<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1997
REGISTRATION NO. 333-32145
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
<TABLE>
<S> <C>
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)
</TABLE>
---------------
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:
<TABLE>
<S> <C>
RALPH ARDITI, ESQ. JOHN W. OSBORN, ESQ.
DEBEVOISE & PLIMPTON SKADDEN, ARPS, SLATE,
875 THIRD AVENUE MEAGHER & FLOM LLP
NEW YORK, NEW YORK 10022 919 THIRD AVENUE
(212) 909-6000 NEW YORK, NEW YORK 10022
(212) 735-3000
</TABLE>
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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. [ ]
(Continued on next page)
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<PAGE> 2
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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> 3
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
OWENS CORNING CAPITAL II
------------------
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"), and Owens Corning Capital II, a statutory business trust formed
under the laws of the State of Delaware ("OC Capital" or the "Trust"). 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 of 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 contract adjustment payments
("Contract Adjustment Payments"), if any, and (b) beneficial ownership of a %
Trust Preferred Security (a "Trust Preferred Security"), having a stated
liquidation amount per Trust Preferred Security equal to the Stated Amount,
representing a preferred undivided beneficial interest in the assets of OC
Capital. The Company will, directly or indirectly, own all the common securities
(the "Common Securities" and, together with the Trust Preferred Securities, the
"Trust Securities") representing undivided beneficial interest 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 %
Subordinated Debentures of the Company, due , 2002 (the
"Debentures"). As long as the FELINE PRIDES are in the form of Income PRIDES,
the related Trust Preferred Securities 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)
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SEE "RISK FACTORS" BEGINNING ON PAGE S-16 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 AND THE RELATED UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
------------------
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 PROCEEDS TO
PUBLIC(1) COMMISSION(2) THE COMPANY(3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Income PRIDES.......................... $50.00 $ $
- ----------------------------------------------------------------------------------------------------------------
Total(4)................................... $300,000,000 $ $
================================================================================================================
</TABLE>
(1) Plus accrued distributions on the related Trust Preferred Securities and
Contract Adjustment Payments, if any, from , 1997.
(2) The Company and OC Capital have agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting estimated expenses payable by the Company estimated at
$ .
(4) The Company and OC Capital have granted to the Underwriters a 30-day option
to purchase up to an additional 900,000 Income PRIDES, to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public, Underwriting Commission and Proceeds to the Company
will be $ , $ and $ , respectively. See
"Underwriting."
------------------
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.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
------------------
The date of this Prospectus Supplement is , 1997.
- ---------------
(SM) Service Mark of Merrill Lynch & Co. Inc.
<PAGE> 4
Aggregate payments of % of the Stated Amount per annum will be made or
accrue on each Income PRIDES quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing , 1997,
until the Purchase Contract Settlement Date. These payments will consist of
cumulative cash distributions on the related Trust Preferred Securities payable
by OC Capital 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, in each case, subject to the Company's right to defer payment
of such amounts. The ability of OC Capital to make the quarterly distributions
on the Trust Preferred Securities is solely dependent upon the receipt of
corresponding interest payments from the Company on the Debentures. The Company
has the right at any time, and from time to time, limited to a period not
extending beyond the maturity date of the Debentures, to defer the interest
payments due on the Debentures and to defer Contract Adjustment Payments until
the Purchase Contract Settlement Date. As a consequence of such deferral,
quarterly distributions on the Income PRIDES would be deferred, but would
continue to accrue with interest compounded quarterly.
The distribution rate on the Trust Preferred Securities (as well as the
interest rate on the related Debentures) will be reset on the Purchase Contract
Settlement Date to a rate per annum (the "Reset Rate") to be determined by the
Reset Agent (as defined herein) equal to the sum of (x) a spread amount (the
"Reset Spread") to be determined by the Reset Agent on the fifth Business Day
prior to the Purchase Contract Settlement Date and (y) the rate of interest on
the Two-Year Benchmark Treasury (as defined herein) in effect on the Purchase
Contract Settlement Date, such sum being the distribution rate the Trust
Preferred Securities (as well as the interest rate the Debentures) should bear
in order for a Trust Preferred Security and a Debenture to have an approximate
market value of 100.5% of their stated amount and principal amount, respectively
on the Purchase Contract Settlement Date, provided that the Reset Spread may not
exceed 200 basis points (2%). Such market value may be less than 100.5% if the
Reset Spread is set at the maximum of 2%.
The payment of distributions out of moneys held by OC Capital and payments
on liquidation of OC Capital are guaranteed by the Company (the "Guarantee") to
the extent described herein and under "Description of the Guarantee." The
Guarantee covers payments of distributions and other payments on the Trust
Preferred Securities only if and to the extent OC Capital has funds available
therefor, which will not be the case unless the Company has made a payment of
principal or interest on the Debentures held by OC Capital as its sole asset.
The Guarantee, when taken together with the Company's obligations under the
Debentures, the Indenture (as defined below) and the Company's obligations under
the Declaration (as defined below), provides full and unconditional guarantee on
a subordinated unsecured basis by the Company of amounts due on the Trust
Preferred Securities.
Each holder of income PRIDES will have the right, at any time, to
substitute for the related Trust Preferred Securities held by the Collateral
Agent zero-coupon U.S. Treasury Securities (CUSIP No. 912 820 AY3) which are
principal strips of the 8 1/2% U.S. Treasury Securities which mature on the
Business Day prior to the Purchase Contract Settlement Date (the "Treasury
Securities") in a principal amount per Income PRIDES equal to the stated
liquidation amount per Trust Preferred Security. Because Treasury Securities are
issued in integral multiples of $1,000, 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. FELINE PRIDES with respect to
which Treasury Securities have been substituted for the related Trust Preferred
Securities as collateral to secure such obligation are referred to herein 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 of the Company equal to the Settlement Rate
described herein, and (ii) the Company will pay the holder Contract Adjustment
Payments, if any, 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 Business Day immediately preceding the Purchase Contract
Settlement Date. Upon the substitution of Treasury Securities for the related
Trust Preferred Securities as collateral, such Trust Preferred Securities will
be
S-2
<PAGE> 5
released to the holder as described herein and thereafter will trade separately
from the resulting Growth PRIDES. Contract Adjustment Payments, if any, will be
payable by the Company on the Growth PRIDES on March 31, June 30, September 30
and December 31 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 Purchase Contracts to the
Purchase Contract Agent plus 20 Trust Preferred Securities to the Collateral
Agent in exchange for 20 Income PRIDES and the release of the related Treasury
Security to such holder. Such Trust Preferred Securities will be pledged with
the Collateral Agent to secure the holder's obligation to purchase Common Stock
under the related Purchase Contracts.
On the Business Day immediately preceding the Purchase Contract Settlement
Date, unless a holder of Income PRIDES or Growth PRIDES (i) has settled the
related Purchase Contract through the early delivery of cash to the Purchase
Contract Agent in the manner described herein or (ii) has notified the Purchase
Contract Agent of its intention to settle the related Purchase Contract with
separate cash on the Business Day prior to the Purchase Contract Settlement Date
and has so settled the related Purchase Contract or (iii) an event described
under "Description of the Purchase Contracts -- Termination" has occurred, (A)
in the case of Income PRIDES, such holder will be deemed to have requested OC
Capital to put the aggregate principal amount of the related Debenture to the
Company, for a price equal to such principal amount, plus accumulated and unpaid
interest, if any, and upon the repurchase of such Debentures, the proceeds will
be applied to redeem the related Trust Preferred Securities of such holder
having an aggregate stated liquidation amount equal to the aggregate principal
amount of the Debentures to be repurchased and will automatically be applied to
satisfy in full such holder's obligation to purchase Common Stock under the
related Purchase Contract, and (B) in the case of Growth PRIDES, the principal
amount of the related Treasury Securities, 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 or settles a Purchase Contract with cash on the Business Day immediately
preceding the Purchase Contract Settlement Date, the related Trust Preferred
Securities or Treasury Securities, as the case may be, will be released to the
holder as described herein.
The Company will have the right at any time to dissolve the Trust and cause
the Debentures to be distributed to the holders of the Trust Securities. If the
Debentures are distributed to the holders of the Trust Preferred Securities, the
Company will use its best efforts to cause the Debentures to be listed on such
exchange on which the Income PRIDES are then listed, including, if applicable,
the New York Stock Exchange.
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 TRANSACTIONS, THE PURCHASE OF SECURITIES TO
COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-3
<PAGE> 6
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.
S-4
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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(g) 3,980 3,913 3,261 3,274 3,013 3,162
Total debt........................... 2,033(g) 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(h)........................... 3.02x -- -- 3.67x 2.15x 2.42x 1.88x
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK
DIVIDENDS(h)......................... 3.02x -- -- 3.67x 2.15x 2.42x 1.88x
</TABLE>
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(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.
S-5
<PAGE> 8
(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) In the second quarter of 1997, the Company purchased Fibreboard Corporation,
a North American manufacturer of vinyl siding and accessories and
manufactured stone, for $657 million, including $138 million of debt
assumed. The purchase price, which is included in long-term debt at June 30,
1997, was financed primarily through borrowings on the Company's new
long-term credit facility early in the third quarter of 1997. The purchase
price allocations were based on preliminary estimates of fair market value
and are subject to revision. The estimated fair value of assets acquired
from Fibreboard, including goodwill, was $923 million, and liabilities
assumed totaled $404 million (including the debt of $138 million).
(h) 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 $700
million and $600 million, respectively.
S-6
<PAGE> 9
THE TRUST
Owens Corning Capital II 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"). 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 gross proceeds of the
Trust Securities in the Debentures and (iii) engaging in only those other
activities necessary or incidental thereto. See "The Trust."
THE OFFERING
Securities Offered......... 6,000,000 Income PRIDES.
Issuers.................... Owens Corning (the "Company") and Owens Corning
Capital II (the "Trust").
Stated Amount.............. $50 per Income PRIDES.
Components of FELINE
PRIDES................... Each FELINE PRIDES offered hereby initially will
consist of a unit (referred to as an "Income
PRIDES(SM)") comprised of (a) a stock purchase
contract (the "Purchase Contract") under which (i)
the holder will purchase from the Company on
November 16, 2000 (the "Purchase Contract
Settlement Date"), for an amount of cash equal to
the Stated Amount, a number of newly issued shares
of common stock, par value $.10 per share (the
"Common Stock"), of the Company equal to the
Settlement Rate (as defined herein), and (ii) the
Company will pay Contract Adjustment Payments, if
any, to the holder, and (b) beneficial ownership of
a % Trust Preferred Security, having a stated
liquidation amount equal to the Stated Amount,
representing a preferred, undivided beneficial
interest in the assets of the Trust. The Company
will, directly or indirectly, own all of the Common
Securities. The Trust exists for the sole purpose
of issuing the Trust Preferred Securities and the
Common Securities and investing the proceeds
thereof in an equivalent amount of % Debentures
of the Company, due , 2002 (the
"Debentures").
The distribution rate on the Trust Preferred
Securities (as well as the interest rate on the
related Debentures) will be reset on the Purchase
Contract Settlement Date to the Reset Rate, to be
determined by a nationally recognized investment
banking firm chosen by the Company (the "Reset
Agent"). See "Description of the Preferred
Securities -- Market Rate Reset."
The Company will have the right at any time to
dissolve the Trust and, after satisfaction of
liabilities to creditors of the Trust, if any,
cause the Debentures to be distributed to the
holders of the Trust Preferred Securities.
References herein to Trust Preferred Securities,
unless the context otherwise requires, mean the (i)
Trust Preferred Securities or (ii) the Debentures
which have been delivered to the holders upon
dissolution of the Trust in the case of an
Investment Company Event or otherwise. The
distribution rate and the payment dates for the
Trust
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<PAGE> 10
Preferred Securities will correspond to the
interest rate and the payment dates for the
Debentures, which will be the sole assets of the
Trust. As long as a FELINE PRIDES is in the form of
an Income PRIDES, the related Trust Preferred
Securities 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 holder's
obligation to purchase the Common Stock under the
related Purchase Contract. See "Risk Factors."
Purchase Contract
Agreement.................. The FELINE PRIDES will be issued under a Purchase
Contract Agreement, to be dated as of ,
1997 (the "Purchase Contract Agreement"), between
the Company and 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").
Substitution of Pledged
Securities............... Each holder of an Income PRIDES will have the right
to substitute for the related Trust Preferred
Securities held by the Collateral Agent zero-coupon
U.S. Treasury Securities (CUSIP No. 912 820 AY3),
which are principal strips of the 8 1/2% U.S.
Treasury Securities which mature on November 15,
2000 (the "Treasury Securities"), in an amount per
Income PRIDES equal to the Stated Amount per Trust
Preferred Security. Because Treasury Securities are
issued in integral multiples of $1,000, holders of
an 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 Trust Preferred Securities 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 or earlier for an amount
of cash equal to the Stated Amount of such Growth
PRIDES, a number of newly issued shares of Common
Stock of the Company equal to the Settlement Rate
described herein, and (ii) the Company will pay the
holder Contract Adjustment Payments, if any, 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 Business Day prior to the Purchase Contract
Settlement Date. Upon the substitution of Treasury
Securities for the related Trust Preferred
Securities as collateral, such Trust Preferred
Securities will be released to the holder as
described herein and thereafter will trade
separately from the resulting Growth PRIDES. 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 therewith. See "Certain Provisions of
the Purchase Contract Agreement and the Pledge
Agreement-- Miscellaneous."
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<PAGE> 11
Recreating Income PRIDES... A holder of Growth PRIDES will have the right to
subsequently recreate Income PRIDES by delivering
Growth PRIDES to the Purchase Contract Agent plus
20 Trust Preferred Securities to the Collateral
Agent in exchange for 20 Income PRIDES and the
release of the related Treasury Security to such
holder. Such Trust Preferred Securities 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."
Current Payments........... Holders of Income PRIDES will be entitled to
receive aggregate cash distributions at a rate
of % of the Stated Amount per annum from and
after , 1997, payable quarterly in
arrears, consisting of cumulative cash
distributions on the related Trust Preferred
Securities payable by the Trust 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, in each case subject to the Company's
right to defer the payment of such amounts. The
ability of the Trust to make the quarterly
distributions on the related Trust Preferred
Securities is solely dependent upon the receipt of
corresponding interest payments from the Company on
the Debentures. The Company's obligations with
respect to the Contract Adjustment Payments will be
senior and unsecured and will rank pari passu in
right of payment with all other senior unsecured
obligations of the Company, except that such
obligations with respect to the Contract Adjustment
Payments will be subordinated and junior in right
of payment to the Company's obligations under the
Lease, dated as of December 1, 1977, between Ohio
Water Development Authority, as Lessor, and the
Company, as Lessee (the "Senior Lease").
In the event that a holder of Income PRIDES elects
to substitute Treasury Securities for the related
Trust Preferred Securities, such holder would
receive on the resulting Growth PRIDES only the
quarterly distributions of Contract Adjustment
Payments, if any, 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, limited to a period not extending
beyond the maturity date of the Debentures, to
defer the interest payments due on the Debentures.
As a consequence of such deferral, quarterly
distributions to holders of Income PRIDES (or any
Trust Preferred Securities outstanding after the
Purchase Contract Settlement Date or after a
substitution of collateral resulting in the
creation of Growth PRIDES) would be deferred (but
despite such deferral, would continue to accumulate
quarterly and would accrue interest thereon
compounded quarterly at the interest rate then
borne by the Debentures). The Company also has the
right to defer the payment of Contract Adjustment
Payments, if any, on the related 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
S-9
<PAGE> 12
"Deferred Contract Adjustment Payments"). See
"Description of the Purchase Contracts -- Contract
Adjustment Payments." If interest payments on the
Debentures or the Contract Adjustment Payments are
deferred, the Company has agreed, among other
things, 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, if any, 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 Payment, 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."
Payment Dates.............. Subject to the deferral provisions described
herein, the current payments described above will
be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year,
commencing , 1997, through and
including (i) in the case of the Contract
Adjustment Payments, if any, the Purchase Contract
Settlement Date or the most recent such quarterly
date on or prior to any early settlement of the
related Purchase Contracts and (ii) in the case of
Trust Preferred Securities, through and including
the most recent such quarterly date on or prior to
the date a Debenture corresponding to a Trust
Preferred Security is put to the Company, as
described under "Description of the
Debentures -- Put Option", or the date the
liquidation amount of a Trust Preferred Security,
together with all accrued and unpaid distributions
thereon, is paid in full (each, a "Payment Date").
Purchase Contract
Settlement Date.......... November 16, 2000.
Settlement of Purchase
Contracts................ On the Business Day immediately preceding the
Purchase Contract Settlement Date, unless a holder
of Income PRIDES or Growth PRIDES (i) has settled
the related Purchase Contract through the early
delivery of cash to the Purchase Contract Agent in
the manner described herein (ii) has notified the
Purchase Contract Agent of its intention to settle
the related Purchase Contract with separate cash on
the Business Day prior to the Purchase Contract
Settlement Date and has so settled the related
Purchase Contract, or (iii) an event described
under "Description of the Purchase
Contracts -- Termination" has occurred, (A) in the
case of Income PRIDES, such holder will be deemed
to have requested the Trust to put the related
Debenture to the Company, and the principal amount
of such Debenture equal to the Stated Amount per
FELINE PRIDES will automatically be applied to
satisfy in full such holder's obligation to
purchase Common Stock under the related Purchase
Contract and the related Trust Preferred Security
will be deemed to have been redeemed by the Company
as a result of such application, and (B) in the
case of Growth PRIDES, the principal amount of the
related Treasury Securities, when paid at maturity,
will
S-10
<PAGE> 13
automatically be applied to satisfy in full such
holder's obligation to purchase Common Stock under
the related Purchase Contract. See "Description of
the Debentures-- Put Option."
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 or settles the related
Purchase Contract with cash on the Business Day
immediately preceding Purchase Contract Settlement
Date, the related Trust Preferred Securities or
Treasury Securities, as the case may be, will be
released to the holder as described herein.
Settlement Rate............ The number of new shares of Common Stock issuable
upon settlement of each Purchase Contract on the
Purchase Contract Settlement Date (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 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 Trust
Preferred Securities 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
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, if any, 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
any amount 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 reorganization
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<PAGE> 14
with respect to the Company. Upon such termination,
the Collateral Agent will release the related Trust
Preferred Securities, 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 Trust Preferred Securities will not be
entitled to vote to appoint, remove or replace, or
to increase or decrease the number of Regular
Trustees and will generally have no voting rights
except in the limited circumstances described under
"Description of Trust Preferred
Securities -- Voting Rights." Holders of Purchase
Contracts forming part of the Income PRIDES or
Growth PRIDES in their capacities 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 and the Trust Preferred
Securities will not be listed or traded on any
securities exchange. See "Underwriting."
NYSE Symbol of Common
Stock.................... "OWC"
TRUST PREFERRED SECURITIES
The Trust.................. Owens Corning Capital II, a Delaware business
trust. The sole assets of the Trust will consist of
the Debentures. The Company will directly or
indirectly own all of the Common Securities
representing undivided beneficial interests in the
assets of the Trust.
Trust Preferred
Securities................. 6,000,000 of % Trust Preferred Securities
(liquidation amount $50 per Trust Preferred
Security), representing preferred, undivided
beneficial interests in the assets of the Trust.
Distributions.............. Distributions on the Trust Preferred Securities,
which will constitute all or a portion of the
distributions on the Income PRIDES, will be
cumulative, will accrue from the first date of
issuance of the Trust Preferred Securities and will
be payable initially at the annual rate of % of
the liquidation amount of $50 per Trust Preferred
Security to but excluding the Purchase Contract
Settlement Date, and from the Purchase Contract
Settlement Date to but excluding November 16, 2002,
at the Reset Rate, in each case, when, as and if
funds are available for payment. Subject to the
distribution deferral provisions, distributions
will be payable quarterly in arrears on each March
31, June 30, September 30 and December 31,
commencing , 1997.
Market Rate
Reset.................... The quarterly distribution rate on the Trust
Preferred Securities (as well as the interest rate
on the related Debentures) will be reset on the
Purchase Contract Settlement Date to the Reset
Rate, determined by the Reset Agent as the rate the
Trust Preferred Securities should bear in order for
a Trust Preferred Security to have an approximate
market value of 100.5% of the Stated Amount on the
Purchase Contract Settlement Date, provided, that
in no event will the Reset Rate be higher than the
rate on the Two-Year Benchmark Treasury Rate plus
200 basis points
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<PAGE> 15
(2%). Such market value may be less than 100.5% if
the Reset Spread is set at the maximum of 2%. It is
currently anticipated that Merrill Lynch & Co. will
be the Reset Agent. See "Description of the
Preferred Securities -- Market Rate Reset."
Distribution Deferral
Provisions............... The ability of the Trust to pay distributions on
the Trust Preferred Securities is solely dependent
on the receipt of interest payments from the
Company on the Debentures. The Company has the
right at any time, and from time to time, to defer
the interest payments due on the Debentures for
successive extension periods (the "Extension
Periods"), limited, in the aggregate, to a period
not extending beyond the maturity date of the
Debentures. The corresponding quarterly
distributions on the Trust Preferred Securities
would be deferred by the Trust (but would continue
to accumulate quarterly and would accrue interest,
compounded quarterly, at the same rate as the
interest rate then bourne by the Debentures) until
the end of any such Extension Period. If a deferral
of an interest payment occurs, the holders of the
Trust Preferred Securities will accrue interest
income for United States federal income tax
purposes in advance of the receipt of any
corresponding cash distribution with respect to
such deferred interest payments. See "Risk
Factors -- Right to Defer Current Payment,"
"Description of the Trust Preferred
Securities -- Distributions" and "Certain Federal
Income Tax Consequences -- Interest Income and
Original Issue Discount on Trust Preferred
Securities."
Rights Upon Deferral of
Distribution............. During any period in which interest payments on the
Debentures are deferred, interest will accrue on
the Debentures (compounded quarterly) and quarterly
distributions on the Trust Preferred Securities
will continue to accumulate with interest thereon
at the distribution rate, compounded quarterly.
Liquidation Preference..... In the event of any liquidation of the Trust, and
after satisfaction of liabilities to creditors of
the Trust, if any, holders will be entitled to
receive Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation
amount of the Trust Preferred Securities.
Put Option................. On the Business Day immediately preceding the
Purchase Contract Settlement Date, each holder of
Income PRIDES that has neither previously exercised
such holder's option of Early Settlement nor
settled the related Purchase Contract with cash on
such date will be deemed to have requested the
Trust to put the aggregate principal amount of the
related Debentures to the Company on the Purchase
Contract Settlement Date in an amount per Debenture
equal to $50, plus accumulated and unpaid interest,
if any (a "Put Option"). Upon the repurchase of the
Debentures by the Company pursuant to such Put
Option, (i) the proceeds from such repurchase shall
simultaneously be applied to redeem Trust Preferred
Securities of such holder having an aggregate equal
to the aggregate principal amount of the Debentures
so repurchased and will be applied to satisfy in
full such holder's obligation to purchase Common
Stock under the related Purchase Contract as
described herein and (ii) any accumulated and
unpaid interest with respect to the Debentures so
repurchased will be paid to such holder in cash. To
the extent that holders of Income PRIDES exercise
their right of Early
S-13
<PAGE> 16
Settlement or settle their related Purchase
Contracts with cash on the Business Day immediately
preceding the Purchase Contract Settlement Date,
the related Debenture will not be repurchased by
the Company and the related Trust Preferred
Securities will not be redeemed on the Purchase
Contract Settlement Date as stated above.
Investment Company Event
Distribution............. In certain circumstances involving an Investment
Company Event (which event will generally be
triggered if the Trust is considered an "investment
company" under the Investment Company Act of 1940,
as amended), the Trust would be dissolved, with the
result that, after satisfaction of liabilities to
creditors of the Trust, if any, the Debentures with
an aggregate principal amount equal to the
aggregate stated liquidation amount of the Trust
Preferred Securities, would be distributed to the
holders of the Trust Preferred Securities on a pro
rata basis. In such event, an Income PRIDES would
thereafter consist of a Debenture with a principal
amount equal to the Stated Amount of such Income
PRIDES and the related Purchase Contract, and a
holder could, on the Purchase Contract Settlement
Date, cause the Debenture to be repaid and the
proceeds thereof applied to satisfy in full such
holder's obligation to purchase Common Stock under
the related Purchase Contract as described herein.
Redemption................. The Company will not have the ability to redeem the
Debentures prior to their stated maturity date.
Guarantee.................. The Company will irrevocably and unconditionally
guarantee (the "Guarantee"), on a senior unsecured
basis and to the extent described herein, the
payment in full of (i) distributions on the Trust
Preferred Securities to the extent the Trust has
funds available therefor, and (ii) generally, the
liquidation amount of the Trust Preferred
Securities to the extent the Trust has assets
available for distribution to holders of Trust
Preferred Securities in the event of a dissolution
of the Trust. The Guarantee will be a senior
unsecured obligation of the Company and will rank
pari passu with all of the Company's other senior
unsecured obligations, except that such obligations
with respect to the Guarantee will be subordinated
and junior in right of payment to the Company's
obligations under the Senior Lease.
Debentures................. The Debentures will mature on November 16, 2002,
and will bear, initially, interest at the rate
of % per annum, payable quarterly in arrears on
each March 31, June 30, September 30 and December
31 commencing , 1997. The interest rate
on the Debentures (as well as the distribution rate
on the Trust Preferred Securities) will be reset on
the Purchase Contract Settlement Date, to the Reset
Rate, determined by the Reset Agent. See
"Description of Debentures -- Interest." Interest
payments may be deferred from time to time by the
Company for successive Extension Periods not
extending, in the aggregate, beyond the stated
maturity date of the Debentures. During any
Extension Period, interest would continue to accrue
and compound quarterly. Upon the termination of any
Extension Period and the payment of all amounts
then due, the Company may commence a new Extension
Period, provided such extended Extension Period
does not extend beyond the stated maturity date of
the Debentures. No interest shall be due during an
Extension Period until the end of such period.
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<PAGE> 17
During an Extension Period, the Company will be
prohibited from paying dividends on or purchasing
any of its capital stock and making certain other
restricted payments until quarterly interest
payments are resumed and all amounts then due on
the Debentures are paid. The Debentures will be
senior unsecured obligations of the Company and
will rank pari passu with all of the Company's
other senior unsecured obligations, except that the
Debentures will be subordinated and junior in right
of payment to the Company's obligations under the
Senior Indebtedness (as defined herein). See
"Description of the Debentures."
Federal Income Tax
Consequences............. The Debentures may be issued with original issue
discount ("OID"), in which case a holder will be
required to include such OID in income on an
economic accrual basis, or if the Company exercises
its right to defer payments of interest on the
Debentures will be treated as reissued with OID.
The Company believes Contract Adjustment Payments
and Deferred Contract Adjustment Payments (whether
payable in cash or additional shares of Common
Stock), if any, may constitute income to a holder
when received or accrued, in accordance with such
holder's method of accounting. Holders should
consult their advisors concerning the treatment of
Contract Adjustments and Deferred Contract
Adjustment 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, OID or market 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............ All or substantially all of the proceeds from the
sale of the Income PRIDES, of which the Trust
Preferred Securities are a component, will be
invested by the Trust in Debentures of the Company
and the net proceeds of approximately $ million
ultimately will be used by the Company to repay
indebtedness under the $2 billion Credit Agreement,
dated as of June 26, 1997 (the "Credit Agreement"),
among the Company, certain subsidiaries of the
Company, the banks party thereto and Credit Suisse
First Boston, as agent for such banks, 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. See "Use of Proceeds."
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<PAGE> 18
RISK FACTORS
Potential purchasers of the FELINE PRIDES offered hereby should carefully
consider the risk factors set forth herein under "Risk Factors" as well as other
information contained in this Prospectus Supplement and the accompanying
Prospectus.
INVESTMENT IN FELINE PRIDES WILL BECOME INVESTMENT IN COMMON STOCK; RISK OF
DECLINE IN EQUITY VALUE
Although holders of the FELINE PRIDES will be the beneficial owners of the
related Trust Preferred Securities or Treasury Securities, as the case may be,
prior to the Purchase Contract Settlement Date, unless a holder of FELINE PRIDES
settles the related Purchase Contracts through the 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), the proceeds of the repurchase
by the Company of the related Debentures or the principal of the related
Treasury Securities, when paid at maturity, as the case may be, will
automatically be applied to the purchase of a specified number of shares of
Common Stock on behalf of such holder. Thus, unless a holder has cash settled,
following the Purchase Contract Settlement Date, holders will own shares of
Common Stock rather than a beneficial interest in Trust Preferred Securities 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 FELINE PRIDES 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 FELINE PRIDES, in which case an investment
in the Securities will result in a loss. Accordingly, a holder of the FELINE
PRIDES 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
FELINE PRIDES 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 FELINE PRIDES 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. Any such arbitrage could, in turn, affect the trading
prices of the Income PRIDES, Growth PRIDES, Trust Preferred Securities and
Common Stock.
S-16
<PAGE> 19
VOTING RIGHTS
Holders of Trust Preferred Securities will not be entitled to vote to
appoint, remove or replace or to increase or decrease the number of Owens
Corning Trustees, and will generally have no voting rights except in the limited
circumstances described under "Description of the Trust Preferred
Securities -- Voting Rights." Holders of FELINE PRIDES 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 FELINE PRIDES 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 FELINE PRIDES 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 either the Purchase Contracts or the Trust Preferred Securities and has no
obligation to consider the interests of the holders of the FELINE PRIDES 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 Income PRIDES, the Growth PRIDES or
the Trust Preferred 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 and the Trust Preferred Securities will
not be listed or traded on any securities exchange. The Company and the Trust
have been advised by the Underwriters that they presently intend to make a
market for the Growth PRIDES and the Trust Preferred Securities; 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, the Growth PRIDES or the Trust Preferred
Securities, 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 Trust Preferred Securities, 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.
PLEDGED SECURITIES ENCUMBERED
Although holders of FELINE PRIDES will be beneficial owners of the related
Trust Preferred Securities 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
S-17
<PAGE> 20
interest. Additionally, notwithstanding 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.
INVESTMENT COMPANY EVENT DISTRIBUTION
Upon the occurrence of an Investment Company Event, the Trust will be
dissolved (except in the limited circumstances described in the following
sentence) with the result that the Debentures with an aggregate principal amount
equal to the aggregate stated liquidation amount of the Trust Preferred
Securities would be distributed to the holders of the Trust Preferred Securities
on a pro rata basis. Such dissolution and distribution shall be conditioned on
the Company being unable to avoid such Investment Company Event within a 90 day
period by taking some ministerial action or pursuing some other reasonable
measure that will have no adverse effect on the Trust, the Company or the
holders of the Trust Preferred Securities, and will involve no material cost. In
addition, the Company will have the right at any time to dissolve the Trust. See
"Description of the Trust Preferred Securities -- Distribution of the
Debentures."
Under current United States federal income tax law, a distribution of
Debentures upon the dissolution of the Trust would not be a taxable event to
holders of the Trust Preferred Securities including the Collateral Agent. See
"Certain Federal Income Tax Consequences -- Distribution of Debentures to U.S.
Holders of Trust Preferred Securities."
There can be no assurance as to the impact on the market prices for the
Income PRIDES of a distribution of the Debentures in exchange for Trust
Preferred Securities upon a dissolution of the Trust. Because the Income PRIDES
will consist of Debentures and related Purchase Contracts upon the occurrence of
the dissolution of the Trust as a result of an Investment Company Event or
otherwise, prospective purchasers of Income PRIDES are also making an investment
decision with regard to the Debentures and should carefully review all the
information regarding the Debentures contained herein. See "Description of the
Trust Preferred Securities -- Distribution of the Debentures" and "Description
of the Debentures -- General."
RIGHT TO DEFER CURRENT PAYMENTS
The Company may, at its option, defer the payment of Contract Adjustment
Payments, if any, on the Purchase Contracts until the Purchase Contract
Settlement Date. However, deferred installments of Contract Adjustment Payments
will bear Deferred Contract Adjustment Payments at the rate of % per annum
(compounding on each succeeding Payment Date) until paid. If the 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 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 Purchase Contracts 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 a
holder of FELINE PRIDES divided by (y) the Applicable Market Value. See
"Description of the Purchase Contracts -- Contract Adjustment Payments."
The Company also has the right under the Indenture to defer payments of
interest on the Debentures by extending the interest payment period at any time,
and from time to time, on the Debentures. As a consequence of such an extension,
quarterly distributions on the Trust Preferred Securities, held either as a
component of the Income PRIDES or held separately, would be deferred (but
despite such deferrals would accrue interest compounded on a quarterly basis) by
the Trust during any such extended interest payment period. Such right to extend
the interest payment period for the Debentures is limited to a period, in the
aggregate, not extending beyond the maturity date of the Debentures. See
"Description of the Trust Preferred
S-18
<PAGE> 21
Securities -- Distributions" and "Description of the Debentures -- Option to
Extend Interest Payment Period."
The Company believes that, as of the issue of the Debentures, the
likelihood that it will exercise its right to defer payments of interest on the
Debentures is remote and that, therefore, the Debentures should not be
considered to be issued as a result of the Company's right to defer payments of
Interest on the Debentures (as defined herein) unless it actually exercises such
deferral right. There is no assurance that the Internal Revenue Service will
agree with such position. See "Certain Federal Income Tax Consequences."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Trust Preferred Securities
held either as a component of the Income PRIDES or held separately would be
required to accrue original issue discount in its gross income for United States
federal income tax purpose even though the Company would not make actual cash
payments during an Extension Period. As a result, each such holder of Trust
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
the Trust related to such income if such holder disposes of its Trust Preferred
Securities prior to the record date for the date on which distributions of such
amount are made. The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Debentures. However, should the Company determine to exercise such right in the
future, the market price of the Trust Preferred Securities is likely to be
affected. A holder that disposes of its Trust Preferred Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to holds its Trust Preferred Securities. In addition,
as a result of the existence of the Company's right to defer interest payments,
the market price of the Trust Preferred Securities (which represent an undivided
beneficial interest in the assets of the Trust) may be more volatile than the
market price of other securities that are not subject to such deferral. See
"Certain Federal Income Tax Consequences."
PURCHASE CONTRACT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF PURCHASE CONTRACT AGENT
Although the Trust Preferred Securities constituting a part of the Income
PRIDES will be issued pursuant to the Declaration, which will be qualified under
the Trust Indenture Act, the Purchase Contract Agreement will not be qualified
as an indenture under 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 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-19
<PAGE> 22
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
S-20
<PAGE> 23
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)
<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 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; 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 $22 million and for
Composite Materials by $5 million and to increase general corporate expense
by $853 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
Fibreboard Acquisition
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, Sierra Corp., certain
other subsidiaries of the Company, the banks party thereto and Credit Suisse
First Boston, as agent for such banks.
S-21
<PAGE> 24
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 products which
Company management believes 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.
Amerimark Acquisition
On July 29, 1997, the Company entered into an agreement to purchase
substantially all the assets and to assume certain of the liabilities of
AmeriMark Building Products, Inc., a Delaware corporation ("AmeriMark"), and its
subsidiaries for approximately $310 million. AmeriMark is a specialty building
products company serving the exterior residential housing industry, with major
product lines that include vinyl siding, vinyl windows and aluminum accessories.
The Company currently intends to finance up to two-thirds of the purchase price
through the sale of non-core businesses, including the Company's Pabco
subsidiary, which had 1996 sales of $58 million. The balance of the AmeriMark
purchase price is expected to come from cash generated by the Company's
operations and external sources, as required.
S-22
<PAGE> 25
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
Sponsor and 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 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. Although upon issuance of the Trust
Preferred Securities, the holders of Income PRIDES will be the beneficial owners
of the related Trust Preferred Securities, such Trust Preferred Securities will
be pledged with the Collateral Agent to secure the obligations of the holders
under the related Purchase Contracts. See "Description of the Purchase
Contracts -- Pledged Securities and Pledge Agreement" and "Description of the
Trust Preferred 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 Debentures and (iii)
engaging in only those other activities necessary or incidental thereto. The
Trust has a term of approximately seven (7) years, but may dissolve 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 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 Guarantee" and
"Description of the Trust Preferred Securities -- Voting Rights."
The Institutional Trustee will hold title to the 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 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 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 Trust 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 Debentures -- Miscellaneous."
The rights of the holders of the Trust 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 the Trust Preferred 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.
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<PAGE> 26
USE OF PROCEEDS
All or substantially all of the proceeds from the sale of the Income
PRIDES, of which the Trust Preferred Securities are a component, will be
invested by the Trust in the Debentures, and the remainder, if any, will be paid
to the Company. The net proceeds from such sale, estimated to be approximately
$ million, ultimately will be used by the Company 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 August , 1997 borne by
the loans then outstanding under the Credit Agreement was % per annum. The
loan commitments under the Credit Agreement expire in June 2002.
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> <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 August 21, 1997)....... 44 3/16 39 1/4
</TABLE>
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 quarters
of 1997, and $.075 per share for the third quarter of 1997.
S-24
<PAGE> 27
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 offered hereby (based on an assumed aggregate public offering price of
$50 per Security, (b) the concurrent purchase by the Trust from the Company of
$300,000,000 principal amount of Debentures and (c) an assumed application of
the proceeds from the foregoing, after estimated underwriting commissions and
estimated expenses of this offering, 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 $ 119
Long-term debt:
Senior................................................... 1,877 1,647
Less: Current portion................................. 23 23
------ ------
Total long-term debt..................................... 1,854 1,624
------ ------
Company obligated convertible security of subsidiary
holding solely parent debentures ("MIPS")................ 194 194
------ ------
Company obligated preferred security of subsidiary holding
solely parent debentures................................. -- 290
Minority interest.......................................... 25 25
Stockholders' equity:
Preferred Stock, no par value; 8 million shares
authorized; none issued............................... -- --
Common Stock, $.10 par value; 100 million shares
authorized; 53,338,336 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....................................... $1,899 $ 1,899
====== ======
</TABLE>
- ---------------
(a) Does not include shares of Common Stock issuable under the Purchase
Contracts 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).
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Trust Preferred 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 %
Subordinated Debentures due , 2002 of the Company.
S-25
<PAGE> 28
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(g) 3,980 3,913 3,261 3,274 3,013 3,162
Total debt............................... 2,033(g) 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(h)...... 3.02x -- -- 3.67x 2.15x 2.42x 1.88x
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS(h)......... 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.
S-26
<PAGE> 29
(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).
(g) In the second quarter of 1997, the Company purchased Fibreboard Corporation,
a North American manufacturer of vinyl siding and accessories and
manufactured stone, for $657 million, including $138 million of debt
assumed. The purchase price, which is included in long-term debt as of June
30, 1997, was financed primarily through borrowings on the Company's new
long-term credit facility early in the third quarter of 1997. The purchase
price allocations were based on preliminary estimates of fair market value
and are subject to revision. The estimated fair value of assets acquired
from Fibreboard, including goodwill, was $923 million, and liabilities
assumed totaled $404 million (including the debt of $138 million).
(h) 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 $700
million and $600 million, respectively.
S-27
<PAGE> 30
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 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.
S-28
<PAGE> 31
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.
<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
continuing operations.............. $ 1.76 $(8.59) $ 1.87 $(8.43)
</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
S-29
<PAGE> 32
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 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
S-30
<PAGE> 33
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.
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
S-31
<PAGE> 34
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 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
S-32
<PAGE> 35
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
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.
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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 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."
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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.
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
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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, 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:
<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
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<PAGE> 39
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 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.
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<PAGE> 40
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.
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 and the Purchase Contract Agent. 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, if any, to the holder, and (b) (i) a 1/20
undivided beneficial ownership interest in a related % Trust Preferred
Security, having a stated liquidation amount per Trust Preferred Security equal
to the Stated Amount, representing a preferred, undivided beneficial interest in
the assets of the Trust, which will consist solely of the Debentures, or (ii) in
the case of a distribution of the Debentures upon the dissolution of the Trust
as a result of an Investment Company Event, as described below, or otherwise,
Debentures having a principal amount equal to the Stated Amount. As long as a
FELINE PRIDES is in the form of an Income PRIDES, the related Trust Preferred
Securities will be pledged to the Collateral Agent, to secure the holder's
obligation to purchase Common Stock under the related Purchase Contract.
SUBSTITUTION OF PLEDGED SECURITIES
Each holder of an Income PRIDES will have the right, at any time to
substitute for the related Trust Preferred Securities held by the Collateral
Agent Treasury Securities, in a principal amount per Income PRIDES equal to the
Stated Amount per Trust Preferred Security. Because 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 with
respect to which Treasury Securities have been substituted for the related Trust
Preferred Securities as collateral to secure such 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 20 Trust Preferred
Securities 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 20 Trust Preferred Securities from the pledge
under the 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 20 related Trust Preferred Securities 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 or earlier for an amount of
cash equal to the Stated Amount of such Growth PRIDES, a number of newly issued
shares of Common Stock of the Company equal to the Settlement Rate described
herein, and (ii) the Company will pay the holder Contract Adjustment Payments,
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<PAGE> 42
if any, 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 Business Day immediately preceding the Purchase Contract
Settlement Date. The related Trust Preferred Securities released to the holder
thereafter will trade separately from the resulting Growth PRIDES. Contract
Adjustment Payments, if any, 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, if any, were paid. In addition,
imputed interest would accrete on the related Treasury Securities. Distributions
on any Trust Preferred Securities, up to but not including the Purchase Contract
Settlement Date, including after a substitution of collateral resulting in the
creation of Growth PRIDES, will continue to be payable by the Trust at the rate
of % of the Stated Amount per annum, subject to the Company's deferral
rights described in "-- Current Payments."
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 20 Trust Preferred Securities and (b)
transferring 20 Purchase Contracts to the Purchase Contract Agent accompanied by
a notice stating that the Growth PRIDES holder has deposited 20 Trust Preferred
Securities 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 20 Purchase Contracts, (ii) transfer such Treasury Security
to such holder and (iii) deliver 20 Income PRIDES to such holder. The
substituted Trust Preferred Securities will be pledged with the Collateral Agent
to secure the holder's obligation to purchase Common Stock under the related
Purchase Contracts.
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 quarterly in arrears. The quarterly payments on the
Income PRIDES will consist of (i) cumulative cash distributions on the related
Trust Preferred Securities initially payable by the Trust at the rate of %
of the Stated Amount per annum and (ii) Contract Adjustment Payments payable by
the Company, at the rate of % of the Stated Amount per annum, in each case
subject to the Company's right of deferral as described herein.
The ability of the Trust to make the quarterly distributions on the Trust
Preferred Securities is solely dependent upon the receipt of corresponding
interest payments from the Company on the Debentures. The Company has the right
at any time, and from time to time, limited to a period not extending beyond the
maturity of the Debentures, to defer the interest payments on the Debentures. As
a consequence of such deferral, quarterly distributions to holders of Income
PRIDES (or any Trust Preferred Securities outstanding after the Purchase
Contract Settlement Date or after a substitution of collateral resulting in the
creation of Growth PRIDES) would be deferred (but despite such deferral, would
continue to accumulate quarterly and would accrue interest thereon compounded
quarterly at the same rate as interest on the Debentures). The Company also has
the right to defer the payment of Contract Adjustment Payments, if any, 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"). See
"Description of the Purchase Contracts-Contract Adjustment Payments" and
"Description of the Trust Preferred Securities -- Distributions."
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<PAGE> 43
In the event a holder of Income PRIDES substituted Treasury Securities for
the related Trust Preferred Securities, such holder would receive on the
resulting Growth PRIDES only quarterly Contract Adjustment Payments, if any,
subject to the Company's rights of deferral. In addition, imputed interest would
accrete on the related Treasury Securities.
VOTING RIGHTS
Holders of Trust Preferred Securities, in their capacities as such holders,
will not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of Regular Trustees and will generally have no voting rights
except in the limited circumstances described under "Description of Trust
Preferred Securities -- Voting Rights." Holders of Purchase Contracts relating
to the Income PRIDES or Growth PRIDES, in their capacities 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 and
the Trust Preferred Securities 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, in the case
of Income PRIDES, 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 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 Business Day immediately preceding the Purchase Contract Settlement
Date, unless a holder of Income PRIDES or Growth PRIDES (i) 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," (ii) has notified the Purchase Contract
Agent of its intention to settle the related Purchase Contracts with separate
cash on the Purchase Contract Settlement Date in the manner described under
"-- Notice to Settle with Cash," and has so settled the Purchase Contract, or
(iii) an event described under "-- Termination" below has occurred, (A) in the
case of Income PRIDES, such holder will be deemed to have requested the Trust to
put the aggregate principal amount of the related Debentures to the Company, for
a price equal to such principal amount, plus accumulated and unpaid interest, if
any, and upon
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the repurchase of such Debentures by the Company pursuant to a Put Option (as
defined herein), (1) the proceeds from such repurchase shall simultaneously be
applied to redeem the related Trust Preferred Securities of such holder having
an aggregate stated liquidation amount equal to the aggregate principal amount
of the Debentures so repurchased and will be automatically applied to satisfy in
full such holder's obligation to purchase Common Stock under the related
Purchase Contracts and (2) any accumulated and unpaid interest with respect to
the Debentures so repurchased will be paid to such holder in cash (see
"Description of the Debentures -- Put Option"), and (B) in the case of Growth
PRIDES the principal amount of the related Treasury Securities, when paid at
maturity, will automatically be 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
Income PRIDES or Growth PRIDES effects the early settlement of the related
Purchase Contract through the delivery of cash or settles the related Purchase
Contract with cash on the Purchase Contract Settlement Date, the related Trust
Preferred Securities 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. See "Description of Trust
Preferred Securities -- Voting Rights."
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 be deemed to have agreed to treat (i) itself
as the owner of the related Trust Preferred Securities or Treasury Securities,
as the case may be, and (ii) the Debentures as indebtedness, in each case, 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 such 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 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 Trust
Preferred Securities 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 Purchase Contracts
being
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settled will be forfeited, (d) the holder's right to receive future Contract
Adjustment Payments, if any, will terminate and (e) no adjustment will be made
to or for the holder on account of Deferred Contract Adjustment Payments or any
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 related
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 Trust Preferred Securities 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.
NOTICE TO SETTLE WITH CASH
A holder of an Income PRIDES or Growth PRIDES wishing to settle the related
Purchase Contract with separate cash on the Business Day immediately preceding
the Purchase Contract Settlement Date must notify the Purchase Contract Agent 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 "Notice to Settle by Separate Cash" on the reverse side of the
certificate completed and executed as indicated on or prior to 5:00 p.m., New
York City time, on the second Business Day immediately preceding the Purchase
Contract Settlement Date. Such form must be 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
number of Purchase Contracts being settled.
CONTRACT ADJUSTMENT PAYMENTS
Contract Adjustment Payments, if any, 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 quarterly, until paid. Contract Adjustment Payments payable
for any period will be computed on the basis of a 360-day year of twelve 30
day-months. Contract Adjustment Payments will accrue from , 1997 and
will be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing , 1997.
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
relating to such Income PRIDES or Growth PRIDES. Subject to any applicable laws
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
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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 will
be senior unsecured obligations of the Company and will rank pari passu with all
of the Company's other senior unsecured debt obligations, except that such
obligations with respect to the Contract Adjustment Payments will be
subordinated and junior in right of payment to the Company's obligations under
the Senior Lease.
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, if any, 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 shares 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 capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of the Company
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
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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) 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 Company's 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."
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.
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TERMINATION
The Purchase Contracts, and the rights and obligations of the Company and
of the holders of the FELINE PRIDES thereunder (including the right thereunder
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 Trust Preferred Securities 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.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The Trust Preferred Securities 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
Trust Preferred Securities, (ii) to substitute Trust Preferred Securities 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, each holder of an Income PRIDES
will be entitled through the Purchase Contract Agent and the Collateral Agent to
all of the proportional rights and preferences of the related Trust Preferred
Security (including distribution, voting, redemption, repayment and liquidation
rights) and each holder of a Growth PRIDES will retain beneficial ownership of
the related Treasury Securities pledged in respect of the related Purchase
Contracts. The Company will have no interest in the Pledged Securities other
than its security interest.
Except as described in "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,
if any, 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 quarterly payments on the Income PRIDES will consist of (i) cumulative
cash distributions on the Trust Preferred Securities payable by the Trust at the
rate of % of the Stated Amount per annum, and (ii) Contract Adjustment
Payments, if any, payable by the Company, at the rate of % per annum, in
each case subject to the Company's right to defer the payment of such amounts.
The ability of the Trust to make quarterly distributions on the related
Trust Preferred Securities is solely dependent upon the receipt of corresponding
interest payments from the Company on the Debentures. The Company has the right
at any time, and from time to time, limited to a period not extending beyond the
maturity of the Debentures, to defer the interest payments on the Debentures and
to defer Contract Adjustment Payments. As a consequence of such deferral,
quarterly distributions to holders would be deferred (but despite such deferral,
would continue to accrue with interest thereon compounded quarterly at the same
rate as interest on the Debentures). See "Description of the Purchase
Contract -- Contract Adjustment Payments" and "Description of the Trust
Preferred Securities -- Distributions."
In the event a holder of Income PRIDES substituted Treasury Securities for
the related Trust Preferred Securities, such holder would receive on the
resulting Growth PRIDES only the quarterly Contract
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Adjustment Payments, if any, subject to the Company's rights of deferral. In
addition, imputed interest would continue to accrete on the related Treasury
Securities.
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 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 Trust Preferred Securities,
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
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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.
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.
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.
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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
662/3% 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 Trust
Preferred Securities or the rights of holders of Growth PRIDES to substitute
Trust Preferred Securities 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.
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 Debentures, 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
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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 to 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.
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.
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DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities, which form a component of the Income
PRIDES, and which, under certain circumstances, will trade separately, will be
issued pursuant to the terms of the Declaration. See "Description of the FELINE
PRIDES -- Substitution of Pledged Securities." 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 Trust Preferred Securities under the Declaration for purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
Trust Preferred 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 Trust Preferred 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. Whenever 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 Trust Preferred
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 Trust Preferred 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 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 Trust Preferred Securities or
liquidation of the Trust, are guaranteed by the Company to the extent described
under "Description of the Guarantee." The Guarantee, when taken together with
the Company's obligations under the Debentures and the Indenture and its
obligations under the Declaration, including the obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Preferred Securities), provides a full and unconditional guarantee of
amounts due on the Trust Preferred Securities. The Guarantee will be held by
Wilmington Trust Company, the Guarantee Trustee, for the benefit of the holders
of the Trust Preferred Securities. The 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 Trust Preferred
Securities is to vote to direct the Institutional Trustee to enforce the
Institutional Trustee's rights under the Debentures (except in the limited
circumstances in which the holder may take direct action). See "-- Declaration
Events of Default" and "-- Voting Rights."
DISTRIBUTIONS
Distributions on the Trust Preferred Securities will be fixed initially at
a rate per annum of % of the stated liquidation amount of $50 per Trust
Preferred Security. Distributions on the Trust Preferred Securities will be
reset on the Purchase Contract Settlement Date. See "Market Rate Reset."
Distributions in arrears for more than one quarter will bear interest thereon at
the rate per annum of % thereof compounded quarterly. 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 Trust Preferred Securities will be cumulative and will
accrue from , 1997 and will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing ,
1997, when, as and if funds are available for payment. Distributions will be
made by the Institutional Trustee, except as otherwise described below.
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The Company has the right under the Indenture to defer payments of interest
on the Debentures by extending the interest payment period from time to time on
the Debentures, which right, if exercised, would defer quarterly distributions
on the Trust Preferred 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 Debentures is limited to a
period, in the aggregate, not extending beyond the maturity date of the
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 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 (including guarantees) issued
by the Company that rank junior to such Debentures, and (c) make any guarantee
payments with respect to the foregoing other than pursuant to the 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 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 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 Trust 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.
Distributions on the Trust Preferred 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 Trust Preferred Securities will be limited to
payments received from the Company on the Debentures. See "Description of the
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
Guarantee."
Distributions on the Trust Preferred Securities will be payable to the
holders thereof, including the Collateral Agent, as they appear on the books and
records of the Trust on the relevant record dates, which, as long as the Trust
Preferred Securities remain in book-entry only form, will be one Business Day
prior to the relevant payment dates. Such distributions will be paid through the
Institutional Trustee who will hold amounts/received in respect of the
Debentures in the Property Account for the benefit of the holders of the Trust
Preferred 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 the Trust Preferred Securities do not continue to remain in book-entry
form, the Regular Trustees 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 distributions
are to be made on the Trust Preferred 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.
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MARKET RATE RESET
The quarterly distribution rate on the Trust Preferred Securities (as well
as the interest rate on the related Debentures) will be reset on the Purchase
Contract Settlement Date to the Reset Rate, which will be equal to the sum of
the Reset Spread and the rate on the Two-Year Benchmark Treasury in effect on
the Purchase Contract Settlement Date and will be determined by the Reset Agent
as the rate the Trust Preferred Securities should bear in order for the Trust
Preferred Securities to have an approximate market value on the of 100.5% of the
Stated Amount on the Purchase Contract Settlement Date, provided that in no
event will the Reset Rate be higher than the rate on the Two-Year Benchmark
Treasury on the Purchase Contract Settlement Date plus 200 basis points (2%).
Such market value may be less than 100.5% if the Reset Spread is set at a
maximum of 2%. The "Two-Year Benchmark Treasury" shall mean direct obligations
of the United States (which may be obligations traded on a when-issued basis
only) having a maturity comparable to the remaining term to maturity of the
Trust Preferred Securities, as agreed upon by the Company and the Reset Agent.
The rate for the Two-Year Benchmark Treasury will be the bid side rate displayed
at 10:00 A.M., New York City time, on the Purchase Contract Settlement Date in
the Telerate system (or if the Telerate system is (a) no longer available on the
Purchase Contract Settlement Date or (b) in the opinion of the Reset Agent
(after consultation with the Company) no longer an appropriate system from which
to obtain such rate, such other nationally recognized quotation system as, in
the opinion of the Reset Agent (after consultation with the Company) is
appropriate). If such rate is not so displayed, the rate for the Two-Year
Benchmark Treasury shall be, as calculated by the Reset Agent, the yield to
maturity for the Two-Year Benchmark Treasury, expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis, and computed by taking the arithmetic mean of the secondary market bid
rates, as of 10:30 A.M., New York City time, on the Purchase Contract Settlement
Date of three leading United States government securities dealers selected by
the Reset Agent (after consultation with the Company) (which may include the
Reset Agent or an affiliate thereof). In no event will the Reset Rate be higher
than the rate on the Two-Year Benchmark Treasury on the Purchase Contract
Settlement Date plus 200 basis points (2%). It is currently anticipated that
Merrill Lynch & Co. will be the investment banking firm acting as the Reset
Agent.
On the fifth business day prior to the Purchase Contract Settlement Date,
the Two-Year Benchmark Treasury to be used to determine the Reset Rate on the
Purchase Contract Settlement Date will be selected and the Reset Spread to be
added to the rate on the Two-Year Benchmark Treasury in effect on the Purchase
Contract Settlement Date will be established by the Reset Agent, and the Reset
Spread and the Two-Year Benchmark Treasury will be announced by the Company (the
"Reset Announcement Date"). The Company will cause a notice of the Reset Spread
and such Two-Year Benchmark Treasury to be published on the Business Day
following the Reset Announcement Date by publication in a daily newspaper in the
English language of general circulation in The City of New York, which is
expected to be The Wall Street Journal. The Company will request, not later than
7 nor more than 15 calendar days prior to the Reset Announcement Date, that the
Depositary notify its participants holding Trust Preferred Securities, Income
PRIDES or Growth PRIDES of such Reset Announcement Date and of the procedures
that must be followed if any owner of an Income PRIDES wishes to settle the
related Purchase Contract with cash on the Purchase Contract Settlement Date.
MATURITY
Subject to the requirement that the Trust put the Debentures to the Company
under certain circumstances, the Debentures will mature on , 2002.
Upon the repayment of the Debentures at maturity, the proceeds from such
repayment shall simultaneously be applied to redeem Trust Preferred Securities
having an aggregate stated liquidation amount equal to the aggregate principal
amount of the Debentures so repaid. See "Description of the Debentures."
DISTRIBUTION OF THE DEBENTURES
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in practice under the
1940 Act (as defined below) to the effect that, as a result of the occurrence of
a change in law or regulation or a written change in interpretation or
application of
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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 Investment
Company Act of 1940, as amended (the "1940 Act") .
If, at any time, an Investment Company Event shall occur and be continuing,
the Trust shall be dissolved, with the result that the Debentures with 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, the Trust
Securities, would be distributed to the holders of the Trust Securities in
liquidation of such holders' interests in the Trust on a pro rata basis within
90 days following the occurrence of such Investment Company Event; provided,
however, that in the case of the occurrence of a Tax Event, such dissolution and
distribution shall be conditioned on the Company being unable to avoid such Tax
Event within such 90-day period by taking some ministerial action or pursuing
some other reasonable measure that will have no adverse effect on the Trust, the
Company or the holders of the Trust Securities and will involve no material
cost. If an Investment Company Event occurs, Debentures distributed to the
Collateral Agent in liquidation of such holder's interest in the Trust would be
pledged (in lieu of the Trust Preferred Securities) to secure Income PRIDES
holders' obligations to purchase Common Stock under the Purchase Contracts.
The Company will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities of creditors of the Trust as provided by
applicable law, cause the Debentures to be distributed to the holders of the
Trust Securities. As of the date of any distribution of Debentures upon
dissolution of the Trust, (i) the Trust Preferred Securities will no longer be
deemed to be outstanding, (ii) the Depositary or its nominee, as the record
holder of the Trust Preferred Securities, will receive a registered global
certificate or certificates representing the Debentures to be delivered upon
such distribution, and (iii) any certificates representing Trust Preferred
Securities not held by the Depositary or its nominee will be deemed to represent
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 Trust Preferred Securities until such certificates are presented to the
Company or its agent for transfer or reissuance. Debentures distributed to the
Collateral Agent in liquidation of the interest of the holders of the Trust
Preferred Securities in the Trust would be pledged (in lieu of the Trust
Preferred Securities) to secure Income PRIDES holders' obligations to purchase
Common Stock under the Purchase Contracts.
There can be no assurance as to the market prices for either the Trust
Preferred Securities or the Debentures that may be distributed in exchange for
the Trust Preferred Securities if a dissolution of the Trust were to occur.
Accordingly, the Trust Preferred Securities or such Debentures that an investor
may receive if a dissolution of the Trust were to occur may trade at a discount
to the price that the investor paid to purchase the Trust Preferred Securities
forming a part of the Income PRIDES offered hereby.
Subject to applicable law (including, without limitation, United States
federal securities laws) the Company or its subsidiaries may at any time, and
from time to time, purchase outstanding Trust Preferred Securities by tender, in
the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution of the Trust, the
then holders of the Trust Preferred Securities will be entitled to receive out
of the assets of the Trust, after satisfaction of liabilities to creditors,
Debentures in 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, the Trust Preferred Securities on a pro rata basis in exchange for such
Trust Preferred Securities.
The holders of the Common Securities will be entitled to receive
distributions upon any such dissolution pro rata with the holders of the Trust
Preferred Securities, except that if a Declaration Event of Default has
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occurred and is continuing, the Trust Preferred Securities shall have a
preference over the Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall dissolve (i) on ,
2004, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the Company 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) after the receipt by
the Institutional Trustee of written direction from the Company to dissolve the
Trust or the filing of a certificate of dissolution or its equivalent with
respect to the Trust, (v) upon the distribution of Debentures or (vi) upon the
entry of a decree of a judicial dissolution of the holder of the Common
Securities, the Company or the Trust.
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 Trust Preferred Securities
have been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the Trust Preferred 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 Trust Preferred Securities and
only the holders of the Trust Preferred Securities will have the right to direct
the Institutional Trustee with respect to certain matters under the Declaration
and, therefore, the Indenture. If a Declaration Event of Default with respect to
the Trust Preferred Securities is waived by holders of Trust Preferred
Securities, such waiver will also constitute the waiver of such Declaration
Event of Default with respect to the Common Securities without any further act,
vote or consent of the holders of the Common Securities. If the Institutional
Trustee fails to enforce its rights under the Debentures in respect of an
Indenture Event of Default after a holder of record of Trust Preferred
Securities has made a written request, such holder of record of Trust Preferred
Securities may institute a legal proceeding against the Company to enforce the
Institutional Trustee's rights under the Debentures without first 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 Debentures on the date such interest or principal is otherwise
payable (after giving effect to any right of deferral), then a holder of Trust
Preferred Securities may directly institute a proceeding after the respective
due date specified in the Debentures for enforcement of payment (a "Direct
Action") to such holder directly of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Trust Preferred Securities of such holder. In connection with such Direct
Action, the Company shall have the right under the Indenture to set off any
payment made to such holder of the Company. The holders of Trust Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures. See "Effect of Obligations under the Debentures
and the Guarantee."
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Debentures will have the right under the
Indenture to declare the principal of and interest on the 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 and the Trust Indenture Act
and under "Description of the Guarantee -- Modification of the Guarantee;
Assignment," and as otherwise required by law and the Declaration, the holders
of the Trust Preferred Securities will have no voting rights.
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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 stated liquidation amount of
the Trust 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 Debentures, to (i) exercise the remedies
available under the Indenture with respect to the 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 Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the 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 Debentures (a "Super-Majority")
affected thereby, only the holders of at least such Super-Majority in aggregate
stated liquidation amount of the Trust Preferred Securities may direct the
Institutional Trustee to give such consent or take such action. The
Institutional Trustee shall notify all holders of the Trust Preferred Securities
of any notice of default received from the Debt Trustee (as defined below) with
respect to the 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 federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
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 Preferred Securities and the
Common 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 stated liquidation amount of the Trust Preferred
Securities and the Common 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 stated
liquidation amount of the Trust Preferred Securities and the Common Securities
which the relevant Super-Majority represents of the aggregate principal amount
of the 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 Preferred Securities and the Common 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 Trust Preferred Securities
may be given at a separate meeting of holders of Trust 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 Trust 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 Trust 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 Trust
Preferred Securities will be required for the Trust to cancel Trust Preferred
Securities or distribute Debentures in accordance with the Declaration.
Notwithstanding that holders of Trust Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the Trust
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
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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 Trust Preferred
Securities were not outstanding.
The procedures by which holders of Trust Preferred Securities may exercise
their voting rights are described below. See "-- Book-Entry Only Issuance -- The
Depository Trust Company" below.
Holders of the Trust 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.
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, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Trust Securities, whether by
way of amendment to the Declaration or otherwise or (ii) the dissolution 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 or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in such stated
liquidation amount of the Trust Securities affected thereby; provided, that if
any amendment or proposal referred to in clause (i) above would adversely affect
only the Trust Preferred Securities or the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in stated 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 as other than a grantor trust for purposes of United States
federal income taxation, (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 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 Debentures,
(iii) if the Trust Preferred Securities are listed, any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization on which the Trust Preferred Securities
are then listed or quoted, (iv) such merger, consolidation, amalgamation or
replacement does not cause the Trust 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 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 effect the
rights, preferences and privileges of the holders of the Trust Securities
(including any
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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 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 stated 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 federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depositary will act as securities depositary for the Trust Preferred
Securities. The Trust Preferred Securities 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 Trust Preferred
Securities certificates, representing the total aggregate number of Trust
Preferred Securities, will be issued and will be deposited with the Depositary.
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 Trust
Preferred Securities as represented by a global certificate.
Purchases of Trust Preferred Securities within the Depositary's system must
be made by or through Direct Participants, which will receive a credit for the
Trust Preferred Securities on the Depositary's records. The ownership interest
of each actual purchaser of each Trust Preferred Security (a "Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depositary of
their purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Trust Preferred Securities. Transfers of
ownership interests in the Trust Preferred 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 Trust Preferred Securities, except in the event that use of the
book-entry system for the Trust Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Trust Preferred Securities
deposited by Participants with the Depositary are registered in the name of the
Depositary's nominee, Cede & Co. The deposit of Trust Preferred Securities with
the Depositary and their registration in the name of Cede & Co. effect no change
in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Trust Preferred Securities. The Depositary's records
reflect only the identity of the Direct Participants to whose accounts such
Trust Preferred 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.
So long as the Depositary or its nominee is the registered owner or holder
of a Global Certificate, the Depositary or such nominee, as the case may be,
will be considered the sole owner or holder of the Trust Preferred Securities
represented thereby for all purposes under the Declaration and the Trust
Preferred Securities. No beneficial owner of an interest in a Global Certificate
will be able to transfer that interest except in accordance with the Depositary
applicable procedures, in addition to those provided for under the Declaration.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Trust Preferred Securities (including the
presentation of Trust Preferred Securities for exchange as described below) only
at the direction of one or more Participants to whose account the Depositary's
interests in the Global Certificates are credited and only in respect of such
portion of the stated liquidation amount of Trust
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Preferred Securities as to which such Participant or Participants has or have
given such directions. However, if there is a Declaration Event of Default under
the Trust Preferred Securities, the Depositary will exchange the Global
Certificates for Certificated Securities, which it will distribute to its
Participants.
Conveyance of notices and other communications by the Depositary to Direct
Participants and 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 that may be in effect from
time to time.
Although voting with respect to the Trust Preferred Securities is limited,
in those cases where a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities. Under
its usual procedures, the Depositary 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 Direct Participants to whose accounts the
Trust Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy). The Company and the Trust believe that
the arrangements among the Depositary, Direct and Indirect Participants, and
Beneficial Owners will enable the Beneficial Owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a record
holder of a beneficial interest in the Trust.
Distribution payments on the Trust Preferred Securities will be made to the
Depositary in immediately available funds. The Depositary's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street name,"
and such payments will be the responsibility of such Participant and not of the
Depositary, the Trust or the Company, subject to any statutory or regulatory
requirements to the contrary that may be in effect from time to time. Payment of
distributions to the Depositary is the responsibility of the Trust, disbursement
of such payments to Direct Participants is the responsibility of the Depositary,
and disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Trust Preferred
Security certificate will not be entitled to receive physical delivery of Trust
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary to exercise any rights under the Trust Preferred
Securities.
Although the Depositary has agreed to the foregoing procedure in order to
facilitate transfer of interests in the Global Certificates among Participants,
the Depositary is under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time. None of the
Company, the Trust or any Owens Corning Trustee will have any responsibility for
the performance by the Depositary or its Participants or Indirect Participants
under the rules and procedures governing the Depositary. The Depositary may
discontinue providing its services as securities depositary with respect to the
Trust Preferred Securities at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Trust Preferred Securities certificates are required to be printed
and delivered to holders. Additionally, the Regular Trustees (with the consent
of the Company) may decide to discontinue use of the system of book-entry
transfers through the Depositary (or any successor depositary) with respect to
the Trust Preferred Securities. In that event, certificates for the Trust
Preferred Securities will be printed and delivered to holders. In each of the
above circumstances, the Company will, appoint a paying agent with respect to
the Trust Preferred Securities.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
and the Trust believe to be reliable, but neither the Company nor the Trust
takes responsibility for the accuracy hereof.
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REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Payments in respect of the Trust Preferred Securities represented by the
Global Certificates shall be made to the Depositary, which shall credit the
relevant accounts at the Depositary 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 be permitted to resign as Paying Agent upon
30 days' written notice to the Owens Corning Trustees. In the event that The
Bank of New York 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).
The Institutional Trustee will act as registrar, transfer agent and paying
agent for the Trust Preferred Securities.
Registration of transfers of Trust Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment (and the giving of
such indemnity as the Trust or the Company may require) in respect of any tax or
other government charge which may be imposed in relation to it.
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 Trust Preferred Securities, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Trust Preferred 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 Guarantee.
GOVERNING LAW
The Declaration and the Trust Preferred 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 federal income tax purposes. The Company is authorized and directed to
conduct its affairs so that the Debentures will be treated as indebtedness of
the Company for 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 Declaration of Trust, the certificate of trust of the Trust
or the certificate of incorporation of the Company, that each of the Company and
the Regular Trustees determines in its 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 Trust Preferred Securities or vary the terms
thereof.
Holders of the Trust Preferred Securities have no preemptive rights.
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 Trust 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 purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the Guarantee will be
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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 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. Whenever particular defined terms of the Trust Preferred
Securities Guarantee are referred to in this Prospectus Supplement, such defined
terms are incorporated herein by reference. The Guarantee will be held by the
Guarantee Trustee for the benefit of the holders of the Trust Preferred
Securities.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full on a senior unsecured
basis, to the holders of the Trust 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 Trust 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 thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on the Trust Preferred Securities,
to the extent the Trust shall have funds available therefor; and (ii) upon a
voluntary or involuntary dissolution of the Trust (other than in connection with
the distribution of Debentures to the holders of Trust Preferred Securities),
the lesser of (a) the aggregate of the stated liquidation amount and all accrued
and unpaid distributions on such Trust 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 Trust 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 Trust Preferred Securities or
by causing the Trust to pay such amounts to such holders.
The Guarantee will be a full and unconditional guarantee generally on a
senior unsecured basis with respect to the Trust Preferred Securities issued by
the Trust, 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 Debentures purchased by the Trust, the Trust will
not pay distributions on the Trust Preferred Securities and will not have funds
available therefor. See "Effect of Obligations under the Debentures and the
Guarantee."
The Guarantee, when taken together with the Company's obligations under the
Debentures, the Indenture, and the Declaration, will have the effect of
providing a full and unconditional guarantee on a senior unsecured basis (other
than in respect of the Company's obligations under the Senior Lease) by the
Company of payments due on the Trust 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 Trust 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 Trust
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 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
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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 junior to the 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 Trust 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 stated liquidation amount of the
outstanding Trust 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 Trust Preferred Securities then outstanding.
TERMINATION
The Guarantee will terminate (a) upon distribution of the Debentures held
by the Trust to the holders of the Trust Preferred Securities or (b) 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 Trust Preferred
Securities must restore payment of any sums paid under the Trust 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 stated liquidation amount of the Trust
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 such Guarantee, any holder of Trust 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. 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 a senior unsecured obligation of the Company
and will rank pari passu with all of the Company's other senior unsecured
obligations, except that such obligations with respect to the Guarantee will be
subordinated and junior in right of payment to the Company's obligations under
the Senior Lease.
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).
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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 Trust 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.
DESCRIPTION OF THE DEBENTURES
Set forth below is a description of the specific terms of the 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.
Under certain circumstances involving the dissolution of the Trust,
Debentures may be distributed to the holders of the Trust Securities in
liquidation of the Trust. See "Description of the Trust Preferred
Securities -- Distribution of the Debentures" and will rank pari passu in right
of payment with all of the Company's other senior unsecured obligations, except
that the Debentures will be subordinated an junior in right of payment to the
Company's obligations under the Senior Indebtedness.
GENERAL
The Debentures will be issued as senior unsecured debt under the Indenture.
The Debentures will be limited in aggregate principal amount to $ ,
such amount being the sum of the Stated Amount of the Trust Preferred Securities
and the Common Securities.
The Debentures will not be subject to a sinking fund provision. The entire
principal amount of the 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 , 2002.
The Company will have the right at any time to dissolve the Trust and cause
the Debentures to be distributed to the holders of the Trust Securities. If
Debentures are distributed to holders of Trust Securities in liquidation of such
holders' interests in the Trust, such Debentures will initially be issued as a
Global Security (as defined herein). As described herein, under certain limited
circumstances, Debentures may be issued in certificated form in exchange for a
Global Security. See "-- Book-Entry and Settlement" below. In the event that
Debentures are issued in certificated form, such Debentures will be in
denominations of $50 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Debentures issued as a
Global Security will be made to the Depositary, a successor depositary or, in
the event that no depositary is used, to a Paying Agent for the Debentures. In
the event Debentures are issued in certificated form, principal and interest
will be payable, the transfer of the Debentures will be registrable and
Debentures will be exchangeable for Debentures of other denominations of a like
aggregate principal amount, at the corporate trust office or agency of the
Institutional Trustee in Wilmington, Delaware; provided, that at the option of
the Company, payment of interest may be made by check mailed to the address of
the holder
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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 Debentures is the Institutional Trustee, the payment of principal
and interest on the 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
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 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), the
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 Debentures.
The Company may not make any payment with respect to the Debentures if and
for so long as (i) the 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 Debentures would, immediately after giving effect thereto,
result in a Senior Indebtedness Default.
A payment with respect to the Debentures shall include, without limitation,
payment of principal of, premium, if any, and interest on the Debentures, the
purchase of 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 the
Senior Indebtedness when due or the happening of an event of default with
respect to the 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 the 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 Indebtedness or instrument has been
avoided, disallowed or subordinated.
"Senior Indebtedness" means all payment obligations of the Company, under
the lease, dated as of December 1, 1977, between the Ohio Water Development
Authority, as Lessor, and the Company, as Lessee (the "Senior Lease"). Senior
Indebtedness shall continue to constitute Senior Indebtedness for all purposes
of the 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.
INTEREST
Each Debenture shall bear interest initially at the rate of % per annum
from the original date of issuance, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year (each an "Interest Payment
Date"), commencing , 1997, to the person in whose name such Debenture
is registered, subject to certain exceptions, at the close of business on the
Business Day next
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preceding such Interest Payment Date. The interest rate on the Debentures (as
well as the distribution rate on the related Trust Preferred Securities) will be
reset on the Purchase Contract Settlement Date to the Reset Rate, which will be
equal to the sum of the Reset Spread and the rate on the Two-Year Benchmark
Treasury in effect on the Purchase Contract Settlement Date, and will be
determined by the Reset Agent as the rate the Debentures should bear in order
for the Debentures to have an approximate market value of 100.5% of the
aggregate principal amount on the Purchase Contract Settlement Date, provided
that in no event will the Reset Rate be higher than the rate on the Two-Year
Benchmark Treasury on the Purchase Contract Settlement Date plus 200 basis
points (2%). Such market value may be less than 100.5% if the Reset Spread is
set at a permitted maximum of 2%. The "Two-Year Benchmark Treasury" shall mean
direct obligations of the United States (which may be obligations traded on a
when-issued basis only) having a maturity comparable to the remaining term of
the Debentures, as agreed upon by the Company and the Reset Agent. The rate for
the Two-Year Benchmark Treasury will be the bid side rate displayed at 10:00
A.M., New York City time, on the Purchase Contract Settlement Date in the
Telerate system (or if the Telerate system is (a) no longer available on the
Purchase Contract Settlement Date or (b) in the opinion of the Reset Agent, no
longer an appropriate system from which to obtain such rate, such other
nationally recognized quotation system as, in the opinion of the Reset Agent
(after consultation with the Company) is appropriate). If such rate is not so
displayed, the rate for the Two-Year Benchmark Treasury shall be, as calculated
by the Reset Agent, the yield to maturity for the Two-Year Benchmark Treasury,
expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis, and computed by taking the arithmetic
mean of the secondary market bid rates, as of 10:30 A.M., New York City time, on
the Purchase Contract Settlement Date of three leading United States government
securities dealers selected by the Reset Agent (after consultation with the
Company) (which may include the Reset Agent or an affiliate thereof). It is
currently anticipated that Merrill Lynch & Co. will be the investment banking
firm acting as the Reset Agent.
On the fifth business day prior to the Purchase Contract Settlement Date
the Two-Year Benchmark Treasury will be selected and the Reset Spread to be
added to the rate on the Two-Year Benchmark Treasury in effect on the Purchase
Contract Settlement Date will be established by the Reset Agent, and the Reset
Spread and the Two-Year Benchmark Treasury will be announced by the Company (the
"Reset Announcement Date"). The Company will cause a notice of the Reset Spread
and such Two-Year Benchmark Treasury to be published on the Business Day
following the Reset Spread Announcement Date by publication in a daily newspaper
in the English language of general circulation in The City of New York, which is
expected to be The Wall Street Journal. In the event the Debentures shall not
continue to remain in book-entry only form, the Company shall have the right to
select record dates, which shall be more than fifteen Business Days but less
than 60 Business Days prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed will be computed on the basis of the actual number of days elapsed
in such a 90-day period. In the event that any date on which interest is payable
on the Debentures is not a Business Day, then payment of the interest 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, 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.
REDEMPTION
The Company will not have the ability to redeem the Debentures prior to
their stated maturity date. However, the Company will be able to defease the
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 their Debentures.
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PUT OPTION
In accordance with the terms of the Debentures, holders, including the
Institutional Trustee and the Collateral Agent, have the right to require the
Company to repurchase, on the Purchase Contract Settlement Date, their
Debentures at an amount per Debenture equal to $50, plus accumulated and unpaid
interest, if any. See "Description of Purchase Contracts -- General."
On the Purchase Contract Settlement Date, each holder of Income PRIDES that
has neither previously exercised such holder's option of Early Settlement nor
settled the related Purchase Contract with cash on such date will be deemed to
have requested the Trust to put the aggregate principal amount of the related
Debentures to the Company for a price equal to such aggregate principal amount,
plus accumulated and unpaid interest, if any. Upon the repurchase of the
Debentures by the Company pursuant to such Put Option, (i) the proceeds from
such repurchase shall simultaneously be applied to redeem Trust Preferred
Securities of such holder having an aggregated stated liquidation amount equal
to the aggregate principal amount of the Debentures so repurchased and will be
applied to satisfy in full such holder's obligation to purchase Common Stock
under the related Purchase Contract as described herein and (ii) any accumulated
and unpaid interest with respect to the Debentures so repurchased will be paid
to such holder in cash.
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 Debentures, to defer payments of interest by extending the
interest payment period for a period not extending beyond the maturity date of
the 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 quarterly at the rate
specified for the 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 or 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 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 junior
to the 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 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 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 Debentures. If the
Institutional Trustee shall be the sole holder of the 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 Trust Preferred Securities are payable or (ii) the
date the Regular Trustees are required to give notice, if applicable, to the
NYSE (or other applicable self-regulatory organization) or to holders of the
Trust Preferred Securities of the record or payment date of
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such distribution. The Regular Trustees shall give notice of the Company's
selection of such Extension Period to the holders of the Trust Preferred
Securities. If the Institutional Trustee shall not be the sole holder of the
Debentures, the Company shall give the holders of the 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, if applicable, to the NYSE (or other applicable self-regulatory
organization) or to holders of the Debentures of the record or payment date of
such related interest payment.
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 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 Debentures, will have the right to
declare the principal of and the interest on the 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 Debentures.
The following are Events of Default under the Indenture with respect to the
Debentures: (1) failure to pay interest on the Debentures when due, continued
for 30 days; however, if the Company is permitted by the terms of the Debentures
to defer the payment in question, the date on which such payment is due and
payable shall be the date on which the Company is required to make payment
following such deferral, if such deferral has been elected pursuant to the terms
of the Debentures; (2) failure to pay the principal of (or premium, if any, on)
the Debentures when due and payable at Maturity, upon redemption or otherwise;
however, if the Company is permitted by the terms of the Debentures to defer the
payment in question, the date on which such payment is due and payable shall be
the date on which the Company is required to make payment following such
deferral, if such deferral has been elected pursuant to the terms of the
Debentures; (3) failure to observe or perform in any material respect certain
other covenants contained in the Indenture, continued for a period of 90 days
after written notice has been given to the Company by the Debt Trustee or
holders of at least 25% in aggregate principal amount of the outstanding
Debentures; and (4) certain events of bankruptcy, insolvency or reorganization
relating to the Company.
The Indenture provides that the Debt Trustee shall, within 30 days after
the occurrence of any Default or Event of Default with respect to the
Debentures, give the holders of the Debentures notice of all incurred Defaults
or Events of Default known to it (the term "Default" includes any event which
after notice or passage of time or both would be an Event of Default); provided,
however, that, except in the case of an Event of Default or a Default in a
payment on the Debentures, the Debt Trustee shall be protected in withholding
such notice of and so long as the board of directors, the executive committee or
directors or responsible officers of the Debt Trustee in good faith determine
that the withholding of such notice is in the interest of the holders of the
Debentures.
If an Event of Default with respect to the Debentures occurs and is
continuing, the Debt Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Debentures, by notice in writing to the
Company (and to the Debt Trustee if given by the holders of at least 25% in
aggregate principal amount of the Debentures), may declare the unpaid principal
of and accrued interest to the date of acceleration on all the outstanding
Debentures to be due and payable immediately and, upon any such declaration, the
Debentures shall become immediately due and payable.
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In addition, in the case of the Debentures held by the Trust, 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, then a holder of Trust
Preferred Securities may directly institute a proceeding against the Company for
payment.
Any such declaration with respect to the Debentures may be annulled and
past Events of Default and Defaults (except, unless theretofore cured, an Event
of Default or a Default in payment of principal of or interest on the
Debentures) may be waived by the holders of a majority of the principal amount
of the outstanding Debentures, upon the conditions provided in the Indenture.
The Indenture provides that the Company shall periodically file statements
with the Debt Trustee regarding compliance by the Company with certain of the
respective covenants thereof and shall specify any Event of Default or Defaults
with respect to the Debentures, in performing such covenants, of which the
signers may have knowledge.
An Indenture Event of Default also constitutes a Declaration Event of
Default. The holders of Trust Preferred Securities in certain circumstances have
the right to direct the Institutional Trustee to exercise its rights as the
holder of the Debentures. See "Description of the Trust Preferred
Securities -- Declaration Events of Default" and "-- Voting Rights."
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 Debentures on the date such interest or principal
is otherwise payable, the Company acknowledges that a holder of Trust Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder directly of the principal of and interest on the Debentures having a
principal amount equal to the aggregated stated liquidation amount of the Trust
Preferred Securities of such holder after the respective due date specified in
the Debentures. In connection with such 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 Trust Preferred Securities will not be able to exercise directly
any other remedy available to the holders of the Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Trust Preferred Securities in connection with
the involuntary or voluntary dissolution of the Trust, the 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, Debentures represented by the Global
Security will not be exchangeable for, and will not otherwise be issuable as,
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 certificated 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 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 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 Debentures are distributed to holders of Trust Preferred Securities in
liquidation of such holders' interests in the Trust, the Depositary will act as
securities depositary for the Debentures. For a description of the Depositary
and the specific terms of the depositary arrangements, see "Description of the
Trust Preferred
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Securities -- Book-Entry Only Issuance -- The Depository Trust Company." As of
the date of this Prospectus Supplement, the description therein of the
Depositary's book-entry system and the Depositary's practices as they relate to
purchases, transfers, notices and payments with respect to the Trust Preferred
Securities apply in all material respects to any debt obligations represented by
one or more Global Securities held by the Depositary. The Company may appoint a
successor to the Depositary or any successor depositary in the event the
Depositary or such successor depositary is unable or unwilling to continue as a
depositary for the Global Securities.
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 Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
A Global Security shall be exchangeable for 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 Debentures. Any Global Security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for 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 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 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 Trust Preferred Securities. The payment of such fees and expenses will be
fully and unconditionally guaranteed by the Company.
EFFECT OF OBLIGATIONS UNDER THE
DEBENTURES AND THE 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
Debentures and engage in only those other activities necessary or incidental
thereto.
As long as payments of interest and other payments are made when due on the
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 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 Debentures will match the distribution
rate and distribution and other payment dates for the Trust Preferred
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 Trust Preferred Securities (to the extent funds
therefor are available) are guaranteed by the Company as and to the extent set
forth under "Description of the Guarantee." If the Company does not make
interest payments on the Debentures purchased by the Trust, the Trust will not
have sufficient funds to pay distributions on the Trust Preferred 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 Debentures
when due (taking account of any Extension Period), the Declaration provides a
mechanism whereby the holders of the Trust Preferred Securities, using the
procedures described in "Description of the Trust Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company" and
"-- Voting Rights," may direct the Institutional Trustee to enforce its rights
under the Indenture. If the Institutional Trustee fails to enforce its rights
under the Indenture in respect of an Indenture Event of Default, such holder of
record of Trust Preferred Securities may institute a legal proceeding against
the Company to enforce the Institutional Trustee's rights under the Indenture
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 Debentures on
the date such interest or principal is otherwise payable, then a holder of Trust
Preferred Securities may directly institute a proceeding against the Company for
payment. The Company, under the Guarantee, acknowledges that the Guarantee
Trustee shall enforce the Guarantee on behalf of the holders of the Trust
Preferred Securities. If the Company fails to make payments under the Guarantee,
the Guarantee provides a mechanism whereby the holders of the Trust Preferred
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 Guarantee, any holder of Trust Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee, or any other person or entity.
The Guarantee, when taken together with the Company's obligations under the
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 of amounts due on the Trust
Preferred Securities. See "Description of Guarantee."
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, Trust
Preferred Securities 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, Trust Preferred
Securities or Common Stock acquired under a Purchase Contract as a capital asset
(for purposes of this summary, a "U.S. Holder"). The statements of law or legal
conclusion in this summary represent the opinion of Debevoise & Plimpton,
special counsel to the Company ("Tax 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 U.S. Holder. This summary does not address all potential tax
consequences that may be applicable to a particular U.S. Holder,
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and is not intended to be wholly applicable to all categories of U.S. Holders
(including, for example, (a) insurance companies, banks, tax-exempt
organizations or dealers, (b) persons holding FELINE PRIDES, Trust Preferred
Securities 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 TRUST PREFERRED SECURITIES AND TREASURY SECURITIES
A U.S. Holder will be treated as owning the Trust Preferred Securities or
Treasury Securities constituting a part of the FELINE PRIDES. The Company and,
by acquiring FELINE PRIDES, each U.S. Holder agree to treat such U.S. Holder as
the owner, for United States federal, state and local income and franchise tax
purposes, of the Trust Preferred Securities or Treasury Securities constituting
a part of the FELINE PRIDES beneficially owned by such U.S. Holder. The
remainder of this summary will assume that U.S. Holders of FELINE PRIDES will be
treated as the owners of the Trust Preferred Securities or Treasury Securities
constituting a part of such FELINE PRIDES for United States federal income tax
purposes.
ACQUISITION OF INCOME PRIDES; INITIAL BASIS IN TRUST PREFERRED SECURITIES AND
PURCHASE CONTRACTS
A U.S. Holder's acquisition of Income PRIDES will be treated as an
acquisition of the Trust Preferred Security and the Purchase Contract
constituting such Income PRIDES. The purchase price of each Income PRIDES will
be allocated between the Trust Preferred Security and the Purchase Contract
constituting such Income PRIDES in proportion to their respective fair market
values at the time of purchase. Such allocation will establish the U.S. Holder's
initial tax basis in the Trust Preferred Security and the Purchase Contract.
The Company intends to take the position that, at the time of issuance of
the Income PRIDES, the fair market value of each Trust Preferred Security equals
$ and the fair market value of each Purchase Contract equals
$ . The Company's position will be binding upon each U.S. Holder (but
not on the IRS) unless such U.S. Holder explicitly discloses a contrary position
on a statement attached to such U.S. Holder's timely filed United States federal
income tax return for the taxable year in which an Income PRIDES is acquired.
Thus, absent such disclosure, a U.S. Holder should allocate the purchase price
for an Income PRIDES (i.e., the Stated Amount) in accordance with the foregoing.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Trust Preferred 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 described 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. Holder will be considered
the owner of an undivided interest in the 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.
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Holder's gross income will increase such U.S. Holder's tax basis in its Trust
Preferred Securities, and the amount of distributions to a U.S. Holder will
reduce such U.S. Holder's tax basis in its Trust Preferred Securities.
CLASSIFICATION OF THE DEBENTURES
The Company, the Trust and, by acquiring FELINE PRIDES, each U.S. Holder
agree to treat the Debentures as indebtedness for all United States federal,
state and local income and franchise tax purposes. There is no authority
addressing the tax classification of instruments similar to the Debentures
issued as part of an instrument similar to FELINE PRIDES. Nevertheless, in
connection with the issuance of the Debentures, Tax Counsel will render its
opinion to the effect that, under current law and assuming compliance with the
terms of the Indenture and certain other documents, and based on certain
assumptions and advice described in such opinion, the Debentures will be
classified as indebtedness of the Company. The remainder of this summary will
assume that the Debentures will be treated as indebtedness of the Company.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT ON TRUST PREFERRED SECURITIES
Subject to the discussion below regarding the Company's right to defer
payments of interest on the Debentures, the Debentures should be treated as
"reset bonds" under applicable Treasury Regulations, and interest on the
Debentures should not constitute contingent interest for purposes of the
"original issue discount" ("OID") rules. Under the Treasury Regulations
applicable to reset bonds, the Debentures should be treated, solely for purposes
calculating the accrual of OID, as maturing on the day immediately preceding the
Purchase Contract Settlement Date for an amount equal to 100.5% of the Stated
Amount (the "Reset Amount") and as having been reissued on the Purchase Contract
Settlement Date for the Reset Amount. If the amount of the initial purchase
price for the FELINE PRIDES allocated to the Trust Preferred Security is less
than the Reset Amount, the Debentures should be treated as having been issued
with OID equal to the difference between the Reset Amount and the amount so
allocated to the Trust Preferred Security, unless such difference is less than
three-fourths of one-percent of the Reset Amount. If the Debenture were treated
as issued with OID, a U.S. Holder would be required to include such OID in
income on an economic accrual basis over the period between the issue date and
the day immediately preceding the Purchase Contract Settlement Date regardless
of such U.S. Holder's method of tax accounting. Consequently, each U.S. Holder
(including those using the cash basis of accounting) would be required to
include OID in its gross income even though the Company will not actually make
current cash payments with respect to such OID. In addition, a U.S. Holder
should include stated interest on the Debentures in income as ordinary income
when paid to the Trust or accrued, in accordance with such U.S. Holder's regular
method of accounting.
Under the Indenture, the Company has the right to defer payments of
interest on the Debentures. The Company's right to defer payments of interest
could cause the Debentures to be subject to the OID rules. The Company, however,
believes, and intends to take the position, that as of the issue date, the terms
and conditions of the 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 option to defer the payment of
interest a "remote" contingency for these purposes. If so treated, except as
provided below, the Debentures would not be subject to the OID rules as a result
of the Company's right to defer payments of interest on the Debentures.
If the Company were to exercise its right to defer payments of interest,
the 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. Holder's taxable
interest income with respect to the Debentures would thereafter be accounted for
on an economic accrual basis regardless of such U.S. Holder's method of tax
accounting, and actual distributions of stated interest would not be reported as
taxable income. Consequently, each U.S. Holder (including those using the cash
basis of accounting) would be required to include OID in its gross income 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 right to defer payments of interest is not a "remote" contingency
for these purposes, in which case U.S. Holders would be
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required to accrue OID on the Debentures on an economic accrual basis under the
OID rules described in the preceding paragraph.
Corporate U.S. Holders will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Trust
Preferred Securities.
INCOME FROM CONTRACT ADJUSTMENT PAYMENTS AND DEFERRED CONTRACT ADJUSTMENT
PAYMENTS
There is no direct authority addressing the treatment of the Contract
Adjustment Payments and Deferred Contract Adjustment 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
each U.S. Holder when received or accrued, in accordance with the U.S. Holder's
method of accounting. To the extent the Company is required to file information
returns with respect to Contract Adjustment Payments or Deferred Contract
Adjustment Payments, it intends to treat such payments as taxable income to each
U.S. Holder. U.S. Holders should consult their tax advisors concerning the
treatment of Contract Adjustment Payments and Deferred Contract Adjustment
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 or Deferred Contract
Adjustment Payments because it views them as a cost of issuing the Common Stock.
DISTRIBUTION OF DEBENTURES TO U.S. HOLDERS OF TRUST PREFERRED SECURITIES
Under current law, a distribution by the Trust of the Debentures as
described under the caption "Description of the Trust Preferred
Securities -- Liquidation Distribution Upon Dissolution" will be non-taxable and
will result in a U.S. Holder or, in the case of Income PRIDES, the Collateral
Agent on behalf of the U.S. Holder, receiving its pro rata share of the
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. Holder had in its Trust Preferred Securities before such distribution.
A U.S. Holder will continue to include interest (or OID) in respect of
Debentures received from the Trust in the manner described under "Interest
Income and Original Issue Discount on Trust Preferred Securities."
ACQUISITION OF COMMON STOCK UNDER A PURCHASE CONTRACT
A U.S. 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 U.S. 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 U.S. Holder's tax basis in the
Purchase Contract (if any), less the portion of such purchase price and tax
basis allocable to the fractional share. Payments of Contract Adjustment
Payments or Deferred Contract Adjustment Payments that have been received in
cash by a U.S. Holder but not included in income by such U.S. Holder should
reduce such U.S. 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 U.S. Holder's income but not paid in cash
should increase such U.S. Holder's tax basis in the Purchase Contract or the
Common Stock (see "Income from Contract Adjustment Payments and Deferred
Contract Adjustment 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 U.S. Holder of an Income PRIDES that delivers Treasury Securities to the
Collateral Agent in substitution for Trust Preferred Securities generally will
not recognize gain or loss upon the delivery of such Treasury Securities or the
release of the Trust Preferred Securities to such U.S. Holder. Such U.S. Holder
will continue to include in income any interest, OID or market discount or
amortize any bond premium otherwise
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includible or deductible, respectively, by such U.S. Holder with respect to such
Treasury Securities and Trust Preferred Securities, and such U.S. Holder's tax
basis in the Treasury Securities, the Trust Preferred Securities and the
Purchase Contract will not be affected by such delivery and release. U.S.
Holders should consult their tax advisors concerning the tax consequences of
purchasing, owning and disposing of Treasury Securities.
SUBSTITUTION OF TRUST PREFERRED SECURITIES TO RECREATE INCOME PRIDES
A U.S. Holder of a Growth PRIDES that delivers Trust Preferred Securities
to the Collateral Agent to recreate an Income PRIDES generally will not
recognize gain or loss upon the delivery of such Trust Preferred Securities or
the release of the Treasury Securities to the U.S. Holder. Such U.S. Holder will
continue to include in income any interest, OID or market discount or amortize
any bond premium otherwise includible or deductible, respectively, by such U.S.
Holder with respect to such Treasury Securities and Trust Preferred Securities,
and such U.S. Holder's tax basis in the Treasury Securities, the Trust Preferred
Securities and the Purchase Contract will not be affected by such delivery and
release.
SALE OR DISPOSITION OF FELINE PRIDES
If a U.S. Holder sells, exchanges or otherwise disposes of FELINE PRIDES,
such U.S. Holder will be treated as having sold, exchanged or disposed of the
Purchase Contract and the Trust Preferred Securities or, in the case of Growth
PRIDES, the Treasury Securities, that constitute such FELINE PRIDES and
generally will have gain or loss equal to the difference between the portion of
the proceeds to such U.S. Holder allocable to the Purchase Contract and the
Trust Preferred Securities or Treasury Securities, as the case may be, and such
U.S. Holder's respective adjusted tax bases in the Purchase Contract and the
Trust Preferred Securities or Treasury Securities. Such gain or loss generally
will be capital gain or loss, except to the extent that such U.S. Holder is
treated as having received an amount with respect to accrued interest on the
Trust Preferred Securities, which will be treated as ordinary interest income,
or to the extent such U.S. 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 U.S. Holder held the FELINE PRIDES (or, in the case
of gain or loss with respect to the Trust Preferred Securities or Treasury
Securities, such Trust Preferred Securities or Treasury Securities) for more
than one year at the time of disposition. Under recently enacted legislation,
the maximum tax rate on capital gains for an individual U.S. Holder has been
reduced if such U.S. Holder's holding period is more than eighteen months. If
the sale, exchange or other disposition of FELINE PRIDES occurs when the
Purchase Contract has negative value, the U.S. Holder might be considered to
have received additional consideration for the Trust Preferred Securities or
Treasury Securities in an amount equal to such negative value, and to have paid
such amount to be released from the U.S. Holder's obligation under the Purchase
Contract. U.S. 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 to a U.S. Holder of Contract Adjustment Payments or Deferred
Contract Adjustment Payments that have not previously been included in the
income of such U.S. Holder should either reduce such U.S. 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 U.S. Holder's income but not
paid should increase such U.S. Holder's tax basis in the Purchase Contract (see
"Income from Contract Adjustment Payments and Deferred Contract Adjustment
Payments" above).
SALES OR REDEMPTIONS OF TRUST PREFERRED SECURITIES
Gain or loss will be recognized by a U.S. Holder on a sale or redemption of
a Trust Preferred Security (including a redemption for cash) in an amount equal
to the difference between the amount realized by the U.S. Holder on the sale or
redemption and the U.S. Holder's adjusted tax basis in the Trust Preferred
Security sold or redeemed. Gain or loss recognized by a U.S. Holder on Trust
Preferred Securities held for more than
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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). Under recently enacted
legislation, the maximum tax rate on capital gains for an individual U.S. Holder
has been reduced if such U.S. Holder's holding period is more than eighteen
months.
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 United States federal income
tax purposes) will be includable in income by the U.S. Holder when received. Any
such dividend will be eligible for the dividends received deduction if received
by an otherwise qualifying corporate U.S. Holder that meets the holding period
and other requirements for the dividends received deduction.
SALE OR DISPOSITION OF COMMON STOCK
Upon a sale, exchange or other disposition of Common Stock, a U.S. Holder
generally will recognize gain or loss equal to the difference between the amount
realized and such U.S. 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 U.S. Holder held the Common Stock for more than one year at the time
of such disposition. Under recently enacted legislation, the maximum tax rate on
capital gains for an individual U.S. Holder has been reduced if such U.S.
Holder's holding period is more than eighteen months.
EARLY SETTLEMENT OF PURCHASE CONTRACT
A U.S. Holder will not recognize gain or loss on the receipt of such U.S.
Holder's proportionate share of Trust Preferred Securities or Treasury
Securities upon Early Settlement of a Purchase Contract and will have the same
tax basis in such Trust Preferred Securities or Treasury Securities as before
such Early Settlement.
TERMINATION OF PURCHASE CONTRACT
If a Purchase Contract terminates, a U.S. Holder will recognize gain or
loss equal to the difference between the amount realized (if any) upon such
termination and such U.S. Holder's adjusted tax basis (if any) in the Purchase
Contract at the time of such termination. Payments of Contract Adjustment
Payments or Deferred Contract Adjustment Payments received by a U.S. Holder but
not included in income by such U.S. Holder should either reduce such U.S.
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 U.S. Holder's income but not
paid should increase such U.S. Holder's tax basis in the Purchase Contract (see
"Income from Contract Adjustment Payments and Deferred Contract Adjustment
Payments" above). Any such gain or loss should be capital gain or loss and
should be long-term capital gain or loss if the U.S. Holder held such Purchase
Contract for more than one year at the time of such termination. Under recently
enacted legislation, the maximum tax rate on capital gains for an individual
U.S. Holder has been reduced if such Holder's holding period is more than
eighteen months. A U.S. Holder will not recognize gain or loss on the receipt of
such U.S. Holder's proportionate share of the Trust Preferred Securities or
Treasury Securities upon termination of the Purchase Contract and will have the
same tax basis in such Trust Preferred Securities or Treasury Securities as
before such distribution.
ADJUSTMENT TO SETTLEMENT RATE
U.S. 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 U.S. 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 U.S. Holder
for certain taxable distributions with respect to the Common Stock. Thus, under
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certain circumstances, an increase in the Settlement Rate might give rise to a
taxable dividend to U.S. Holders of FELINE PRIDES even though such U.S. Holders
would not receive any cash related thereto.
SECONDARY HOLDERS OF FELINE PRIDES
U.S. 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 Trust
Preferred Securities or Treasury Securities constituting a part of such FELINE
PRIDES will be limited to its cash purchase price or whether it will also
include an amount equal to such negative value. U.S. Holders should consult
their tax advisors regarding the United States federal income to consequences to
Secondary Holders of the purchase, ownership and disposition of FELINE PRIDES.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Payments under the FELINE PRIDES, Trust Preferred Securities 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, Trust Preferred Securities 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 U.S.
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 U.S. Holder's United States federal income tax liability.
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, 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 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............................
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 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.
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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.
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 Securities or the
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 900,000 Income PRIDES from the
Company and the Trust 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 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 Income PRIDES, Purchase Contracts,
Trust Preferred Securities or Common Stock, as the case may be, or any
securities of the Company similar to the Income PRIDES, Purchase Contracts,
Trust Preferred Securities or Common Stock or any security convertible into or
exchangeable or exercisable for Income PRIDES, Purchase Contracts, Trust
Preferred Securities or Common
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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 Income PRIDES to be created or
recreated upon substitution of Pledged Securities, or shares of Common Stock
issuable upon early settlement of the Income PRIDES or Growth PRIDES or upon
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, the Trust and the Underwriters. In determining
the terms of the Income PRIDES, including the public offering price, the
Company, the Trust 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
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 and the Trust
Preferred Securities will not be listed or traded on any securities exchange.
The Company and the Trust have been advised by the Underwriters that they
presently intend to make a market for the Growth PRIDES and the Trust Preferred
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 Income PRIDES, the Growth PRIDES or the Trust
Preferred Securities 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 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.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have performed, and may in the future perform,
investment banking and/or commercial banking services for the Company. In
addition, in connection with the financing of the acquisition of Fibreboard
Corporation, the Company, Sierra Corp. and certain other subsidiaries of the
Company entered into a $2 billion Credit Agreement, dated as of June 26, 1997,
with the banks party thereto and Credit Suisse First Boston, as agent for such
banks. A portion of the outstanding amount of loans under the Credit Agreement,
including amounts provided by Credit Suisse First Boston, will be repaid with a
portion of the net proceeds of this Offering. See "The Company -- Recent
Developments" and "Use of Proceeds." The Company may, in the future, engage in
loan transactions with Credit Suisse First Boston in the ordinary course of the
Company's business.
LEGAL OPINIONS
The validity of the Purchase Contracts, the Common Stock issuable upon
settlement thereof and the Debentures will be passed upon for the Company and
the Trust by Debevoise & Plimpton, New York, New York, and certain matters of
Delaware law with respect to the validity of the Trust Preferred Securities
offered hereby will be passed upon for the Company and the Trust by Morris,
Nichols, Arsht & Tunnell, special Delaware counsel to the Company. The validity
of the Purchase Contracts, the Common Stock issuable upon settlement thereof the
Debentures and the Trust Preferred Securities will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
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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.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
U.S.$690,000,000
OWENS CORNING
STOCK PURCHASE CONTRACTS,
STOCK PURCHASE UNITS AND
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 subordinated debentures (the
"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, 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 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 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 Debentures will be senior unsecured obligations of the Company and will
rank pari passu in right of payment with all of the Company's other senior
unsecured obligations, except that the Debentures will be subordinated and
junior in right of payment to the Company's obligations under the Senior
Indebtedness (as defined in "Description of 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 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 Debentures) with respect to each deferral period as
may be specified in such Prospectus Supplement (each, an "Extension Period").
See "Description of 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 senior unsecured obligations of the
Company and will rank pari passu with all of the Company's other senior
unsecured obligations, except that such obligations with respect to the
Guarantee will be subordinated and junior in right of payment to the Company's
obligations under the Senior Lease (as defined in "Description of Debentures --
Subordination"). 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 Debentures, which will have
terms corresponding to the terms of the Preferred Securities. The Debentures
will be the sole assets of the Trust, and payments under the 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
(continued on next page)
<PAGE> 82
the occurrence of certain events as are described herein and in the accompanying
Prospectus Supplement, the Company may redeem the 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 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 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 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
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 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 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 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.
------------------
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.
<PAGE> 83
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 Debentures and the issuance of the
Trust Securities. See "The Trust," "Description of Debentures," "Description of
Preferred Securities" and "Description of the Guarantee."
2
<PAGE> 84
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).
3
<PAGE> 85
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.
4
<PAGE> 86
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 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 seven 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 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 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 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 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 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.
5
<PAGE> 87
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Securities
(including 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. 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 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(g) 3,980 3,913 3,261 3,274 3,013 3,162
Total debt............................... 2,033(g) 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(h)...... 3.02x -- -- 3.67 x 2.15 x 2.42 x 1.88 x
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS(h)......... 3.02x -- -- 3.67 x 2.15 x 2.42 x 1.88 x
</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
6
<PAGE> 88
$.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).
(g) In the second quarter of 1997, the Company purchased Fibreboard Corporation,
a North American manufacturer of vinyl siding and accessories and
manufactured stone, for $657 million, including $138 million of debt
assumed. The purchase price, which is included in long-term debt, was
financed primarily through borrowings on the Company's new long-term credit
facility early in the third quarter of 1997. The purchase price allocations
were based on preliminary estimates of fair market value and are subject to
revision. The estimated fair value of assets acquired from Fibreboard,
including goodwill, was $923 million, and liabilities assumed totalled $404
million (including the debt of $138 million).
(h) 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 $700
million and $600 million, respectively.
7
<PAGE> 89
DESCRIPTION OF DEBENTURES
The 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 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
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Debentures will be issued as senior unsecured debt under the Indenture
and will rank pari passu in right of payment with all of the Company's other
senior unsecured obligations, except that the Debentures will be subordinated
and junior in right of payment to the extent and in the manner set forth in the
Indenture to the Company's obligations under the Senior Indebtedness. 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 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 Debentures: (i) the title of the Debentures;
(ii) any limit upon the aggregate principal amount of the Debentures; (iii) the
date or dates on which the principal of the Debentures is payable or the method
of determination thereof; (iv) the rate or rates, if any, at which the
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 Debentures will be payable
and where, subject to the terms of the Indenture as described below under "--
Denominations, Registration and Transfer," the 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 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 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 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 Debentures shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligation; (viii) the denominations in which
any 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 Debentures shall be payable, or in
which the 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 Debentures; (xi) if other than the principal
amount thereof, the portion of the principal amount of 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 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 Debentures and the manner
in which such amounts will be determined; (xiv) the terms and conditions
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relating to the issuance of a temporary Global Security representing all of the
Debentures of such series and exchange of such temporary Global Security for
definitive Debentures of such series; (xv) subject to the terms described under
"-- Global Debentures," whether the 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 Debentures into Preferred
Securities or other securities; (xviii) the relative degree, if any, to which
such Debentures of the series shall be senior to or be subordinated to other
series of such Debentures or other indebtedness of the Company in right of
payment, whether such other series of Debentures or other indebtedness are
outstanding or not; and (xix) any other terms of the Debentures not inconsistent
with the provisions of the Indenture.
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 Debentures will
be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debentures is payable in one or more
foreign currencies or currency units or if any 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 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 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 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
Debentures will be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. Debentures of any
series will be exchangeable for other 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.
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 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 designated by the Company with respect to any series of
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 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 Debentures
of any series during a period beginning at the opening of business 15 days
before the day of selection for redemption of 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 Debentures so selected for
redemption, except, in the case of any Debentures being redeemed in part, any
portion thereof not to be redeemed.
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GLOBAL DEBENTURES
The Debentures of a series may be issued in whole or in part in the form of
one or more Global Debentures that will be deposited with, or on behalf of, a
depositary identified in the Prospectus Supplement relating to such series.
Global 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 Debentures represented thereby, a Global Debenture may
not be transferred except as a whole by the depositary for such Global 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 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 Debenture, and the deposit of such Global
Debenture with or on behalf of the applicable depositary, the depositary for
such Global Debenture or its nominee will credit on its book-entry registration
and transfer system, the respective principal amounts of the individual
Debentures represented by such Global 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
Debentures or by the Company if such Debentures are offered and sold directly by
the Company. Ownership of beneficial interests in a Global Debenture will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global 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 Debenture.
So long as the depositary for a Global Debenture, or its nominee, is the
registered owner of such Global Debenture, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debentures
represented by such Global Debenture for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in a Global Debenture
will not be entitled to have any of the individual Debentures of the series
represented by such Global Debenture registered in their names, will not receive
or be entitled to receive physical delivery of any such Debentures of such
series in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Debentures represented by a Global 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 Debenture representing such
Debentures. None of the Company, the Debt Trustee, any paying agent, or the
Securities Registrar for such 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 Debenture for such 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 Debentures or its
nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Debenture representing any of such Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Debenture for such 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 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.
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Unless otherwise specified in the applicable Prospectus Supplement, if the
depositary for a series of 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 Debentures of
such series in exchange for the Global Debenture representing such series of
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
Debentures, determine not to have any Debentures of such series represented by
one or more Global Debentures and, in such event, will issue individual
Debentures of such series in exchange for such Global Debentures. Further, if
the Company so specifies with respect to the Debentures of a series, an owner of
a beneficial interest in a Global Debenture representing Debentures of such
series may, on terms acceptable to the Company, the Debt Trustee and the
depositary for such Global Debenture, receive individual Debentures of such
series in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Debentures. In any such
instance, an owner of a beneficial interest in a Global Debenture will be
entitled to physical delivery of individual Debentures of the series represented
by such Global Debenture equal in principal amount to such beneficial interest
and to have such Debentures registered in its name. Individual 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 Debentures may be issued in exchange for the Global Debenture
representing any 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 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
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 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 Debentures will be
made to the person or entity in whose name such 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 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 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 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,
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 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 Debentures in denominations larger than $50 may be
redeemed in part but only in integral multiples of $50. If the 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.
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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 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 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 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 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
Debentures to defer the 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 Debentures.
Certain material U.S. federal income tax consequences and special considerations
applicable to any such 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 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 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
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maturity of the 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 Debentures. If the Institutional Trustee shall be the sole holder of the
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 Debentures, the
Company shall give the holders of the 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 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 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
Debentures. In addition, under the Indenture, certain rights and obligations of
the Company and the rights of holders of the 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 Debentures; but no
extension of the maturity of 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 Debentures, other
modification in the terms of payment of the principal of, or interest on, the
Debentures, or reduction of the percentage required for modification, will be
effective against any holder of any outstanding Debentures without the holder's
consent.
In addition, the Company and the Debt Trustee may execute, without the
consent of any holder of Debentures, any supplemental Indenture for the purpose
of creating any new series of Debentures.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Debentures that has occurred and is
continuing constitutes an "Indenture Event of Default" with respect to such
series of Debentures:
(i) failure for 30 days to pay any interest on such series of the
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 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 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
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
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of 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 Debentures may annul such declaration and
waive the default if the default (other than the non-payment of the principal of
such series of 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 Debentures
affected thereby may, on behalf of the holders of all the 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 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.
In case an Indenture Event of Default shall occur and be continuing as to a
series of 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
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 Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an Indenture Event of Default with respect to the Debentures has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the 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 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 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 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
Debentures protection in the event of a highly leveraged or other transaction
involving the Company that may adversely affect holders of the
Debentures.
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SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture provides that when, among other things, all 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 Debentures are payable sufficient to pay and discharge
the entire indebtedness on the 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 Debentures if and to the extent
indicated in the applicable Prospectus Supplement.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Debentures of any series may be convertible or exchangeable into Preferred
Securities or other securities. The specific terms on which 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 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 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), the
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 Debentures.
The Company may not make any payment with respect to the Debentures if and
for so long as (i) the 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 the Senior Indebtedness; or (iii) a payment by the Company
with respect to the Debentures would, immediately after giving effect thereto,
result in a Senior Indebtedness Default.
A payment with respect to the Debentures shall include, without limitation,
payment of principal of, premium, if any, and interest on the Debentures, the
purchase of 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 the
Senior Indebtedness when due or the happening of an event of default with
respect to the 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 the 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.
"Senior Indebtedness" means all indebtedness incurred, assumed or
guaranteed, directly or indirectly, by the Company, 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
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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, under the Lease, dated as of
December 1, 1977, between the Ohio Water Development Authority, as Lessor, and
the Company, as Lessee (the "Senior Lease"). Senior Indebtedness shall continue
to constitute Senior Indebtedness for all purposes of the Debentures, and the
provisions of the applicable Article of the Indenture shall continue to apply to
the Senior Indebtedness, notwithstanding the fact that the Senior Indebtedness
or any claim in respect thereof shall be disallowed, avoided or subordinated
pursuant to the provisions of the Bankruptcy Code or other applicable law.
The Indenture provides that the foregoing subordination provisions, insofar
as they relate to any particular issue of Debentures, may be changed prior to
such issuance. Any such change would be described in the Prospectus Supplement
relating to such Debentures.
GOVERNING LAW
The Indenture and the 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 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 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 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
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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
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 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 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 Debentures is
limited to a period not extending beyond the stated Maturity of the 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
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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 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 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 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.
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
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
Debentures -- Debentures." If the Company does not make interest payments on
such 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 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 Debentures. See "Description of Debentures -- Optional Redemption." If less
than all of any series of 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 Debentures held by the
Trust shall be allocated pro rata to the Preferred Securities and the Common
Securities.
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Distribution of 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 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 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 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 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.
There can be no assurance as to the market prices for the Preferred
Securities or the 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
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 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 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 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 Debentures, (y) interest payable by the Company on
the 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
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"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 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 Debentures to holders of any Trust Securities in connection with
a dissolution or liquidation of Trust, Debentures having a principal amount
equal to the liquidation amount of the Trust Securities of the holder to whom
such Debentures are distributed.
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 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
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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.
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 Debentures, on and after the Redemption Date
interest will cease to accrue on the 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 DISSOLUTION
Unless otherwise specified in the applicable Prospectus Supplement,
pursuant to the Declaration, the Trust shall dissolve (i) on , 2004,
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, after receipt by the Institutional Trustee of
written direction from the Company to dissolve the Trust or 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 dissolve the
Trust, or the revocation of the charter of the Company and the expiration of 90
days after the date of revocation without a reinstatement
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thereof, (iv) upon the distribution of 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 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 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 dissolution
occurs as described in clause (v) above, the 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 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.
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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 dissolution of the Trust as described above. See
"-- Liquidation Distribution Upon Dissolution." 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
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 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 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,
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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 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 Debentures, to (i) exercise the remedies available
under the Indenture with respect to the 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 Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the 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 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 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
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
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liquidation amount of the Trust Securities which the relevant Super-Majority
represents of the aggregate principal amount of the 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.
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 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.
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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 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.
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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 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 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.
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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 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 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 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
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.
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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 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 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 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.
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STATUS OF THE GUARANTEE
The Guarantee will constitute a senior unsecured obligation of the Company
and will rank pari passu with all of the Company's other senior unsecured
obligations, except that such obligations with respect to the Guarantee will be
subordinated and junior in right of payment to the Company's obligations under
the Senior Lease. The terms of the Preferred 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
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 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 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 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 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.
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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.
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 Debentures. A principal difference between the rights of a
holder of a Preferred Security and a holder of a Debenture is that a holder of a
Debenture will accrue, and (subject to the permissible extension of the interest
period) is entitled to receive, interest on the principal amount of 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 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
Debentures, would be a subordinated creditor of the Company, subordinated in
right of payment to all Senior Indebtedness, 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 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 Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the 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 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.
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
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(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 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
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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.
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
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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 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.
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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.
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
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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
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.
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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 and the Trust. 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 Registration
Statement 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 Registration Statement 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 Registration Statement 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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======================================================
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
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary............................... S-4
Risk Factors..................................... S-16
The Company...................................... S-20
The Trust........................................ S-23
Use of Proceeds.................................. S-24
Price Range of Common Stock and Dividends........ S-24
Condensed Consolidated Capitalization............ S-25
Accounting Treatment............................. S-25
Selected Consolidated Financial Information...... S-26
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ S-28
Asbestos and Other Litigation.................... S-34
Description of the Feline Prides................. S-39
Description of the Purchase Contracts............ S-41
Certain Provisions of the Purchase Contract
Agreement and the Pledge Agreement............. S-48
Description of the Trust Preferred Securities.... S-51
Description of the Guarantee..................... S-60
Description of the Debentures.................... S-63
Effect of Obligations under the Debentures and
the Guarantee.................................. S-69
Certain Federal Income Tax Consequences.......... S-70
Underwriting..................................... S-76
Legal Opinions................................... S-78
PROSPECTUS
Available Information............................ 2
Incorporation of Certain Documents by
Reference...................................... 3
The Company...................................... 4
The Trust........................................ 5
Use of Proceeds.................................. 6
Selected Consolidated Financial Information...... 6
Description of Junior Subordinated Debentures.... 8
Description of Preferred Securities.............. 16
Description of the Guarantee..................... 28
Relationship Among the Preferred Securities, the
Junior Subordinated Debentures and the
Guarantee...................................... 30
Description of Capital Stock..................... 31
Description of Stock Purchase Contracts and Stock
Purchase Units................................. 34
Book-Entry Issuance.............................. 35
Plan of Distribution............................. 36
Legal Opinions................................... 38
Experts.......................................... 38
</TABLE>
======================================================
======================================================
6,000,000
FELINE PRIDES(SM)
OWENS CORNING
OWENS CORNING CAPITAL II
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
, 1997
(SM)SERVICE MARK OF MERRILL LYNCH & CO. INC.
======================================================
<PAGE> 121
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>
<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..................................................................... *
========
</TABLE>
- ---------------
* To be filed by amendment.
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 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:
II-1
<PAGE> 122
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 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
II-2
<PAGE> 123
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:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement for the FELINE PRIDES.*
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 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).
</TABLE>
II-3
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- ----------------------------------------------------------------------------------
<S> <C>
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 Trust Preferred Securities.*
4.7.3 Form of Preferred Securities Guarantee Agreement in respect of Owens Corning
Capital II, with respect to the Trust Preferred Securities.*
4.8.1 Form of Indenture between Owens Corning and Wilmington Trust Company, as Trustee.*
4.8.2 Form of 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.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(A) RULE 415 OFFERING
The undersigned Registrants hereby undertake:
(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;
II-4
<PAGE> 125
(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 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-5
<PAGE> 126
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 Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toledo, State of Ohio, on August 22, 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, Chief Executive August 22, 1997
- ------------------------------------- Officer and Director (principal
(Glen H. Hiner) executive officer)
* Senior Vice President and Chief August 22, 1997
- ------------------------------------- Financial Officer (principal financial
(David W. Devonshire) officer)
* Vice President and Controller August 22, 1997
- -------------------------------------
(Steven J. Strobel)
* Director August 22, 1997
- -------------------------------------
(Norman P. Blake, Jr.)
* Director August 22, 1997
- -------------------------------------
(Gaston Caperton)
* Director August 22, 1997
- -------------------------------------
(Leonard S. Coleman, Jr.)
* Director August 22, 1997
- -------------------------------------
(William W. Colville)
* Director August 22, 1997
- -------------------------------------
(John H. Dasburg)
* Director August 22, 1997
- -------------------------------------
(Landon Hilliard)
* Director August 22, 1997
- -------------------------------------
(Sir Trevor Holdsworth)
* Director August 22, 1997
- -------------------------------------
(Jon M. Huntsman, Jr.)
* Director August 22, 1997
- -------------------------------------
(Ann Iverson)
* Director August 22, 1997
- -------------------------------------
(W. Walker Lewis)
* Director August 22, 1997
- -------------------------------------
(Furman C. Moseley, Jr.)
* Director August 22, 1997
- -------------------------------------
(W. Ann Reynolds)
*By: /s/ Michael I. Miller
--------------------------------
Attorney-in-fact
</TABLE>
II-6
<PAGE> 127
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
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Toledo, State of Ohio, on
August 22, 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-7
<PAGE> 128
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------ ------------------------------------------------------------------- --------------
<C> <S> <C>
1.1 Form of Underwriting Agreement for the FELINE PRIDES.*
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 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 Trust Preferred Securities.*
4.7.3 Form of Preferred Securities Guarantee Agreement in respect of
Owens Corning Capital II, with respect to the Trust Preferred
Securities.*
4.8.1 Form of Indenture between Owens Corning and Wilmington Trust
Company, as Trustee.*
4.8.2 Form of 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.*
</TABLE>
II-8
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------ ------------------------------------------------------------------- --------------
<C> <S> <C>
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.
** Previously filed.
II-9
<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
August 20, 1997
