Company on the Junior Subordinated Debentures is not, or within 90 days
of the date thereof, will not be, deductible, in whole or in part, for U.S.
federal income tax purposes, or (z) the Trust is, or will be within 90 days of
the date thereof, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law") to the effect that the Trust is or will be considered
an "investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which Change in
1940 Act Law becomes effective on or after the date of original issuance of the
Preferred Securities.
"Like Amount" means (i) with respect to a redemption of any Trust
Securities, Trust Securities having a liquidation amount equal to that portion
of the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities based upon the relative
liquidation amounts of such classes of Trust Securities, and the proceeds of
which will be used to pay the Redemption Price of such Trust Securities, and
(ii) with respect to a distribution of Junior Subordinated Debentures to holders
of any Trust Securities in connection with a dissolution or liquidation of
Trust, Junior Subordinated Debentures having a principal amount equal to the
liquidation amount of the Trust Securities of the holder to whom such Junior
Subordinated Debentures are distributed.
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REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Junior Subordinated Debentures. Redemptions of
Preferred Securities shall be made and the Redemption Price shall be payable on
each Redemption Date only to the extent that the Trust has funds on hand
available for the payment of such Redemption Price. See also "-- Subordination
of Common Securities."
If the Trust gives a notice of redemption in respect of the Preferred
Securities, then, on the Redemption Date, to the extent funds are available, the
Institutional Trustee will deposit irrevocably with the Depositary for the
Preferred Securities (if such Preferred Securities are issued in the form of one
or more Global Preferred Securities) funds sufficient to pay the applicable
Redemption Price and will give such Depository irrevocable instructions and
authority to pay the Redemption Price to the beneficial owners of the Preferred
Securities. See "-- Global Preferred Securities" and "Book-Entry Issuance." If
the Preferred Securities are not issued in the form of one or more Global
Preferred Securities, the Trust, to the extent funds are available, will
irrevocably deposit with the paying agent for the Preferred Securities funds
sufficient to pay the applicable Redemption Price and will give such paying
agent irrevocable instructions and authority to pay the Redemption Price to the
holders thereof upon surrender of their certificates evidencing the Preferred
Securities. Notwithstanding the foregoing, Distributions payable on or prior to
the Redemption Date for the Preferred Securities called for redemption shall be
payable to the holders of the Preferred Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of the Preferred Securities so called for redemption will
cease, except the right of the holders of the Preferred Securities to receive
the Redemption Price, but without interest on such Redemption Price, and the
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by the Company pursuant to the Guarantee as described
under "Description of the Guarantee", Distributions on such Preferred Securities
will continue to accumulate at the then applicable rate, from the Redemption
Date originally established by the Trust for the Preferred Securities to the
date such Redemption Price is actually paid, in which case the actual payment
date will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to applicable law (including, without limitation, U.S.
federal securities law), the Company or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
If less than all of the Preferred Securities and Common Securities
issued by the Trust are to be redeemed on a Redemption Date, then the aggregate
liquidation amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata among the Preferred Securities and Common
Securities of such Trust based on the relative liquidation amounts of such
classes of Trust Securities. The particular Preferred Securities to be redeemed
shall be selected on a pro rata basis not more than 60 days prior to the
Redemption Date by the Institutional Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method as the
Institutional Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (equal to $50 or an integral multiple
of $50 in excess thereof) of the liquidation amount of Preferred Securities of a
denomination larger than $50. The Institutional Trustee shall promptly notify
the registrar in writing of the Preferred Securities selected for redemption
and, in the case of any Preferred Securities selected for partial redemption,
the liquidation amount thereof to be redeemed. For all purposes of each
Declaration, unless the context otherwise requires, all provisions relating to
the redemption of Preferred Securities shall relate, in the case of any
Preferred Securities redeemed or to be redeemed only in part, to the portion of
the aggregate liquidation amount of Preferred Securities which has been or is to
be redeemed.
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Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Preferred Securities
to be redeemed at its registered address. Unless the Company defaults in payment
of the Redemption Price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on the Junior Subordinated
Debentures or portions thereof (and Distributions will cease to accumulate on
the Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions (including Additional Amounts , if
applicable) on, and the Redemption Price of, the Trust's Preferred Securities
and Common Securities, as applicable, shall be made pro rata based on the
liquidation amount of the Preferred Securities and Common Securities; provided,
however, that if on any Distribution Date or Redemption Date an Indenture Event
of Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or Redemption Price of, any of
the Trust's Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
(including Additional Amounts, if applicable) on all of the Trust's outstanding
Preferred Securities for all Distribution periods terminating on or prior
thereto, or in the case of payment of the Redemption Price the full amount of
such Redemption Price on all of the Trust's outstanding Preferred Securities
then called for redemption, shall have been made or provided for, and all funds
available to the Institutional Trustee shall first be applied to the payment in
full in cash of all Distributions (including Additional Amounts, if applicable)
on, or Redemption Price of, the Trust's Preferred Securities then due and
payable.
In the case of any Event of Default under a Declaration resulting
from an Indenture Event of Default, the Company as holder of the Trust's Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default under such Declaration until the effect of all such Events
of Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Events of Default under the Declaration
have been so cured, waived or otherwise eliminated, the Institutional Trustee
shall act solely on behalf of the holders of the Preferred Securities and not on
behalf of the Company as holder of the Trust's Common Securities, and only the
holders of the Preferred Securities will have the right to direct the
Institutional Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Unless otherwise specified in the applicable Prospectus Supplement,
pursuant to the Declaration, the Trust shall terminate (i) on , 2002, the
expiration of the term of the Trust, (ii) upon the bankruptcy of the Company,
(iii) upon the filing of a certificate of dissolution or its equivalent with
respect to the Company, the filing of a certificate of cancellation with respect
to the Trust [after written direction from the Company to dissolve the
Trust][after obtaining the consent of the holders of at least a majority in
liquidation amount of the Trust Securities affected thereby voting together as a
single class to file such certificate of cancellation], or the revocation of the
charter of the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) upon the distribution of Junior
Subordinated Debentures, (v) upon the entry of a decree of a judicial
dissolution of the holder of the Common Securities, the Company or the Trust, or
(vi) upon the redemption of all the Trust Securities.
If an early dissolution occurs as described in clause (ii), (iii) or
(v) above, the Trust shall be liquidated by the Owens Corning Trustees as
expeditiously as the Owens Corning Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the applicable Trust Securities a
Like Amount of the Junior Subordinated Debentures that are then held by the
Trust, unless such distribution is determined by the Institutional Trustee not
to be practical, in which event such holders will be entitled to receive out of
the assets of the Trust available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to, in the case of holders of Preferred Securities, the
aggregate of the liquidation amount plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has
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insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Trust on the Preferred
Securities shall be paid on a pro rata basis. The holder(s) of the Trust's
Common Securities will be entitled to receive distributions upon any such
liquidation pro rata with the holders of the Preferred Securities, except that
if an Indenture Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities. If specified in the
applicable Prospectus Supplement, a supplemental Indenture may provide that if
an early termination occurs as described in clause (v) above, the Junior
Subordinated Debentures that are then held by the Trust may be subject to
optional redemption in whole (but not in part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default"
under the Declaration (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of an Indenture Event of Default under the
Indenture (see "Description of Junior Subordinated Debentures -- Indenture
Events of Default"); or
(ii) default by the Institutional Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Institutional Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Owens Corning Trustees in the
Declaration (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause (ii)
or (iii) above), and continuation of such default or breach for a period
of 90 days after written notice has been given to the defaulting Owens
Corning Trustee or Trustees by the holders of at least 25% in aggregate
liquidation amount of the outstanding Preferred Securities, which notice
shall specify such default or breach and require it to be remedied and
shall state that such notice is a "Notice of Default" under the
Declaration; or
(v) the occurrence of certain events of bankruptcy or insolvency
with respect to the Institutional Trustee and the failure by the Company
to appoint a successor Institutional Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of
Default actually known to the Institutional Trustee, the Institutional Trustee
shall transmit notice of such Event of Default to the holders of the Preferred
Securities, the Regular Trustees and the Company, as Depositor, unless such
Event of Default shall have been cured or waived. The Company, as Depositor, and
the Regular Trustees are required to file annually with the Institutional
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If an Indenture Event of Default has occurred and is continuing, the
Preferred Securities of the Trust shall have a preference over the Common
Securities of the Trust upon termination of the Trust as described above. See
"-- Liquidation Distribution Upon Termination." The existence of an Event of
Default does not entitle the holders of Preferred Securities to accelerate the
maturity thereof.
REMOVAL OF OWENS CORNING TRUSTEES
Unless an Indenture Event of Default shall have occurred and be
continuing, any Owens Corning Trustee may be removed at any time by the holder
of the Common Securities. If an Indenture Event of Default with respect to any
series of Junior Subordinated Debentures has occurred and is continuing, the
Institutional Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in liquidation amount of the outstanding Preferred
Securities of the Trust. In no event will the holders of
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the Preferred Securities of the Trust have the right to vote to appoint, remove
or replace the Administrative Trustees, which voting rights are vested
exclusively in the Company as the holder of the Common Securities of the Trust.
No resignation or removal of an Owens Corning Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Declaration.
CO-TRUSTEES AND SEPARATE INSTITUTIONAL TRUSTEE
Unless an Event of Default with respect to the Preferred Securities
of the Trust shall have occurred and be continuing, at any time or times, for
the purpose of meeting the legal requirements of the Trust Indenture Act or of
any jurisdiction in which any part of the Trust Property may at the time be
located, the Company, as the holder of the Common Securities of the Trust, and
the Regular Trustees shall have power to appoint one or more persons either to
act as a co-trustee, jointly with the Institutional Trustee, of all or any part
of such Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the applicable Declaration. In case an Indenture Event of Default
has occurred and is continuing, the Institutional Trustee alone shall have power
to make such appointment.
MERGER OR CONSOLIDATION OF TRUST TRUSTEES
Any entity into which the Institutional Trustee, the Delaware Trustee
or any Regular Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
entity succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under the Declarations,
provided such entity shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) if the Trust is not the
survivor, such successor entity either (x) assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Trust Securities
other securities having substantially the same terms as the Trust Securities
(the "Successor Securities"), so long as the Successor Securities rank the same
as the Trust Securities rank with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Institutional Trustee as the holder of the Junior Subordinated Debentures, (iii)
the Preferred Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which the Preferred
Securities are then listed or quoted, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose identical
to that of the Trust, (vii) prior to such merger, consolidation, amalgamation or
replacement, the Company has received an opinion of independent counsel to the
Trust experienced in such matters to the effect that, (A) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (B) following such merger,
consolidation, amalgamation or replacement, neither the Trust nor such successor
entity will be required to register as an investment company under the 1940 Act
and (C) following such merger, consolidation, amalgamation or replacement, the
Trust (or the successor entity) will continue to be
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classified as a grantor trust for United States federal income tax purposes and
(viii) the Company guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee and the
Common Securities Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause the Trust or the Successor Entity to be classified as
other than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF DECLARATION
Except as provided below and under "Description of the Guarantee --
Modification of the Guarantee; Assignment" and as otherwise required by law and
the Declaration, the holders of the Preferred Securities will have no voting
rights.
Subject to the requirement of the Institutional Trustee obtaining a
tax opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Junior Subordinated Debentures, to (i) exercise the
remedies available under the Indenture with respect to the Junior Subordinated
Debentures, (ii) waive any past Indenture Event of Default that is waivable
under Section ___ of the Indenture, (iii) exercise any right to rescind or annul
a declaration that the principal of all the Junior Subordinated Debentures shall
be due and payable or (iv) consent to any amendment, modification or termination
of the Indenture or the Junior Subordinated Debentures where such consent shall
be required; provided, however, that, where a consent or action under the
Indenture would require the consent or act of holders of more than a majority in
principal amount of the Junior Subordinated Debentures (a "Super-Majority")
affected thereby, only the holders of at least such Super-Majority in aggregate
liquidation amount of the Preferred Securities may direct the Institutional
Trustee to give such consent or take such action. The Institutional Trustee
shall notify all holders of the Preferred Securities of any notice of default
received from the Debt Trustee with respect to the Junior Subordinated
Debentures. Such notice shall state that such Indenture Event of Default also
constitutes an Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Institutional
Trustee shall not take any of the actions described in clause (i), (ii) or (iii)
above unless the Institutional Trustee has obtained an opinion of tax counsel
experienced in such matters to the effect that, as a result of such action, the
Trust will not fail to be classified as a grantor trust for United States
federal income tax purposes.
In the event the consent of the Institutional Trustee, as a holder of
the Junior Subordinated Debentures, is required under the Indenture with respect
to any amendment, modification or termination of the Indenture, the
Institutional Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a majority in liquidation amount of the Trust Securities voting together as a
single class; provided, however, that where a consent under the Indenture would
require the consent of a Super-Majority, the Institutional Trustee may only give
such consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super-Majority
represents of the aggregate principal amount of the Junior Subordinated
Debentures outstanding. The Institutional Trustee shall be under no obligation
to take any such action in accordance with the directions of the holders of the
Trust Securities unless the Institutional Trustee has obtained an opinion of tax
counsel experienced in such matters to the effect that for the purposes of
United States federal income tax, the Trust will not be classified as other than
a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Event of Default.
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Any required approval or direction of holders of Preferred Securities
may be given at a separate meeting of holders of Preferred Securities convened
for such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be mailed to each holder of record of Preferred Securities. Each such notice
will include a statement setting forth the following information: (i) the date
of such meeting or the date by which such action is to be taken; (ii) a
description of any resolution proposed for adoption at such meeting on which
such holders are entitled to vote or of such matter upon which written consent
is sought; and (iii) instructions for the delivery of proxies or consents. No
vote or consent of the holders of Preferred Securities will be required for the
Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned at such time by the Company or any entity
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Company, shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise
their voting rights are described below. See "Book-Entry Issuance" below.
Holders of the Preferred Securities will have no rights to appoint or
remove the Owens Corning Trustees, who may be appointed, removed or replaced
solely by the Company as the indirect or direct holder of all of the Common
Securities.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of the Trust may be issued in whole or in
part in the form of one or more Global Preferred Securities that will be
deposited with, or on behalf of, the depositary identified in the Prospectus
Supplement relating to the Preferred Securities. Unless otherwise indicated in
the applicable Prospectus Supplement for the Preferred Securities, the
depositary will be The Depository Trust Company ("DTC"). Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred Security
may not be transferred except as a whole by the depositary for such Global
Preferred Security to a nominee of such depositary or by a nominee of such
depositary to such depositary or another nominee of such depositary or by such
depositary or any nominee to a successor depositary or any nominee of such
successor.
While the specific terms of the depositary arrangement with respect
to the Preferred Securities of the Trust (if other than as described under
"Book-Entry Issuance") will be described in the Prospectus Supplement relating
to the Preferred Securities, the Company anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of
such Global Preferred Security with or on behalf of the applicable depositary,
the depositary for such Global Preferred Security or its nominee will credit, on
its book-entry registration and transfer system, the respective aggregate
liquidation amounts of the individual Preferred Securities represented by such
Global Preferred Securities to the accounts of Participants. Such accounts shall
be designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Company if such Preferred Securities are offered
and sold directly by the Company. Ownership of beneficial interests in a Global
Preferred Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Preferred Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical
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delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the depositary for a Global Preferred Security, or its
nominee, is the registered owner of such Global Preferred Security, such
depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such Global Preferred
Security for all purposes under the Declaration. Except as provided below,
owners of beneficial interests in a Global Preferred Security will not be
entitled to have any of the individual Preferred Securities represented by such
Global Preferred Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Preferred Securities in
definitive form and will not be considered the owners or holders thereof under
the Declaration.
Payments of liquidation amount, premium or Distributions in respect
of individual Preferred Securities represented by a Global Preferred Security
registered in the name of a depositary or its nominee will be made to such
depositary or its nominee, as the case may be, as the registered owner of the
Global Preferred Security representing such Preferred Securities. None of the
Company, the Institutional Trustee, any paying agent or the registrar for such
Preferred Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the depositary for the Preferred Securities
of the Trust, or its nominee, upon receipt of any payment of liquidation amount,
premium or Distributions in respect of a Global Preferred Security representing
any of such Preferred Securities, immediately will credit Participants' accounts
with payments in amounts proportionate to their respective beneficial interest
in the aggregate lf such Global Preferred Security for such Preferred Securities
as shown on the records of such Depositary or its nominee. The Company also
expects that payments by Participants to owners of beneficial interests in such
Global Preferred Security held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name." Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement,
if a Depositary for the Preferred Securities of an Trust is at any time
unwilling, unable or ineligible to continue as a depositary and a successor
depositary is not appointed by the Company within 90 days, the Trust will issue
individual Preferred Securities of the Trust in exchange for the Global
Preferred Security representing such Preferred Securities. In addition, the
Company may at any time and in its sole discretion, subject to any limitations
described in the Prospectus Supplement relating to the Preferred Securities,
determine not to have any Preferred Securities of the Trust represented by one
or more Global Preferred Securities and, in such event, the Trust will issue
individual Preferred Securities in exchange for the Global Preferred Security or
Securities representing such Preferred Securities. Further, if the Company so
specifies with respect to the Preferred Securities of the Trust, an owner of a
beneficial interest in a Global Preferred Security representing such Preferred
Securities may, on terms acceptable to the Company, the Institutional Trustee
and the Depositary for such Global Preferred Security, receive individual
Preferred Securities in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Preferred
Securities. In any such instance, an owner of a beneficial interest in a Global
Preferred Security will be entitled to physical delivery of individual Preferred
Securities represented by such Global Preferred Security equal in liquidation
amount to such beneficial interest and to have such Preferred Securities
registered in its name. Individual Preferred Securities so issued will be issued
in denominations, unless otherwise specified by the Company, of $50 and integral
multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
applicable depositary, which shall credit the relevant accounts at such
depositary on the applicable Distribution Dates or, if the Preferred Securities
are not held by a depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the
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applicable Prospectus Supplement, the paying agent for the Preferred Securities
shall initially be the Institutional Trustee and any co-paying agent chosen by
the Institutional Trustee and acceptable to the Regular Trustees and the
Company. The paying agent shall be permitted to resign as paying agent upon 30
days' written notice to the Institutional Trustees and the Company. In the event
that the Institutional Trustee shall no longer be the paying agent, the Regular
Trustees shall appoint a successor to act as paying agent (which shall be a bank
or trust company acceptable to the Regular Trustees and the Company).
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement,
the Institutional Trustee will act as registrar and transfer agent for the
Preferred Securities.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of each Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trust will not be required to register or cause to be
registered the transfer of the Preferred Securities after the Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, other than during the occurrence and
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Declarations and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Institutional Trustee is under no obligation to exercise any of
the powers vested in it by the Declarations at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Institutional Trustee is required
to decide between alternative causes of action, construe ambiguous provisions in
a Declaration or is unsure of the application of any provision of a Declaration,
and the matter is not one on which holders of Preferred Securities are entitled
under such Declaration to vote, then the Institutional Trustee shall take such
action as is directed by the Company and if not so directed, shall take such
action as it deems advisable and in the best interests of the holders of the
Trust Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or fail to be classified as a grantor trust for U.S.
federal income tax purposes and so that the Junior Subordinated Debentures will
be treated as indebtedness of the Company for U.S. federal income tax purposes.
In this connection, the Company and the Regular Trustees are authorized to take
any action, not inconsistent with applicable law, the certificate of trust of
the Trust or the Declaration, that the Company and the Regular Trustees
determine in their discretion to be necessary or desirable for such purposes, as
long as such action does not materially adversely affect the interests of the
holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar
rights.
The Trust may not borrow money or issue debt or mortgage or pledge
any of its assets.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee
which will be executed and delivered by the Company for the benefit of the
holders from time to time of Preferred Securities. The Guarantee will be
qualified as an indenture under the Trust Indenture Act. Wilmington Trust
Company, an independent trustee, will act as indenture trustee under the
Guarantee (the "Guarantee Trustee") for the
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purposes of compliance with the provisions of the Trust Indenture Act. The terms
of the Guarantee will be those set forth in the Guarantee and those made part of
the Guarantee by the Trust Indenture Act. The following summary does not purport
to be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the form of the Guarantee (including
the definitions therein of certain terms), which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Whenever particular defined terms of the Guarantee are referred
to in this Prospectus, such defined terms are incorporated herein by reference.
The Guarantee will be held by the Trustee for the benefit of the holders of the
Preferred Securities.
GENERAL
Pursuant to the Guarantee, unless otherwise specified in the
applicable Prospectus Supplement, the Company will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, on a
subordinated basis, to the holders of the Preferred Securities issued by the
Trust, the Guarantee Payments (as defined herein) (except to the extent paid by
the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which the Trust may have or assert. The following payments or
distributions with respect to Preferred Securities issued by the Trust, to the
extent not paid by or on behalf of the Trust (the "Guarantee Payments"), will be
subject to the Guarantee (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on the Preferred Securities, to the
extent the Trust shall have funds available therefor; (ii) with respect to any
Preferred Securities called for redemption by the Trust, the redemption price
(the "Redemption Price") and all accrued and unpaid distributions to the date of
redemption, to the extent the Trust has funds available therefor and (iii) upon
a voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or the redemption of all of
the Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid distributions on the Preferred Securities to
the date of payment, to the extent the Trust has funds available therefor, and
(b) the amount of assets of the Trust remaining available for distribution to
holders of the Preferred Securities in liquidation of the Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of Preferred Securities or by
causing the Trust to pay such amounts to such holders.
The Guarantee will be a full and unconditional guarantee on a
subordinated basis of the Guarantee Payments with respect to the Preferred
Securities, but will not apply to any payment of distributions except to the
extent the Trust shall have funds available therefor. If the Company does not
make interest payments on the Junior Subordinated Debentures purchased by the
Trust, the Trust will not pay distributions on the Preferred Securities issued
by the Trust and will not have funds available therefor. See "Relationship Among
the Preferred Securities, The Junior Subordinated Debentures and the Guarantee."
The Guarantee, when taken together with the Company's obligations under the
Indenture and the Declaration, will have the effect of providing a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Preferred Securities.
The Company has also agreed separately to irrevocably and
unconditionally guarantee the obligations of the Trust with respect to the
Common Securities (the "Common Securities Guarantee") to the same extent as the
Guarantee, except that upon an Indenture Event of Default, holders of the
Preferred Securities shall have priority over holders of Common Securities with
respect to distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any
Preferred Securities issued by the Trust remain outstanding, if there shall have
occurred any event that would constitute an event of default under the Guarantee
or the Declaration, then (a) the Company shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of capital stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security outstanding
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on the date of such event requiring the Company to purchase capital stock of the
Company, (ii) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (iv) dividends or distributions in
capital stock of the Company and (v) redemptions or purchases of any rights
pursuant to the Rights Agreement or any successor to the Rights Agreement, and
the declaration thereunder of a dividend of rights in the future), (b) the
Company shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to the Junior Subordinated Debentures and (c) the
Company shall not make any guarantee payments with respect to the foregoing
(other than payments pursuant to the Guarantee or the Common Securities
Guarantee).
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect the
rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of not less than a majority in liquidation amount of the outstanding
Preferred Securities issued by the Trust. All guarantees and agreements
contained in the Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Preferred Securities then outstanding.
TERMINATION
The Guarantee will terminate as to the Preferred Securities (a) upon
full payment of the Redemption Price of all Preferred Securities then
outstanding, (b) upon distribution of the Junior Subordinated Debentures held by
the Trust to the holders of the Preferred Securities of the Trust or (c) upon
full payment of the amounts payable in accordance with the Declaration upon
liquidation of the Trust. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure
of the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to
enforce the Guarantee, any holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce such holder's rights under
the Guarantee, without first instituting a legal proceeding against the Trust,
the Guarantee Trustee or any other person or entity. Notwithstanding the
foregoing, if the Company has failed to make a required guarantee payment, a
holder of Preferred Securities may directly institute a proceeding against the
Company for enforcement of the Guarantee for such payment. The Company waives
any right or remedy to require that any action be brought first against the
Trust or any other person or entity before proceeding directly against the
Company.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company; (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred or
preference stock of any affiliate of the Company; and (iii) senior to the
Company's common stock. The terms of the Preferred
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Securities provide that each holder of Preferred Securities issued by the Trust
by acceptance thereof agrees to the subordination provisions and other terms of
the Guarantee.
The Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the guarantee without
instituting a legal proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with
respect to the Guarantee, undertakes to perform only such duties as are
specifically set forth in the Guarantee and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provisions, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby; but the foregoing shall not relieve the Guarantee Trustee, upon the
occurrence of an event of default under the Guarantee, from exercising the
rights and powers vested in it by the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with
the internal laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As long as payments of interest and other payments are made when due
on the Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation amount of the
Preferred Securities and Common Securities; (ii) the interest rate and interest
and other payment dates on the Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the Preferred
Securities; (iii) the Company shall be obligated to pay, directly or indirectly,
all costs, expenses, debts and obligations of the Trust (other than with respect
to the Trust Securities); and (iv) the Declaration further provides that the
Trust will not engage in any activity that is not consistent with the limited
purposes of the Trust.
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Company as and to the extent
set forth under "Description of the Guarantee." Taken together, the Company's
obligations under a series of Junior Subordinated Debentures, the Indenture, the
Declaration and the Guarantee have the effect of providing a full, irrevocable
and unconditional guarantee of payments of Distributions and other amounts due
on the Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Preferred Securities. If and to the extent that
the Company does not make payments on the Junior Subordinated Debentures, the
Trust will not pay Distributions or other amounts due on the Preferred
Securities. The Guarantee does not cover payment of Distributions when the Trust
does not have sufficient funds to pay such Distributions. In such event, the
remedy of a holder of Preferred Securities is to institute a legal proceeding
directly against the Company for enforcement of payment of such Distributions to
such holder.
Notwithstanding anything to the contrary in the Indenture, the
Company has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee.
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A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Trust or
any other person or entity.
The Trust's Preferred Securities evidence preferred undivided
beneficial interests in the assets of the Trust, and each Trust exists for the
sole purpose of issuing the Preferred Securities and Common Securities and
investing the proceeds thereof in Junior Subordinated Debentures. A principal
difference between the rights of a holder of a Preferred Security and a holder
of a Junior Subordinated Debenture is that a holder of a Junior Subordinated
Debenture will accrue, and (subject to the permissible extension of the interest
period) is entitled to receive, interest on the principal amount of Junior
Subordinated Debentures held, while a holder of Preferred Securities is only
entitled to receive Distributions if and to the extent the Trust has funds
available for the payment of such Distributions.
Upon any voluntary or involuntary dissolution of the Trust involving
the liquidation of the Junior Subordinated Debentures, the holders of Preferred
Securities of the Trust will be entitled to receive, out of assets held by the
Trust, the Liquidation Distribution in cash. See "Description of Preferred
Securities -- Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Institutional Trustee,
as holder of the Junior Subordinated Debentures, would be a subordinated
creditor of the Company, subordinated in right of payment to all Senior Debt,
but entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Since the Company
is the guarantor under the Guarantee, the positions of a holder of the Preferred
Securities and a holder of the Junior Subordinated Debentures relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Indenture Event of Default under the Indenture. However,
in the event of payment defaults under, or acceleration of, Senior Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior Indebtedness
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on any Junior Subordinated Debentures
would constitute an Indenture Event of Default under the Indenture.
DESCRIPTION OF CAPITAL STOCK
The Company's Certificate of Incorporation, as amended (the
"Charter"), currently authorizes the issuance of two classes of stock: (i) 100
million shares of Common Stock, par value $0.10 per share, of which 53,338,336
shares were issued and outstanding as of June 30, 1997 and (ii) 8 million
shares of Preferred Stock, without par value, of which no shares were issued and
outstanding on such date.
The following descriptions of the classes of the Company's capital
stock are summaries, do not purport to be complete, and are subject, in all
respects, to the applicable provisions of the General Corporation Law of
Delaware, the Charter, the Certificate of Designation of Series A Participating
Preferred Stock (the "Certificate of Designation"), the Certificate of Increase
of Designation of Series A Participating Preferred Stock (the "Certificate of
Increase") and the Rights Agreement which, in the case of the Charter, the
Certificate of Designation, the Certificate of Increase and the Rights
Agreement, are included as Exhibits to the Registration Statement of which this
Prospectus forms a part.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for every share
standing in his or her name on the books of the Company. The Common Stock does
not have cumulative voting rights for the election of directors, which means
that holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors if they choose to do so, and, in such event, the
holders of the remaining shares voting for the election of directors will not be
able to elect any person or persons to the Board of Directors.
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Subject to the limitations contained in the Company's debt
instruments and after provision for the payment of dividends on any series of
Preferred Stock which might be issued and which has a preference with respect to
the payment of dividends, holders of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors of the Company.
The Common Stock has no conversion rights and is not redeemable. No
holder of Common Stock has any preemptive right to subscribe for any stock or
other securities of the Company which may be issued.
In the event of dissolution, liquidation or winding up of the
Company, or upon any distribution of its assets, the holders of Common Stock are
entitled to receive a pro rata portion of all of the assets available for
distribution to stockholders, subject to any preferential right which may be
accorded to any series of Preferred Stock which might be issued.
The Common Stock is listed on the NYSE and the Toronto Stock
Exchange. The outstanding shares of Common Stock are validly issued, fully paid
and non-assessable.
PREFERRED STOCK
The Board of Directors of the Company has the authority, without
further action by stockholders, to determine the principal rights, preferences
and privileges of any unissued Preferred Stock. Provisions may be included in
the shares of Preferred Stock, such as extraordinary voting, dividend,
redemption or conversion rights, which could discourage an unsolicited tender
offer or takeover proposal.
SERIES A PREFERRED STOCK
Out of the authorized Preferred Stock, the Company has designated
750,000 shares of Series A Participating Preferred Stock ("Series A Preferred
Stock"), the terms of which are summarized below. Each outstanding share of
Common Stock includes a right, which expires December 30, 2006, to purchase one
one-hundredth of a share of Series A Preferred Stock ("1996 Preferred Share
Purchase Rights"), which Rights are listed on the New York Stock Exchange and
the terms of which are summarized below under "1996 Preferred Share Purchase
Rights."
Dividends
Holders of shares of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, dividends, payable in cash quarterly in arrears on
January 1, April 1, July 1 and October 1 of each year (each, a "Quarterly
Dividend Payment Date"), at an annual rate per share of the greater of (i)
$10.00 or (ii) 100 times the aggregate per share amount of all cash and non-cash
dividends or other distributions (other than dividends payable in Common Stock
or subdivisions of outstanding shares of Common Stock) declared on the Common
Stock since the last Quarterly Dividend Payment Date. Accrued but unpaid
dividends accumulate but do not bear interest.
The Series A Preferred Stock will be junior as to dividends to any
series or class of Preferred Stock (or any similar stock) that ranks senior as
to dividends to the Series A Preferred Stock. The Series A Preferred Stock has
priority as to dividends over the Common Stock and any other series or class of
the Company's stock thereafter issued that ranks junior as to dividends to the
Series A Preferred Stock. If dividends or distributions payable on the Series A
Preferred Stock are in arrears, the Company (i) may not declare or pay dividends
or other distributions on the Common Stock (or any other stock of the Company
that ranks junior to the Series A Preferred Stock) and (ii) is restricted in its
declaration and payment of dividends or other distributions on any stock of the
Company that ranks on a parity with the Series A Preferred Stock except for
dividends paid ratably in accordance with the respective preferential amounts
payable on the Series A Preferred Stock and all such parity stock.
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Liquidation Rights
In the case of the voluntary or involuntary liquidation, dissolution
or winding-up of the Company, holders of shares of Series A Preferred Stock are
entitled to receive the liquidation preference of the higher of (i) $100.00 per
share, plus an amount equal to the accrued and unpaid dividends to the payment
date, or (ii) 100 times the aggregate per share amount to be distributed to
holders of shares of Common Stock, before any payment or distribution is made to
the holders of shares of Common Stock (or any other stock of the Company that
ranks junior to the Series A Preferred Stock). The holders of shares of Series A
Preferred Stock and of any other stock of the Company that ranks on a parity
with the Series A Preferred Stock are entitled to share ratably, in accordance
with the respective preferential amounts payable on such stock, in any
distribution that is not sufficient to pay in full the aggregate of the amounts
payable thereon.
Consolidation and Merger Rights
In case the Company enters into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are changed
into or exchanged for other stock or securities, cash and/or any other property,
each share of Series A Preferred Stock at the same time will be similarly
changed into or exchanged for an amount per share equal to 100 times the
aggregate amount of stock or securities, cash and/or any other property into
which or for which each share of Common Stock is changed or exchanged.
Limitation on Share Repurchase
If dividends or distributions payable on the Series A Preferred Stock
are in arrears, the Company may not redeem, purchase or otherwise acquire for
consideration (i) any stock of the Company that ranks on a parity with the
Series A Preferred Stock, except in exchange for shares of any stock of the
Company ranking junior to the Series A Preferred Stock or (ii) any shares of
Series A Preferred Stock or any stock of the Company that ranks on a parity with
the Series A Preferred Stock, except through a purchase offer made in writing or
by publication to all holders of such shares on terms that the Board of
Directors of the Company determines will result in fair and equitable treatment
among the respective series or classes of shares.
Voting Rights
Each share of Series A Preferred Stock entitles the holder thereof to
100 votes on all matters submitted to a vote of the Company's stockholders, and
the holders of the shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Company having general voting
rights will vote together as one class on all matters submitted to a vote of the
Company's stockholders.
If, at the time of any annual stockholders' meeting for the election
of directors, the equivalent of at least six quarterly dividends payable on any
shares of Series A Preferred Stock are in default, the number of members of the
Company's Board of Directors will be increased by two, and the holders of the
Series A Preferred Stock, voting separately as a class, will be entitled at such
meeting (and each subsequent annual stockholders' meeting) to elect such two
additional directors. Such voting rights will terminate when all such dividends
in arrears have been paid or declared and set apart for payment. Upon the
termination of such voting rights, the terms of office of all directors so
elected will terminate immediately and the number of members of the Company's
Board of Directors will be reduced by two.
Other Features
The shares of Series A Preferred Stock are not redeemable. Unless
otherwise provided in the Company's Restated Certificate of Incorporation or the
designation of a subsequent series of Preferred Stock, the Series A Preferred
Stock will rank junior to all of the Company's other series of Preferred Stock
as to the payment of dividends and the distribution of assets on liquidation,
dissolution or winding-up, and
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senior to the Common Stock. Series A Preferred Stock may be issued in fractions
of a share (in one one-hundredths (1/100) of a share and integral multiples
thereof).
1996 PREFERRED SHARE PURCHASE RIGHTS
Under a Rights Agreement, dated as of December 12, 1996 (the "Rights
Agreement"), between the Company and The Chase Manhattan Bank, as Rights Agent,
each outstanding share of Common Stock is coupled with a 1996 Preferred Share
Purchase Right. Each right entitles the holder to buy from the Company one
one-hundredth of a share of Series A Preferred Stock at a price of $190.
The 1996 Preferred Share Purchase Rights become exercisable and
detach from the Common Stock ten business days after a person or group acquires,
or announces a tender offer for, 15% or more of the Company's outstanding shares
of Common Stock. The rights will expire on December 30, 2006, unless redeemed
earlier by the Company. The rights are redeemable by the Company at one cent
each at any time prior to public announcement or notice to the Company that an
acquiring person or group has purchased 15% or more of the Company's outstanding
Common Stock (an "Acquisition Event"). At any time after an Acquisition Event
and prior to the acquisition by such person or group of 50% or more of the
outstanding Common Stock, the Board of Directors of the Company may exchange one
share of Common Stock for each right outstanding, other than the rights held by
the acquiring person or group. At any time after an Acquisition Event and the
rights become exercisable, each right, other than rights held by the acquiring
person or group, would entitle its holder to buy Common Stock of the Company
having a market value of twice the exercise price of the right or, if the
Company is subsequently acquired in a merger or other business combination, such
shares of the acquiring or surviving company. Until the 1996 Preferred Share
Purchase Rights detach from the Common Stock (or the earlier termination or
redemption of the 1996 Preferred Share Purchase Rights), an additional 1996
Preferred Share Purchase Right will be issued with every share of newly issued
Common Stock.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the
General Corporation Law of Delaware. In general, this statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person becomes an interested stockholder, unless
the business combination is approved in a prescribed manner. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within the prior three years did own) 15% or more of the corporation's voting
stock.
In addition to Section 203 of the General Corporation Law of Delaware
and the Preferred Share Purchase Rights, the Charter contains several provisions
that may discourage certain transactions involving an actual or threatened
change of control of the Company.
For example, the Charter requires that certain business combinations
and other combinations involving the Company and a holder of 10% or more of its
voting securities be approved by at least 66 2/3% of all shares having voting
rights.
The foregoing provisions of the General Corporation Law of Delaware
and the Charter are intended to encourage persons seeking to acquire control of
the Company to consult first with the Board of Directors to permit negotiation
of the terms of any proposed business combination or offer. They may, however,
also have the effect of discouraging a third party from attempting to acquire
control of the Company. In addition, since these provisions are designed to
discourage accumulations of large blocks of stock by third parties who wish to
gain control of the Company, such provisions may reduce the temporary market
price fluctuations caused by such accumulations.
TRANSFER AGENT AND REGISTRAR
The primary Transfer Agent and Registrar for the Common Stock is
ChaseMellon Shareholder Services, located in New York, New York.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock or Preferred Stock at a
future date or dates. The consideration per share of Preferred Stock or Common
Stock may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part of
units ("Stock Purchase Units") consisting of a Stock Purchase Contract and Debt
Securities, Preferred Securities or debt obligations of third parties, including
U.S. Treasury securities, securing the holders' obligations to purchase the
Preferred Stock or the Common Stock under the Stock Purchase Contracts. The
Stock Purchase Contracts may require the Company to make periodic payments to
the holders of the Stock Purchase Units or vice versa, and such payments may be
unsecured or prefunded on some basis. The Stock Purchase Contracts may require
holders to secure their obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any
Stock Purchase Contracts or Stock Purchase Units. The description in the
Prospectus Supplement will not purport to be complete and will be qualified in
its entirety by reference to the Stock Purchase Contracts, and, if applicable,
collateral arrangements and depositary arrangements, relating to such Stock
Purchase Contracts or Stock Purchase Units.
BOOK-ENTRY ISSUANCE
Unless otherwise specified in the applicable Prospectus Supplement,
DTC will act as depositary for Securities issued in the form of Global
Securities. Such Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered Global Securities will be issued for such Securities
representing in the aggregate the total number of such Securities, and will be
deposited with or on behalf of DTC.
DTC 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. DTC
holds securities that its Participants deposit with DTC. DTC 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 include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC 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 DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for such Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities issued in the form of Global Securities 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 interests
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in such Securities, except in the event that use of the book-entry system for
such Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the
Securities issued in the form of Global Securities; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Securities 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 DTC 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.
Redemption notices shall be sent to Cede & Co. as the registered
holder of Securities issued in the form of Global Securities. If less than all
of a series of such Securities are being redeemed, DTC's current practice is to
determine by lot the amount of the interest of each Direct Participant to be
redeemed.
Although voting with respect to Securities issued in the form of
Global Securities is limited to the holders of record of such Securities, in
those instances in which a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to such Securities. Under its usual
procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the issuer
of such Securities 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 such Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Payments in respect of Securities issued in the form of Global
Securities will be made by the issuer of such Securities to DTC. DTC's practice
is to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the Institutional Trustee, either Trust or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payments to DTC are the responsibility of the issuer of the
applicable Securities, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depositary with respect
to any Securities at any time by giving reasonable notice to the issuer of such
Securities. In the event that a successor depositary is not obtained, individual
Security certificates representing such Securities are required to be printed
and delivered. The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary).
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Trust and the Company believe to
be accurate, but the Trust and the Company assume no responsibility for the
accuracy thereof. Neither the Trust nor the Company has any responsibility for
the performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
PLAN OF DISTRIBUTION
Any of the Securities being offered hereby may be sold in any one or
more of the following ways from time to time: (i) through agents; (ii) to or
through underwriters; (iii) through dealers; and (iv) directly by the Company
or, in the case of Preferred Securities, by the Trust to purchasers.
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The distribution of the Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Offers to purchase Securities may be solicited by agents designated
by the Company from time to time. Any such agent involved in the offer or sale
of the Securities in respect of which this Prospectus is delivered will be
named, and any commissions payable by the Company or the Trust to such agent
will be set forth, in the applicable Prospectus Supplement. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be acting on a
reasonable best efforts basis for the period of its appointment. Any such agent
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the Securities so offered and sold.
If Securities are sold by means of an underwritten offering, the
Company and, in the case of an offering of Preferred Securities, the Trust will
execute an underwriting agreement with an underwriter or underwriters at the
time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the applicable Prospectus Supplement which
will be used by the underwriters to make resales of the Securities in respect of
which this Prospectus is being delivered to the public. If underwriters are
utilized in the sale of any Securities in respect of which this Prospectus is
being delivered, such Securities will be acquired by the underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined by the underwriters at the time of sale. Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters or directly by one or more underwriters. If any
underwriter or underwriters are utilized in the sale of Securities, unless
otherwise indicated in the applicable Prospectus Supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent and that the underwriters with respect to a sale of
such Securities will be obligated to purchase all such Securities if any are
purchased.
The Company or the Trust, as applicable, may grant to the
underwriters options to purchase additional Securities, to cover
over-allotments, if any, at the initial public offering price (with additional
underwriting commissions or discounts), as may be set forth in the Prospectus
Supplement relating thereto. If the Company or the Trust, as applicable, grants
any over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Securities.
If a dealer is utilized in the sale of the Securities in respect of
which this Prospectus is delivered, the Company or the Trust, as applicable,
will sell such Securities to the dealer as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale. Any such dealer may be deemed to be an underwriter, as
such term is defined in the Securities Act, of the Securities so offered and
sold. The name of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the
Company or the Trust, as applicable, and the sale thereof may be made by the
Company or the Trust directly to institutional investors or others, who may be
deemed to be underwriters within the meaning of the Securities Act with respect
to any resale thereof. The terms of any such sales will be described in the
Prospectus Supplement relating thereto.
Securities may also be offered and sold, if so indicated in the
applicable Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for the Company or the Trust, as applicable.
Any remarketing firm will be identified and the terms of its agreement, if any,
with the Company or the Trust and its compensation will be described in the
applicable Prospectus Supplement. Remarketing firms may be deemed to be
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underwriters, as that term is defined in the Securities Act, in connection with
the Securities remarketed thereby.
If so indicated in the applicable Prospectus Supplement, the Company
or the Trust, as applicable, may authorize agents and underwriters to solicit
offers by certain institutions to purchase Securities from the Company or the
Trust at the public offering price set forth in the applicable Prospectus
Supplement pursuant to delayed delivery contracts providing for payment and
delivery on the date or dates stated in the applicable Prospectus Supplement.
Such delayed delivery contracts will be subject to only those conditions set
forth in the applicable Prospectus Supplement. A commission indicated in the
applicable Prospectus Supplement will be paid to underwriters and agents
soliciting purchases of Securities pursuant to delayed delivery contracts
accepted by the Company or the Trust, as applicable.
Agents, underwriters, dealers and remarketing firms may be entitled
under relevant agreements with the Company or the Trust, as applicable, to
indemnification by the Company or the Trust against certain liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, underwriters, dealers and remarketing firms may
be required to make in respect thereof.
Each series of Securities will be a new issue and, other than the
Common Stock, which is listed on the New York Stock Exchange and the Toronto
Stock Exchange, will have no established trading market. The Company may elect
to list any series of Securities on an exchange, and in the case of the Common
Stock, on any additional exchange, but, unless otherwise specified in the
applicable Prospectus Supplement, the Company shall not be obligated to do so.
No assurance can be given as to the liquidity of the trading market for any of
the Securities.
Agents, underwriters, dealers and remarketing firms may be customers
of, engage in transactions with, or perform services for, the Company and its
subsidiaries in the ordinary course of business.
LEGAL OPINIONS
Unless otherwise specified in a Prospectus Supplement relating to
particular Securities, the validity of the Securities offered hereby, other than
Preferred Securities, will be passed upon for the Company by Debevoise &
Plimpton, New York, New York, and certain matters of Delaware law with respect
to the validity of the Preferred Securities offered hereby will be passed upon
for the Company by Morris, Nichols, Arsht & Tunnell, special Delaware counsel to
the Company. The validity of the Securities offered hereby will be passed upon
for the underwriters, dealers or agents, if any, by counsel to be named in the
applicable Prospectus Supplement.
EXPERTS
The financial statements and schedules incorporated in this
Prospectus by reference to the 1996 Form 10-K have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated in this Prospectus by reference in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of the Company included in any
subsequent Annual Report of the Company on Form 10-K and incorporated by
reference in this Prospectus will have been examined by the independent public
accountants whose report thereon appears in such Annual Report. Such
consolidated financial statements of the Company shall be deemed to be
incorporated herein from the date of filing of the applicable report on Form
10-K in reliance on the reports of such independent public accountants, given on
the authority of such firm as experts in auditing and accounting.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts and commissions) expected to be incurred in connection with the
issuance and distribution of the securities being registered. Except for the
Securities and Exchange Commission filing fee, all amounts shown are estimates:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee......................................... $136,364
NYSE Listing Fees........................................ *
Rating Agency Fees....................................... *
Accountants' Fees and Expenses........................... *
Counsel's Fees and Expenses.............................. *
Blue Sky Fees and Expenses (including counsel's fees).... *
Printing and Engraving Expenses.......................... *
Fees and Expenses of Trustees............................ *
Miscellaneous............................................ *
-------
Total.................................................... *
=======
---------------
*To be filed by amendment.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Reference is made to Section 102(b)(7) of the General Corporation Law
of the State of Delaware as to the limitation of personal liability of directors
and officers and to Section 145 of the General Corporation Law of the State of
Delaware as to indemnification by the Company of its directors and officers.
B. Article FOURTEENTH of the Company's Certificate of Incorporation, as
amended, provides as follows with respect to the indemnification of the
Company's directors and officers and the limitation of personal liability of its
directors and officers:
FOURTEENTH: The corporation shall indemnify to the full extent
authorized or permitted by law any person made, or threatened to be made,
a party to any action or proceeding (whether civil or criminal or
otherwise) by reason of the fact that he, his testator or intestate, is or
was a director or officer of the corporation or by reason of the fact that
such director or officer, at the request of the corporation, is or was
serving any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity. Nothing contained
herein shall affect any rights to indemnification to which employees other
than directors and officers may be entitled by law. No director of the
corporation shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which such director derived an improper personal
benefit. No amendment to or repeal of this Article
II-1
<PAGE> 159
FOURTEENTH shall apply to or have any effect on the liability or alleged
liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment.
C. Article IX of the Company's By-Laws provides as follows with respect
to the indemnification of the Company's directors and officers and of certain
other persons:
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall, to the fullest extent permitted by
applicable law from time to time in effect, (but, in the case of any
amendment of such law, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such
law permitted the Corporation to provide prior to such amendment)
indemnify any and all persons who may serve or who have served at any
time as directors or officers of the Corporation, or who at the
request of the Corporation may serve or at any time have served as
directors, officers, employees or agents of another corporation
(including subsidiaries of the Corporation) or of any partnership,
joint venture, trust or other enterprise, and any directors or
officers of the Corporation who at the request of the Corporation may
serve or at any time have served as agents or fiduciaries of an
employee benefit plan of the Corporation or any of its subsidiaries,
from and against any and all of the expenses, liabilities or other
matters referred to in or covered by law whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as
a director, officer, employee or agent. The Corporation may also
indemnify any and all other persons whom it shall have power to
indemnify under any applicable law from time to time in effect to the
extent permitted by such law. The indemnification provided by this
Article IX shall not be deemed exclusive of any other rights to which
any person may be entitled under any provision of the Certificate of
Incorporation, other By-Law, agreement, vote of stockholders or
disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding
such office, and shall be contract rights and continue as to a person
who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
If a claim under this Article IX is not paid in full by the
Corporation within sixty days after a written claim has been received
by the Corporation, except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be twenty
days, the director or officer may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought
by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the director or officer shall be
entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the director or officer to enforce a
right to indemnification hereunder (but not in a suit brought by the
director or officer to enforce a right to an advancement of expenses)
it shall be a defense that, and (ii) any suit by the Corporation to
recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the director or officer has
not met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to
the commencement of such suit that indemnification of the director or
officer is proper in the circumstances because the director or
officer has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board, independent legal counsel, or its
stockholders) that the director or officer has not met such
applicable standard of conduct, shall create a presumption that the
director or
II-2
<PAGE> 160
officer has not met the applicable standard of conduct or, in the
case of such a suit brought by the director or officer, be a defense
to such suit. In any suit brought by the director or officer to
enforce a right to indemnification or to an advancement of expenses
hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of
proving that the director or officer is not entitled to be
indemnified, or to such advancement of expenses, under this Article
IX or otherwise shall be on the Corporation.
The indemnification provided in this Article IX shall inure to
each person referred to herein, whether or not the person is serving
in any of the enumerated capacities at the time such expenses
(including attorneys' fees), judgments, fines or amounts paid in
settlement are imposed or incurred, and whether or not the claim
asserted against him is based on matters which antedate the adoption
of this Article IX. None of the provisions of this Article IX shall
be construed as a limitation upon the right of the Corporation to
exercise its general power to enter into a contract or understanding
of indemnity with a director, officer, employee, agent or any other
person in any proper case not provided for herein. Each person who
shall act or have acted as a director or officer of the Corporation
shall be deemed to be doing so in reliance upon such right of
indemnification.
For purposes of this Article IX, the term "Corporation" shall
include constituent corporations referred to in subsection (h) of
Section 145 of the General Corporation Law of the State of Delaware
(or any similar provision of applicable law at the time in effect).
D. The Company has entered into an Indemnity Agreement with each member of
the Company's Board of Directors. Each Indemnity Agreement provides, among other
things, that in the event the director was, is or becomes a party, witness or
other participant in a Claim (as defined in the Indemnity Agreement) by reason
of (or arising in part out of) an Indemnifiable Event (as defined in the
Indemnity Agreement), the Company is required to indemnify the director to the
fullest extent authorized by the Company's By-Laws as in effect on the date of
the Indemnification Agreement notwithstanding any subsequent amendment, repeal
or modification of such By-Laws, against any and all expenses, judgments, fines,
penalties and amounts paid in settlement of such Claim. The Indemnity Agreement
requires that the Company advance to the director all expenses relating to
Claims and contains an undertaking by the director to reimburse the Company for
any such advances that are subsequently determined in a final judicial
determination to have been impermissible under applicable law.
E. The directors and officers of the Company are covered by insurance
policies, maintained by the Company at its expense, insuring the directors and
officers against certain liabilities which might be incurred by them in such
capacities, including liabilities arising under the Securities Act of 1933.
ITEM 16. EXHIBITS.
The following Exhibits are filed as part of this Registration
Statement:
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------
1.1 Form of Underwriting Agreement for the FELINE PRIDES.*
1.2 Form of Underwriting Agreement for Capital Securities.*
4.1 Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit (3)(i) to the
Company's quarterly report on Form 10-Q (File No.
1-3660) for the quarter ended March 31, 1997).
II-3
<PAGE> 161
4.2 By-laws of the Company, as amended (incorporated by reference
to Exhibit 3 to the Company's annual report on Form 10-K (File
No. 1-3660) for the fiscal year ended December 31, 1995).
4.3 Specimen Certificate of Common Stock of the Company
(incorporated by reference to Exhibit 99 to the Company's
Annual Report on Form 10-K (File No. 1-3660) for the fiscal
year ended December 31, 1996).
4.4.1 Rights Agreement, dated as of December 12, 1996 (incorporated
by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A (File No. 1-3660), dated December 19,
1996).
4.4.2 Form of Rights Certificate (attached as Exhibit to the Rights
Agreement incorporated by reference herein as Exhibit 4.4.1).
4.5.1 Form of Stock Purchase Contract Agreement (including as
Exhibit A the form of the Security Certificate).*
4.5.2. Form of Pledge Agreement.*
4.6.1 Certificate of Trust of Owens Corning Capital II (incorporated
by reference to Exhibit 4.8.1 to the Registration Statement
on Form S-3 (Reg. No. 333-24501) of the Company, Owens Corning
Capital II and Owens Corning Capital III).
4.6.2 Declaration of Trust of Owens Corning Capital II (incorporated
by reference to Exhibit 4.8.2 to the Registration Statement
on Form S-3 (Reg. No. 333-24501) of the Company, Owens Corning
Capital II and Owens Corning Capital III).
4.7.1 Form of Amended and Restated Declaration of Trust for Owens
Corning Capital II, with respect to the Capital Securities.*
4.7.2 Form of Preferred Security Certificate for Owens Corning
Capital II, with respect to the Capital Securities.*
4.7.3 Form of Capital Securities Guarantee Agreement in respect of
Owens Corning Capital II, with respect to the Capital
Securities.*
4.8.1 Form of Indenture between Owens Corning and Wilmington Trust
Company, as Trustee.* 4.8.2 Form of Junior Subordinated
Debentures.* 5.1.1 Opinion of Debevoise & Plimpton as to the
legality of the Securities (other than the Preferred
Securities) being registered.*
5.1.2 Opinion of Morris, Nichols, Arsht & Tunnell, special Delaware
counsel, relating to the legality of the Preferred Securities
of Owens Corning Capital II.*
8.1 Opinion of Debevoise & Plimpton, as to United States tax
matters.*
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Fixed Charges and Preferred Stock Dividends.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
23.2 Consent of Debevoise & Plimpton (included in Exhibit 5.1.1 and
8.1).*
23.3 Consent of Morris, Nichols, Arsht & Tunnell, special Delaware
counsel (included in Exhibit 5.1.2).*
24 Powers of Attorney.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company,
as Debt Trustee under the Indenture.*
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company,
as Institutional Trustee under the Amended and Restated
Declaration of Trust of Owens Corning Capital II.
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company,
as Guarantee Trustee under the Guarantee for Owens Corning
Capital II.*
- --------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(A) RULE 415 OFFERING
The undersigned Registrants hereby undertake:
II-4
<PAGE> 162
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(B) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY
REFERENCE.
The undersigned Registrants hereby further undertake that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Company's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(C) POLICY REGARDING INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by any
Registrant of expenses incurred or paid by a director, officer or controlling
person of a Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate
II-5
<PAGE> 163
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(D) REGISTRATION STATEMENTS PERMITTED BY RULE 430A.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by any Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Owens
Corning certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toledo, State of Ohio, on July 25, 1997.
OWENS CORNING
By: /s/ Michael I. Miller
--------------------------------
Michael I. Miller
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
* Chairman of the Board, July 24, 1997
- ------------------------------ Chief Executive Officer and
(Glen H. Hiner) Director (principal executive
officer)
* Senior Vice President and July 22, 1997
- ------------------------------ Chief Financial Officer
(David W. Devonshire) (principal financial officer)
* Vice President and July 23, 1997
- ------------------------------ Controller
(Steven J. Strobel)
* Director July 21, 1997
- ------------------------------
(Norman P. Blake, Jr.)
* Director July 16, 1997
- ------------------------------
(Gaston Caperton)
* Director July 17, 1997
- ------------------------------
(Leonard S. Coleman, Jr.)
* Director July 16 1997
- ------------------------------
(William W. Colville)
* Director July 18, 1997
- ------------------------------
(John H. Dasburg)
* Director July 16, 1997
- ------------------------------
(Landon Hilliard)
* Director July 17, 1997
- ------------------------------
(Sir Trevor Holdsworth)
* Director July 16, 1997
- ------------------------------
(Jon M. Huntsman, Jr.)
* Director July 17, 1997
- ------------------------------
(Ann Iverson)
* Director July 16, 1997
- ------------------------------
(W. Walker Lewis)
* Director July 17, 1997
- ------------------------------
(Furman C. Moseley, Jr.)
* Director July 17, 1997
- ------------------------------
(W. Ann Reynolds)
*By: /s/ Michael I. Miller
--------------------------
Attorney-in-fact
</TABLE>
II-7
<PAGE> 165
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, Owens
Corning Capital II (i) certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and (ii) has duly caused
this Statement on Form S-3 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Toledo, State of Ohio, on July 25,
1997.
OWENS CORNING CAPITAL II
By OWENS CORNING, as Sponsor
By /s/ Michael I. Miller
-------------------------------------
Name: Michael I. Miller
Title: Vice President and Treasurer
II-8
<PAGE> 166
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY NUMBERED
EXHIBIT NUMBER EXHIBIT PAGE
- ------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C>
1.1 Form of Underwriting Agreement for the FELINE PRIDES.*
1.2 Form of Underwriting Agreement for the Capital Securities.*
4.1 Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit (3)(i) to the Company's
quarterly report on Form 10-Q (File No. 1-3660) for the
quarter ended March 31, 1997).
4.2 By-laws of the Company, as amended (incorporated by
reference to Exhibit 3 to the Company's annual report on Form
10-K (File No. 1-3660) for the fiscal year ended December 31,
1995).
4.3 Specimen Certificate of Common Stock of the Company
(incorporated by reference to Exhibit 99 to the Company's
Annual Report on Form 10-K (File No. 1-3660) for the fiscal
year ended December 31, 1996).
4.4.1 Rights Agreement, dated as of December 12, 1996
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A (File No. 1-3660), dated
December 19, 1996).
4.4.2 Form of Rights Certificate (attached as Exhibit to the Rights
Agreement incorporated by reference herein as Exhibit 4.4.1).
4.5.1 Form of Stock Purchase Contract Agreement (including as
Exhibit A the form of the Security Certificate).*
4.5.2. Form of Pledge Agreement.*
4.6.1 Certificate of Trust of Owens Corning Capital II (incorporated
by reference to Exhibit 4.8.1 to the Registration Statement on
Form S-3 (Reg. No. 333-24501) of the Company, Owens
Corning Capital II and Owens Corning Capital III).
4.6.2 Declaration of Trust of Owens Corning Capital II (incorporated
by reference to Exhibit 4.8.2 to the Registration Statement on
Form S-3 (Reg. No. 333-24501) of the Company, Owens
Corning Capital II and Owens Corning Capital III).
4.7.1 Form of Amended and Restated Declaration of Trust for Owens
Corning Capital II, with respect to the Capital Securities.*
4.7.2 Form of Preferred Security Certificate for Owens Corning
Capital II, with respect to the Capital Securities.*
4.7.3 Form of Capital Securities Guarantee Agreement in respect of
Owens Corning Capital II, with respect to the Capital
Securities.*
4.8.1 Form of Indenture between Owens Corning and Wilmington
Trust Company, as Trustee.*
</TABLE>
II-9
<PAGE> 167
<TABLE>
<S> <C>
4.8.2 Form of Junior Subordinated Debentures.*
5.1.1 Opinion of Debevoise & Plimpton as to the legality of the
Securities (other than the Preferred Securities) being
registered.*
5.1.2 Opinion of Morris, Nichols, Arsht & Tunnell, special Delaware
counsel, relating to the legality of the Preferred Securities
of Owens Corning Capital II.*
8.1 Opinion of Debevoise & Plimpton, as to United States tax
matters.*
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Fixed Charges and Preferred Stock Dividends.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
23.2 Consent of Debevoise & Plimpton (included in Exhibit 5.1.1 and
8.1)*
23.3 Consent of Morris, Nichols, Arsht & Tunnell, special Delaware
counsel (included in Exhibit 5.1.2).*
24 Powers of Attorney.
25.1 Form T-1 Statement of Eligibility of Wilmington Trust Company,
as Debt Trustee under the Indenture.*
25.2 Form T-1 Statement of Eligibility of Wilmington Trust Company,
as Institutional Trustee under the Amended and Restated
Declaration of Trust of Owens Corning Capital II.*
25.3 Form T-1 Statement of Eligibility of Wilmington Trust Company,
as Guarantee Trustee under the Guarantee for Owens Corning
Capital II.*
</TABLE>
- --------------------
* To be filed by amendment.
II-10
<PAGE> 1
EXHIBIT 12.1
OWENS CORNING
STATEMENT RE COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In millions, except ratio information)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------------------------------------------------------
EARNINGS:
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before income taxes 149.7 (715.1) (562.0) 340.0 132.7 146.3 103.5
Interest expense 42.9 37.6 78.9 89.3 94.1 89.5 110.1
Portion of rents representative of
interest factor 16.5 13.2 28.8 21.2 17.8 14.0 12.8
Preferred stock dividends for MIPS 6.5 6.5 13.0 8.3
Previously capitalized interest
amortized 1.6 1.1 2.5 1.9 1.6 1.3 1.1
Adjustments for minority interest&
equity affiliate distributions 2.8 2.8 3.0 2.0 5.3 6.6 3.9
----- ----- ----- ----- ----- ----- -----
220.0 (653.9) (435.9) 462.7 251.5 257.7 231.4
===== ===== ===== ===== ===== ===== =====
FIXED CHARGES:
Interest charges on operations 49.9 43.2 89.6 96.7 98.9 92.5 110.6
Portion of rents representative of
interest factor 16.5 13.2 28.7 21.2 17.8 14.0 12.8
Preferred stock dividends for MIPS 6.5 6.5 13.0 8.3 -- -- --
----- ----- ----- ----- ----- ----- -----
72.9 62.9 131.3 126.2 116.7 106.5 123.4
===== ===== ===== ===== ===== ===== =====
RATIO OF EARNINGS TO FIXED
CHARGES 3.02x -- -- 3.67x 2.15x 2.42x 1.88x
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS 3.02x -- -- 3.67x 2.15x 2.42x 1.88x
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
January 18, 1997, included in Owens Corning's Form 10-K for the year ended
December 31, 1996, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Toledo, Ohio
July 21, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 24th day of July, 1997.
/s/ Glen H. Hiner
-----------------------------------
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 24th day of July, 1997.
/s/ Glen H. Hiner
-----------------------------------
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 22nd day of July, 1997.
/s/ David W. Devonshire
-----------------------------------
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 22nd day of July, 1997.
/s/ David W. Devonshire
-----------------------------------
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 23rd day of July, 1997.
/s/ Steven J. Strobel
-----------------------------------
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 23rd day of July, 1997.
/s/ Steven J. Strobel
-----------------------------------
<PAGE> 7
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 21st day of July, 1997.
/s/ Norman P. Blake, Jr.
-----------------------------------
<PAGE> 8
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 21st day of July, 1997.
/s/ Norman P. Blake, Jr.
-----------------------------------
<PAGE> 9
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ Gaston Caperton
-----------------------------------
<PAGE> 10
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ Gaston Caperton
-----------------------------------
<PAGE> 11
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Leonard S. Coleman, Jr.
-----------------------------------
<PAGE> 12
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Leonard S. Coleman, Jr.
-----------------------------------
<PAGE> 13
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ William W. Colville
-----------------------------------
<PAGE> 14
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ William W. Colville
-----------------------------------
<PAGE> 15
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 18th day of July, 1997.
/s/ John H. Dasburg
-----------------------------------
<PAGE> 16
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 18th day of July, 1997.
/s/ John H. Dasburg
-----------------------------------
<PAGE> 17
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ Landon Hilliard
-----------------------------------
<PAGE> 18
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ Landon Hilliard
-----------------------------------
<PAGE> 19
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Sir Trevor Holdsworth
-----------------------------------
<PAGE> 20
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Sir Trevor Holdsworth
-----------------------------------
<PAGE> 21
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ Jon M. Huntsman, Jr.
-----------------------------------
<PAGE> 22
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ Jon M. Huntsman, Jr.
-----------------------------------
<PAGE> 23
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Ann Iverson
-----------------------------------
<PAGE> 24
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Ann Iverson
-----------------------------------
<PAGE> 25
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ W. Walker Lewis
-----------------------------------
<PAGE> 26
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 16th day of July, 1997.
/s/ W. Walker Lewis
-----------------------------------
<PAGE> 27
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Furman C. Moseley, Jr.
-----------------------------------
<PAGE> 28
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ Furman C. Moseley, Jr.
-----------------------------------
<PAGE> 29
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Common Stock, Stock Purchase
Contracts and Stock Purchase Units of Owens Corning (collectively, the
"Securities"), to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ W. Ann Reynolds
-----------------------------------
<PAGE> 30
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints David W. Devonshire, Michael I. Miller and Christian L.
Campbell and each of them (with full power to act alone), the undersigned's true
and lawful attorney and agent, with full power of substitution and
resubstitution, in the name and on behalf of the undersigned, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable in compliance with the
Securities Act of 1933, as amended (the "Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the registration under the Act of Subordinated Debt Securities
of Owens Corning and Guarantees by Owens Corning (collectively, the
"Securities") with respect to the Preferred Securities of certain statutory
business trusts, to be offered from time to time by Owens Corning (through
underwriters or otherwise), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in any and all capacities to a Registration Statement on Form S-3 to
be filed with the Securities and Exchange Commission in respect of the
Securities, to any and all amendments, including post-effective amendments, or
supplements to such Registration Statement, to any additional Registration
Statements to be filed pursuant to Rule 462(b) under the Act and to any and all
instruments or documents filed as a part of, or in connection with, any
Registration Statement referred to above or amendments or supplements thereto,
and the undersigned hereby ratifies and confirms all that the said attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 17th day of July, 1997.
/s/ W. Ann Reynolds
-----------------------------------
