SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
Commission File No. 1-3660
Owens Corning
One Owens Corning Parkway
Toledo, Ohio 43659
Area Code (419) 248-8000
A Delaware Corporation
I.R.S. Employer Identification No. 34-4323452
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which Registered
Common Stock - $.10 Par Value New York Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Participating Preferred
Stock, no par value, of the
Registrant
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes / X /
No / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
At February 23, 1999, the aggregate market value of
Registrant's $.10 par value common stock (Registrant's
voting stock) held by non-affiliates was $1,831,976,814,
assuming for purposes of this computation only that all
directors and executive officers are considered affiliates.
At February 23, 1999, there were outstanding 54,351,085
shares of Registrant's $.10 par value common stock.
Parts of Registrant's definitive 1999 proxy statement filed
or to be filed pursuant to Regulation 14A (the "1999 Proxy
Statement") are incorporated by reference into Part III of
this Form 10-K.
<PAGE> -2-
PART I
ITEM 1. BUSINESS
Owens Corning, a global company incorporated in Delaware in
1938, serves consumers and industrial customers with
building materials systems and composites systems. Building
materials are used in residential remodeling and repair,
commercial improvement, new residential and commercial
construction, and other related markets. Composite
materials are used in end-use markets such as building
construction, automotive, telecommunications, marine,
aerospace, energy, appliance, packaging and electronics.
Many of the Company's products are marketed under
registered trademarks, including FIBERGLAS and/or the color
PINK.
Approximately 80% of Owens Corning's sales are related to
home improvement, non-residential markets, sales of
composite materials and sales outside U.S. markets.
Approximately 20% of the Company's sales are related to new
U.S. residential construction.
The Company operates in two reportable operating segments -
Building Materials and Composite Materials. In 1998, the
Building Materials segment accounted for 78% of the
Company's total sales while Composite Materials accounted
for 22% of total sales. During 1998, Owens Corning
continued the implementation of its strategic restructuring
program, initiated in the fourth quarter of 1997, to close
manufacturing facilities, enhance manufacturing productivity
and reduce overhead. The program produced a decrease in
manufacturing and operating expenses of approximately $110
million in 1998. The Company also realized $32 million of
cost reductions during 1998 through the integration of its
1997 acquisitions in the Exterior Systems Business. In the
first quarter of 1998, the Company sold its 50% ownership
interest in Alpha/Owens-Corning, LLC, a manufacturer and
marketer of unsaturated polyester and vinylester resins.
Additionally, in the third quarter of 1998, the Company sold
51% of a joint venture containing its yarns and specialty
materials business (the "yarns joint venture"). Owens
Corning continues to have a 49% interest in the yarns joint
venture.
The Company also has affiliate companies in a number of
countries. Affiliated companies' sales, earnings and assets
are not included in either operating segment unless the
Company owns more than 50% of the affiliate and the
ownership is not considered temporary.
Revenue from external customers, income from operations and
total assets attributable to each of Owens Corning's
operating segments and geographic regions, as well as
information concerning the dependence of the Company's
operating segments on foreign operations, for each of the
years 1998, 1997, and 1996, are contained in Note 1 to Owens
Corning's Consolidated Financial Statements, entitled
"Segment Data", on pages 46 through 51 hereof.
Owens Corning's executive offices are at One Owens Corning
Parkway, Toledo, Ohio 43659; telephone (419) 248-8000.
Unless the contest requires otherwise, the terms "Owens
Corning" and "Company" in this report refer to Owens Corning
and its subsidiaries.
BUILDING MATERIALS
Principal Products And Methods Of Distribution
The Building Materials segment 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: (i) glass fiber, foam and mineral wool
insulation, (ii) roofing materials, and (iii) exterior
products for the home, including vinyl and metal siding and
accessories, vinyl windows and patio doors, rainware
(consisting primarily of gutters and downspouts), cast stone
building products and rebranded housewrap. The businesses
responsible for these products and markets include:
Insulating Systems, Roofing Systems, Exterior Systems,
System Thinking Sales and Distribution and International
Building Materials Systems.
<PAGE> -3-
In 1997 Owens Corning became the industry leader in the
vinyl siding market with its acquisitions of Fibreboard
Corporation and AmeriMark Building Products, Inc. Together,
these acquisitions represent over $1 billion in residential
exterior building product sales, including vinyl siding,
vinyl windows and patio doors, aluminum products and cast
stone products. The Company has seven vinyl siding
manufacturing plants, five aluminum products manufacturing
plants and more than 180 company-owned specialty
distribution centers. Almost all siding is sold through
distribution, mostly specialty distributors who cater to
exterior contractors by providing siding, siding
accessories, aluminum rainware and often windows and patio
doors. Owens Corning's network of company-owned outlets
accounts for over half of the Company's siding sales. Cast
stone is sold primarily through independent dealers and
masonry suppliers.
The Company's System Thinking Sales and Distribution
Business is a major channel through which the Company
generates sales of building insulation products, roofing
shingles and accessories, housewrap, windows/patio doors,
and vinyl siding to home centers, lumberyards, retailers and
distributors. These products are used primarily in the home
improvement, new residential construction, and commercial
construction and repair markets. In 1998, approximately 20%
of the Company's sales were related to new construction
activities in the United States, while home improvement and
remodeling accounted for approximately 40%.
Other channels of distribution for the Company's building
materials include sales of insulation products in North
America to insulation contractors, wholesalers, specialty
distributors, metal building insulation laminators,
mechanical insulation distributors and fabricators,
manufactured housing producers, and appliance, office
products and automotive manufacturers. Foam insulation and
related products are sold to distributors and retailers who
resell to residential builders, remodelers and do-it-
yourself customers; commercial and industrial markets
through specialty distributors; and, in some cases, large
contractors, particularly in the agricultural and cold
storage markets.
In Europe, Asia and Latin America, building techniques do
not employ as much open-cavity construction as in North
America, resulting in a greater opportunity for growth in
foam insulation than glass fiber in these markets. In
developing markets, both foam and glass fiber insulation are
opportunities. In Europe, the Company sells building
insulation to large insulation wholesalers, builder
merchants, contractors, distributors, and retailers. The
Company sells mechanical insulation products to
distributors, fabricators, and manufacturers in the heating,
ventilation, power and process, appliance and fire
protection industries. The Company has foam plants in the
U.K., Spain and Italy and has licensed others for the
manufacture of foam products at locations in Europe, the
Middle East and Asia. The Company sells its foam products
through traditional agents and distributors.
In Latin America, the Company produces and sells building
and mechanical insulation primarily through an affiliate
joint venture in Mexico, as well as exports from U.S.
plants. In Asia Pacific, the Company sells primarily
mechanical insulation through joint venture businesses,
including two majority owned insulation plants and an
insulation fabrication center in China, two minority owned
joint ventures, one in Saudi Arabia and one in Thailand, and
four licensees.
<PAGE> -4-
The Company sells roofing shingles to distributors and
retailers, who resell them to residential roofing and
remodeling contractors, as well as to do-it-yourself
customers. Approximately 80% of roofing shingles sold in
North America are used for reroofing, with new residential
construction accounting for the remainder. Owens Corning
also sells residential shingles through exports from the
U.S. to East European, Latin American and Asia Pacific
countries.
The Company sells non-paving asphalt products, including
industrial and specialty applications, under the TrumbullT
brand name. There are three principal kinds of industrial
asphalt: Built-Up Roofing Asphalt (BURA), used in
commercial flat roof systems to provide waterproofing and
adhesion; saturants or coating asphalt, used to manufacture
roofing mats, felts and residential shingles; and industrial
specialty asphalt, used by manufacturers in a variety of
products such as waterproofing systems, adhesives, coatings,
dyes, and product extenders, as well as in various
automotive applications.
There are several channels of distribution for the Company's
asphalt products. The Company's asphalt products are used
internally in the manufacture of the Company's residential
roofing products and are also sold to other shingle
manufacturers. In addition, asphalt is sold to roofing
contractors and distributors for BURA systems and to
manufacturers in a variety of other industries, including
automotive, chemical, rubber and construction.
Seasonality
Sales in the Building Materials segment tend to follow
seasonal home improvement, remodeling and renovation, and
new construction industry patterns. Sales levels for the
segment, therefore, are typically lower in the winter
months.
Major Customers
No customer in the Building Materials segment accounted for
more than 4% of the segment's sales in 1998.
COMPOSITE MATERIALS
Principal Products and Methods of Distribution
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 Systems and Engineered Pipe Systems.
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 thousands of 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 transportation, building construction, electrical/
electronics, consumer recreational and infrastructure.
<PAGE> -5-
Within the construction market, the major end-use
application for glass fiber is asphaltic roofing shingles,
where glass fiber is used to provide fire and mildew
resistance in 95% of all such shingles produced in North
America. The Company sells glass fiber and/or mat directly
to a small number of major shingle manufacturers (including
the Company's own roofing business).
Tubs, showers and other related internal building components
used for both remodeling and new construction are also major
applications of composite materials in the construction
market. These end-use products are some of the first
successful material substitution conversions normally
encountered in developing countries. Glass fiber
reinforcements and composite material solutions for these
markets are sold to direct accounts, and also to
distributors around the world, who in turn service thousands
of customers.
More than 80% of transportation-related composite materials
is used in automotive applications. Non-automotive
transportation applications include heavy trucks, rail cars,
shipping containers, refrigerated containers, trailers and
commercial ships. Growth continues in automotive
applications, as composite systems create new applications
or displace other materials in existing applications. There
are hundreds of composites applications, including body
panels, door modules, integrated front-end systems,
instrument panels, chassis and underbody components and
systems, and heat and noise shields. These composite parts
are either produced by original equipment manufacturers
(OEMs), or are purchased by OEMs from first-tier suppliers.
Glass fibers for these parts are sold mostly to first-tier
and second-tier OEM suppliers.
Within the electrical/electronics markets, glass fiber
composites are used to protect and reinforce fiber optic and
copper cables. The Company also produces central strength
members for fiber optic cables. Other end-use applications
in the electrical/electronics markets include connectors,
circuit breaker boxes, computer housings, electricians'
safety ladders, and hundreds of various electro/mechanical
components. Through its 49% interest in the yarns joint
venture, the Company continues to participate in the yarns
and specialty material markets, where glass fiber is used
extensively in printed circuit boards made for the consumer
electronics, transportation, and telecommunications
industries.
The consumer recreational markets include sporting goods and
marine applications. The Company sells composite materials
to OEMs and boat builders, both directly and through
distributors.
The Company manufactures large diameter glass-reinforced
plastic (GRP) pipe designed for use in underground pressure
and gravity fluid handling systems. The pipe is a filament-
wound structural composite made with glass fiber and
polyester resins. The Company, directly and with joint
venture partners around the world, manufactures and sells
GRP pipe directly to governments and private industry for
major infrastructure projects, primarily for the safe and
efficient transport of water and waste.
Major Customers
No customer in the Composite Materials segment accounted for
more than 5% of the segment's sales in 1998.
<PAGE> -6-
GENERAL
Raw Materials and Patents
Owens Corning considers the sources and availability of raw
materials, supplies, equipment and energy necessary for the
conduct of its business in each operating segment to be
adequate.
The Company has numerous U.S. and foreign patents issued and
applied for relating to its products and processes in each
operating segment resulting from research and development
efforts.
The Company has issued royalty-bearing patent licenses to
companies in several foreign countries. The licenses cover
technology relating to both operating segments.
Including registered trademarks for the Owens Corning logo,
the color PINK, and FIBERGLAS, the Company has approximately
290 trademarks registered in the United States and
approximately 1,225 trademarks registered in other
countries.
The Company considers its patent and trademark positions to
be adequate for the present conduct of its business in each
of its operating segments.
Working Capital
Owens Corning's manufacturing operations in each of its
operating segments are generally continuous in nature and it
warehouses much of its production prior to sale since it
operates primarily with short delivery cycles.
Research and Development
During 1998, 1997 and 1996, the Company spent approximately
$57 million, $69 million, and $78 million, respectively, for
research and development activities. Customer sponsored
research and development was not material in any of the last
three years.
Environmental Control
Owens Corning's capital expenditures relating to compliance
with environmental control requirements were approximately
$17 million in 1998. The Company currently estimates that
such capital expenditures will be approximately $15 million
in 1999 and $15 million in 2000.
The Company does not consider that it has experienced a
material adverse effect upon its capital expenditures or
competitive position as a result of environmental control
legislation and regulations. Operating costs of
environmental control equipment, however, were approximately
$53 million in 1998. Owens Corning continues to invest in
equipment and process modifications to remain in compliance
with applicable environmental laws and regulations.
<PAGE> -7-
The 1990 Clean Air Act Amendments (Act) provide that the
United States Environmental Protection Agency (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 wool fiber glass, mineral wool,
amino/phenolic resin, secondary aluminum smelting, asphalt
processing and roofing, and metal coil coating. The EPA's
currently announced schedule is to issue regulations
covering wool fiber glass, mineral wool, amino/phenolic
resin, secondary aluminum smelting, and asphalt processing
and roofing in 1999, and metal coil coating in 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.
Number of Employees
Owens Corning averaged approximately 21,000 employees during
1998 and had approximately 20,000 employees at December 31,
1998.
Competition
Owens Corning's products compete with a broad range of
products made from numerous basic, as well as high-
performance, materials.
The Company competes with a number of manufacturers in the
United States of glass fibers in primary forms, not all of
which produce a broad line of glass fiber products.
Approximately one-half of these producers compete with the
Company's Building Materials operating segment in the sale
of glass fibers in primary form. A similar number compete
with the Company's Composite Materials operating segment.
Companies in other countries export small quantities of
glass fiber products to the United States. The Company also
competes outside the United States with a number of
manufacturers of glass fibers in primary forms.
Owens Corning also competes with many manufacturers,
fabricators and distributors in the sale of products made
from glass fibers. In addition, the Company competes with
many other manufacturers in the sale of roofing materials
for sloped roofing, industrial asphalts, vinyl siding,
windows and patio doors and other products.
Owens Corning provides services on a fee-for-service basis
in the form of materials and product testing, in competition
with numerous testing laboratories, and also sells claims
management services.
Methods of competition include product performance, price,
terms, service and warranty.
ITEM 2. PROPERTIES
PLANTS
Owens Corning's plants as of February 1, 1999 are listed
below by operating segment and primary products, and are
owned except as noted. The Company considers that these
properties are in good condition and well maintained, and
are suitable and adequate to carry on the Company's
business. The capacity of each plant varies depending upon
product mix.
<PAGE> -8-
BUILDING MATERIALS SEGMENT
Thermal and Acoustical Insulation
Delmar, New York Palestine, Texas
Eloy, Arizona Phenix City, Alabama (1)
Fairburn, Georgia Salt Lake City, Utah
Kansas City, Kansas Santa Clara, California
Mount Vernon, Ohio Waxahachie, Texas
Newark, Ohio
Anshan, China Queensferry, United Kingdom
Babelegi, South Africa Ravenhead, United Kingdom
Candiac, Canada (2) Scarborough, Canada
Edmonton, Canada Shanghai, China
Guangzhou, China Springs, South Africa
Pontyfelin, United Kingdom Vise, Belgium
(1) Facility is leased.
(2) Not in operation.
Foam Insulation
Byron Center, Michigan Rockford, Illinois
Carson, California Tallmadge, Ohio
Los Angeles, California (1)
Hartlepool, United Kingdom Turin, Italy
Nanjing, China Valleyfield, Canada
Santa Perpetua, Spain Volpiano, Italy
(1) Facility is leased.
Roofing and Asphalt Processing (one of each at every
location, except as noted).
Atlanta, Georgia Jessup, Maryland
Brookville, Indiana (1) Kearny, New Jersey
Channelview, Texas (2) Medina, Ohio
Compton, California Memphis, Tennessee
Denver, Colorado Minneapolis, Minnesota
Detroit, Michigan (2) Morehead City, North
Ennis, Texas (2) Carolina (2) (3)
Ft. Lauderdale, Florida (2) Oklahoma City, Oklahoma (2)
Houston, Texas Portland, Oregon (4)
Irving, Texas Savannah, Georgia (1)
Jacksonville, Florida Summit, Illinois
(1) Roofing plant only.
(2) Asphalt processing plant only.
(3) Facility is leased.
(4) Two asphalt processing plants, as well as one roofing plant.
<PAGE> -9-
Fabrication Centers
Angola, Indiana Indianapolis, Indiana (1)
Athens, Alabama Johnson City, Tennessee (1)
Atlanta, Georgia (1) Los Angeles, California (1)
Cleveland, Tennessee (1) Montgomery, Alabama (1)
Columbus, Ohio (1) Shelbyville, Kentucky (1)
Dallas, Texas (1) Springfield, Tennessee (1)
Grand Rapids, Michigan (1) Tiffin, Ohio (1)
Hazelton, Pennsylvania (1) Van Buren, Arkansas (1)
Hebron, Ohio
Brantford, Canada
(1) Facility is leased.
Manufactured Housing/Recreational Vehicles Specialty Parts
Douglas, Georgia Nappanee, Indiana (2)
Elkhart, Indiana (1) Plant City, Florida (1)
Goshen, Indiana Waco, Texas (1)
Miami, Florida (1)
(1) Facility is leased.
(2) Two facilities.
Metal Rainware
Ashville, Ohio Richmond, Virginia
Beloit, Wisconsin (1) Roxboro, North Carolina
Lincoln Park, Michigan
(1) Facility is leased.
Cast Stone Products
Napa, California (1)
Navarre, Ohio
(1) Facility is leased.
Vinyl Siding
Atlanta, Georgia (1) Joplin, Missouri
Claremont, North Carolina Olive Branch, Mississippi
Fair Bluff, North Carolina
London, Ontario Mission, British Columbia (1)
(1) Facility is leased.
<PAGE> -10-
Windows/Patio Doors
Bradenton, Florida
Lakeland, Florida
In addition, Owens Corning has 182 Specialty Distribution
Centers in 36 states in the U.S.
COMPOSITE MATERIALS SEGMENT
Textiles and Reinforcements
Aiken, South Carolina Huntingdon, Pennsylvania (1)
Amarillo, Texas Jackson, Tennessee (1)
Anderson, South Carolina New Braunfels, Texas (1)
Duncan, South Carolina (1) South Hill, Virginia (1) (2)
Fort Smith, Arkansas
Apeldoorn, The Netherlands Markham, Canada (1)
Battice, Belgium Rio Claro, Brazil
Birkeland, Norway San Vincente deCastellet/
Guelph, Canada Barcelona, Spain
L'Ardoise, France Springs, South Africa
Liversedge, United Kingdom Wrexham, United Kingdom
(1) Facility is leased.
(2) Under construction.
Engineered Pipe Systems
Bagneres-De-Bigorre, France
Sandefjord, Norway
-11-
OTHER PROPERTIES
Owens Corning's principal executive offices of approximately
400,000 square feet are located in the Owens Corning World
Headquarters, Toledo, Ohio. The lease for this facility
terminates May 31, 2015, with options to extend through May
31, 2030.
The Company's research and development activities are
primarily conducted at its Science and Technology Center,
located on approximately 500 acres of land outside
Granville, Ohio. It consists of twenty-three structures
totaling approximately 635,000 square feet. The Company
also has Application Development Centers in Battice,
Belgium, Shanghai, China and Bangalore, India.
ITEM 3. LEGAL PROCEEDINGS
The paragraphs in Note 22 to the Company's Consolidated
Financial Statements, entitled "Contingent Liabilities", on
pages 81 through 88 hereof, are incorporated here by
reference.
Securities and Exchange Commission rules require the Company
to describe certain governmental proceedings arising under
federal, state or local environmental provisions unless the
Company reasonably believes that the proceeding will result
in monetary sanctions of less than $100,000. The following
proceeding is reported in response to this requirement.
Based on the information presently available to it, however,
the Company believes that the costs which may be associated
with this matter will not have a materially adverse effect
on the Company's financial position or results of
operations.
As previously reported, by letter dated September 10,
1998, the New Jersey Department of Environmental
Protection (DEP) alleged violation of an Administrative
Consent Order (ACO) relating to an asbestos remediation
project. DEP's violation letter stated that the
minimum penalty stipulated by the ACO for the alleged
violation would be $1,407,000. While deferring any
obligation to pay such penalties, DEP's letter required
the submittal of a revised schedule detailing all
outstanding obligations under the ACO to remediate the
site. The Company promptly submitted the revised
schedule and, by letter dated November 10, 1998, DEP
acknowledged receipt of such schedule and satisfaction
of the September 10, 1998 violation letter. DEP stated
that it was deferring any obligation to pay the
referenced penalties, while reserving the right to
incorporate such penalties into any assessments for
future violations of the ACO. The Company does not
anticipate further action in connection with this
matter.
<PAGE> -12-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Owens Corning has nothing to report under this Item.
<PAGE> -13-
Executive Officers of the Company
(as of March 1, 1999)
The term of office for elected officers is one year from the
annual election of officers by the Board of Directors
following the Annual Meeting of Stockholders in April. All
those listed have been employees of Owens Corning during the
past five years except as indicated.
Name and Age Position*
Glen H. Hiner (64) Chairman of the Board and Chief
Executive Officer since January
1992. Director since 1992.
Maura J. Abeln (43) Senior Vice President, General
Counsel and Secretary since February
1998; formerly Vice President and
General Counsel of GE Plastics
(1991).
Rhonda L. Brooks (47) Vice President and President,
Roofing Systems Business since
January 1998; formerly Vice
President, Investor Relations
(1997), Vice President, Marketing,
Composites (1995), Senior Vice
President and General Manager of Ply
Gem Industries (1994), and various
Vice President positions at Warner-
Lambert (1990).
David T. Brown (50) Vice President and President,
Insulating Systems Business since
January 1998; formerly Vice
President and President, Building
Materials Sales and Distribution-
North America (1996), Vice President
and President, Roofing/Asphalt
(1994), and Vice President,
Roofing/Asphalt Division (1993).
Domenico Cecere (49) Senior Vice President and President,
North America Building Materials
Systems Business since January 1999;
formerly Senior Vice President and
Chief Financial Officer (1998), Vice
President and President,
Roofing/Asphalt (1996), and Vice
President and Controller (1993).
Carl B. Hedlund (51) Vice President and President,
International Building Materials
Systems Business since January 1998;
formerly Vice President and
President, Asia Pacific (1995), Vice
President and President,
Retail/Distribution (1994), and Vice
President, Retail and Distribution,
Construction Products Group (1993).
Richard D. Lantz (47) Vice President and President, System
Thinking Sales and Distribution
Business since January 1998;
formerly Vice President - Marketing,
Insulation Business (1997), Vice
President, Marketing and Sales
Support, Building Materials Sales
and Distribution (1996), Vice
President, Marketing, Roofing and
Asphalt (1995), and Business
Development Manager, Roofing and
Asphalt (1992).
<PAGE> -14-
Name and Age Position*
Robert C. Lonergan (55) Senior Vice President, Strategic
Resources since January 1998;
formerly Vice President, Science and
Technology (1995), and President,
Windows (1993).
Heinz-J. Otto (49) Vice President and President,
Composite Systems Business since
January 1998; formerly Vice
President and President, Composites
(1996), and Head of Region Europe
and Executive Board Member, Landis &
Gyr Corp. (1992).
J. Thurston Roach (57) Senior Vice President and Chief
Financial Officer since January
1999; formerly Senior Vice
President and President, North
America Building Materials Systems
Business (1998), Vice Chairman of
Simpson Investment Company (1997),
President of Simpson Timber Company
(1996), and Senior Vice President,
Chief Financial Officer and Secretary
of Simpson Investment Company (1984).
Steven J. Strobel (41) Vice President and Controller since
September 1996; formerly Chief
Financial Officer of Kraft Canada,
Inc. (1994) and Vice President and
Controller of Kraft USA Operations
(1991).
Michael H. Thaman (34) Vice President and President,
Exterior Systems Business since
January 1999; formerly Vice
President and President, Engineered
Pipe Systems (1997), General
Manager, OEM Solutions Group (1996),
Plant Manager - Toronto, Canada
(1994), and Director, Corporate
Development (1992).
*Information in parentheses indicates year in which service in position began.
<PAGE> -15-
Part II
ITEM 5. MARKET FOR OWENS CORNING'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market on which Owens Corning's common stock
is traded is the New York Stock Exchange. The high and low
sales prices in dollars per share for Owens Corning's common
stock as reported in the consolidated transaction reporting
system for each quarter during 1998 and 1997 are set forth
in the following tables.
<TABLE>
<S> <C> <C> <C> <C> <C>
1998 High Low 1997 High Low
First Quarter 37 27 First Quarter 49-7/8 40
Second Quarter 44-1/2 34-13/16 Second Quarter 45 36-7/8
Third Quarter 46-5/8 32 Third Quarter 44-3/16 34-11/16
Fourth Quarter 39-15/16 25-5/8 Fourth Quarter 37-13/16 31-7/8
</TABLE>
The number of stockholders of record of the Company's common
stock on February 23, 1999 was 6,546.
The Company declared dividends of $.0625 per share of common
stock for the first and second quarters of 1997 and dividends
of $.075 per share for the third and fourth quarters of 1997
and each of the quarters of 1998. In connection with certain
of its current bank credit facilities, the Company has agreed
to restrictions affecting the payment of cash dividends. As
of March 1, 1999, these restrictions limited funds available
for the payment of cash dividends by the Company to $20
million annually.
<PAGE> -16-
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain financial information of the Company.
<TABLE>
<S> <C> <C> <C> <C> <C>
1998(a) 1997(b) 1996(c) 1995(d) 1994(e)
(In millions of dollars, except
per share data and where noted)
Net sales $5,009 $4,373 $3,832 $3,612 $3,351
Cost of sales 3,944 3,482 2,840 2,670 2,536
Marketing, administrative
and other expenses 659 572 523 444 429
Science and technology expenses 57 69 84 78 71
Restructure costs 117 68 38 - 89
Provision for asbestos litigation claims 1,415 - 875 - -
Gain on sale of assets 359 - 37 - -
Income (loss) from operations (824) 182 (491) 420 226
Cost of borrowed funds 140 111 77 87 94
Income (loss) before provision
for income taxes (964) 71 (568) 333 132
Provision (credit) for income taxes (306) 9 (283) 109 58
Net income (loss) (705) 47 (284) 231 159
Net income (loss) per share
Basic (13.16) .89 (5.54) 4.73 3.65
Diluted (13.16) .88 (5.54) 4.41 3.35
Dividends per share on common
stock
Declared .3000 .2750 .1250 - -
Paid .3000 .2625 .0625 - -
Weighted average number of shares
outstanding (in thousands)
Basic 53,579 52,860 51,349 48,744 43,647
Diluted 53,579 53,546 51,349 53,918 50,007
Net cash flow from operations 124 131 335 285 233
Capital spending 253 227 325 276 258
Total assets 5,101 4,996 3,913 3,261 3,274
Long-term debt 1,535 1,595 818 794 1,037
Average number of employees
(in thousands) 20 22 19 17 17
</TABLE>
(a) During 1998, the Company recorded a pretax charge of
$1.415 billion ($906 million after-tax) for asbestos
litigation claims, a pretax charge of $243 million
($171 million after-tax) for restructuring and other
actions, a pretax net credit of $275 million ($165
million after-tax) from the sale of the Company's yarns
and other businesses, a pretax credit of $84 million
($52 million after tax) from the sale of its ownership
interest in Alpha/Owens-Corning, LLC, a $39 million
after-tax extraordinary loss from the early retirement
of debt, and a $10 million charge for various tax
adjustments.
(b) During 1997, the Company recorded a pretax charge of
$143 million ($104 million after-tax) for restructuring
and other actions as well as a $15 million after-tax
charge for the cumulative effect of the change in
method of accounting for business process reengineering
costs. The incremental sales from the 1997
acquisitions were $534 million during 1997.
<PAGE> -17-
ITEM 6 . SELECTED FINANCIAL DATA (Continued)
(c) During 1996, the Company recorded a net pretax charge
of $875 million ($542 million after-tax) for asbestos
litigation claims that may be received after 1999 and
probable additional insurance recovery; special charges
totaling $42 million ($27 million after-tax) 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 ($26 million
after-tax) for restructuring and other actions; a $27
million reduction of tax reserves due to favorable
legislation; and a pretax gain of $37 million ($27
million after-tax) from the sale of the Company's
ownership interest in its former Japanese affiliate,
Asahi Fiber Glass Co. Ltd.
(d) During 1995, the Company recorded an $8 million tax
credit as a result of a tax loss carryback.
(e) During 1994, the Company recorded a $117 million pretax
charge ($85 million after-tax) for productivity
initiatives and other actions. The Company also
recorded a $10 million after-tax charge for the
adoption of Statement of Financial Accounting Standards
(SFAS) No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions for its non-
U.S. plans, a $28 million after-tax charge for the
adoption of SFAS No. 112, Employers' Accounting for
Postemployment Benefits, and a $123 million after-tax
credit for the change in accounting method for
rebuilding furnaces.
<PAGE> -18-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All per share information in Item 7 is on a diluted basis.)
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-
looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from
those projected in the statements. Some of the important
factors that may influence possible differences are
continued competitive factors and pricing pressures,
construction activity, interest rate movements, issues
involving implementation of new business systems, Year 2000
readiness, achievement of expected cost reductions, asbestos
litigation, and general economic conditions.
RESULTS OF OPERATIONS
Business Overview
The Company's growth agenda has focused on increasing sales
and earnings by (i) acquiring businesses with products that
can be sold through existing or complementary distribution
channels, (ii) achieving productivity improvements and cost
reductions in existing and acquired businesses and (iii)
entering new growth markets. The Company is implementing two
major initiatives, the System Thinking (TM) strategy and
Advantage 2000, to enhance sales growth and achieve
productivity improvements across all businesses. System
Thinking for the Home (TM) leverages the Company's broad
product offering and strong brand recognition to increase
its share of the building materials and home improvement
markets. This systems approach represents a shift from
product-oriented selling to providing systems-driven
solutions that combine the Company's insulation, roofing,
exterior and acoustic systems, to provide a high
performance, cost-effective building "envelope" for the
home. In the Composite Materials business, the Company has
partnered with the plastics industry and, with the Company's
System Thinking philosophy, is taking a solution-oriented,
customer-focused approach toward the continuous development
of substitution opportunities for composite materials. In
addition, the Company is implementing Advantage 2000, a
fully integrated business technology system designed to
reduce costs and improve business processes.
The Company has grown its sales from nearly $3.4 billion in
1994 to $5.0 billion in 1998. Acquisitions have been a
significant component of that growth. Since 1994, the
Company has completed 17 acquisitions for an aggregate
purchase price of over $1.2 billion. The Company's
acquisitions have broadened its lines of business to include
siding, accessories and other home exteriors and have
diversified its materials portfolio beyond fiber glass to
include polymers such as vinyl and styrene, and metal and
stone. In 1997, the Company completed the two largest of
these acquisitions by acquiring Fibreboard Corporation
("Fibreboard") and AmeriMark Building Products, Inc.
("AmeriMark"), making Owens Corning the leader in the U.S.
vinyl siding, siding accessories and manufactured stone
markets, as well as a large specialty distributor in North
America through 180 Company-owned distribution centers.
Despite improvements in the Company's strategic position in
1997, the Company experienced a highly competitive pricing
environment in several of its product markets that negatively
impacted financial results. In North America, the Company's
insulation pricing decreased by approximately 10 percent over
the course of 1997 and worldwide composites pricing decreased
by approximately 6 percent during 1997. Income from
operations for 1997 was adversely impacted by approximately
<PAGE> -19-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
$87 million as a result of price declines in insulation
products and approximately $64 million as a result of price
declines affecting composite materials. Offset by small
price increases in other businesses, the net unfavorable
effect of price on 1997 income from operations was
approximately $142 million.
During 1998, the pricing environment applicable to several
of the Company's major products, particularly residential
insulation, began to improve. Over the course of the year,
the Company announced three separate price increases,
totaling 27%, applicable to residential insulation. Another
9% price increase applicable to such products was announced
effective January 1999. In early 1998, the Company also
announced price increases applicable to its commercial and
industrial insulation products as well as its residential
roofing products and composites products. By the end of
1998, most notably in the fourth quarter, the Company's
average price levels of insulation products surpassed the
year-end 1997 levels. Despite the successful implementation
of price increases during 1998, including the restoration of
residential insulation prices to their late 1996 levels,
income from operations during 1998 was adversely impacted by
approximately $44 million, compared to 1997, due largely to
the relatively low insulation pricing base in effect at the
beginning of 1998, the lag in fully realizing the 1998 price
increases as the Company honors the remainder of pre-
existing pricing contracts, and price declines attributable
to vinyl siding products. The Company expects the upward
price trend established during 1998 to continue into 1999.
As a result of the growth of the Company's business and the
significant pricing pressure experienced in 1997, the
Company implemented a strategic restructuring program
designed to improve profitability, augment previously
announced profitability initiatives, and improve operational
efficiency. The specific objectives of this strategic
program are discussed in "Restructuring of Operations and
Other Actions" below and in Note 4 to the Consolidated
Financial Statements.
Years Ended December 31, 1998, 1997 and 1996
Sales and Profitability
Net sales for the year ended December 31, 1998 were $5.009
billion, reflecting a 15% increase from the 1997 level of
$4.373 billion. Net sales in 1996 were $3.832 billion. The
year to year increases are primarily due to the acquisitions
of Fibreboard and AmeriMark which were completed in the
second and fourth quarters of 1997, respectively. Continued
strength in U.S. residential roofing markets resulted in
increased volume and price during 1998. Volume declines in
North American and European residential insulation markets
were partially offset by volume increases in mechanical and
other insulation markets. Although average price levels for
insulation products were lower in 1998 than 1997 when
calculated on an annual basis, residential insulation price
levels were higher in the fourth quarter of 1998 compared to
the fourth quarter of 1997, indicating the benefits of the
price increases implemented throughout 1998 and the
establishment of an upward price trend which is expected to
continue into 1999. This represents a reversal of the
downward trend in insulation pricing experienced during 1997
and 1996. In the vinyl siding market, volume increases were
largely offset by declines in pricing during 1998. Volume
increases in North American composites markets during 1998,
particularly during the fourth quarter, helped to offset
price declines in European and Asian markets during the
year. On a consolidated basis, there was virtually no
impact of currency translation on sales in foreign
currencies during 1998. Please see Note 1 to the
Consolidated Financial Statements.
Sales outside the U.S. represented 20% of total sales for
the year ended December 31, 1998, compared to 24% during
1997 and 25% during 1996. The decline in non-U.S. sales as
a percentage of total sales in 1998 compared to 1997 and
1996 is due to the 1997 acquisitions of Fibreboard and
<PAGE> -20-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
AmeriMark, which are primarily U.S. operations, and volume
declines in Europe during 1998. Gross margin for the year
ended December 31, 1998 was 21% of net sales, compared to
20% and 26% in 1997 and 1996, respectively. The decline in
gross margin as a percentage of sales in 1998 and 1997
compared to 1996 and prior years is largely attributable to
the lower-margin businesses of the 1997 acquisitions. Cost
of sales in 1998 includes a $65 million charge as part of
the $243 million charge for restructuring and other actions
described below. Gross margin during 1998 reflects the
benefits of price improvements, cost reductions resulting
from the Company's strategic restructuring program, and
continuing productivity improvements across the Company's
businesses. Cost of sales in 1997 includes a $38 million
charge as part of the $143 million charge for restructuring
and other actions described below.
For the year ended December 31, 1998, the Company reported a
net loss of $705 million, or $13.16 per share, compared to
net income of $47 million, or $.88 per share, for the year
ended December 31, 1997, and a net loss of $284 million, or
$5.54 per share, for the year ended December 31, 1996.
Included in the 1998 net loss are a $1.415 billion pretax
charge ($906 million after-tax) for asbestos litigation
claims, a $243 million pretax charge ($171 million after-
tax) for restructuring and other actions and a $359 million
pretax gain ($217 million after-tax) from the sale of
certain businesses. Net income in 1998 also reflects
manufacturing and operating expense reductions of
approximately $110 million on a pretax basis, resulting from
the Company's strategic restructuring program. Cost of
borrowed funds during 1998 was $140 million, $29 million
higher than the 1997 level, due to higher levels of average
debt, offset partially by a reduction in average interest
rates during 1998. The reduction in equity in net income of
affiliates for the year ended December 31, 1998 reflects the
first quarter 1998 sale of the Company's 50% ownership
interest in Alpha/Owens-Corning, LLC. As part of the
Company's debt realignment strategy, the Company
repurchased, via a tender offer, certain debt securities
during the third quarter of 1998 and recorded an
extraordinary loss of $39 million, or $.72 per share, net of
related income taxes of $25 million. Please see Notes 2, 4,
5 and 22 to the Consolidated Financial Statements.
Net income for the year ended December 31, 1997 was $47
million, or $.88 per share, and reflects the adverse impact
of lower prices in insulation and composites worldwide
compared to 1996. Net income for 1997 also includes a
pretax charge of $143 million ($104 million after-tax) for
restructuring and other actions; an increase in cost of
borrowed funds and minority interest expense compared to
1996, due primarily to the financing of the Fibreboard and
AmeriMark acquisitions; a $15 million credit ($10 million
after-tax) resulting from the modification of certain
employee benefits in the second quarter of 1997; and a $15
million after-tax charge for the cumulative effect of the
change in method of accounting for business process
reengineering costs. Please see Notes 4, 6 and 8 to the
Consolidated Financial Statements.
The 1996 net loss of $284 million, or $5.54 per share,
reflects a pretax charge of $875 million ($542 million after-
tax) for asbestos litigation claims; pretax charges totaling
$42 million ($27 million after-tax) 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
($26 million after-tax) for restructuring and other actions;
a $27 million reduction of tax reserves due to favorable
legislation; and a pretax gain of $37 million ($27 million
after-tax) from the sale of the Company's ownership interest
in its former Japanese affiliate, Asahi Fiber Glass Co. Ltd.
Please see Notes 4, 5 and 11 to the Consolidated Financial
Statements.
<PAGE> -21-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Marketing and administrative expenses were $587 million
during 1998, compared to $544 million and $500 million in
1997 and 1996, respectively. The increase in marketing and
administrative expenses reflects the incremental costs due
to acquisitions, partially offset by the benefits of cost
reductions resulting from the Company's strategic
restructuring program.
Restructuring of Operations and Other Actions
Please see also Note 4 to the Consolidated Financial
Statements.
During the first and third quarters of 1998, the Company
recorded a total pretax charge of $243 million for
restructuring and other actions as part of the Company's
strategic restructuring program to reduce overhead, enhance
manufacturing productivity, and close manufacturing
facilities, which was announced in early 1998. This charge
includes $117 million for restructuring and $126 million for
other actions in 1998, the majority of which represent asset
impairments. On a cumulative basis since the fourth quarter
of 1997, the Company has recorded a total pretax charge of
$386 million for this program, of which $185 million
represents restructure costs and $201 million represents
other actions.
The $117 million restructuring charge in 1998 includes
approximately $90 million for costs associated with the
elimination of approximately 1,900 positions worldwide and
$27 million for the divestiture of non-strategic businesses
and facilities, of which $3 million represents exit cost
liabilities, comprised primarily of lease commitments. The
$27 million charge for non-strategic businesses and
facilities includes $12 million for the closure of certain
U.S. manufacturing facilities, $6 million for the closure of
a pipe manufacturing facility in China, and $9 million for
other actions.
The primary components of the $126 million charge for other
actions in 1998 and their classification on the Company's
consolidated statement of income include: $30 million to
write down to fair value certain manufacturing assets held
for use in China, due primarily to poor current and
projected financial results, recorded as cost of sales; $15
million to write down to net realizable value equipment and
inventory made obsolete by changes in the Company's
manufacturing and marketing strategies, recorded as cost of
sales; $17 million for the write-down of an investment in
and the write-off of a receivable from a joint venture in
Korea to reflect the current business outlook and the fair
market value of the assets, recorded as other operating
expenses; $12 million for the write-down of goodwill
associated with the 1995 acquisition of Fiber-lite,
determined to be unrecoverable due to a change in market
conditions and customer demand, recorded as other operating
expenses; and $9 million for the write-down of certain
assets in the U.S. to fair market value, recorded as cost of
sales. The Company plans to hold and use the investments
but disposed of most of the equipment in 1998. Also
included in the $126 million charge for other actions are
$13 million for the write-off of certain receivables in the
U.S. and Asia determined to be uncollectable, recorded as
cost of sales and other operating expenses; and $30 million
for other actions recorded as cost of sales, marketing and
administrative expenses, and other operating expenses.
During the fourth quarter of 1997, the Company recorded a
$143 million pretax charge for restructuring and other
actions as the first phase of the strategic restructuring
program. The $143 million pretax charge was comprised of a
$68 million charge associated with the restructuring of the
Company's business segments and a $75 million charge
associated with asset impairments, including investments in
certain affiliates. The components of the restructure
charge include $25 million for personnel reductions, $41
million for the divestiture of non-strategic businesses and
facilities, including the 1998 closure of the Candiac,
<PAGE> -22-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Quebec manufacturing facility, and $2 million for other
actions. The $25 million for personnel reductions represents
severance costs associated with the elimination of nearly
550 positions worldwide.
The primary components of the $75 million charge for other
actions and their classification on the Company's
consolidated statement of income include: $17 million for
the write-off of certain assets and investments associated
with unconsolidated joint ventures in Spain and Argentina
due primarily to poor current and projected financial
results and the expected loss of local partners, recorded as
other operating expenses; $12 million for the write-down of
certain investments in mainland China to reflect the current
business outlook and the fair market value of the
investments, recorded as cost of sales; $24 million to write
down to net realizable value equipment and inventory made
obsolete by changes in the Company's manufacturing and
marketing strategies, recorded as cost of sales; $8 million
for a supplemental employee retirement plan approved by the
Board of Directors in December 1997, recorded as marketing
and administrative expenses; $5 million for the write-off of
an insurance receivable that was determined to be
uncollectable after judicial rejection of the Company's
claim, recorded as other operating expenses; and $9 million
for several other actions recorded as cost of sales,
marketing and administrative expenses, and other operating
expenses. The Company plans to hold and use the investments
but disposed of the equipment in 1998.
During the fourth quarter of 1996, the Company recorded a
$43 million pretax charge for restructuring and other
actions which included the costs associated with a work
force realignment, a replacement of computer technology and
asset valuations and expenses related to exited businesses.
The $43 million pretax charge was comprised of a $38 million
restructure charge and a $5 million charge related to an
exited business. The components of the restructure charge
included $20 million for personnel reductions, $8 million in
computer technology and $10 million for asset valuations and
exited businesses. The $20 million for personnel reductions
represented severance costs associated with the elimination
of nearly 400 positions worldwide.
As indicated above, certain of the charges recorded during
1998, 1997 and 1996 represent valuation adjustments
associated with asset impairments. The Company continually
evaluates whether events and circumstances have occurred
that indicate that the carrying amount of certain long-lived
assets is recoverable. When factors indicate that a long-
lived asset should be evaluated for possible impairment, the
Company uses an estimate of the expected undiscounted cash
flows to be generated by the asset to determine whether the
carrying amount is recoverable or if an impairment exists.
When it is determined that an impairment exists, the Company
uses the fair market value of the asset, usually measured by
the discounted cash flows to be generated by the asset, to
determine the amount of the impairment to be recorded in the
financial statements.
As a result of the strategic restructuring program, the
Company realized a decrease in manufacturing and operating
expenses of approximately $110 million during 1998. Based
upon expected economic conditions over the next few years,
including effects on matters such as labor, material and
other costs, the Company expects additional cost reductions
of approximately $65 million in 1999, resulting in ongoing
pretax savings of approximately $175 million per year. The
expected $175 million in cost reductions, the majority of
which will be cash savings, is comprised of $150 million in
reduced personnel costs, $14 million in reduced facility
costs, and $11 million of reductions in related program
spending. The Company also expects additional cost savings
during 1999 resulting from improved logistics and materials
sourcing.
<PAGE> -23-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company also implemented programs to gain synergies in
its Exterior Systems Business during 1998. As a result of
these programs, which include closing redundant facilities,
integrating business systems, and improving purchasing
leverage, the Company reduced costs by approximately $32
million during 1998 and expects to save an additional $20
million per year in 1999 and beyond, the majority of which
will be cash savings.
Building Materials
In the Building Materials segment, sales increased 22% in
1998 compared to 1997, reflecting the incremental sales from
the AmeriMark and Fibreboard acquisitions. Building
Materials sales reflect the benefits of volume increases in
North American vinyl siding and residential roofing markets
during 1998, offset partially by volume declines in European
residential insulation markets. Price increases in North
American residential roofing markets were more than offset
by insulation and vinyl siding prices, which were lower on
average for total year 1998 than 1997. Prices of
residential insulation, particularly in the U.S., however,
benefited from an upward trend during much of 1998 and
resulted in prices during the fourth quarter of 1998 that
were above fourth quarter 1997 levels. The translation
impact of sales denominated in foreign currencies was
slightly unfavorable during 1998. Income from operations
was $311 million during 1998, up from $172 million in 1997.
Income from operations in 1998 reflects productivity
improvements and cost reductions resulting from the
strategic restructuring program, as well as strong
residential roofing volume and price. Please see Notes 1
and 5 to the Consolidated Financial Statements.
The consolidated results of the Company include the results
of operations of Fibreboard and AmeriMark beginning with the
third and fourth quarters of 1997, respectively. To enhance
comparability, certain information below is presented on a
pro forma basis and reflects the acquisitions of Fibreboard
(excluding Pabco and operations that were discontinued by
Fibreboard prior to the acquisition) and AmeriMark as though
they had occurred at the beginning of the periods presented.
(The pro forma impact of all acquisitions during 1997 and
1996, other than Fibreboard and AmeriMark, was not material
to the Company's results of operations for those years.)
The pro forma results include certain adjustments, primarily
for depreciation and amortization, interest and other
expenses directly attributable to the acquisitions, and are
not necessarily indicative of the combined results that
would have occurred had the acquisitions occurred at the
beginning of that period. These pro forma results do not
reflect the benefits from the consolidation of the exterior
systems business discussed above.
<TABLE>
<S> <C> <C> <C> <C>
PRO FORMA AS REPORTED
Year Ended Year Ended
December 31, December 31,
1997 1996 1997 1996
(In millions of dollars,
except share data)
Net sales $5,041 $ 4,932 $4,373 $3,832
Income (loss) from continuing operations 46 (301) 62 (284)
Diluted earnings per share from continuing
operations $ .86 $ (5.86) $ 1.17 $(5.54)
</TABLE>
Early in the first quarter of 1998, the Company completed
the sale of the assets of Pabco, a producer of molded
calcium silicate insulation, fireproofing board and metal
jacketing, acquired as part of the Fibreboard acquisition in
1997. Please see Note 5 to the Consolidated Financial
Statements.
<PAGE> -24-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Composite Materials
In the Composite Materials segment, sales were down 6% for
the year ended December 31, 1998 compared to 1997, due
largely to the disposition (discussed below) of 51% of the
Company's yarns and specialty materials business (the "yarns
business") late in the third quarter of 1998. Adjusted for
the impact of this disposition, sales were flat for the year
ended December 31, 1998. Volume increases in North American
markets in 1998, particularly during the fourth quarter,
were offset by price declines across European and Asian
markets. The translation impact of sales denominated in
foreign currencies was slightly favorable during 1998.
Income from operations was $202 million in 1998, compared to
$165 million in 1997. Reflected in income from operations
during 1998 are the benefits of productivity improvements
and cost reductions from the Company's restructuring
program, offset partially by reduced prices during 1998 and
the deconsolidation of the Company's yarns business. Please
see Notes 1 and 5 to the Consolidated Financial Statements.
During the third quarter of 1998, the Company formed a joint
venture for its yarns business to which it contributed two
manufacturing plants and certain proprietary technology. On
September 30, 1998, the Company completed the sale of 51% of
the joint venture to a U.S. subsidiary of Groupe Porcher
Industries of Badinieres, France for $340 million. The
Company continues to have a 49% ownership interest in the
joint venture. Upon closing, the Company also received a
distribution of approximately $193 million from the joint
venture. By retaining a 49% ownership interest in the joint
venture, the Company will continue to safeguard its
proprietary technology and participate in the yarns market.
Please see Note 5 to the Consolidated Financial Statements.
The consolidated balance sheet of the Company as of December
31, 1998 reflects the third quarter 1998 disposition of the
Company's yarns business. The results of operations of the
yarns business are reflected in the Company's consolidated
statement of income through the period ending September 30,
1998. For the nine months ended September 30, 1998 and the
years ended December 31, 1997 and 1996, the yarns business
recorded sales of approximately $205 million, $277 million,
and $275 million, respectively, and income from operations
of approximately $57 million, $80 million and $80 million,
respectively. Effective September 30, 1998, the Company
accounts for its ownership interest in the yarns joint
venture under the equity method.
Accounting Changes
During the first quarter of 1998, the Company adopted
Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS 130). Comprehensive
income is defined as the change in equity of a business
enterprise during a period from transactions and other
events and circumstances from non-owner sources. The
Company's comprehensive income includes net income, currency
translation adjustments, minimum pension liability
adjustments, and deferred gains and losses on certain
hedging transactions. Please see the Company's Consolidated
Statement of Comprehensive Income.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). This statement establishes
accounting and reporting standards requiring that every
derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at
its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings
unless specific hedge
<PAGE> -25-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income
statement, and requires that a company must formally
document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June
15, 1999, but earlier adoption is allowed. The Company has
not yet quantified the impact of adopting SFAS 133 and has
not determined the timing of or the method of adoption. The
Company is aware, however, that the adoption of SFAS 133
could increase volatility in earnings and other
comprehensive income.
LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS
Cash flow from operations was $124 million for the year
ended December 31, 1998, compared to $131 million for the
year ended December 31, 1997. The slight decrease in cash
flow from operations in 1998 is largely attributable to a
$205 million increase in payments for asbestos litigation
claims, net of insurance proceeds, during 1998 compared to
1997. Payments for asbestos litigation claims were $455
million during 1998 and proceeds from insurance were $47
million, compared to $300 million and $97 million,
respectively, during 1997. The increase in net payments
results principally from the fact that in conjunction with
the National Settlement Program (NSP) negotiations in the
fourth quarter of 1998, the Company was able to achieve
settlements on favorable terms of certain appeals and other
pending claims earlier than anticipated. The Company
anticipates $850 million of total payments for asbestos
litigation claims during 1999 due to the implementation of
the Company's NSP, described in Note 22 to the Consolidated
Financial Statements. The Company expects that $150 million
of insurance proceeds will be available to cover these
costs. During 1998, the Company collected a federal income
tax refund of approximately $85 million, which favorably
impacted cash flow from operations during the year. Please
see Notes 17 and 22 to the Consolidated Financial
Statements.
Inventories at December 31, 1998 decreased $66 million,
including $37 million for divestitures and non-cash write-
offs during the third quarter of 1998, from the December 31,
1997 level of $503 million. Receivables at December 31,
1998 were $451 million, a 5% increase over the December 31,
1997 level, due largely to a $40 million increase in sales
in December 1998 compared to December 1997. Receivables at
December 31, 1998 also reflect a $39 million reduction
attributable to the divestitures and non-cash write-offs
during the third quarter of 1998. The increase in accounts
payable and accrued liabilities from $814 million at
December 31, 1997 to $942 million at December 31, 1998
favorably contributed to cash flow from operations during
1998. On an aggregate basis, receivables, inventory, and
accounts payable and accrued liabilities at December 31,
1998, adjusted for the divestitures and non-cash write-offs
during the third quarter of 1998, reflect improved working
capital management during 1998.
At December 31, 1998, the Company's net working capital was
negative $354 million and its current ratio was .81,
compared to $121 million and 1.09, respectively, at December
31, 1997. A $500 million increase in the current portion of
the reserve for asbestos litigation claims, due to the
implementation of the Company's National Settlement Program,
partially offset by the related income tax benefit,
contributed to the decrease in net working capital at
December 31, 1998.
The Company's total borrowings at December 31, 1998 were
$1.626 billion, $112 million lower than at year-end 1997.
Proceeds from the sale of businesses during 1998 were used
to reduce debt as well as repurchase the Company's Trust
Preferred Hybrid Securities during the year.
<PAGE> -26-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
As of December 31, 1998, the Company had unused lines of
credit of $1.307 billion available under long-term bank
credit facilities and an additional $124 million under short-
term facilities, compared to $884 million and $224 million,
respectively, at year-end 1997. The net increase in unused
available lines of credit reflects the Company's reduced
borrowings at December 31, 1998 compared to December 31,
1997, offset partially by an agreed $200 million reduction
in the maximum availability from the Company's long-term
credit facility during the first quarter of 1998. Letters of
credit issued under the facility, most of which support
appeals from asbestos trials, also reduce the available
credit. The impact of such reduction is reflected in the
unused lines of credit discussed above. Please see Note 2
to the Consolidated Financial Statements.
During 1998, the Company implemented a debt realignment
program intended to reduce financing costs. This program,
which extended the average length of term debt from four
years to ten years, included the issuance of a total of $950
million in new debt securities, the repurchase of the
Company's $309 million of Trust Preferred Hybrid Securities
and the retirement of $361 million of higher-rate debt
securities. In connection with this early retirement of
debt, the Company paid premiums of approximately $62
million, incurred related non-cash costs of approximately $2
million, and recorded an extraordinary loss of approximately
$39 million, or $.72 per share, net of related income taxes
of $25 million. Please see Notes 2, 3 and 8 to the
Consolidated Financial Statements.
Capital spending for property, plant and equipment,
excluding acquisitions, was $253 million in 1998. The
Company anticipates 1999 capital spending, exclusive of
acquisitions and investments in affiliates, will be
approximately $225 million, the majority of which is
uncommitted. The Company expects that funding for these
expenditures will be from the Company's operations and
external sources as required.
Asbestos Litigation
Gross payments for asbestos litigation claims during 1998,
including payments for claims settled in prior years and
excluding amounts payable in future years, were $455
million. The 1998 expenditures include $92 million in
defense and other costs. Proceeds from insurance were $47
million resulting in a net pretax cash outflow of $408
million ($245 million after-tax). The increase in 1998
expenditures from 1997 expenditures of approximately $300
million is principally attributable to payments in 1998 for
claims resolved in prior years and to the fact that, in
conjunction with the National Settlement Program
negotiations in the fourth quarter of 1998, Owens Corning
was able to achieve additional settlements on favorable
terms of certain appeals and other pending claims earlier
than anticipated. On December 15, 1998, Owens Corning
announced a National Settlement Program (NSP) under which
more than 176,000 asbestos claims against the Company will
be resolved. Average payments per claim under the NSP are
expected to be substantially lower than those experienced by
Owens Corning in recent years. Settlement payments
aggregating approximately $1.2 billion for cases pending
against Owens Corning will be made over a period of up to
five years, with most payments occurring in 1999 and 2000.
Such payments will be made from the Company's available cash
and credit resources. As a result of such payments, the
Company's gross payments for asbestos litigation claims will
increase in 1999 and 2000 over the levels experienced in
recent years. However, such payments are expected to be
substantially lower than historical levels in 2001 and
subsequent years. The Company's total payments for asbestos
litigation claims in 1999, including defense costs, are
expected to be approximately $850 million, due principally
to payments in conjunction with the NSP. Proceeds from
insurance of $150 million are expected to be available to
cover these costs resulting in a net pretax cash outflow of
$700
<PAGE> -27-
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
million ($450 million after-tax). In addition to providing
for the resolution of approximately 176,000 claims against
Owens Corning, the NSP establishes administrative processing
arrangements with participating law firms under which future
asbestos claims will be resolved without litigation, with
future claimants to receive specified amounts based on the
type and severity of disease and other factors. Please see
Note 22 to the Consolidated Financial Statements.
Gross payments for asbestos litigation claims against
Fibreboard during 1998 were approximately $129 million, all
of which was paid directly by Fibreboard's insurers or from
an escrow account funded by its insurers to claimants on
Fibreboard's behalf. Fibreboard is a participant in the NSP
and is a party to most of the NSP Agreements. If the Global
Settlement is overturned by the United States Supreme Court,
and the Insurance Settlement therefore becomes effective, it
is anticipated that over 100,000 asbestos litigation claims
pending against Fibreboard will be resolved under the NSP.
Payments of such claims will be made over the next five
years with most payments occurring in 1999 and 2000. Such
payments will be made from the approximately $2.0 billion in
funds available under the Insurance Settlement to resolve
pending and future Fibreboard claims. Please see Notes 17
and 22 to the Consolidated Financial Statements.
The Company expects funds generated from operations,
together with funds available under long and short term bank
credit facilities, to be sufficient to satisfy its debt
service obligations under its existing and anticipated
indebtedness, its contingent liabilities for uninsured
asbestos personal injury claims, as well as its capital
expenditure programs and growth agenda.
Environmental Matters
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. 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 1998, the Company was designated as a PRP in such
federal, state, local or private proceedings for nine
additional sites. At December 31, 1998, a total of 37 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 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 wool fiber glass, mineral wool,
amino/phenolic resin, secondary aluminum smelting, asphalt
processing and roofing, and metal coil coating. The EPA's
currently announced schedule is to issue regulations
covering wool fiber glass, mineral wool, amino/phenolic
resin, secondary aluminum smelting, and asphalt processing
and roofing in 1999, and metal coil coating in 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,
<PAGE> -28-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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.
Year 2000 Readiness
This information should be considered a Year 2000 Readiness
Disclosure.
Background
Some of the Company's existing information technology ("IT")
systems and control systems containing embedded technology
such as processors, controllers and microchips ("Non-IT")
were originally programmed using two digits rather than four
digits to define the applicable year. As a result, such
systems, if not remediated, may experience miscalculations
or disruptions when processing information containing dates
that fall after December 31,1999 or other dates that could
cause computer malfunctions (the "Year 2000 Issue").
The Company's State of Readiness
In recognition of the significance of the Year 2000 Issue,
the Company formed a senior management team representing
business units and business process functions including
information technology, sourcing, logistics and legal. This
team oversees the Company's efforts to assess and resolve
the Year 2000 Issue. In addition, the Company's individual
organizational units have developed, and are implementing,
Year 2000 plans. These plans include assessment of all the
Company's IT and Non-IT systems and an evaluation of the
external environment to identify significant exposure areas
and to develop appropriate remediation or other risk
management approaches. The Company is also developing
business continuity plans to assure that all of its
operations are prepared in the case of an unexpected system
or supplier failure.
IT Systems
The Company has been actively implementing new systems and
technology on a worldwide basis since 1995 as part of its
Advantage 2000 program to improve productivity and
operational efficiency. One objective of this initiative is
to ensure all business transactions are supporting
requirements to process data accurately in the year 2000 and
beyond. The scope of this program has been continuously
expanded to include each of the seventeen acquisitions made
by the Company during the past five years.
To date, over 75% of the Company's IT systems are both ready
for the year 2000 and are already in operation for daily
business transaction processing. This has been accomplished
through the comprehensive implementation of enterprise
resource planning software across most of the Company's
business units. The Company's schedule is to have updated
or replaced all remaining IT systems by the end of second
quarter 1999. Management expects that most of these
remaining IT systems will be in full operation by the end of
second quarter 1999 and that all will be in full operation
by the end of the third quarter. All significant system
changes are currently progressing to achieve this schedule.
<PAGE> -29-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Non-IT Systems
The Company has completed an inventory and assessment of
substantially all of the Non-IT systems in its operating
facilities. Those Non-IT systems that may fail as a result
of the Year 2000 Issue have been identified. Corrective
actions such as replacement, update or installation of
vendor supplied upgrades are currently being performed.
Concurrent with this renovation process, the Company is now
testing Year 2000 corrections to ensure that Non-IT systems
will function properly on key dates in accordance with
testing methodologies which management believes are
reasonable and reflective of practices employed by
comparable companies. As with the IT systems discussed
above, the Company plans to have all of the identified
technology remediated and tested by the end of second
quarter 1999. Most locations will also be operating with
these remediated systems within the same time frame; all
locations are expected to be using these systems for
business operations by the end of third quarter 1999.
External Environment
The Company is working with its suppliers and customers to
assess their level of Year 2000 readiness. This process
includes both the receipt of confirmation documents as well
as selective on-site visits. Critical suppliers have been
identified; confirmations received, and now the Company is
conducting visits, which are expected to be completed in
first quarter 1999. Based upon results of the confirmations
and visits, the Company expects to develop any required
contingency plans by the end of the second quarter. Such
contingency plans will include, as appropriate, using
alternate suppliers that are Year 2000 ready.
Estimated Costs
The cumulative cost of systems replacement, remediation and
update from 1995 through 1998 has been approximately $145
million, including technology, design and development, and
related training and deployment in business locations. The
Company currently estimates that its remaining costs to
assess and resolve the Year 2000 Issue including the
replacement and remediation at all remaining locations are
in the range of $25 million to $30 million. These cost
estimates are based on currently available information, and
may be subject to change.
Risks
If needed modifications and upgrades of systems are not made
on a timely basis by the Company or its materially
significant suppliers, the Company could experience
significant disruptions to one or more of its operations,
financial loss, legal liability and similar risks, any of
which could have a material adverse effect on the Company's
results of operations or financial position. The Company
believes that the most reasonably likely worst case scenario
would be a short-term slowdown or cessation of manufacturing
operations at one or more of the Company's facilities and a
short-term inability on the part of the Company to process
orders and billings in a timely manner, and to deliver
product to customers. In view of the Company's Year 2000
readiness program, including contingency and continuity
plans, the Company believes that significant disruptions are
unlikely and that any disruptions would be both short-term
and manageable.
<PAGE> -30-
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market Risk
The Company is exposed to the impact of changes in foreign
currency exchange rates and interest rates in the normal
course of business. The Company manages such exposures
through the use of certain financial and derivative
financial instruments. The Company's objective with these
instruments is to reduce exposure to fluctuations in
earnings and cash flows associated with changes in foreign
currency exchange rates and interest rates.
The Company enters into various forward contracts and
options, which change in value as foreign currency exchange
rates change, to preserve the carrying amount of foreign
currency-denominated assets, liabilities, commitments, and
certain anticipated foreign currency transactions and
earnings. The Company also enters into certain currency and
interest rate swaps to protect the carrying amount of its
investments in certain foreign subsidiaries, to hedge the
principal and interest payments of certain debt instruments,
and to manage its exposure to fixed versus floating interest
rates.
The Company's policy is to use foreign currency and interest
rate derivative financial instruments only to the extent
necessary to manage exposures as described above. The
Company does not enter into foreign currency or interest
rate derivative transactions for speculative purposes.
The Company uses a variance-covariance Value at Risk (VAR)
computation model to estimate the potential loss in the fair
value of its interest rate-sensitive financial instruments
and its foreign currency-sensitive financial instruments.
The VAR model uses historical foreign exchange rates and
interest rates as an estimate of the volatility and
correlation of these rates in future periods. It estimates
a loss in fair market value using statistical modeling
techniques.
The amounts presented below represent the maximum potential
one-day loss in fair value that the Company would expect
from adverse changes in foreign currency exchange rates or
interest rates assuming a 95% confidence level:
<TABLE>
<S> <C>
Risk Category Amount
(In millions of dollars)
Foreign currency $ 1
Interest rate $ 8
</TABLE>
Virtually all of the $8 million potential loss associated
with interest rate risk is attributable to fixed-rate long-
term debt instruments.
<PAGE> -31-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 35 through 90 hereof are incorporated here by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Owens Corning has nothing to report under this Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING
The information required by this Item is incorporated by
reference from the Company's 1999 Proxy Statement except
that certain information concerning Owens Corning's
executive officers is included on pages 13 through 14
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by
reference from the Company's 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by
reference from the Company's 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by
reference from the Company's 1999 Proxy Statement.
<PAGE> -32-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. See Index to Financial Statements on page 34 hereof
2. See Index to Financial Statement Schedules on page 91
hereof
3. See Exhibit Index beginning on page 93 hereof
Management contracts and compensatory plans and
arrangements required to be filed as an exhibit pursuant
to Item 14(c) of Form 10-K are denoted in the Exhibit
Index by an asterisk ("*").
(b) REPORTS ON FORM 8-K
During the fourth quarter of 1998, the Company filed the
following current reports on Form 8-K:
(i) Dated October 14, 1998, under Item 2, "Acquisition or
Disposition of Assets", and Item 7, "Financial
Statements and Exhibits", and including the following
financial statements and notes of Owens Corning:
- Pro Forma Balance Sheet as of June 30, 1998 (unaudited)
- Pro Forma Statement of Income for the six months ended
June 30, 1998 (unaudited)
- Pro Forma Statement of Income for the year ended
December 31, 1997 (unaudited)
- Notes to pro forma financial statements (unaudited)
(ii) Dated December 15, 1998, under Item 5, "Other Events"
<PAGE> -33-
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OWENS CORNING
By /s/ Glen H. Hiner Date March 11, 1999
Glen H. Hiner, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
/s/ Glen H. Hiner Date March 11, 1999
Glen H. Hiner, Chairman of the Board,
Chief Executive Officer and Director
/s/ Thurston Roach Date March 11, 1999
J. Thurston Roach, Senior Vice
President and Chief Financial Officer
/s/ Steven J. Strobel Date March 11, 1999
Steven J. Strobel, Vice President and
Controller
/s/ Curtis H. Barnette Date March 12, 1999
Curtis H. Barnette, Director
/s/ Norman P. Blake, Jr. Date March 12, 1999
Norman P. Blake, Jr., Director
Date
Gaston Caperton, Director
Date
Leonard S. Coleman, Jr., Director
/s/ William W. Colville Date March 12, 1999
William W. Colville, Director
/s/ John H. Dasburg Date March 12, 1999
John H. Dasburg, Director
/s/ Landon Hilliard Date March 11, 1999
Landon Hilliard, Director
/s/ Jon M. Huntsman, Jr. Date March 12, 1999
Jon M. Huntsman, Jr., Director
/s/ Ann Iverson Date March 11, 1999
Ann Iverson, Director
Date
W. Walker Lewis, Director
/s/ Furman C. Moseley Date March 15, 1999
Furman C. Moseley, Jr., Director
/s/ W. Ann Reynolds Date March 12, 1999
W. Ann Reynolds, Director
<PAGE> -34-
INDEX TO FINANCIAL STATEMENTS
Item Page
Report of Independent Public Accountants.......................35
Summary of Significant Accounting Policies..................36-37
Consolidated Statement of Income - for the
years ended December 31, 1998, 1997 and 1996...............38-39
Consolidated Statement of Comprehensive Income -
for the years ended December 31, 1998, 1997 and 1996..........40
Consolidated Balance Sheet - December 31, 1998 and 1997.....41-42
Consolidated Statement of Stockholders' Equity -
for the years ended December 31, 1998, 1997 and 1996..........43
Consolidated Statement of Cash Flows - for the years
ended December 31, 1998, 1997 and 1996.....................44-45
Notes to Consolidated Financial Statements
Notes 1 through 23.........................................46-90
<PAGE> -35-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Owens Corning:
We have audited the accompanying consolidated balance sheet
of OWENS CORNING (a Delaware corporation) and subsidiaries
as of December 31, 1998 and 1997, and the related
consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Owens Corning and subsidiaries as of December
31, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally
accepted accounting principles.
As discussed in Note 6 to the consolidated financial
statements, during the fourth quarter of 1997, the Company
changed its method of accounting for business process
reengineering costs.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The
schedule listed in the Index to Financial Statement
Schedules is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
January 25, 1999
Toledo, Ohio
<PAGE> -36-
OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Owens Corning and subsidiaries' (the "Company") consolidated
financial statements include the accounts of majority owned
subsidiaries, unless ownership is considered temporary.
Significant intercompany accounts and transactions are
eliminated.
Net Income per Share
Basic net income per share is computed using the weighted
average number of common shares outstanding during the
period. Diluted net income per share reflects the dilutive
effect of common equivalent shares and increased shares that
would result from the conversion of debt and equity
securities. The effects of anti-dilution are not presented.
Unless otherwise indicated, all per share information
included in the notes to the consolidated financial
statements is presented on a diluted basis.
Inventory Valuation
Inventories are stated at cost, which is less than market
value, and include material, labor and manufacturing
overhead. The majority of U.S. inventories are valued using
the last-in, first-out (LIFO) method and the balance of
inventories are generally valued using the first-in, first-
out (FIFO) method.
Goodwill
Goodwill is carried at cost, less accumulated amortization,
and is amortized on a straight-line basis over a period of
forty years. The Company continually evaluates whether
events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant
revision or that the remaining balance may not be
recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an
estimate of the undiscounted cash flows of the related
business over the remaining life of the goodwill in
assessing whether the goodwill is recoverable.
Investments in Affiliates
Investments in affiliates are accounted for using the equity
method, under which the Company's share of earnings of these
affiliates is reflected in income as earned and dividends
are credited against the investment in affiliates when
received.
Capitalization of Software Developed for Internal Use
The Company capitalizes the direct external and internal
costs incurred in connection with the development, testing
and installation of software for internal use. Internally
developed software is included in plant and equipment and is
amortized over its estimated useful life using the straight-
line method.
<PAGE> -37-
OWENS CORNING AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation
For assets placed in service prior to January 1, 1992, the
Company's plant and equipment is depreciated primarily using
the double-declining balance method for the first half of an
asset's estimated useful life and the straight-line method
is used thereafter. For assets placed in service after
December 31, 1991, the Company's plant and equipment is
depreciated using the straight-line method.
Derivative Financial Instruments
Gains and losses on hedges of existing assets or liabilities
are included in the carrying amount of those assets or
liabilities and are ultimately recognized in income as part
of those carrying amounts. Gains and losses on hedges of net
investments in foreign subsidiaries are included in
stockholders' equity. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions also
are deferred and are recognized in income or as adjustments
of carrying amounts when the hedged transaction occurs.
Gains and losses on forward currency exchange contracts that
do not qualify as hedges are recognized as other income or
expense.
Stock Based Compensation Plans
The Company applies Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123) for disclosures of its stock based compensation
plans. The Company applies Accounting Principles Board
Opinion No. 25 and related Interpretations for expense
recognition as permitted by SFAS 123.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain reclassifications have been made to 1997 and 1996 to
conform with the classifications used in 1998.
<PAGE> -38-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars,
except share data)
NET SALES $5,009 $4,373 $3,832
COST OF SALES 3,944 3,482 2,840
Gross margin 1,065 891 992
OPERATING EXPENSES
Marketing and administrative expenses 587 544 500
Science and technology expenses (Note 12) 57 69 84
Provision for asbestos litigation claims (Note 22) 1,415 - 875
Restructure costs (Note 4) 117 68 38
Other (Note 4) 72 28 23
Total operating expenses 2,248 709 1,520
Gain on sale of assets (Note 5) 359 - 37
INCOME (LOSS) FROM OPERATIONS (824) 182 (491)
Cost of borrowed funds (Notes 2, 3 and 21) 140 111 77
INCOME (LOSS) BEFORE PROVISION (CREDIT)
FOR INCOME TAXES (964) 71 (568)
Provision (credit) for income taxes (Note 11) (306) 9 (283)
INCOME (LOSS) BEFORE MINORITY INTEREST
AND EQUITY IN NET INCOME OF AFFILIATES (658) 62 (285)
Minority interest (Notes 7 and 8) (16) (11) (8)
Equity in net income of affiliates (Note 15) 8 11 9
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (666) 62 (284)
Extraordinary loss (Note 2) (39) - -
Cumulative effect of accounting change (Note 6) - (15) -
NET INCOME (LOSS) $(705) $ 47 $(284)
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -39-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Continued)
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars,
except share data)
NET INCOME PER COMMON SHARE (Note 19)
Basic:
Income (loss) before extraordinary item and
cumulative effect of accounting change $(12.44) $ 1.18 $ (5.54)
Extraordinary loss (Note 2) (.72) - -
Cumulative effect of accounting change (Note 6) - (.29) -
Net income (loss) per share $(13.16) $ .89 $ (5.54)
Diluted:
Income (loss) before extraordinary item and
cumulative effect of accounting change $(12.44) $ 1.17 $ (5.54)
Extraordinary loss (Note 2) (.72) - -
Cumulative effect of accounting change (Note 6) - (.29) -
Net income (loss) per share $(13.16) $ .88 $ (5.54)
Weighted average number of common shares
outstanding and common equivalent shares
during the period (in millions)
Basic 53.6 52.9 51.3
Diluted 53.6 53.5 51.3
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -40-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
Net income (loss) $ (705) $ 47 $ (284)
Other comprehensive income, net of tax:
Foreign currency translation adjustments 6(a) (46) (14)(b)
Minimum pension liability adjustment
(net of taxes of $1 million in 1998) 1 - -
Hedging gains/(losses) (4) 10 4
Other comprehensive income (loss) 3 (36) (10)
Comprehensive income (loss) $ (702) $ 11 $ (294)
</TABLE>
(a) Includes certain reclassifications to net income due to
the sale or disposition of certain businesses, the impact
of which was not material to other comprehensive income.
(b) Includes $17 million reclassification as an increase to in
come from operations due to the sale of the Company's
ownership interest in Asahi Fiber Glass Co., Ltd. (Note
5).
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130). Comprehensive income is defined as
the change in equity of a business enterprise during a
period from transactions and other events and
circumstances from nonowner sources. It includes all
changes in equity during a period except those resulting
from investments by owners and distributions to owners.
SFAS 130 requires that the Company classify items of other
comprehensive income by their nature in the financial
statements and display the accumulated balance of other
comprehensive income separately in the stockholders'
equity section of the Company's consolidated balance
sheet.
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -41-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C>
ASSETS 1998 1997
(In millions of dollars)
CURRENT
Cash and cash equivalents $ 54 $ 58
Receivables, less allowances of $23 million
in 1998 and $20 million in 1997 (Note 13) 451 432
Inventories (Note 14) 437 503
Insurance for asbestos litigation claims - current
portion (Note 22) 150 100
Deferred income taxes (Note 11) 293 160
Assets held for sale (Note 5) - 41
Income tax receivable (Note 11) 117 96
Other current assets 27 38
Total current 1,529 1,428
OTHER
Insurance for asbestos litigation claims (Note 22) 260 357
Asbestos costs to be reimbursed - Fibreboard (Note 22) 74 116
Deferred income taxes (Note 11) 608 328
Goodwill, less accumulated amortization of $78
million in 1998 and $45 million in 1997 (Notes 4 and 5) 762 778
Investments in affiliates (Notes 4 and 15) 45 52
Other noncurrent assets (Note 10) 205 184
Total other 1,954 1,815
PLANT AND EQUIPMENT, at cost
Land 64 66
Buildings and leasehold improvements 701 676
Machinery and equipment 2,476 2,629
Construction in progress 257 214
3,498 3,585
Less: Accumulated depreciation (1,880) (1,832)
Net plant and equipment 1,618 1,753
TOTAL ASSETS $5,101 $4,996
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -42-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1998 AND 1997
(Continued)
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
(In millions of dollars)
CURRENT
Accounts payable and accrued liabilities
(Note 16) $ 942 $ 814
Reserve for asbestos litigation claims -
current portion (Note 22) 850 350
Short-term debt (Note 3) 69 23
Long-term debt - current portion (Note 2) 22 120
Total current 1,883 1,307
LONG-TERM DEBT (Note 2) 1,535 1,595
OTHER
Reserve for asbestos litigation claims (Note 22) 1,780 1,320
Asbestos-related liabilities - Fibreboard (Note 22) 79 123
Other employee benefits liability (Note 9) 326 335
Pension plan liability (Note 10) 55 65
Other 364 165
Total other 2,604 2,008
COMMITMENTS AND CONTINGENCIES
(Notes 18, 21 and 22)
COMPANY OBLIGATED SECURITIES OF ENTITIES
HOLDING SOLELY PARENT DEBENTURES
(Notes 7 and 8) 194 503
MINORITY INTEREST 19 24
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized
8 million shares, none outstanding (Note 20)
Common stock, par value $.10 per share;
authorized 100 million shares; issued
1998-54.3 million and 1997-53.6 million
shares (Notes 5 and 19) 679 657
Deficit (1,762) (1,041)
Accumulated other comprehensive income (37) (40)
Other (Note 19) (14) (17)
Total stockholders' equity (1,134) (441)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 5,101 $ 4,996
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -43-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
COMMON STOCK (In millions of dollars)
Balance beginning of year $ 657 $ 606 $ 579
Issuance of stock for:
Acquisitions (Note 5) - 16 20
Awards under stock compensation plans (Note 19) 22 35 7
Balance end of year 679 657 606
DEFICIT
Balance beginning of year (1,041) (1,072) (781)
Net income (loss) (705) 47 (284)
Cash dividends declared (16) (16) (7)
Balance end of year (1,762) (1,041) (1,072)
ACCUMULATED OTHER COMPREHENSIVE
INCOME
Balance beginning of year
Currency translation adjustment (47) (1) 13
Minimum pension liability adjustment (3) (3) (3)
Deferred gains (losses) on hedges 10 - (4)
Total beginning balance (40) (4) 6
Adjustments
Currency translation adjustment 6 (46) (14)
Minimum pension liability adjustment 1 - -
Deferred gains (losses) on hedges (4) 10 4
Total adjustments 3 (36) (10)
Balance end of year
Currency translation adjustment (41) (47) (1)
Minimum pension liability adjustment (2) (3) (3)
Deferred gains (losses) on hedges 6 10 -
Total balance end of year (37) (40) (4)
OTHER
Balance beginning of year (17) (14) (16)
Net increase (decrease) 3 (3) 2
Balance end of year (14) (17) (14)
STOCKHOLDERS' EQUITY $(1,134) $ (441) $ (484)
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -44-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars)
NET CASH FLOW FROM OPERATIONS
Net income (loss) $ (705) $ 47 $ (284)
Reconciliation of net cash provided
by operating activities:
Noncash items:
Provision for asbestos litigation claims
(Note 22) 1,415 - 875
Extraordinary loss from early retirement
of debt (Note 2) 39 - -
Cumulative effect of accounting change
(Note 6) - 15 -
Provision for depreciation and
amortization 197 173 141
Provision (credit) for deferred
income taxes (Note 11) (416) 110 (258)
Gain on sale of assets (Note 5) (359) - (37)
Other (Note 4) 122 49 35
(Increase) decrease in receivables (Note 13) (58) 57 20
(Increase) decrease in inventories 16 60 (71)
Increase (decrease) in accounts payable
and accrued liabilities 120 (60) 103
Disbursements of VEBA trust - 19 45
Proceeds from insurance for asbestos
litigation claims, excluding Fibreboard
(Note 22) 47 97 101
Payments for asbestos litigation claims,
excluding Fibreboard (Note 22) (455) (300) (267)
Other 161 (136) (68)
Net cash flow from operations 124 131 335
NET CASH FLOW FROM INVESTING
Additions to plant and equipment (253) (227) (325)
Investment in subsidiaries, net of
cash acquired (Note 5) - (564) (70)
Proceeds from the sale of affiliate or business
(Notes 5 and 15) 668 - 55
Other (33) (8) (20)
Net cash flow from investing $ 382 $(799) $(360)
</TABLE>
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -45-
OWENS CORNING AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Continued)
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars)
NET CASH FLOW FROM FINANCING
(Notes 2, 3 and 8)
Net additions (reductions) to long-term
credit facilities $ (635) $ 796 $ 39
Other additions to long-term debt 971 108 22
Other reductions to long-term debt (494) (133) (43)
Net increase (decrease) in short-term debt 41 (81) 32
Repurchase of trust preferred hybrid
securities (309) - -
Premiums paid for early retirement of debt (62) - -
Dividends paid (16) (14) (3)
Other (4) 6 3
Net cash flow from financing (508) 682 50
Effect of exchange rate changes on cash (2) (1) 2
Net increase (decrease) in cash and cash
equivalents (4) 13 27
Cash and cash equivalents at beginning
of year 58 45 18
Cash and cash equivalents at end of year $ 54 $ 58 $ 45
The accompanying summary of significant accounting policies and notes
are an integral part of this statement.
<PAGE> -46-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Segment Data
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). In accordance
with SFAS 131, the Company has identified two reportable
operating segments and has reported financial and descriptive
information about each of those segments below on a basis that
is used internally for evaluating segment performance and
deciding how to allocate resources to those segments.
To determine its reportable operating segments, the Company's
management identified each component of the Company that
engages in business activities from which it earns revenue and
incurs expenses, whose results are regularly reviewed by a
chief operating decision maker to determine the allocation of
resources to these businesses, and for which discrete financial
information is available, each of which is an operating
segment. The Company has aggregated those operating segments
which have similar economic characteristics and are similar in
the nature of products and services, the nature of production
processes, the type or class of customer for their products and
services, and the methods used to distribute their products or
provide their services.
The Company's two reportable operating segments are defined as
follows:
Building Materials
Production and sale of glass wool fibers formed into
thermal and acoustical insulation and air ducts;
extruded and expanded polystyrene insulation; roofing
shingles and asphalt materials; windows and doors; vinyl
and metal siding and accessories; cast stone building
products; and the branded sale of housewrap.
Composite Materials
Production and sale of glass fiber yarns; rovings, mats
and veils; strand and reinforcement products; glass
reinforced plastic pipe; and polyester and vinyl ester
resins.
Intersegment sales, which include sales of Composite Materials
to Building Materials, are generally recorded at market or
equivalent value and are included in the internal evaluation of
segment performance. Income (loss) from operations by
operating segment consists of net sales less related costs and
expenses and is presented on a basis that is used internally
for evaluating segment performance. Certain categories of
expenses such as cost of borrowed funds, general corporate
expenses or income, and certain non-recurring expense or income
items are excluded from the internal evaluation of segment
performance. Accordingly, these items are not reflected in
income (loss) from operations for the Company's reportable
operating segments. Please refer to the reconciliation of
reportable operating segment income from operations to
consolidated income before income taxes below for additional
information about such items.
Total assets by reportable operating segment are those assets
that are used in the Company's operations in each operating
segment and do not include general corporate assets. General
corporate assets consist primarily of cash and cash
equivalents, deferred taxes, asbestos assets, and corporate
property and equipment. Please refer to the reconciliation of
reportable operating segment assets to consolidated total
assets below for additional information about such items.
External customer sales by geographic region are attributed
based upon the location from which the product is shipped.
Long-lived assets by geographic region are attributed based
upon the location of the assets.
<PAGE> -47-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
</TABLE>
<TABLE>
<S> <C> <C> <C>
NET SALES 1998 1997 1996
(In millions of dollars)
Reportable Operating Segments
Building Materials
United States $ 3,436 $ 2,704 $ 2,253
Europe 272 301 284
Canada and other 219 212 145
Total Building Materials 3,927 3,217 2,682
Composite Materials
United States 686 707 723
Europe 372 392 400
Canada and other 135 157 137
Total Composite Materials 1,193 1,256 1,260
Total Reportable Operating Segments 5,120 4,473 3,942
Reconciliation to Consolidated Net Sales
Composite Materials U.S. sales to
Building Materials U.S. (111) (100) (110)
Net Sales $ 5,009 $ 4,373 $ 3,832
External Customer Sales by Geographic Region
United States $ 4,011 $ 3,311 $ 2,866
Europe 644 693 684
Canada and other 354 369 282
Net Sales $ 5,009 $ 4,373 $ 3,832
</TABLE>
<PAGE> -48-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
INCOME (LOSS) FROM OPERATIONS 1998 1997 1996
(In millions of dollars)
Reportable Operating Segments
Building Materials
United States $ 287 $ 172 $ 247
Europe 14 5 21
Canada and other 10 (5) 13
Total Building Materials 311 172 281
Composite Materials
United States 167 166 174
Europe 24 (7) 46
Canada and other 11 6 19
Total Composite Materials 202 165 239
Total Reportable Operating Segments $ 513 $ 337 $ 520
Geographic Regions
United States $ 454 $ 338 $ 421
Europe 38 (2) 67
Canada and other 21 1 32
Total Reportable Operating Segments $ 513 $ 337 $ 520
Reconciliation to Consolidated Income (Loss)
Before Provision for Income Taxes
Restructuring and other charges (Note 4) (243) (143) (85)
Asbestos litigation claims (Note 22) (1,415) - (875)
Gain on sale of affiliate or business
(Note 5) 359 - 37
General corporate expense (38) (12) (88)
Cost of borrowed funds (140) (111) (77)
Consolidated Income (loss) before
provision for income taxes $(964) $ 71 $(568)
</TABLE>
<PAGE> -49-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
TOTAL ASSETS December 31,
1998 1997 1996
(In millions of dollars)
Reportable Operating Segments
Building Materials
United States $1,894 $2,066 $1,033
Europe 279 268 239
Canada and other 220 330 243
Total Building Materials 2,393 2,664 1,515
Composite Materials
United States 331 438 405
Europe 244 260 355
Canada and other 163 164 206
Total Composite Materials 738 862 966
Total Reportable Operating Segments $3,131 $3,526 $2,481
Reconciliation to Consolidated Total Assets
Asbestos insurance asset 484 573 554
Deferred income taxes 901 488 580
Income tax receivable 117 96 4
Cash and cash equivalents 54 58 45
Investments in affiliates 45 52 64
LIFO inventory valuation adjustment (56) (74) (82)
Other general corporate assets 425 277 267
Consolidated Total Assets $5,101 $4,996 $3,913
LONG-LIVED ASSETS BY GEOGRAPHIC REGION
United States $1,698 $1,792 $1,098
Europe 371 357 381
Canada and other 311 382 329
Total Long-Lived Assets $2,380 $2,531 $1,808
</TABLE>
<PAGE> -50-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
<TABLE>
<S> <C> <C> <C>
PROVISION FOR DEPRECIATION
AND AMORTIZATION 1998 1997 1996
(In millions of dollars)
Reportable Operating Segments
Building Materials
United States $ 96 $ 72 $ 57
Europe 20 18 16
Canada and other 12 16 7
Total Building Materials 128 106 80
Composite Materials
United States 19 24 22
Europe 18 18 18
Canada and other 11 9 9
Total Composite Materials 48 51 49
Total Reportable Operating Segments $ 176 $ 157 $ 129
Geographic Regions
United States $ 115 $ 96 $ 79
Europe 38 36 34
Canada and other 23 25 16
Total Reportable Operating Segments $ 176 $ 157 $ 129
Reconciliation to Consolidated Provision
for Depreciation and Amortization
General corporate depreciation and
amortization 21 16 12
Consolidated Provision for Depreciation
and Amortization $ 197 $ 173 $ 141
</TABLE>
<PAGE> -51-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1. Segment Data (Continued)
ADDITIONS TO LONG-LIVED ASSETS
ADDITIONS TO PLANT AND EQUIPMENT
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars)
Reportable Operating Segments
Building Materials
United States $ 117 $ 82 $ 95
Europe 15 18 10
Canada and other 17 29 36
Total Building Materials 149 129 141
Composite Materials
United States 32 21 63
Europe 35 14 30
Canada and other 4 17 34
Total Composite Materials 71 52 127
Total Reportable Operating Segments $ 220 $ 181 $ 268
Geographic Regions
United States $ 149 $ 103 $ 158
Europe 50 32 40
Canada and other 21 46 70
Total Reportable Operating Segments $ 220 $ 181 $ 268
ADDITIONS TO GOODWILL (1) - 446 17
Total Additions to Long-Lived Assets
of Reportable Operating Segments $ 220 $ 627 $ 285
</TABLE>
(1) During 1997, the Company made certain acquisitions (Note 5)
which included cash expenditures for goodwill of $446 million,
of which $431 million was in Building Materials in the U.S.,
$9 million was in Composite Materials in the U.S., and $6
million was in Building Materials in Europe. During 1996,
cash expenditures for goodwill associated with acquisitions
were $17 million, of which $10 million is attributable to
Building Materials in Europe, $3 million is attributable to
Building Materials in Africa, and $4 million is attributable to
Composite Materials in Africa.
<PAGE> -52-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long-Term Debt
<TABLE>
<S> <C> <C>
1998 1997
(In millions of dollars)
U.S. credit facility due in
2002, variable $ 259 $ 899
Asian credit facility due in
2003, variable 29 -
European credit facilities due in
1999, variable 10 34
Debentures due in 2005, 7.5% 300 -
Debentures due in 2008, 7.7% 250 -
Debentures due in 2018, 7.5% 400 -
Guaranteed debentures due in 2001, 10% 42 150
Debentures due in 2002, 8.875% 40 150
Debentures due in 2012, 9.375% 7 150
Guaranteed debentures due in 1998, 9.8% - 100
U.S. medium term notes due in 2000, 7.0% 60 60
Bonds due in 2000, 7.25%, payable in
Deutsche marks (Note 21) 50 50
Eurobonds due through 2001, 9.814% (Note 21) 36 46
Other long-term debt due through 2012,
at rates from 5.375% to 12.47% 74 76
1,557 1,715
Less: Current portion (22) (120)
Total long-term debt $1,535 $1,595
</TABLE>
In 1998, the Company amended its long-term revolving credit
agreement and reduced the maximum commitment equivalent to $1.8
billion, of which portions can be denominated in Canadian
dollars, Belgian francs or British pounds subject to the
provisions of the agreement. The agreement allows the Company
to borrow under multiple options, which provide for varying
terms and interest rates. The commitment fee, charged on the
entire commitment, is a sliding scale based on credit ratings
and was .25% at December 31, 1998. As of December 31, 1998,
$234 million of this facility was used for standby letters of
credit and $1.307 billion was unused. The average rate of
interest on this facility was 6.25% at December 31, 1998.
The Asian credit facility is payable in U.S. dollars and has an
aggregate commitment of 45 million U.S. dollars. The rate of
interest on this facility at December 31, 1998 was 6.29%. The
commitment fee on the unused portions of the facility was
.375% at December 31, 1998.
The European credit facility is payable in U.S. dollars and has
an aggregate commitment of 10 million U.S. dollars. The rate
of interest on this facility at December 31, 1998 was 5.22%.
The commitment fee on the unused portions of the facility was
.1% at December 31, 1998.
<PAGE> -53-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long Term Debt (Continued)
As is typical for bank credit facilities, the agreements
relating to the facilities described above contain restrictive
covenants, including requirements for the maintenance of
interest coverage, a leverage ratio and minimum coverage of
fixed charges; and limitations on the early retirement of
subordinated debt, additional borrowings, payment of dividends,
and purchase of Company stock. The agreements include a
provision which would result in all of the unpaid principal and
accrued interest of the facilities becoming due immediately
upon a change of control in ownership of the Company. A
material adverse change in the Company's business, assets,
liabilities, financial condition or results of operations
constitutes a default under the agreements.
During the second quarter of 1998, the Company issued two
series of debt securities for an aggregate principal amount of
$550 million. The first series, representing $300 million of
the securities, is due May 1, 2005 and bears an annual rate of
interest of 7.5%, payable semiannually. The second series,
representing $250 million of the securities, is due May 1, 2008
and bears an annual rate of interest of 7.7%, payable
semiannually. Both series of securities (the "Notes") were
issued as unsecured obligations of the Company and are
redeemable, in whole or in part, at the option of the Company
at any time at a redemption price equal to the greater of (i)
100% of the principal amount of such Notes or (ii) the sum of
the present values of the remaining scheduled payments of
principal and interest at prevailing market rates.
During the third quarter of 1998, the Company issued a series
of debt securities (the "debentures") as unsecured obligations
of the Company for an aggregate principal amount of $400
million. The debentures bear an annual rate of interest of
7.5%, payable semiannually, and mature on August 1, 2018. The
debentures are redeemable, in whole or in part, at the option
of the Company at any time at a redemption price equal to the
greater of (i) 100% of the principal amount of such debentures
or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest at prevailing
market rates. The proceeds from the issuance of the
debentures, net of issuance costs, were approximately $395
million. The Company used the net proceeds to pay for the
principal and premium amounts of the tender offers of certain
other debt securities of the Company described below.
During the third quarter of 1998, the Company commenced cash
tender offers (the "tender offers") for an aggregate principal
amount of $450 million for the following debt securities: the
$150 million aggregate principal amount of the Company's 8 7/8%
Debentures due 2002, the $150 million aggregate principal
amount of the Company's 9 3/8% Debentures due 2012, and the
$150 million aggregate principal amount of the Company's 10%
Debentures due 2001. The tender offers were completed on August
3, 1998 and as of that date, approximately $361 million of
these Debentures had been tendered. In connection with this
early retirement of debt, the Company paid premiums of
approximately $62 million, incurred non-cash costs of
approximately $2 million, and recorded an extraordinary loss of
approximately $39 million, or $.72 per share, net of related
income taxes of $25 million.
Additionally, during the third quarter of 1998, the Company
repurchased its $309 million of Trust Preferred Hybrid
Securities at face value which had been issued in October 1997
as payment for the Company's acquisition of the assets of
AmeriMark and also repaid $100 million of other debt which
matured in August 1998.
<PAGE> -54-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Long Term Debt (Continued)
The aggregate maturities and sinking fund requirements for
all long-term debt issues for each of the five years
following December 31, 1998 are:
<TABLE>
<S> <C> <C>
Credit Other Long-
Year Facilities Term Debt
(In millions of dollars)
1999 $ 10 $ 12
2000 - 133
2001 - 63
2002 259 81
2003 29 1
</TABLE>
3.Short-Term Debt
<TABLE>
<S> <C> <C>
1998 1997
(In millions of dollars)
Balance outstanding at December 31 $ 69 $ 23
Weighted average interest rates on
short-term debt outstanding at
December 31 6.4% 5.9%
</TABLE>
The Company had unused short-term lines of credit totaling
$124 million and $224 million at December 31, 1998 and 1997,
respectively.
<PAGE> -55-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Restructuring of Operations and Other Actions
During the third quarter of 1998, the Company recorded a
$148 million pretax charge for restructuring and other
actions as the final phase of the Company's previously
announced program to close manufacturing facilities, enhance
manufacturing productivity and reduce overhead. On a
cumulative basis since the fourth quarter of 1997, the
Company has recorded a total pretax charge of $386 million,
of which $143 million was recorded in the fourth quarter of
1997, $95 million was recorded in the first quarter of 1998,
and $148 million was recorded in the third quarter of 1998.
The $148 million pretax charge in the third quarter of 1998
was comprised of a $30 million charge associated with the
restructuring of the Company's business segments and a $118
million charge associated with other actions, the majority
of which represent asset impairments. The $30 million
restructure charge has been classified as a separate
component of operating expenses on the Company's
consolidated statement of income while the $118 million
charge for other actions is comprised of a $60 million
charge to cost of sales, a $4 million charge to marketing
and administrative expenses, and a $54 million charge to
other operating expenses. The components of the restructure
charge include $9 million for personnel reductions and $21
million for the divestiture of non-strategic businesses and
facilities, of which $20 million represents non-cash asset
write-downs to estimated fair value and $1 million
represents exit cost liabilities, comprised primarily of
lease commitments. The $9 million for personnel reductions
represents severance costs associated with the elimination
of approximately 400 positions, primarily in the U.S. and
Asia. The primary groups affected include manufacturing and
administrative personnel. As of December 31, 1998,
approximately $1 million has been paid and charged against
the reserve for personnel reductions, representing the
elimination of approximately 200 positions, the majority of
whose severance payments will be made over the course of
1999. No charges have been made against exit cost
liabilities and no adjustments have been made to the
liability.
The components and classification of the $118 million of
other actions, of which $103 million represents non-cash
asset revaluations, include: $30 million to write down to
fair value certain manufacturing assets held for use in
China, due primarily to poor current and projected financial
results, recorded as cost of sales; $15 million to write
down to net realizable value equipment and inventory made
obsolete by changes in the Company's manufacturing and
marketing strategies, recorded as cost of sales; $17 million
for the write-down of an investment in and the write-off of
a receivable from a joint venture in Korea to reflect the
current business outlook and the fair market value of the
assets, recorded as other operating expenses; $12 million
for the write-down of goodwill associated with the 1995
acquisition of Fiber-lite, determined to be unrecoverable
due to a change in market conditions and customer demand,
recorded as other operating expenses; and $9 million for the
write-down of certain assets in the U.S. to fair market
value, recorded as cost of sales. The Company plans to hold
and use the investments but disposed of the equipment in
1998. Also included in the $118 million charge for other
actions are $13 million for the write-off of certain
receivables in the U.S. and Asia determined to be
uncollectable, recorded as cost of sales and other operating
expenses; and $22 million for other actions recorded as cost
of sales, marketing and administrative expenses, and other
operating expenses.
<PAGE> -56-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Restructuring of Operations and Other Actions (Continued)
During the first quarter of 1998, the Company recorded a $95
million pretax charge for restructuring and other actions as
the second phase of the Company's strategic restructuring
program to enhance manufacturing productivity and reduce
overhead.
The $95 million pretax charge in the first quarter of 1998
was comprised of an $87 million charge associated with the
restructuring of the Company's business segments and an $8
million charge associated with other actions. The $87
million restructure charge has been classified as a separate
component of operating expenses on the Company's
consolidated statement of income while the $8 million charge
for other actions is comprised of a $5 million charge to
cost of sales and a $3 million charge to marketing and
administrative expenses. The components of the restructure
charge include $81 million for personnel reductions and $6
million for the divestiture of non-strategic businesses and
facilities, of which $2 million represents exit cost
liabilities, comprised primarily of lease commitments. The
$81 million for personnel reductions represents severance
costs associated with the elimination of approximately 1,500
positions worldwide. The primary employee groups affected
include manufacturing and corporate administrative
personnel. As of December 31, 1998, approximately $51
million has been paid and charged against the reserve for
personnel reductions, representing the elimination of
approximately 1,500 employees, the majority of whose
severance payments were made over the course of 1998, and
approximately $2 million has been charged against exit cost
liabilities. No adjustments have been made to the liability.
During the fourth quarter of 1997, the Company recorded a
$143 million pretax charge for restructuring and other
actions as the first phase of the program to close
manufacturing facilities, enhance manufacturing productivity
and reduce overhead. The $143 million pretax charge was
comprised of a $68 million charge associated with the
restructuring of the Company's business segments and a $75
million charge associated with asset impairments, including
investments in certain affiliates. The components of the
restructure charge include $25 million for personnel
reductions; $41 million for the divestiture of non-strategic
businesses and facilities, of which $13 million represents
exit cost liabilities, primarily for leased warehouse and
office facilities to be vacated, and $28 million represents
non-cash asset revaluations; and $2 million for other
actions. The divestiture of non-strategic businesses and
facilities includes the closure of the Candiac, Quebec
manufacturing facility which was completed in the first
quarter of 1998.
The $25 million for personnel reductions during the fourth
quarter of 1997 represents severance costs associated with
the elimination of nearly 550 positions worldwide. The
primary employee groups affected include manufacturing and
corporate administrative personnel. As of December 31, 1998,
approximately $20 million has been paid and charged against
the reserve for personnel reductions, representing the
elimination of approximately 550 employees, the majority of
whose severance payments were made over the course of 1998,
and approximately $8 million has been charged against exit
cost liabilities. No adjustments have been made to the
liability.
<PAGE> -57-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Restructuring of Operations and Other Actions (Continued)
The components of the $75 million of other actions during
the fourth quarter of 1997 and their classification on the
Company's 1997 consolidated statement of income are as
follows: $17 million for the write off of certain assets and
investments associated with unconsolidated joint ventures in
Spain and Argentina due primarily to poor current and
projected financial results and the expected loss of local
partners, recorded as other operating expenses; $12 million
for the write-down of certain investments in mainland China
to reflect the current business outlook and the fair market
value of the investments, recorded as cost of sales; $24
million to write down to net realizable value equipment -and
inventory made obsolete by changes in the Company's
manufacturing and marketing strategies, recorded as cost of
sales; $8 million for a supplemental employee retirement
plan approved by the Board of Directors in December 1997,
recorded as marketing and administrative expenses; $5
million for the write-off of an insurance receivable that
was determined to be uncollectable after judicial rejection
of the Company's claim, recorded as other operating
expenses; and $9 million for several other actions recorded
as cost of sales, marketing and administrative expenses, and
other operating expenses. The Company plans to hold and use
the investments but has disposed of most of the equipment in
1998.
The following table summarizes the status of the liabilities
from the restructure program described above, including
cumulative spending and adjustments and the remaining
balance as of December 31, 1998:
<TABLE>
<S> <C> <C> <C>
(In millions of dollars) Beginning Total Ending
Liability Payments Liability
Personnel Costs $ 115 $ (72) $ 43
Facility and Business Exit Costs 16 (10) 6
Other 2 (2) -
Total $ 133 $ (84) $ 49
</TABLE>
During the fourth quarter of 1996, the Company recorded a
$43 million pretax charge for restructuring and other
actions which included the costs associated with a work
force realignment, a replacement of computer technology as
well as asset valuations and expenses related to exited
businesses. The $43 million pretax charge was comprised of
a $38 million restructure charge and a $5 million charge
related to an exited business. The components of the
restructure charge included $20 million for personnel
reductions, $8 million in computer technology and $10
million for asset valuations and exited businesses. The $20
million for personnel reductions represented severance costs
associated with the elimination of nearly 400 positions
worldwide. The primary employee group affected was
manufacturing personnel. At December 31, 1998, there is no
remaining balance in the reserve.
The Company continually evaluates whether events and
circumstances have occurred that indicate that the carrying
amount of certain long-lived assets is recoverable. When
factors indicate that a long-lived asset should be evaluated
for possible impairment, the Company uses an estimate of the
expected undiscounted cash flows to be generated by the
asset to determine whether the carrying amount is
recoverable or if an impairment exists. When it is
determined that an impairment exists, the Company uses the
fair market value of the asset, usually measured by the
discounted cash flows to be generated by the asset, to
determine the amount of the impairment to be recorded in the
financial statements.
<PAGE> -58-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Business
Acquisitions
During 1997, the Company made several acquisitions in the
Building Materials segment in the United States and Europe
and two acquisitions in the Composite Materials segment in
the United States and Canada. These acquisitions were
consummated through the exchange of various combinations of
common stock, cash, and trust preferred hybrid securities
(Note 8) for an aggregate purchase price of $886 million.
The largest of these was the acquisition of Fibreboard
Corporation (Fibreboard), a North American manufacturer of
vinyl siding and accessories, as well as manufactured stone,
which operates more than 130 company-owned distribution
centers in 32 states. The purchase price of this
acquisition was $660 million, including debt assumed of $138
million and was consummated by the exchange of cash for all
of the outstanding common shares of Fibreboard at a price of
$55 per share. At the time of acquisition, management
formulated a plan to divest Fibreboard's calcium silicate
insulation and metal jacket business (Pabco), the assets of
which were included in assets held for sale on the Company's
consolidated balance sheet at December 31, 1997. During the
first quarter of 1998, the Company sold Pabco for
approximately $37 million, of which $31 million was received
in cash and $6 million as a note receivable. The Company
collected the entire $6 million note receivable during 1998.
The second largest acquisition in 1997 was the acquisition
of AmeriMark Building Products, Inc. (AmeriMark), a
specialty building products company serving the exterior
residential housing industry. The acquisition was completed
for a purchase price of $317 million and was consummated by
the exchange of $309 million in trust preferred hybrid
securities and $8 million in cash for the net assets of
AmeriMark.
The Company completed four additional acquisitions during
1997 in the U.S., Europe and Canada. The aggregate purchase
price of these acquisitions was $47 million. These
acquisitions exchanged 340,000 shares of the Company's
common stock and $34 million in cash. Additionally, during
1997, the Company issued 178,218 shares of its common stock
as a final adjustment to certain of its 1995 acquisitions.
During 1996 the Company also made several acquisitions in
the Building Materials segment in the United States, Canada
and Europe. The 1996 acquisitions exchanged 472,250 shares
of the Company's common stock and $69 million in cash.
The incremental sales from the acquisitions, in the year of
acquisition, were $534 million and $47 million for the years
ended December 31, 1997 and 1996, respectively. The pro
forma effect of the 1997 and 1996 acquisitions, except for
the acquisitions of Fibreboard and AmeriMark, was not
material to net income for the year ended December 31, 1997
or 1996.
All acquisitions were accounted for under the purchase
method of accounting, whereby the assets acquired and
liabilities assumed have been recorded at their fair values
and the results of operations for the acquisitions have been
included in the Company's consolidated financial statements
subsequent to the dates of acquisition. The estimated fair
value of assets acquired during 1997 was $1.409 billion, and
liabilities assumed, including $150 million in debt, totaled
$523 million. Total assets acquired during 1997 included
goodwill of $546 million, of which $446 million represents a
cash expenditure. The 1996 acquisitions included goodwill
of $32 million.
<PAGE> -59-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Business (Continued)
The following unaudited table presents the pro forma results
of operations for the years ended December 31, 1997 and
1996, assuming the acquisitions of Fibreboard and AmeriMark
occurred at the beginning of each period presented. These
results include certain adjustments, primarily for
depreciation and amortization, interest and other expenses
directly attributable to the acquisition and are not
necessarily indicative of what the results would have been
had the transactions actually occurred at the beginning of
the periods presented. The pro forma results do not include
operations that were discontinued by Fibreboard prior to the
acquisition, or Pabco.
<TABLE>
<S> <C> <C>
Year Ended
December 31,
1997 1996
(In millions of dollars,
except share data)
Net sales $ 5,041 $ 4,932
Income (loss) from continuing operations 46 (301)
Diluted earnings per share from
continuing operations $ .86 $ (5.86)
</TABLE>
Divestitures
Late in the first quarter of 1998, the Company sold its 50%
ownership interest in Alpha/Owens-Corning, LLC. With cash
proceeds of approximately $103 million, the Company recorded
a pretax gain of approximately $84 million.
During the third quarter of 1998, the Company formed a joint
venture for its yarns and specialty materials business (the
"yarns business") to which it contributed two manufacturing
plants and certain proprietary technology. On September 30,
1998, the Company completed the sale of 51% of the joint
venture to a U.S. subsidiary of Groupe Porcher Industries of
Badinieres, France for $340 million. The Company continues
to have a 49% ownership interest in the joint venture. Upon
closing, the Company also received a distribution of $193
million from the joint venture. In connection with the sale,
the Company entered into an agreement with the joint venture
to support the liquidity of the joint venture up to a
maximum of $65 million. As a result of the sale of 51%
interest in the yarns joint venture and the receipt of the
distribution from the joint venture, the Company recorded a
pretax gain of $295 million, net of its commitment under the
agreement referred to above.
The consolidated balance sheet of the Company as of December
31, 1998 reflects the third quarter 1998 disposition of the
Company's yarns business. The results of operations of the
yarns business are reflected in the Company's consolidated
statement of income through the period ending September 30,
1998. For the nine months ended September 30, 1998 and the
years ended December 31, 1997 and 1996, the yarns business
recorded sales of approximately $205 million, $277 million,
and $275 million, respectively, and income from operations
of approximately $57 million, $80 million, and $80 million,
respectively. Effective September 30, 1998, the Company
accounts for its ownership interest in the yarns joint
venture under the equity method.
<PAGE> -60-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Acquisitions and Divestitures of Business (Continued)
Additionally, during the third quarter of 1998, the Company
sold its Kitsons distribution business in the U.K. and its
windows manufacturing business in the U.S. and recorded a
pretax loss of approximately $20 million.
During 1996, the Company sold its ownership interest in its
Japanese affiliate Asahi Fiber Glass Co. Ltd., and recorded
a pretax gain of $37 million.
6. Business Process Reengineering Costs
In the fourth quarter of 1997, the Company recorded a $15
million charge, or $.29 per share, net of related income
taxes of $10 million, to comply with a new required
accounting interpretation announced November 20, 1997. The
Emerging Issues Task Force (EITF), a subcommittee of the
Financial Accounting Standards Board (FASB), requires that
the cost of business process reengineering activities that
are part of a systems development project be expensed as
those costs are incurred. Any unamortized costs that had
previously been capitalized were written off as a cumulative
adjustment in the fourth quarter of 1997.
7.Convertible Monthly Income Preferred Securities (MIPS)
In 1995, Owens-Corning Capital, LLC ("OC Capital"), a
Delaware limited liability company, all of the common
limited liability company interests in which are owned
indirectly by the Company, completed a private offering of 4
million shares of Convertible Monthly Income Preferred
Securities ("Preferred Securities"). The aggregate purchase
price for the offering was $200 million. In conjunction
with the offering, the Company incurred $6 million in
issuance costs.
The Preferred Securities are guaranteed in certain respects
by the Company and are convertible, at the option of the
holders, into Company common stock at the rate of 1.1416
shares of Company common stock for each Preferred Security
(equivalent to a conversion price of $43.80 per common
share). Effective June 1, 1998, OC Capital can initiate
conversion. Distributions on the Preferred Securities are
cumulative and are payable at the annual rate of 6-1/2% of
the liquidation preference of $50 per Preferred Security.
Distributions of $13 million ($8 million after-tax) have
been recorded net of tax as minority interest on the
Company's consolidated statement of income for each of the
years ended December 31, 1998, 1997 and 1996.
The Company issued $200 million of 6-1/2% Convertible
Subordinated Debentures due 2025 to OC Capital, which
represents the sole asset of OC Capital, in exchange for the
proceeds of the offering.
<PAGE> -61-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. Trust Preferred Hybrid Securities
In 1997, the Company delivered 6,180,000 7% Income PRIDES
securities ("Hybrid Securities") in payment of $309 million
of the purchase price for the Company's acquisition of the
assets of AmeriMark Building Products, Inc. (Note 5). Each
Hybrid Security represented (i) beneficial ownership by the
holder of one 7% Trust Preferred Security ("Trust Preferred
Security") of Owens Corning Capital III, a Delaware
statutory business trust all of the common securities of
which are owned by the Company (the "Trust"), having a
liquidation amount of $50, providing for cumulative
distributions at the rate of 7% per annum through November
15, 2000 and at a reset rate thereafter, and guaranteed in
certain respects by the Company, and (ii) the obligation of
the holder under a contract with the Company for the
purchase on November 16, 2000, at a price of $50, of a
number of shares of the Company's common stock as determined
by a formula based on the market price of common stock. The
aggregate number of shares issuable under such formula
ranged from 6.2 million to 8.5 million. The Company issued
$319 million of 7% Debentures due November 15, 2002 to the
Trust, which represented the sole asset of the Trust, in
exchange for the Trust Preferred Securities and the common
securities of the Trust.
Distributions of $13 million and $5 million ($8 million and
$3 million after-tax, respectively) pursuant to the Trust
Preferred Securities have been recorded net of tax as
minority interest during 1998 and 1997, respectively.
During the third quarter of 1998, the Company repurchased
the Hybrid Securities at face value and redeemed the
Debentures.
9. Postemployment and Postretirement Benefits Other Than
Pensions
The Company and its subsidiaries maintain health care and
life insurance benefit plans for certain retired employees
and their dependents. The health care plans in the U.S. are
unfunded and pay either 1) stated percentages of covered
medically necessary expenses, after subtracting payments by
Medicare or other providers and after stated deductibles
have been met, or, 2) fixed amounts of medical expense
reimbursement.
Employees become eligible to participate in the health care
plans upon retirement under the Company's pension plans if
they have accumulated 10 years of service after age 45.
Some of the plans are contributory, with some retiree
contributions adjusted annually. The Company has reserved
the right to change or eliminate these benefit plans subject
to the terms of collective bargaining agreements.
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement
Benefits" (SFAS 132). In accordance with SFAS 132, the
following tables provide a reconciliation of the changes in
the accumulated postretirement benefits obligation and the
accrued benefits cost liability at October 31, 1998 and
1997, as reflected on the consolidated balance sheet at
December 31, 1998 and 1997:
<PAGE> -62-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Postemployment and Postretirement Benefits Other Than Pensions (Continued)
<TABLE>
<S> <C> <C>
1998 1997
(In millions of dollars)
Change in Accumulated Postretirement Benefit
Obligation
Benefits obligation at beginning of period $ 328 $ 277
Service cost 9 7
Interest cost 23 20
Amendments (2) -
Impact of curtailment (12) -
Actuarial (gain) loss 18 37
Acquisitions - 7
Benefits paid (21) (20)
Benefits obligation at end of period $ 343 $ 328
Funded status $ (343) $ (328)
Unrecognized net actuarial (gain) loss 37 30
Unrecognized prior service cost (11) (32)
Benefit payments subsequent to valuation date 3 4
Accrued benefit cost (includes current
liabilities of $21 million and $24 million in
1998 and 1997, respectively) $ (314) $ (326)
Weighted-average assumptions as of December 31 1998 1997
Discount rate 7.0% 7.25%
</TABLE>
The following table presents the components of net periodic
benefits cost during 1998 and 1997:
<TABLE>
<S> <C> <C> <C>
Components of net periodic benefit cost 1998 1997 1996
(In millions of dollars)
Service cost $ 9 $ 7 $ 8
Interest cost 23 20 19
Amortization of prior service cost (20) (20) (20)
Curtailment (gain) loss (3) - -
Net periodic benefit cost $ 9 $ 7 $ 7
</TABLE>
For measurement purposes, a 7% annual rate of increase in
the per capita cost of covered health care claims was
assumed for 1999. The rate was assumed to decrease to 6%
for 2000 and thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported.
To illustrate, a one-percentage point change in the assumed
health care cost trend rate would have the following effects
as of October 31, 1998 and 1997:
<PAGE> -63-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. Postemployment and Postretirement Benefits Other Than
Pensions (Continued)
<TABLE>
<S> <C> <C> <C> <C>
1998 1997
1-Percentage Point 1-Percentage Point
Increase Decrease Increase Decrease
(In millions of dollars)
Effect on total of service
and interest cost components $ 4 $ (3) $ 3 $ (3)
Effect on accumulated
postretirement benefit
obligation 31 (27) 25 (24)
</TABLE>
The Company also recognizes the obligation to provide
benefits to former or inactive employees after employment
but before retirement under certain conditions. These
benefits include, but are not limited to, salary
continuation, supplemental unemployment benefits, severance
benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation
of benefits such as health care and life insurance coverage.
The accrued postemployment benefits cost liability at
October 31, 1998 and 1997, as reflected on the balance sheet
at December 31, 1998 and 1997 was $36 million and $37
million, respectively, including current liabilities of $3
million and $4 million, respectively. The net
postemployment benefits expense was $2 million in 1998, less
than $1 million in 1997, and $2 million in 1996.
10. Pension Plans
The Company has several defined benefit pension plans
covering most employees. Under the plans, pension benefits
are generally based on an employee's pay and number of years
of service. Company contributions to these pension plans are
based on the calculations of independent actuaries using the
projected unit credit method. Plan assets consist primarily
of equity securities with the balance in fixed income
investments. The unrecognized cost of retroactive
amendments and actuarial gains and losses are amortized over
the average future service period of plan participants
expected to receive benefits.
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement
Benefits" (SFAS 132). In accordance with SFAS 132, the
following tables provide a reconciliation of the changes in
the projected pension benefits obligation, the changes in
the pension plan assets, and the net pension liability at
October 31, 1998 and 1997, as reflected on the consolidated
balance sheet at December 31, 1998 and 1997:
<PAGE> -64-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Pension Plans (Continued)
<TABLE>
<S> <C> <C>
Change in Projected Pension Benefit Obligation 1998 1997
(In millions of dollars)
Benefit obligation at beginning of period $ 997 $ 841
Service cost 19 15
Interest cost 69 64
Amendments 2 -
Impact of curtailment (7) (10)
Impact of foreign currency translation (7) 4
Actuarial (gain) loss 70 81
Acquisitions - 89
Employee contributions 3 3
Benefits paid (171) (90)
Benefit obligation at end of period $ 975 $ 997
</TABLE>
Benefits paid during 1998 reflect the impact of the
Company's restructuring program and the sale of certain
businesses. (Notes 4 and 5)
<TABLE>
<S> <C> <C>
Change in Pension Plan Assets 1998 1997
(In millions of dollars)
Fair value of plan assets at beginning of period $ 1,059 $ 860
Actual return on plan assets 74 179
Impact of foreign currency translation (9) 4
Acquisitions - 96
Employer contributions 4 2
Employee contributions 3 2
Settlement (5) -
Benefits paid (165) (84)
Fair value of plan assets at end of period $ 961 $1,059
Funded status $ (14) $ 62
Unrecognized net transition (asset) obligation (31) (38)
Unrecognized net actuarial (gain) loss 77 16
Unrecognized prior service cost (32) $ (48)
Prepaid (accrued) benefit cost $ - $ (8)
Amounts Recognized in the Consolidated Balance Sheet 1998 1997
Prepaid benefit cost (includes noncurrent assets only) $ 53 $ 53
Accrued benefit liability (includes current liabilities of
less than $1 million in 1998 and 1997) (56) (65)
Accumulated other comprehensive income 3 4
Net Amount Recognized $ - $ (8)
</TABLE>
<PAGE> -65-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. Pension Plans (Continued)
<TABLE>
<S> <C> <C>
Weighted-average assumptions as of December 31 1998 1997
Discount rate 7.00% 7.25%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 5.50% 5.00%
</TABLE>
The following table presents the components of net periodic
pension cost during 1998 and 1997:
<TABLE>
<S> <C> <C> <C>
Components of Net Periodic Pension Cost 1998 1997 1996
(In millions of dollars)
Service cost $ 19 $ 15 $ 14
Interest cost 69 64 62
Expected return on plan assets (83) (84) (82)
Amortization of transition amount (5) (5) (5)
Amortization of prior service cost (7) (7) (7)
Amortization of net actuarial (gain) loss 4 11 13
Curtailment (gain) loss 1 2 -
Net periodic benefit cost $(2) $(4) $ (5)
</TABLE>
Certain of the Company's pension plans have an accumulated
benefit obligation (ABO) in excess of the fair value of plan
assets. The ABO and fair value of plan assets for such
plans are $744 million and $707 million, respectively, at
October 31, 1998, and $787 million and $769 million,
respectively, at October 31, 1997.
Certain of the Company's pension plans are unfunded. The
portion of the total projected benefit obligation
attributable to unfunded plans is approximately $13 million
and $14 million at October 31, 1998 and 1997, respectively.
The Company also sponsors defined contribution plans
available to substantially all U.S. employees. Company
contributions for the plans are based on matching a
percentage of employee savings up to a maximum savings
level. The Company's contributions were $14 million in
1998, $13 million in 1997, and $10 million in 1996.
<PAGE> -66-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. Income Taxes
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars)
Income (loss) before provision
(credit) for income taxes:
U.S. $(897) $ 151 $ (609)
Foreign (67) (80) 41
Total $(964) $ 71 $ (568)
Provision (credit) for income taxes:
Current
U.S. $(86) $(123) $ (31)
State and local - 1 (6)
Foreign 5 21 12
Total current (81) (101) (25)
Deferred
U.S. (203) 151 (211)
State and local (20) (3) (48)
Foreign (2) (38) 1
Total deferred (225) 110 (258)
Total provision (credit) for
income taxes $(306) $ 9 $(283)
The reconciliation between the U.S. federal statutory rate
and the Company's effective income tax rate is:
1998 1997 1996
U.S. federal statutory rate (35)% 35% (35)%
State and local income taxes (1) 5 (6)
Adjustment of tax reserves due to
favorable legislation - - (5)
Operating losses of foreign subsidiaries 3 24 -
Foreign tax credits - (6) -
Change in effective state income tax rate - (9) -
Conclusion of prior year tax audits - (4) -
Utilization of tax loss carrybacks - (20) -
Adjustment of valuation allowances - (10) (1)
Special tax election (a) (1) - -
Other 2 (3) (3)
Effective tax rate (32)% 12% (50)%
</TABLE>
(a) Represents a one-time tax benefit associated with Asia Pacific operations.
<PAGE> -67-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. Income Taxes (Continued)
As of December 31, 1998, the Company has not provided for
withholding or U.S. federal income taxes on approximately
$223 million of accumulated undistributed earnings of its
foreign subsidiaries as they are considered by management to
be permanently reinvested. If these undistributed earnings
were not considered to be permanently reinvested,
approximately $16 million of deferred income taxes would
have been provided.
At December 31, 1998, the Company had net operating loss
carryforwards for certain of its foreign subsidiaries and
certain of its state tax jurisdictions, the tax benefit of
which is approximately $157 million. Tax benefits of $74
million expire over the period from 1999 through 2013, and
the remaining $83 million have an indefinite carryforward.
The cumulative temporary differences giving rise to the
deferred tax assets and liabilities at December 31, 1998 and
1997 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997
Deferred Deferred
Deferred Tax Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
(In millions of dollars)
Asbestos litigation claims $ 844 $ - $ 455 $ -
Other employee benefits 142 - 152 -
Pension plans 23 12 24 14
Depreciation - 217 - 233
Operating loss carryforwards 157 - 101 -
State and local taxes - 60 - 43
Other 237 155 190 110
Subtotal 1,403 444 922 400
Valuation allowances (58) - (34) -
Total deferred taxes $ 1,345 $ 444 $ 888 $ 400
</TABLE>
Management fully expects to realize its net deferred tax
assets through income from future operations.
12. Science and Technology Expenses
Science and technology expenses include research and
development costs of $57 million in 1998, $69 million in
1997, and $78 million in 1996. In addition to research and
development costs, science and technology expenses include
continuing commercial activities such as engineering and
product modifications for special applications and testing in
1996.
<PAGE> -68-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. Accounts Receivable Securitization
In 1998, 1997 and 1996, the Company sold certain accounts
receivable of its Building Materials operations to a 100%
owned subsidiary, Owens-Corning Funding Corporation ("OC
Funding"). OC Funding has an agreement whereby it can sell,
on a revolving basis, an undivided percentage ownership
interest in a designated pool of accounts receivable, up to
a maximum of $125 million, which expires in December 1999.
At December 31, 1998 and 1997, $125 million and $100
million have been sold under this agreement, respectively,
and the sale has been reflected as a reduction of accounts
receivable in the Company's consolidated balance sheet.
In 1998 and 1997, the Company also sold certain accounts
receivable of certain European operations. At December 31,
1998 and 1997, $71 million and $33 million have been sold,
respectively, and the sale has been reflected as a reduction
of accounts receivable in the Company's consolidated balance
sheet.
The Company maintains an allowance for doubtful accounts
based upon the expected collectibility of all consolidated
trade accounts receivable, including receivables sold by OC
Funding and the European operations. Discounts of $9
million, $6 million, and $6 million on the receivables sold
have been recorded as other expenses on the Company's
consolidated statement of income for the years ended
December 31, 1998, 1997, and 1996.
14. Inventories
Inventories are summarized as follows:
<TABLE>
<S> <C> <C>
1998 1997
(In millions of dollars)
Finished goods $317 $363
Materials and supplies 176 214
FIFO inventory 493 577
Less: Reduction to LIFO basis (56) (74)
Total inventory $437 $503
</TABLE>
Approximately $271 million and $365 million of FIFO
inventories were valued using the LIFO method at December
31, 1998 and 1997, respectively.
<PAGE> -69-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. Investments in Affiliates
At December 31, 1998 and 1997, the Company's affiliates,
which generally are engaged in the manufacture of fibrous
glass and related products for the insulation, construction,
reinforcements, and textile markets, include:
<TABLE>
<S> <C> <C>
Percent Ownership
1998 1997
Advanced Glassfiber Yarns, LLC. 49% -
Alpha/Owens-Corning, LLC. (USA) - 50%
Amiantit Fiberglass Industries, Ltd.
(Saudi Arabia) 30% 30%
Arabian Fiberglass Insulation Company, Ltd.
(Saudi Arabia) 49% 49%
Flowtite (Botswana) (Proprietary) Limited 49% 49%
* Flowtite Iberica, S.A. (Spain) 100% 100%
LG Owens-Corning Corporation (Korea) 30% 30%
OC Andercol Tuberias S.A. (Colombia) 50% 50%
Owens-Corning (India) Limited 49% 49%
Owens Corning (Nanjing) (China) 50% 51%
Owens-Corning Yapi Merkezi Boru Sanayi
VeTicaret A.S.(Turkey) 50% 50%
* Owens-Corning Canos, S.A. (Argentina) 100% 100%
Owens-Corning Eternit Rohre GmbH (Germany) 50% 50%
Siam Fiberglass Co., Ltd. (Thailand) 17% 17%
Vitro-Fibras, S.A. (Mexico) 40% 40%
</TABLE>
* In late 1997, the Company acquired 100% ownership of Owens-
Corning Canos, S.A. and Flowtite Iberica, S.A. The Company
considers its 100% ownership to be temporary and therefore
continues to account for them as unconsolidated affiliates
under the equity method.
The following table provides summarized financial
information on a combined 100% basis for the Company's
affiliates accounted for under the equity method:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars)
At December 31:
Current assets $ 245 $ 227 $ 200
Noncurrent assets 684 289 259
Current liabilities 143 145 149
Noncurrent liabilities 585 287 168
For the year ended December 31:
Net sales 540 535 516
Gross margin 159 133 126
Net income 30 21 36
</TABLE>
The Company's equity in undistributed net income of
affiliates was $21 million at December 31, 1998.
Net sales, gross margin, and net income for the year ended
December 31, 1998 have been presented on a full-year basis
for Advanced Glassfiber Yarns, LLC (AGY). The Company's
former specialty yarns business is included in the Company's
consolidated financial statements through the period ending
September 30, 1998 (Note 5).
<PAGE> -70-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16.Accounts Payable and Accrued Liabilities
<TABLE>
<S> <C> <C>
1998 1997
(In millions of dollars)
Accounts payable $ 522 $ 436
Payroll and vacation pay 51 47
Payroll, property, and miscellaneous taxes 47 27
Other employee benefits liability (Note 9) 24 28
Restructure costs (Note 4) 35 44
Other 263 232
$ 942 $ 814
</TABLE>
17. Consolidated Statement of Cash Flows
Cash payments for income taxes, net of refunds, and cost of
borrowed funds are summarized as follows:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars)
Income taxes $ (80) $ (6) $ (25)
Cost of borrowed funds 151 123 86
</TABLE>
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
During the year ended December 31, 1998 and the six months
ended December 31, 1997, gross payments for asbestos
litigation claims filed against Fibreboard were
approximately $129 million and $126 million, respectively,
all of which was paid directly by Fibreboard's insurers or
from the escrow account to claimants on Fibreboard's behalf.
During the year ended December 31, 1998 and the six months
ended December 31, 1997, Fibreboard also recorded
settlements with plaintiffs for amounts totaling
approximately $85 million and $132 million, respectively.
Fibreboard settlement agreements are reflected on the
Company's consolidated balance sheet as an increase in both
the Fibreboard asbestos costs to be reimbursed and
Fibreboard asbestos-related liabilities when the agreements
are reached.
See Notes 5 and 8 for supplemental disclosure of non-cash
investing and financing activities.
18. Leases
The Company leases certain manufacturing equipment and
office and warehouse facilities under operating leases, some
of which include cost escalation clauses, expiring on
various dates through 2015. Total rental expense charged to
operations was $130 million in 1998, $124 million in 1997,
and $87 million in 1996. At December 31, 1998, the minimum
future rental commitments under noncancellable leases
payable over the remaining lives of the leases are:
<PAGE> -71-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
18. Leases (Continued)
<TABLE>
<S> <C>
Minimum Future
Period Rental Commitments
(In millions of dollars)
1999 $ 82
2000 68
2001 54
2002 42
2003 36
2004 through 2015 110
$ 392
</TABLE>
19. Stock Compensation Plans
The Company currently has three stock-based compensation
plans. The Company's Stock Performance Incentive Plan
("SPIP") grants stock options, restricted stock, performance
restricted stock and phantom performance units. The Owens
Corning 1995 Stock Plan ("95 Stock Plan") grants options,
restricted stock and performance stock awards. The SPIP and
the 95 Stock Plan (collectively, the "Plans"), permit up to
two percent and one percent, respectively, of common shares
outstanding at the beginning of each calendar year to be
awarded as stock options and restricted stock (with 25% of
this amount as the maximum permitted number of restricted
stock awards). The Company may carry forward, independently
for each plan, unused shares from prior years and may
increase the shares available for awards in any calendar
year through an advance of up to 25% of the subsequent
year's allocation (determined by using 25% of the current
year's allocation). These shares are also subject to the
25% limit for restricted stock awards. During 1998, the
maximum number of shares available under the Plans for stock
awards was 2,642,483 shares. The following are descriptions
of the awards granted under the Plans:
Stock Options
Under the Plans, the exercise prices of each option equal
the market price of the Company's common stock on the date
of grant and an option's maximum term is 10 years. Shares
issued from the exercise of options are recorded in the
common stock accounts at the option price. The awards and
vesting periods of such awards are determined at the
discretion of the compensation committee of the board of
directors. During 1998, 1997 and 1996, respectively,
1,747,472, 1,103,027 and 1,102,510 stock options were
awarded under the Plans.
Restricted Stock Awards
Under the Plans, compensation expense is measured based on
the market price of the stock at date of grant and is
recognized on a straight-line basis over the vesting
period. Stock restrictions lapse, subject to alternate
vesting plans for death, disability, approved early
retirement and involuntary termination, over various
periods ending in 2004. At December 31, 1998, the Company
had 244,400 shares of restricted stock outstanding.
During 1998, 1997 and 1996, 64,550, 77,250 and 78,510
shares of restricted stock were granted, respectively.
The weighted-average grant-date fair value for shares
granted was $30.36, $44.66, and $42.67 for 1998, 1997 and
1996, respectively.
<PAGE> -72-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
Performance Restricted Stock Awards
Under the Plans, certain officers are awarded performance
shares. Performance shares represent the opportunity to
earn up to a specified number of shares of the Company's
common stock, if the Company achieves specified
performance goals during the designated performance
period. Any portion of the award not earned during the
performance period is forfeited by the officer at the end
of such period. Compensation expense is measured based on
market price of the Company's common stock and is
recognized over the performance period, which is generally
three years. At December 31, 1998, the Company had
101,036 units outstanding. During 1998, 1997 and 1996,
respectively, 46,600, 37,100 and 38,200 performance shares
were granted.
Phantom Performance Units
Under the Plans, certain officers are awarded phantom
performance units. Each unit provides the holder the
opportunity to earn a cash award equal to the fair market
value of the Company's common stock upon the attainment of
certain performance goals. Any portion of the award not
earned during the performance period is forfeited by the
officer at the end of such period. Compensation expense is
measured based on market price of the Company's common
stock and is recognized over the performance period, which
is generally three years. At December 31, 1998, the
Company had 153,897 phantom performance units outstanding.
During 1998, 1997 and 1996, respectively, 65,750, 77,850
and 79,600 units were awarded.
Performance Stock Awards
Under the Plans, certain employees are awarded
unrestricted stock based upon achievement of certain goals
within a designated performance period. Compensation cost
for these awards is accrued over the performance period
based upon a base compensation level and the performance
level achieved. Stock awards are issued in the year
subsequent to the performance period. The number of
shares issued is based upon the market price of the stock
on date of issuance and the level of compensation earned.
In 1998 and 1997, respectively, 74,854 and 122,362 shares
were issued to employees.
The Company also has a plan to award stock and stock options
to nonemployee directors. The receipt of the stock awards
may be deferred at the discretion of the directors.
Approximately 345,500 shares were available under this plan
at December 31, 1998. As of December 31, 1998, 18,500
deferred awards were outstanding. In 1998, no options and
5,500 stock awards were granted, 500 of which were issued.
In 1997, 10,000 options and 5,500 stock awards were granted,
of which 3,500 were issued. In 1996, 30,000 options and
4,000 stock awards were granted of which 1,000 were issued.
The weighted-average grant-date fair value for shares
granted was $40.72, $39.13 and $39.63 for 1998, 1997 and
1996, respectively.
<PAGE> -73-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
Under a prior plan, the Company had 5,417 deferred stock
awards outstanding at December 31, 1996. No awards were
outstanding under this plan at December 31, 1998 or 1997.
Under the terms of this plan, no further awards may be made.
The Company applies Financial Accounting Standards Board
Statement No. 123 (SFAS 123) for disclosures of its stock
based compensation plans. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations
for expense recognition as permitted by SFAS 123. All stock
options issued by the Company are exercisable at a price
equal to the market price at the date of grant. Accordingly,
no compensation cost has been recognized for any of the
options granted under the Plans. The compensation cost that
has been recorded for awards other than options was $21
million, $12 million and $17 million in 1998, 1997 and 1996,
respectively.
A summary of the status of the Company's plans that issue
options as of December 31, 1998, 1997, and 1996 and changes
during the years ending on those dates is presented below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1996
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
Beginning of year 5,126,158 $ 38.15 4,894,439 $ 35.59 3,943,110 $ 33.34
Options granted 1,747,472 $ 32.17 1,113,027 $ 44.80 1,132,510 $ 42.92
Options exercised (495,797) $ 32.74 (724,661) $ 30.29 (142,232) $ 30.60
Options canceled (281,865) $ 41.62 (156,647) $ 41.63 (38,949) $ 41.01
End of year 6,095,968 $ 36.72 5,126,158 $ 38.15 4,894,439 $ 35.59
Exercisable 3,568,291 $ 36.60 3,047,126 $ 34.78 2,872,156 $ 32.66
Weighted-average
fair-value of options
granted during the
year $ 10.96 $ 14.29 $ 12.50
</TABLE>
<PAGE> -74-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
The following table summarizes information about options
outstanding at December 31, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
Number Weighted-Average Number Weighted
Range of Outstanding Remaining Exercise Exercisable Average
Exercise Prices at 12/31/98 Contractual Life Price at 12/31/98 Exercise Price
$17.860 - 26.750 617,395 5.62 $ 25.98 326,329 $ 23.79
$26.875 - 31.562 1,072,149 6.82 $ 29.07 443,149 $ 29.99
$32.125 - 37.500 1,296,632 5.60 $ 35.17 1,274,299 $ 35.15
$37.562 - 41.875 1,662,443 6.95 $ 39.90 904,788 $ 40.99
$42.125 - 47.000 1,447,349 7.24 $ 44.70 619,726 $ 44.63
</TABLE>
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted average assumptions by year:
<TABLE>
<S> <C> <C> <C>
Assumptions 1998 1997 1996
Risk-free interest rate 5.46% 6.31% 6.04%
Expected life (in years) 5 5 5
Expected volatility 29.89% 24.64% 24.39%
Expected dividends .69% .82% 1.43%
</TABLE>
Had compensation cost for the Plans been determined based on
the fair value at the grant dates for awards under those
plans consistent with the method described in SFAS 123, the
Company's net income (loss) and net income (loss) per share
would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997 1996
(In millions of dollars,
except share data)
Net income (loss) As reported $ (705) $ 47 $ (284)
Pro forma $ (714) $ 40 $ (288)
Basic net income As reported $(13.16) $.89 $(5.54)
(loss) per share Pro forma $(13.33) $.76 $(5.61)
Diluted net income As reported $(13.16) $.88 $(5.54)
(loss) per share Pro forma $(13.33) $.75 $(5.61)
</TABLE>
The Company cautions that the pro forma results in 1996 and
1997, the initial years following adoption of this
disclosure, do not reflect the full impact of pro forma
compensation expense. Options vest ratably over a three year
period; therefore, 1998 is the first year in which the full
impact is reflected.
The following table reconciles the net income (loss) and
weighted average number of shares used in the basic earnings
per share calculation to the net income (loss) and weighted
average number of shares used to compute diluted earnings
per share.
<PAGE> -75-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19. Stock Compensation Plans (Continued)
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars,
except share data)
Net income (loss) used for basic earnings per share $ (705) $ 47 $ (284)
Net income (loss) effect of assumed conversion of
preferred securities - - -
Net income (loss) used for diluted earnings per share $ (705) $ 47 $ (284)
Weighted average number of shares outstanding
used for basic earnings per share (thousands) 53,579 52,860 51,349
Deferred awards and stock options - 686 -
Shares from assumed conversion of
preferred securities - - -
Weighted average number of shares outstanding and
common equivalent shares used for diluted earnings
per share (thousands) 53,579 53,546 51,349
</TABLE>
Diluted shares outstanding for all periods presented above exclude
approximately 4.6 million common shares from the potential conversion
of certain preferred securities of a subsidiary (Note 7) due to their
anti-dilutive effect. Except for the year ended December 31, 1997,
diluted shares also exclude approximately 700 thousand shares,
primarily from the potential exercise of stock options, due to their
anti-dilutive effect.
20. Share Purchase Rights
Each outstanding share of the Company's common stock includes a
preferred share purchase right. Each right entitles the holder to buy
from the Company one one-hundredth of a share of Series A
Participating Preferred Stock of the Company at a price of $190. The
Board of Directors has designated 750,000 shares of the Company's
authorized preferred stock as Series A Participating Preferred Stock.
There were no preferred shares outstanding at December 31, 1998.
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 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 Company's
outstanding common stock, the Board of Directors may exchange one
share of common stock for each right outstanding, other than 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 rights
detach from the common stock (or the earlier termination or redemption
of the rights), an additional right will be issued with every share of
newly issued common stock.
<PAGE> -76-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Derivative Financial Instruments and Fair Value of
Financial Instruments
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to help
meet financing needs and to reduce exposure to fluctuating
foreign currency exchange rates and interest rates. The Company
is exposed to credit loss in the event of nonperformance by the
other parties to the financial instruments described below.
However, the Company does not anticipate nonperformance by the
other parties. The Company does not engage in trading activities
with these financial instruments and does not generally require
collateral or other security to support these financial
instruments. The notional amounts of derivatives summarized in
the foreign exchange risk and interest rate risk management
section below do not generally represent the amounts exchanged by
the parties and, thus, are not a measure of the exposure of the
Company through its use of derivatives. The amounts exchanged
were calculated on the basis of the notional amounts and the
other terms of the derivatives, which relate to interest rates,
exchange rates, securities prices, or financial or other indexes.
Foreign Exchange Risk and Interest Rate Risk Management
The Company enters into various types of derivative
financial instruments to manage its foreign exchange risk
and interest rate risk, as indicated in the following table.
<TABLE>
<S> <C> <C>
Notional Amount Notional Amount
December 31, 1998 December 31, 1997
(In millions of dollars)
Forward currency exchange
contracts $303 $ 154
Combined interest rate currency swaps 190 190
Options purchased 10 35
Currency swaps 215 215
Interest rate swaps 33 550
</TABLE>
The Company enters into forward currency exchange contracts to
manage its exposure against foreign currency fluctuations on
certain assets and liabilities denominated in foreign currencies.
As of December 31, 1998, the Company has 28 forward currency
exchange contracts maturing in 1999 which exchange 4.2 billion
Belgian francs, 57 million U.S. dollars, 43 million Dutch
guilders, 6 million British pounds, 95 million Norwegian krone,
and various other currencies. As of December 31, 1997, the
Company had 32 forward currency exchange contracts which matured
in 1998 and exchanged 1.4 billion Belgian francs, 36 million U.S.
dollars, 11 million British pounds, 105 million French francs,
198 million Norwegian krone, and various other currencies. Gains
and losses on these foreign currency hedges are included in the
carrying amount of the related assets and liabilities.
During 1998, the Company entered into forward currency exchange
contracts to reduce its exposure to currency fluctuations on the
anticipated 1999 net sales of certain Japanese subsidiaries. The
four forward currency exchange contracts, which mature in 1999,
exchange approximately 1.356 billion Japanese yen against
approximately 10 million U.S. dollars. At December 31, 1998, the
deferred losses on these forward currency exchange contracts were
approximately $2 million.
<PAGE> -77-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21. Derivative Financial Instruments and Fair Value of
Financial Instruments (Continued)
During 1998, the Company also entered into a foreign
currency exchange contract to reduce its exposure to certain
U.S. dollar - denominated debt instruments in China. The
contract, which matures in 1999, exchanges approximately 158
million Chinese renminbi against approximately 19 million
U.S. dollars.
During 1997, the Company entered into forward currency
exchange contracts to reduce its exposure to currency
fluctuations on the anticipated 1998 net sales of certain
Canadian subsidiaries. The seven forward currency exchange
contracts, which matured in 1998, exchanged 10 million
Canadian dollars against 7 million U.S. dollars. At
December 31, 1997, the deferred losses on these forward
currency exchange contracts were not material to the
consolidated financial statements.
The Company enters into combined interest rate currency
swaps to hedge its equity investments in certain foreign
subsidiaries to manage its exposure against fluctuations in
foreign currency rates. As of December 31, 1998 and 1997,
the Company had three combined interest rate currency swaps
maturing in 1999 to manage this exposure. These contracts
exchange 921 million Belgian francs, 50 million French
francs, 17 million Dutch guilders and 50 million U.S.
dollars. Gains and losses on the currency swap portions of
these contracts are included in stockholders' equity. The
differential interest to be paid or received on the interest
rate swap portion of these contracts is accrued as interest
rates change and is recognized over the life of these
agreements. At December 31, 1998 and 1997, deferred gains
of $6 million and $10 million, respectively, are included as
a component of stockholders' equity.
In 1994, the Company entered into two currency swap
transactions to manage its exposure against foreign currency
fluctuations on the principal amount of its guaranteed
9.814% Eurobonds (Note 2). During 1995, the Company
terminated these swaps. The termination of these swaps
exchanged 140 million U.S. dollars for approximately 89
million British pounds, resulting in a gain of approximately
10 million U.S. dollars. At that time, the Company entered
into a combined interest rate currency swap and a currency
swap exchanging U.S. dollars into British pounds to hedge
the interest and principal payments of the Eurobonds. These
agreements also convert part of the fixed rate interest into
variable rate interest. The gain on the exercised swaps is
being amortized over the life of the original hedge. At
December 31, 1998 and 1997, $2 million and $3 million,
respectively, of unamortized gain on the four cross-currency
interest rate swaps is included in other liabilities.
The Company has a cross-currency swap converting from
Deutsche marks into U.S. dollars to hedge the interest and
principal payments of its 7.25% Deutsche mark bonds, due in
2000. The agreement establishes a fixed interest rate of
11.1%.
<PAGE> -78-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21.Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
During 1997, the Company entered into interest rate swaps to
manage its interest rate risk. As of December 31, 1997, the
Company had seven ordinary interest rate swaps that effectively
converted an aggregate principal amount of $350 million of
variable rate long-term debt into fixed rate borrowings. These
swaps were terminated during 1998, resulting in the deferral of
a loss of approximately $8 million which is being amortized
through 2002. For each of the years ended December 31, 1998 and
1997, losses of approximately $1 million related to these swaps
have been recorded as a component of cost of borrowed funds.
During 1997, the Company entered into three interest rate swaps
as a hedge against interest rate fluctuation on an anticipated
refinancing of the Trust Preferred Hybrid Securities (See Note
8). These swaps were intended to lock in an interest rate of
6.3% on a notional amount of $150 million. During 1998, the
Company terminated these swaps and incurred an $8 million loss
on the transaction. This loss was recorded as other operating
expenses on the Company's consolidated statement of income for
the year ended December 31, 1998.
As of December 31, 1998, the Company has an interest rate swap
to convert $33 million in equipment lease payments from a
floating LIBOR to a fixed rate of 5.52%. As of December 31,
1997, the Company had an interest rate swap to convert $50
million in equipment lease payments from a floating LIBOR to a
fixed rate of 5.52%. The differential interest to be paid or
received is accrued as interest rates change and is recognized
over the life of the agreement. As of December 31, 1998 and
1997, this amount was not material to the consolidated financial
statements.
Other Financial Instruments with Off-Balance-Sheet Risk
As of December 31, 1998 and 1997, the Company is contingently
liable for guarantees of indebtedness owed by certain
unconsolidated affiliates of $116 million and $84 million,
respectively. The Company is of the opinion that its
unconsolidated affiliates will be able to perform under their
respective payment obligations in connection with such
guaranteed indebtedness and that no payments will be required
and no losses will be incurred by the Company under such
guarantees.
Concentrations of Credit Risk
As of December 31, 1998 and 1997, the Company has no significant
group concentrations of credit risk.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each category of financial instruments.
Cash and short-term financial instruments
The carrying amount approximates fair value due to the short
maturity of these instruments.
Long-term notes receivable
The fair value has been estimated using the expected future
cash flows discounted at market interest rates.
<PAGE> -79-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
21.Derivative Financial Instruments and Fair Value of Financial
Instruments (Continued)
Long-term debt
The fair value of the Company's long-term debt has been
estimated based on quoted market prices for the same or
similar issues, or on the current rates offered to the
Company for debt of the same remaining maturities.
Foreign currency swaps and interest rate swaps
The fair values of foreign currency swaps and interest rate
swaps have been estimated by traded market values or by
obtaining quotes from brokers.
Forward currency exchange contracts, option contracts, and
financial guarantees
The fair values of forward currency exchange contracts,
option contracts, and financial guarantees are based on
fees currently charged for similar agreements or on the
estimated cost to terminate these agreements or otherwise
settle the obligations with the counter parties at the
reporting date.
The estimated fair values of the Company's financial
instruments as of December 31, 1998 and 1997, which have fair
values different than their carrying amounts, are as follows:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
(In millions of dollars)
Assets:
Long-term notes receivable $ 20 $ 17 $ 18 $ 17
Liabilities:
Long-term debt 1,535 1,561 1,595 1,659
Off-Balance-Sheet Financial
Instruments - Unrealized gains (losses)
Foreign currency swaps - 32 - 21
Interest rate swaps - - - (9)
Combined interest rate
currency swaps - 13 - 13
Options - - - 2
Forward currency exchange contracts - (1) - -
</TABLE>
<PAGE> -80-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As of December 31, 1998 and 1997, the Company is
contingently liable for guarantees of indebtedness owed by
certain unconsolidated affiliates. There is no market for
these guarantees and they were issued without explicit cost.
Therefore, it is not practicable to establish their fair
value.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). This statement establishes
accounting and reporting standards requiring that every
derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at
its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in
the income statement, and requires that a company must
formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June
15, 1999, but earlier adoption is allowed. The Company has
not yet quantified the impact of adopting SFAS 133 and has
not determined the timing of or the method of adoption. The
Company is aware, however, that the adoption of SFAS 133
could increase volatility in earnings and other
comprehensive income.
<PAGE> -81-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. Contingent Liabilities
ASBESTOS LIABILITIES
ITEM A. 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 in personal injury 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. 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.
National Settlement Program
As of September 30, 1998, approximately 196,300 asbestos
personal injury claims were pending against Owens Corning.
On December 15, 1998, Owens Corning announced a National
Settlement Program (NSP) under which more than 176,000
asbestos claims against the Company and more than 100,000
claims against Fibreboard will be resolved. The program also
establishes procedures and fixed payments for resolving
future claims brought by participating plaintiffs' law firms
without litigation for at least 10 years. Average payments
per claim under the NSP are expected to be substantially
lower than those experienced by Owens Corning in recent
years.
The Company established the NSP in response to the rising
cost in recent years of mesothelioma settlements and
judgments, as well as significant changes in the legal
environment, such as the Supreme Court's 1997 decision in
Georgine v. Amchem Products, Inc., striking down an asbestos
class action settlement. The NSP is designed to better
manage Owens Corning's asbestos liability, and that of
Fibreboard, and to better predict the timing and amount of
indemnity payments for both pending and future claims.
Under the NSP, each participating law firm has agreed to a
long-term settlement agreement ("NSP Agreement") providing
for the resolution of claims pending against both Owens
Corning and Fibreboard for a settlement amount negotiated
with each participating firm. Settlement amounts vary based
on a number of factors, including the type and severity of
disease. Settlement payments aggregating approximately $1.2
billion for cases pending against Owens Corning will be made
over a period of up to five years, with most payments
occurring in 1999 and 2000. Such payments will be made from
the Company's available cash and credit resources. All
payments will be subject to satisfactory evidence of a
qualifying medical condition, delivery of customary releases
by each claimant and other conditions. The NSP Agreements
allow claimants to receive prompt payment without incurring
the significant delays and uncertainties of litigation.
Claimants settling non-malignancy claims may also be
entitled to seek additional compensation if they develop a
more severe asbestos-related medical condition in the
future.
<PAGE> -82-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
Under each NSP Agreement, the participating firm also agrees
(consistent with applicable legal requirements) to resolve
any future asbestos personal injury claims against Owens
Corning or Fibreboard through an administrative processing
arrangement, rather than litigation. Under such
arrangement, no settlement payment will be made for future
claims unless specified medical criteria and other
requirements are met, and the amount of any such payment
will be a specified cash settlement value based on the
disease of the claimant and other factors. In the case of
future claims not involving malignancy, such criteria
require medical evidence of functional impairment. Payments
for both pending and future claims will be managed by
Integrex, a wholly-owned Owens Corning subsidiary that
specializes in claims processing.
It is anticipated that payments for a limited number of
future "exigent" claims (principally malignancy claims)
under the administrative processing arrangement will
generally begin in 2001 while payments for other future
claims will begin in 2003. Payments for claims in 2003 and
later years under the NSP will be subject to certain
conditions designed to increase the predictability of annual
cash outflows for asbestos payments. The NSP Agreements
have a term of at least 10 years and may be extended by
mutual agreement of the parties.
Each NSP Agreement will terminate automatically as to
Fibreboard if the Global Settlement discussed below receives
final court approval. Under the Global Settlement,
Fibreboard would be protected by an injunction from asbestos
personal injury claims and should have no further uninsured
liabilities for pending or future asbestos personal injury
claims. If the Global Settlement receives final court
approval, the NSP Agreements would remain in effect with
regard to Owens Corning, whose share of the total costs
under the agreements would remain substantially unchanged.
If the Global Settlement does not receive such approval, the
Insurance Settlement will become effective. Under the
Insurance Settlement (which has received final court
approval) Fibreboard will have access to assets of
approximately $2.0 billion, to be used to resolve pending
and future Fibreboard claims. The Global Settlement, the
Insurance Settlement and the terms of the NSP Agreements
relating to Fibreboard are discussed in greater detail in
Item B below. Each of Owens Corning and Fibreboard retain
the right to terminate any individual NSP Agreement, if in
any year more than a specified number of plaintiffs
represented by the plaintiffs' firm in question opt out of
such agreement.
Owens Corning's total indemnity and defense payments (before
application of insurance recoveries) for asbestos personal
injury claims were $300 million in 1997 and $455 million in
1998. The increase in indemnity and defense payments in
1998 from the $365 million previously estimated for such
period results principally from the fact that, in
conjunction with the NSP negotiations in the fourth quarter
of 1998, Owens Corning was able to achieve settlements on
favorable terms of certain appeals and other pending claims
earlier than anticipated.
<PAGE> -83-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
Tobacco
Owens Corning believes that it has spent significant amounts
to resolve claims of asbestos claimants whose injuries were
caused or contributed to by cigarette smoking, and that the
major tobacco companies should be required to reimburse
asbestos defendants, in whole or in part, for past payments
made to asbestos claimants who were also smokers. The
Company is pursuing this objective through both legislative
lobbying efforts and litigation. As widely reported, the
United States Senate did consider legislation during the
first half of 1998 which would have included provisions in
the proposed national tobacco settlement to compensate past
and future asbestos plaintiffs who also suffer from smoking-
related illnesses. Because the present prospects for any
such legislation are uncertain, the Company is increasing
its litigation efforts against the tobacco companies.
In October 1998 the Circuit Court for Jefferson County,
Mississippi granted leave to file an amended complaint in an
existing action to add claims by Owens Corning against seven
leading tobacco companies and several other tobacco industry
defendants. The court has set a February 2000 trial date
for this action. In addition to the Mississippi lawsuit, a
lawsuit brought in December 1997 by Owens Corning and
Fibreboard is pending in the Superior Court for Alameda
County, California against the same major tobacco companies.
In both cases, Owens Corning and Fibreboard seek monetary
recovery for, among other things, a portion of the payments
made to persons who brought asbestos claims and were also
smokers.
PFT Litigation
As previously reported, 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 United States alleging that
many pulmonary function tests ("PFTs") used in mass
screening programs were improperly administered and
manipulated by the testing laboratory or otherwise
inconsistent with proper medical practice. This matter is
now in active pre-trial discovery and a 1999 trial date is
expected. In January 1997, Owens Corning filed a similar
suit in federal court in Jackson, Mississippi against the
owner of an additional testing laboratory. This suit is in
the discovery phase. The Company believes that these
lawsuits have been helpful in raising the standards for
medical screening of asbestos claims and in developing the
medical criteria for settlement values included in the NSP
Agreements.
<PAGE> -84-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
Insurance
As of December 31, 1998, Owens Corning had approximately
$185 million in unexhausted insurance coverage (net of
deductibles and self-insured retentions and excluding
coverage issued by insolvent carriers) under its liability
insurance policies applicable to asbestos personal injury
claims. This insurance, which is substantially confirmed,
includes both products hazard coverage and primary level non-
products coverage. Portions of this coverage are not
available until 2000 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 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 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
initially through a charge to income in 1991, with an
additional $1.1 billion charge to income (before taking into
account probable non-products insurance recoveries) recorded
in 1996. 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. Reflecting the substantial new information about
pending and future claims gained in the NSP negotiations
with plaintiffs' law firms and the recent changes in the
legal environment referred to above, the Company in the
fourth quarter of 1998 increased its asbestos reserves by
$1.4 billion, resulting in an after-tax charge to 1998
earnings of $906 million. Subject to the uncertainties
referred to below, Owens Corning currently estimates that
its liabilities in respect of indemnity and defense costs
associated with pending and unasserted asbestos personal
injury claims, and its insurance recoveries in respect of
such claims, are as follows:
<PAGE> -85-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
ITEM A. OWENS CORNING (EXCLUDING FIBREBOARD)
<TABLE>
<S> <C> <C>
December 31, December 31,
1998 1997
(In millions of dollars)
Reserve for asbestos litigation claims
Current $ 850 $ 350
Other 1,780 1,320
Total Reserve $2,630 $1,670
Insurance for asbestos litigation claims
Current $ 150 $ 100
Other 260 357
Total Insurance $ 410 $ 457
Net Owens Corning Asbestos Liability $2,220 $1,213
</TABLE>
Owens Corning believes that the NSP will improve its ability
to estimate the timing and amount of indemnity payments and
defense costs for both pending and future asbestos personal
injury claims. Nevertheless, the Company cautions that its
estimate of its liabilities for such claims is influenced by
numerous variables that are difficult to predict and that
such estimate therefore remains subject to uncertainty.
Such variables include the number of claims filed in the
future and the severity of disease involved in such claims;
whether or not such claims are covered by an NSP Agreement;
the extent, if any, to which an individual plaintiff
exercises its right to opt out of an NSP Agreement and/or
utilize other counsel that is not a participant in the NSP;
the extent if any to which Owens Corning exercises its right
to terminate one or more of the NSP Agreements due to
excessive opt-outs; and Owens Corning's success in
controlling the costs of resolving claims outside the NSP.
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 asbestos claims and additional similar asbestos
claims filed in the future may be substantial over time,
management believes that such additional costs will not
impair the ability of the Company to meet its obligations,
to reinvest in its businesses, or to pursue its growth
agenda.
<PAGE> -86-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
ITEM B. 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.
Status
As of September 30, 1998, approximately 128,000 asbestos
personal injury claims were pending against Fibreboard.
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.
Fibreboard is a participant in the NSP and is a party to
most of the NSP Agreements discussed in Item A. As
discussed above, if the Global Settlement is overturned by
the U.S. Supreme Court and the Insurance Settlement
therefore becomes effective, Fibreboard anticipates that in
excess of 100,000 asbestos personal injury claims pending
against it will be resolved under the NSP. Settlement
payments for such claims will be made over a period of five
years, with most payments occurring in 1999 and 2000. Such
payments will be made from the approximately $2.0 billion in
funds available under the Insurance Settlement. Fibreboard
expects that average per-claim settlement payments for both
pending and future claims will be substantially lower than
those experienced by Fibreboard during the 1996-1998 period.
Global Settlement
During 1993, Fibreboard, its insurers and representatives of
a class of future asbestos plaintiffs who have claims
arising from asbestos prior to August 27, 1993, entered into
the Global Settlement. Under the Global Settlement,
Fibreboard would be protected by an injunction from asbestos
personal injury claims, and should have no further asbestos
personal injury liabilities. On July 26, 1996, the U.S.
Fifth Circuit Court of Appeals affirmed the Global
Settlement by a majority 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 Amchem Products, Inc. v. Windsor case.
Amchem involved a proposed nationwide class action
settlement of future asbestos personal injury claims against
the members of the Center for Claims Resolution. The Supreme
Court, affirming the intermediate appellate court,
disapproved and vacated the Amchem class action settlement,
determining that the Amchem class action failed to meet the
class action certification requirements of Federal Rule of
Civil Procedure 23. On January 27, 1998, a panel of the
Fifth Circuit reaffirmed, by majority vote, its prior
decision, and again approved the Global Settlement. In June,
the United States Supreme Court granted certiorari, agreeing
to review the decision by the Fifth Circuit. The Supreme
Court heard oral argument on the case in December 1998, and
a decision is expected in the second quarter of 1999.
<PAGE> -87-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
ITEM B. FIBREBOARD (EXCLUDING OWENS CORNING) (Continued)
If the Global Settlement becomes effective, all asbestos-
related personal injury liabilities of Fibreboard will be
resolved through insurance funds and existing corporate
reserves and a permanent injunction would bar the filing of
any further claims against Fibreboard or its insurers by
class members. 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 by
members of the class.
The Settlement Trust will be funded principally by
Fibreboard's insurers, Continental Casualty Company
("Continental") and Pacific Indemnity Company ("Pacific").
These insurers placed $1.525 billion 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 $1.7 billion at December 31, 1998
after payment of interim expenses and exigent claims
associated with the Global Settlement.
Insurance Settlement
In 1993, Fibreboard, Continental and Pacific entered into
the Insurance Settlement, which was 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. In addition they
will provide Fibreboard with the remaining balance of the
Global Settlement escrow account for claims filed after
August 27, 1993, plus an additional $475 million subject to
certain adjustments. Upon fulfillment of their obligations
under the Insurance Settlement, Continental and Pacific will
be discharged from any further obligations to Fibreboard
under their insurance policies and will be protected by an
injunction against any claims of asbestos personal injury
claimants based upon those insurance policies. Under the
Insurance Settlement, Fibreboard will manage the defense and
resolution of asbestos-related personal injury claims and
<PAGE> -88-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
22. CONTINGENT LIABILITIES (Continued)
ITEM B. FIBREBOARD (EXCLUDING OWENS CORNING) (Continued)
will remain subject to suit by asbestos personal injury
claimants. On October 24, 1996, the statutory time period for
objectors to seek further judicial review of the Insurance
Settlement lapsed with no petition for review having been filed
with the U.S. Supreme Court. Therefore, the Insurance
Settlement is now final and not subject to further appeal.
The Insurance Settlement will not be fully 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 funded.
Management Opinion
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.
OTHER 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.
<PAGE> -89-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
23.Quarterly Financial Information (Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1998
Net sales $1,137 $1,286 $1,324 $1,262
Cost of sales 938 985 1,060 961
Gross margin $ 199 $ 301 $ 264 $ 301
Income (loss) before
extraordinary item 8 59 135 (868)
Extraordinary loss
(Note 2) - - (39) -
Net income (loss) $ 8 $ 59 $ 96 $(868)
Net income (loss) per share:
Basic net income (loss)
per share:
Income (loss) before
extraordinary item .16 1.09 2.51 (16.16)
Extraordinary loss (Note 2) - - (.72) -
Net income (loss) per share $ .16 $ 1.09 $ 1.79 $(16.16)
Diluted net income (loss)
per share
Income (loss) before
extraordinary item $ .16 $ 1.02 $ 2.32 $(16.16)
Extraordinary loss (Note 2) - - (.66) -
Net income (loss) per share $ .16 $ 1.02 $ 1.66 $(16.16)
</TABLE>
<PAGE> -90-
OWENS CORNING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
23.Quarterly Financial Information (Unaudited) (Continued)
<TABLE>
<S> <C> <C> <C> <C>
Quarter
First Second Third Fourth
(In millions of dollars, except share data)
1997
Net sales $ 875 $ 1,017 $ 1,238 $ 1,243
Cost of sales 652 778 971 1,081
Gross margin $ 223 $ 239 $ 267 $ 162
Income (loss) before cumulative
effect of accounting change 42 63 59 (102)
Cumulative effect of accounting
change (Note 6) - - - (15)
Net income (loss) $ 42 $ 63 $ 59 $ (117)
Net income (loss) per share:
Basic net income (loss) per share
Income (loss) before cumulative
effect of accounting change $ .80 $ 1.19 $ 1.11 $(1.91)
Cumulative effect of accounting
change (Note 6) - - - (.29)
Net income (loss) per share $ .80 $ 1.19 $ 1.11 $(2.20)
Diluted net income (loss) per share
Income (loss) before cumulative
effect of accounting change $ .76 $ 1.11 $ 1.05 $(1.91)
Cumulative effect of accounting
change (Note 6) - - - (.29)
Net income (loss) per share $ .76 $ 1.11 $ 1.05 $(2.20)
</TABLE>
Net income per share and basic and diluted weighted average
shares are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly net income
per share may not equal the per share total for the year.
<PAGE> -91-
INDEX TO FINANCIAL STATEMENT SCHEDULES
Number Description Page
II Valuation and Qualifying Accounts and Reserves -
for the years ended December 31, 1998, 1997,
and 1996...........................................92
<PAGE> -92-
OWENS CORNING AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged Balance
Beginning Costs and to Other Deduc- at End
Classification of Period Expenses Accounts tions of Period
(In millions of dollars)
<TABLE>
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1998:
Allowance deducted from
asset to which it applies -
Doubtful Accounts $ 20 $ 9 $ - $6(B) $ 23
Reserve to which it applies -
Restructure Costs 44 93 - 88(C) 49(D)
FOR THE YEAR ENDED
DECEMBER 31, 1997:
Allowance deducted from
asset to which it applies -
Doubtful Accounts $ 17 $ 3 $ 6(A) $6(B) $ 20
Reserve to which it applies -
Restructure Costs 34 40 - 30(C) 44
FOR THE YEAR ENDED
DECEMBER 31, 1996:
Allowance deducted from
asset to which it applies -
Doubtful Accounts $ 19 $ 3 $ - $5(B) $ 17
Reserve to which it applies -
Restructure Costs 20 38 - 24(C) 34
</TABLE>
Notes:
(A) Allowances of subsidiaries acquired.
(B) Uncollectible accounts written off, net of recoveries.
(C) Cash payments.
(D) Includes non-current liabilities of $14 million.
<PAGE> -93-
EXHIBIT INDEX
Exhibit
Number Document Description
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession.
Agreement and Plan of Merger, dated as of May 27,
1997, among Owens Corning, Sierra Corp. and
Fibreboard Corporation (incorporated herein by
reference to Exhibit 2(a) to the Company's current
report on Form 8-K (File No. 1-3660), filed May 28,
1997).
LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998, among Owens Corning, Advanced
Glassfiber Yarns LLC and Glass Holdings Corp.
(incorporated herein by reference to Exhibit 2 to
the Company's current report on Form 8-K (File No. 1-
3660), filed October 14, 1998).
Amendment No. 1 to LLC Interest Sale and Purchase
Agreement dated as of September 30, 1998
(incorporated herein by reference to Exhibit 2 to
the Company's current report on Form 8-K (File No. 1-
3660), filed October 14, 1998).
(3) Articles of Incorporation and By-Laws.
(i) Certificate of Incorporation of Owens
Corning, as amended (incorporated herein by
reference to Exhibit (3) to the Company's
quarterly report on Form 10-Q (File No. 1-3660)
for the quarter ended March 31, 1997).
(ii) By-Laws of Owens Corning, as amended
(incorporated herein by reference to Exhibit (3)
to the Company's annual report on Form 10-K (File
No. 1-3660) for 1995).
(4) Instruments Defining the Rights of Security Holders,
Including Indentures.
Indenture, dated as of May 5, 1997, between Owens
Corning and The Bank of New York, as Trustee
(incorporated herein by reference to Exhibit 4.5.1
to the Company's current report on Form 8-K (File
No. 1-3660), filed May 14, 1997).
Credit Agreement, dated as of June 26, 1997, among
Owens Corning, other Borrowers and Guarantors, the
Banks listed on Annex A thereto, and Credit Suisse
First Boston, as Agent (incorporated herein by
reference to Exhibit (4) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1997), as amended by
Amendment No. 1 thereto (incorporated herein by
reference to Exhibit (4) to the Company's annual
report on Form 10-K (File No. 1-3660) for the year
ended December 31, 1997) and Amendment No. 2 thereto
(filed herewith).
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, copies of all
instruments defining the rights of holders of long-
term debt of the Company where the total amount of
securities authorized under each issue does not
exceed ten percent of the Company's total assets.
<PAGE> -94-
EXHIBIT INDEX
Exhibit
Number Document Description
(10) Material Contracts.
Agreement and Plan of Merger, dated as of May 27,
1997, among Owens Corning, Sierra Corp. and Fibreboa
rd Corporation (incorporated herein by reference to
Exhibit 2(a) to the Company's current report on Form
8-K (File No. 1-3660), filed May 28, 1997).
LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998, among Owens Corning, Advanced
Glassfiber Yarns LLC and Glass Holdings Corp.
(incorporated herein by reference to Exhibit 2 to
the Company's current report on Form 8-K (File No. 1-
3660), filed October 14, 1998).
Amendment No. 1 to LLC Interest Sale and Purchase
Agreement dated as of September 30, 1998
(incorporated herein by reference to Exhibit 2 to
the Company's current report on Form 8-K (File No. 1-
3660), filed October 14, 1998).
Credit Agreement, dated as of June 26, 1997, among
Owens Corning, other Borrowers and Guarantors, the
Banks listed on Annex A thereto, and Credit Suisse
First Boston, as Agent (incorporated herein by
reference to Exhibit (4) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1997), as amended by
Amendment No. 1 thereto (incorporated herein by
reference to Exhibit (4) to the Company's annual
report on Form 10-K (File No. 1-3660) for the year
ended December 31, 1997) and Amendment No. 2 thereto
(filed as Exhibit (4) to this annual report on Form
10-K and incorporated here by reference).
Rights Agreement, dated as of December 12, 1996
(incorporated herein by reference to Exhibit 1 to
the Company's Registration Statement on Form 8-A
(File No. 1-3660), dated December 19, 1996).
* Stock Performance Incentive Plan, as amended (filed herewith).
* Key Management Severance Agreement with Maura J. Abeln (filed
herewith).
* Key Management Severance Agreement with Domenico Cecere (filed
herewith).
* Key Management Severance Agreement with J. Thurston Roach (filed
herewith).
* Letter to Maura J. Abeln (filed herewith).
* Letter to J. Thurston Roach (filed herewith).
* Release and Separation Agreement with Charles H. Dana (filed
herewith).
<PAGE> -95-
EXHIBIT INDEX
* Owens Corning Supplemental Executive Retirement Plan, effective as of
January 1, 1998 (incorporated herein by reference to Exhibit (10) to
the Company's quarterly report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1998).
The following documents are incorporated herein by reference to Exhibit
(10) to the Company's annual report on Form 10-K (File No. 1-3660) for
1997:
* - Renewal Agreement, effective as of July 31, 1999, with Glen H.
Hiner.
* - Agreement with Domenico Cecere.
* 1987 Stock Plan for Directors, as amended (incorporated herein by
reference to Exhibit (10) to the Company's quarterly report on Form
10-Q
(File No. 1-3660) for the quarter ended June 30, 1997).
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's quarterly
report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1996:
* - Long-Term Performance Incentive Plan Terms Applicable to Certain
Executive Officers.
* - Long-Term Performance Incentive Plan Terms Applicable to Officers
Other Than Certain Executive Officers.
* Corporate Incentive Plan Terms Applicable to Certain Executive
Officers (incorporated herein by reference to Exhibit (10) to
the Company's quarterly report on Form 10-Q (File No. 1-3660)
for the quarter ended March 31, 1996).
* Corporate Incentive Plan Terms Applicable to Key Employees other
than Certain Executive Officers (incorporated herein by reference
to Exhibit (10) to the Company's annual report on Form 10-K
(File No. 1-3660) for 1995).
* Agreement, dated as of January 1, 1995, with William W. Colville
(incorporated herein by reference to Exhibit (10) to the Company's
annual report on Form 10-K (File No. 1-3660) for 1994) and amendment
dated September 29, 1997 (incorporated herein by reference to Exhibit
(10) to the Company's annual report on Form 10-K (File No. 1-3660)
for 1997).
* Director's Charitable Award Program (incorporated herein by
reference to Exhibit (10) to the Company's quarterly report on
Form 10-Q (File No. 1-3660) for the quarter ended September 30,
1993).
* Executive Supplemental Benefit Plan, as amended (incorporated herein
by reference to Exhibit (10) to the Company's quarterly report on
Form 10-Q (File No. 1-3660) for the quarter ended March 31, 1993).
* Employment Agreement, dated as of December 15, 1991, with
Glen H. Hiner (incorporated herein by reference to Exhibit (10) to
the Company's annual report on Form 10-K (File No. 1-3660) for
1991), as amended by First Amending Agreement made as of April 1,
1992 (incorporated herein by reference to Exhibit (19) to the
Company's quarterly report on Form 10-Q (File No. 1-3660) for the
quarter ended June 30, 1992).
* Form of Key Management Severance Benefits Agreement (incorporated
herein by reference to Exhibit (10) to the Company's annual report
on Form 10-K (File No. 1-3660) for 1991).
<PAGE> -96-
EXHIBIT INDEX
* Form of Directors' Indemnification Agreement (incorporated herein by
reference to Exhibit (10) to the Company's annual report on Form 10-K
(File No. 1-3660) for 1989).
The following documents are incorporated herein by
reference to Exhibit (10) to the Company's annual
report on Form 10-K (File No. 1-3660) for 1987:
* - Officers Deferred Compensation Plan.
* - Deferred Compensation Plan for Directors, as amended.
(11) Statement re Computation of Per Share Earnings
(filed herewith).
(21) Subsidiaries of Owens Corning (filed herewith).
(23) Consent of Arthur Andersen LLP (filed herewith).
(27) Financial Data Schedule (filed herewith).
* Denotes management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant
to Item 14(c) of Form 10-K.
Exhibit (11)
OWENS CORNING AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Basic:
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
(In millions of dollars,
except share data)
Net income (loss) $ (705) $ 47 $ (284)
Basic weighted average number of
common shares outstanding (thousands) 53,579 52,860 51,349
Basic per share amount $ (13.16) $ .89 $ (5.54)
Diluted:
Net income (loss) $ (705) $ 47 $ (284)
Weighted average number of shares
outstanding (thousands) 53,579 52,860 51,349
Weighted average common equivalent
shares (thousands):
Deferred awards - 352 -
Stock options using the average market
price during the period - 334 -
Shares from assumed conversion
of preferred securities - - -
Diluted weighted average number
of common shares outstanding and
common equivalent shares (thousands) 53,579 53,546 51,349
Diluted per share amount $ (13.16) $ .88 $ (5.54)
</TABLE>
Exhibit (21)
<TABLE>
<S> <C>
State or Other
Jurisdiction
Under the Laws of
Subsidiaries of Owens Corning (12/31/98) Which Organized
AmeriMark Building Products, Inc. Delaware
Commercial Owens Corning Chile Limitada Chile
Crown Manufacturing Inc. Canada
Cultured Stone Corporation California
Decillion, LLC. Delaware
Deutsche Owens-Corning Glasswool GmbH Germany
Engineered Pipe Systems, Inc. Delaware
Engineered Yarns America, Inc. Massachusetts
Eric Company Delaware
European Owens-Corning Fiberglas, S.A. Belgium
Fabwel, Inc. Indiana
Falcon Foam Corporation Delaware
Fibreboard Corporation Delaware
Flowtite (Africa) (Private) Limited Zimbabwe
Flowtite AS Norway
Flowtite Offshore Services Ltd. Cyprus
Flowtite Pipe & Tanks AS Norway
Flowtite Technology AS Norway
Goodman Ventures, Inc. Delaware
IPM Inc. Delaware
Integrex Delaware
Jefferson Holdings, Inc. Delaware
LMP Impianti Srl Italy
Norandex Inc. Delaware
N.V. Owens-Corning S.A. Belgium
OC Celfortec Inc. Canada
O.C. Funding B.V. The Netherlands
OCW Acquisition Corporation
(dba, Delsan Industries Corp.) Delaware
Owens Corning (Anshan) Fiberglas Co. Limited China
Owens Corning (China) Investment Company, Ltd. China
Owens Corning Building Materials Espana S.A. Spain
Owens-Corning Building Products (U.K.) Ltd. United Kingdom
Owens Corning Canada Inc. Canada
Owens-Corning Capital Holdings I, Inc. Delaware
Owens-Corning Capital Holdings II, Inc. Delaware
Owens-Corning Capital L.L.C. Delaware
Owens Corning Cayman (China) Holdings Cayman Islands
Owens-Corning Cayman Limited Cayman Islands
Owens Corning Espana SA Spain
Owens-Corning Fiberglas A.S. Limitada Brazil
</TABLE>
<PAGE>
<TABLE>
<S> <C>
State or Other
Jurisdiction
Under the Laws of
Subsidiaries of Owens Corning (12/31/98) Which Organized
Owens-Corning Fiberglas Deutschland GmbH Germany
Owens-Corning Fiberglas Espana, S.A. Spain
Owens-Corning Fiberglas France S.A. France
Owens-Corning Fiberglas (G.B.) Ltd. United Kingdom
Owens-Corning Fiberglas Norway A/S Norway
Owens-Corning Fiberglas S.A. Uruguay
Owens-Corning Fiberglas Sweden Inc. Delaware
Owens-Corning Fiberglas Technology Inc. Illinois
Owens-Corning Fiberglas (U.K.) Ltd. United Kingdom
Owens-Corning Fiberglas (U.K.) Pension Plan Ltd. United Kingdom
Owens-Corning Finance (U.K.) PLC United Kingdom
Owens-Corning FSC, Inc. Barbados
Owens-Corning Funding Corporation Delaware
Owens-Corning (Guangzhou) Fiberglas Co., Ltd. China
Owens-Corning Holdings Limited Cayman Islands
Owens Corning HT, Inc. Delaware
Owens-Corning Isolation France S.A. France
Owens Corning (Japan) Ltd. Japan
Owens Corning Mexico, S.A. de C.V. Mexico
Owens Corning NRO II Inc. Canada
Owens Corning NRO Inc Canada
Owens-Corning Ontario Holdings Inc. Ontario
Owens-Corning Overseas Holdings, Inc. Delaware
Owens Corning Polyfoam UK Ltd. United Kingdom
Owens-Corning Real Estate Corporation Ohio
Owens Corning (Shanghai) Fiberglas Co., Ltd. China
Owens Corning (Singapore) PTE Ltd. Singapore
Owens Corning South Africa (Pty) Ltd. South Africa
Owens Corning SpA Italy
Owens-Corning (Sweden) AB Sweden
Owens-Corning (UK) Holdings Limited United Kingdom
Owens-Corning Veil Netherlands B.V. The Netherlands
Owens-Corning Veil U.K. Ltd. United Kingdom
P Metals, Inc. Delaware
Procanpol SP.Z.O.O. Poland
Quest Industries, LLC Delaware
Scanglas Ltd. United Kingdom
Soltech, Inc. Kentucky
T Acquisition Inc. Delaware
Trumbull Asphalt Co. of Delaware Delaware
Vytec Corporation Ontario
Vytec Sales Corporation Delaware
Willcorp, Inc. Delaware
Wrexham A.R. Glass Ltd. United Kingdom
10110 Newfoundland Limited Newfoundland
</TABLE>
AMENDMENT NO. 2
DATED AS OF NOVEMBER 30, 1998
TO
CREDIT AGREEMENT
DATED AS OF JUNE 26, 1997
This Amendment No. 2 dated as of November 30, 1998 (the "Amendment") is to
the Credit Agreement dated as of June 26, 1997, as amended by the Amendment
No. 1 thereto dated as of February 20, 1998 (as so amended, the "Credit
Agreement"), among Owens Corning, the other Borrowers and Guarantors parties
thereto, the Banks parties thereto and Credit Suisse First Boston, as Agent.
Terms defined in the Credit Agreement have the same meanings when used in
this Amendment.
Owens Corning, the other Loan Parties, the Banks, and the Agent hereby
agree as follows:
1. Restricted Payments. (a) Section 8.08(b) of the Agreement is
hereby amended to delete the figure "$15,000,000" and to insert in lieu
thereof the figure "$20,000,000".
(b) Section 8.08 of the Agreement is hereby further amended to
insert the word "and" prior to clause (e) thereof, to insert a period in
lieu of the semi-colon at the end of clause (e) thereof and to delete clause
(f) thereof.
2. Interest Coverage Ratio. Section 8.15 of the Agreement is hereby
amended to read as follows:
"Section 8.15 Interest Coverage Ratio.
Commencing with the calendar quarter ending
September 30, 1997, permit the ratio of
Consolidated Adjusted EBITDA to
Consolidated Interest Expense as of the
last day of any calendar quarter to be less
than the following respective amounts for
the periods of four consecutive calendar
quarters of the Company ending on the last
day of the respective calendar quarters
ending on the following dates (treating
those four consecutive calendar quarters as
a single period for the purpose of
determining such ratio):
Calendar Quarter Ending Ratio
March 31, 1998 2.5 to 1.0
June 30, 1998 and 2.25 to 1.0
September 30, 1998
Each other March 31, June 3.0 to 1.0;
30, September 30 and
December 31
provided, however, that from and after the
occurrence of the National Settlement
Program Effective Date and so long as the
National Settlement Program shall be in
full force and effect, for the purpose of
calculating the above ratio, the definition
of Consolidated Adjusted EBITDA shall be as follows:
"Consolidated Adjusted EBITDA" means,
for any period, (i) Consolidated EBITDA
for such period, minus (ii) to the
extent not deducted in the computation
of EBIT for such period, the net after
tax amount of the lesser of (A) the
remainder (but not less than 0) of (I)
actual cash payments made during such
period with respect to claims arising
out of the use of or exposure to
asbestos products, minus (II) to the extent not
added in the computation of EBIT for
such period, the amount of actual cash
payments (including under insurance
policies) received during such period
with respect to claims arising out of
the use of or exposure to asbestos
products, and (B) $200,000,000, in
respect of each period of four
consecutive calendar quarters ending
September 30 and December 31, 1999,
March 31, June 30, September 30 and
December 31, 2000 and 2001 and March
31, 2002, plus (iii) to the extent not
added in the calculation of EBIT for
such period and to the extent not
subtracted pursuant to clause
(ii)(A)(II) above, the net after tax
amount of actual cash payments
(including under insurance policies)
received during such period with
respect to claims arising out of the
use of or exposure to asbestos
products, minus (iv) to the extent not
deducted in the computation of EBIT
for such period, the amount of actual
cash payments to the extent that such
payments are charged against any
reserves established by the Company
and its Subsidiaries referred to in
clause (iii) of the definition of
Consolidated EBITDA, and minus (v) to
the extent that (x) the remainder
described in the preceding clause (ii)
(A) exceeds, during any of the
calendar years 1999, 2000 and 2001,
$200,000,000 or, during the calendar
year 2002, $100,000,000, and (y) the
sum of such excess amounts exceeds
$900,000,000, then from and including
the calendar quarter in which such
excess above $900,000,000 occurs and
for the three succeeding calendar
quarters and from and including each
subsequent calendar quarter in which
an increase in such excess occurs and
for the three succeeding calendar
quarters, the net after-tax amount
corresponding to such excess above
$900,000,000 and to each such increase
in such excess."
3. Leverage Ratio. Section 8.16 of the Agreement is
hereby amended to add at the end of such Section the
following:
"; provided, however, that from and after
the occurrence of the National Settlement
Program Effective Date and so long as the
National Settlement Program shall be in
full force and effect, the Company shall
not permit the Leverage Ratio to be greater
than the following respective amounts at
any time during the following respective
periods:
Period Leverage
Ratio December 1, 1998 through 3.5 to 1.0
December 31, 2001
January 1, 2002 and thereafter 3.0 to 1.0
4. Asbestos Claims Information. Section 9.01
of the Agreement is hereby amended to add thereto a new sub-
Section (f) as follows:
"(f) Asbestos Claims Information.
(i) As soon as available and in any event
within 60 days after the close of each
calendar quarter of the Company, a
certificate of the Company's General
Counsel with respect to:
(A) the total number of asbestos
related health claims
settled by the Company and
its Subsidiaries (other than
Fibreboard) during the
preceding calendar quarter;
(B) the total amount of such
settlements during such
calendar quarter;
(C) the total payments made in
respect of all asbestos
related health claims during
such calendar quarter;
(D) the total number of new
asbestos related health
claims made against the
Company and its Subsidiaries
(other than Fibreboard)
during such calendar quarter
and the total number of such
new claims that are subject
to long-term agreements
between the Company and its
Subsidiaries (other than
Fibreboard) and the counsel
representing the persons
making such claims; and
(E) the total number, as of the
end of such calendar
quarter, of outstanding
asbestos related health
claims against the Company
and its Subsidiaries (other
than Fibreboard) not subject
to signed settlement
agreements.
(ii) In the event that the United
States Supreme Court (x) on or
before December 31, 1999, does
not affirm the January 27, 1998
decision of the United States
Court of Appeals for the Fifth
Circuit approving the Global
Settlement (as defined in the
Quarterly Report on Form 10-Q by
the Company to the Securities and
Exchange Commission for the
quarter ended September 30,
1998), or (y) at any time
reverses such Fifth Circuit
decision or imposes conditions or
limitations on the Global
Settlement that materially reduce
the benefit thereof to
Fibreboard, then, as soon as
available and in any event within
60 days after the close of each
calendar quarter of the Company
ending on or after the earlier of
March 31, 2000 and the date of
the decision of such reversal or
imposing such conditions or
limitations, and until and unless
the United States Supreme Court
shall approve the Global
Settlement (without imposing such
conditions or limitations) or
affirm a lower court decision so
approving the Global Settlement,
a
certificate of the Company's
General Counsel with respect to:
(A) the total number of asbestos
related health claims
settled by Fibreboard during
the preceding calendar
quarter;
(B) the total amount of such
settlements during such
calendar quarter;
(C) the total payments made in
respect of all asbestos
related health claims during
such calendar quarter;
(D) the total number of new
asbestos related health
claims made against
Fibreboard during such
calendar quarter and the
total number of such new
claims that are subject to
long-term agreements between
Fibreboard and the counsel
representing the persons
making such claims; and
(E) the total number, as of the
end of such calendar
quarter, of outstanding
asbestos related health
claims against Fibreboard
not subject to signed
settlement agreements.
5. Definitions. The definitions in Section 15.01(a) of
the Agreement are hereby amended as follows:
"BA Margin" means, at any time, the
rate per annum equal to the sum of (i) the
applicable Utilization Fee at such time,
plus (ii) the rate per annum determined at
such time based upon the S&P Rating and
Moody's Rating at such time set forth under
the relevant column heading below opposite
such Investment Ratings:
Investment Rating Rating Margin
1. S&P Rating not lower than 0.40%
BBB+ and Moody's Rating not
lower than Baa1
2. S&P Rating lower than BBB+ 0.50%
or Moody's Rating lower
than Baa1, but S&P Rating
not lower than BBB and
Moody's Rating not lower
than Baa2
3. S&P Rating lower than BBB 0.625%
or Moody's Rating lower
than Baa2, but S&P Rating
not lower than BBB- and
Moody's Rating not lower
than Baa3
4. S&P Rating lower than BBB-
1.00% or Moody's Rating lower
than Baa3, but S&P Rating not
lower than BB+ and Moody's Rating
not lower than Ba1
5. S&P Rating lower than BB+ 1.25%
or Moody's Rating lower
than Ba1
"COF Margin" means, at any time,
the rate per annum equal to the sum of (i) the
applicable Utilization Fee at such time, plus
(ii) the rate per annum determined at such time
based upon the S&P Rating and Moody's Rating at
such time set forth under the relevant column
heading below opposite such Investment Ratings:
Investment Rating Rating Margin
1. S&P Rating not lower than 0.40%
BBB+ and Moody's Rating
not lower than Baa1
2. S&P Rating lower than 0.50%
BBB+ or Moody's Rating
lower than Baa1, but S&P
Rating not lower than BBB
and Moody's Rating not lower
than Baa2
3. S&P Rating lower than BBB 0.625%
or Moody's Rating lower
than Baa2, but S&P Rating not lower
than BBB- and Moody's Rating not lower
than Baa3
4. S&P Rating lower than BBB- 1.00%
or Moody's Rating lower
than Baa3, but S&P Rating not
lower than BB+ and Moody's Rating
not lower than Ba1
5. S&P Rating lower than BB+ 1.25%
or Moody's Rating lower
than Ba1
"Eurocurrency Margin" means, at any time, the
rate per annum equal to the sum of (i) the applicable
Utilization Fee at such time, plus (ii) the rate per
annum determined at such time based upon the S&P
Rating and Moody's Rating at such time set forth
under the relevant column heading below opposite such
Investment Ratings:
Investment Rating Rating Margin
1. S&P Rating not lower than 0.40%
BBB+ and Moody's Rating
not lower than Baa1
2. S&P Rating lower than BBB+ 0.50%
or Moody's Rating lower
than Baa1, but S&P Rating not lower
than BBB and Moody's Rating not lower
than Baa2
3. S&P Rating lower than BBB 0.625%
or Moody's Rating lower
than Baa2, but S&P Rating not lower
than BBB- and Moody's Rating not lower
than Baa3
4. S&P Rating lower than BBB- 1.00%
or Moody's Rating lower
than Baa3, but S&P Rating not lower
than BB+ and Moody's Rating not lower
than Ba1
5. S&P Rating lower than BB+ 1.25%
or Moody's Rating lower
than Ba1
"Facility Fee Rate" means, at any time, a rate
per annum determined at such time based upon the
Investment Ratings in effect by S&P and Moody's at
such time set forth under the relevant column heading
below opposite such Investment Ratings:
Investment Rating Facility Fee
Rate
1. S&P rating not lower than 0.20%
BBB+ and Moody's rating
not lower than Baa1
2. S&P rating lower than BBB+ 0.25%
or Moody's rating lower
than Baa1, but S&P rating not lower
than BBB and Moody's rating not lower
than Baa2
3. S&P rating lower than BBB 0.25%
or Moody's rating lower
than Baa2, but S&P rating not lower
than BBB- and Moody's rating not lower
than Baa3
4. S&P rating lower than BBB- 0.50%
or Moody's rating lower
than Baa3, but S&P rating not lower
than BB+ and Moody's rating not lower
than Ba1
5. S&P rating lower than BB+ 0.50%
or Moody's rating lower
than Ba1
"National Settlement Program" refers to the
Company's program to enter into agreements with
plaintiff's counsel representing individuals or
entities who have made claims against the Company as
of November 30, 1998 on the basis of asbestos-caused
personal injury, provided that such agreements (a)
include provisions which either finally settle or set
forth an administrative mechanism for the subsequent
resolution of any such claim without the need for a
civil trial, (b) may not be revoked or canceled by
such claimants or their counsel, (c) provide for
payments by the Company with respect to such claims,
net of applicable insurance proceeds, in an aggregate
amount not to exceed $1,600,000,000, and (d) the
number of claims subject to such agreements is not
less than 150,000.
"National Settlement Program Effective Date"
means the date on which the Company has entered into
the various agreements described as the National
Settlement Program.
"Utilization Fee" means, at any time, a rate per
annum equal to (i) if the aggregate principal amount
of the Dollar Equivalent Amount of Loans, L/C
Participations and Canadian L/C Participations
outstanding exceeds 50% of the amount of the
Commitments at such time, (A) if the S&P Rating is
higher than or equal to BBB- or the Moody's Rating is
higher than or equal to Baa3, 0%, and (B) if the S&P
Rating is lower than BBB- and the Moody's Rating is
lower than Baa3, 0%, or (ii) if the aggregate
principal amount of the Dollar Equivalent Amount of Loans, L/C
Participations and Canadian L/C Participations
outstanding does not exceed 50% of the amount of the
Commitments at such time, 0%.
6. Agreement Continues. Except as expressly amended
hereby, the Agreement shall remain in full force and effect.
Each reference to the "Agreement" in the Agreement and the
other Loan Documents shall be deemed to be a reference to the
Agreement as amended hereby. The amendments set forth herein
shall not be deemed to be a consent to any other waiver or
amendment in respect of the Agreement or any other Loan
Document.
7. Representations and Warranties. In order to induce
the Banks and the Agent to enter into this Amendment, the Company
hereby represents and warrants to the Banks and the Agent that:
(a) it has full power, capacity, right and legal
authority to execute, deliver and perform its obligations under
this Amendment and the Agreement as amended hereby and has
taken all action necessary to authorize the execution and
delivery of, and the performance of its obligations under, this
Amendment and the Agreement as amended hereby;
(b) this Amendment and the Agreement as amended
hereby constitute its legal, valid and binding obligations
enforceable against it in accordance with their respective
terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally;
(c) the representations and warranties contained in
the Agreement are true and correct on and as of the date
hereof as though made on and as of the date hereof;
(d) no Default or Event of Default has occurred and
is continuing, or would result from the execution, delivery and
performance by it of this Amendment or the Agreement as amended
hereby; and
(e) as of the date hereof, there are pending against
the Company approximately 196,000 asbestos related health
claims of which:
(i) approximately 150,000 of such claims are
the subject of written agreements to settle
between the Company and the claimants
and/or their counsel;
(ii) approximately 20,000 of such claims are
subject to annual docket agreements;
(iii) approximately 13,500 of such claims have
been previously settled and are subject to
binding agreements with respect to which
all required payments have not yet been
made; and
(iv) approximately 4,500 of such claims are no
longer being pursued actively.
8. Amendment Fee. The Company hereby agrees to pay an
amendment fee to each Bank that executes this Amendment and
delivers, by fax, a signed copy of this Amendment to Winthrop,
Stimson, Putnam & Roberts, Attention: William C.F. Kurz,
Counsel for the Agent, Fax number (212) 858-1500, at or prior
to 12:00 Noon, New York City time, on Monday, November 30,
1998. Such amendment fee shall be equal to 0.15% of such Bank's
Commitment.
9. Effectiveness. This Amendment shall become effective
upon (a) execution hereof by the Company and the Majority
Banks, and (b) payment by the Company to the Agent for the
respective accounts of the Banks entitled thereto the amendment
fees provided in the preceding Section 8 hereof.
10. Governing Law. Pursuant to New York General
Obligations Law Section 5-1401, this Amendment shall be
governed by the law of the State of New York.
11. Counterparts. This Amendment may be signed in any
number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto
were upon the same instrument.
12. Entire Agreement. This Amendment embodies the entire
agreement among the Company, each other Loan Party, the Banks
and the Agent with respect to the subject matter hereof and
supercedes all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be executed by their duly authorized
officers as of the day and year first written above.
OWENS CORNING
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as Agent and as a Bank
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
ARAB BANK PLC
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BANK OF AMERICA ILLINOIS
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE BANK OF NEW YORK
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
CHICAGO BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BANQUE NATIONALE DE PARIS
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BARCLAYS BANK PLC
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE CHASE MANHATTAN BANK
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CIBC, INC.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CITIBANK N.A.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CREDIT COMMUNAL DE BELGIQUE S.A.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CREDIT LYONNAIS CHICAGO BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
DAI-ICHI KANGYO BANK, LTD.
CHICAGO BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
FLEET NATIONAL BANK
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE FUJI BANK, LIMITED
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
GENERALE BANK NEW YORK BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
ISTITUTO BANCARIO SAN PAOLO DI TORINO,
S.P.A., NEW YORK BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
KREDIETBANK N.V., GRAND CAYMAN BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:_________________________________
Name:
Title:
MELLON BANK, N.A.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
MERCANTILE BANK N.A.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE MITSUI TRUST AND BANKING COMPANY,
LIMITED, NEW YORK BRANCH
By:__________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
NATIONSBANK, N.A.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE NORTHERN TRUST COMPANY
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
ROYAL BANK OF CANADA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE SAKURA BANK, LIMITED
NEW YORK BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
SOCIETE GENERALE
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
STANDARD CHARTERED BANK
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE SUMITOMO BANK, LTD.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
SUMITOMO BANK OF CALIFORNIA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE SUMITOMO TRUST & BANKING
CO., LTD. NEW YORK BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
SUNTRUST BANK, ATLANTA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE TORONTO DOMINION (TEXAS), INC.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
WACHOVIA BANK OF GEORGIA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK BRANCH
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
BANK OF TOKYO-MITSUBISHI (CANADA)
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
FIRST CHICAGO NBD BANK CANADA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
THE CHASE MANHATTAN BANK OF CANADA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CANADA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
MELLON BANK CANADA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
ROYAL BANK OF CANADA
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
SOCIETE GENERALE (CANADA)
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
EUROPEAN OWENS-CORNING FIBERGLAS S.A.
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
N.V. OWENS-CORNING S.A.
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
OWENS-CORNING CANADA INC.
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
OWENS-CORNING UK HOLDINGS LTD.
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
SIERRA CORP.
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
FALCON FOAM CORPORATION,
as Guarantor
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
IPM INC.,
as Guarantor
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
OWENS-CORNING FIBERGLAS SWEDEN INC.,
as Guarantor
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
OWENS-CORNING FIBERGLAS TECHNOLOGY
INC., as Guarantor
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
SOLTECH, INC.,
as Guarantor
By:_________________________________
Name: Michael I. Miller
Title: Authorized Signatory
OWENS-CORNING FIBERGLAS (U.K.) LTD.
By___________________________
Michael I. Miller
Authorized Signatory
OWENS-CORNING BUILDING PRODUCTS
(U.K.) LTD.
By___________________________
Michael I. Miller
Authorized Signatory
OWENS CORNING POLYFOAM UK LTD.
By___________________________
Michael I. Miller
Authorized Signatory
OWENS-CORNING ISOLATION FRANCE S.A.
By___________________________
Michael I. Miller
Authorized Signatory
Exhibit 10
OWENS CORNING
STOCK PERFORMANCE INCENTIVE PLAN
(as amended and restated effective January 1, 19991998)
ARTICLE 1. Establishment, Purpose, and Duration
1.1 Establishment of the Plan. Owens Corning, a Delaware
corporation (hereinafter referred to as the "Company"), has
previously established an incentive compensation plan known as the
"Owens Corning Stock Performance Incentive Plan" (such Plan as
amended from time to time being hereinafter referred to as the
"Plan"), as set forth in this document. The Plan permits the grant
of Nonqualified Stock Options, Incentive Stock Options, and Stock
Bonuses (including Phantom Stock Bonuses and Restricted Stock).
The Board of Directors of the Company approved the Plan on
January 23, 1992, subject to ratification by an affirmative vote
of a majority of Shares of Common Stock present and entitled to
vote at the 1992 Annual Stockholders Meeting. Following such
ratification, the Plan became effective May 1, 1992 (the
"Effective Date"). The Board of Directors of the Company
thereafter amended the Plan on June 15, 1995, subject to
stockholder approval of the amendments at the 1996 Annual
Stockholders Meeting. The Plan as so amended became effective as
of June 15, 1995. Pursuant to authority delegated by resolution
of the Board of Directors to the Company, the Plan has been
amended and restated effective January 1, 1998 and January 1,
1999, and shall remain in effect as provided in Section 1.3
herein.
1.2 Purpose of the Plan. The purpose of the Plan is to promote
the success and enhance the value of the Company by linking the
personal interests of Participants to those of Company
stockholders. The Plan is further intended to provide flexibility
to the Company in its ability to motivate, attract, and retain the
services of Participants upon whose judgment, interest, and
special effort the successful conduct of its operation largely is
dependent.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, as described in Section 1.1 herein, and shall
remain in effect, subject to the right of the Board of Directors
to terminate the Plan at any time pursuant to Article 9 herein,
until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after the tenth
anniversary of the Plan's Effective Date.
ARTICLE 2. Definitions and Construction
2.1 Definitions. Whenever used in the Plan, the following terms
shall have the meanings set forth below and, when the meaning is
intended, the initial letter of the word is capitalized:
(a) "Affiliates" means any corporation (other than a
Subsidiary), partnership, joint venture, or any other entity in
which the Company owns, directly or indirectly, at least a ten
percent (10%) Beneficial Ownership interest.
(b) "Award" means, individually or collectively, a grant
under this Plan of Nonqualified Stock Options, Incentive Stock
Options or Stock Bonuses (including Phantom Stock Bonuses and
Restricted Stock).
(c) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
(d) "Board" or "Board of Directors" means the Board of
Directors of Owens Corning.
(e) "Cause" means a felony conviction of a Participant or the
failure of a Participant to contest prosecution for a felony,
or a Participant's willful misconduct or dishonesty, any of
which is directly and materially harmful to the business or
reputation of the Company, including any Subsidiary, Parent, or
Affiliate.
(f) "Change of Control" of the Company shall be deemed to
have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(i) Any Person (other than the Company, any Company
employee benefit plan (including its trustee), any Person
acting on behalf of the Company in a distribution of stock
to the public, or any entity owned directly or indirectly by
the stockholders (immediately prior to such transaction) of
the Company in substantially the same proportions as their
ownership of the Company) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing fifteen percent (15%) or more of the combined
voting power of the then outstanding securities of the
Company entitled to vote generally in the election of
Directors; or
(ii) The occurrence of any transaction or event relating
to the Company that is required to be reported in response
to the requirements of Item 5(f) of Schedule 13E-3 of
Regulation 13A of the Exchange Act; or
(iii) When, during any period of two (2) consecutive years
during the existence of the Plan, the individuals who, at
the beginning of such period, constitute the Board of
Directors of the Company, cease for any reason other than
death to constitute at least a majority thereof, unless each
Director who was not a Director at the beginning of such
period was elected by, or on the recommendation of, at least
two-thirds of the Directors at the beginning of such period,
provided that any Director elected by or on the
recommendation of at least two-thirds of the Directors at
the beginning of any such two (2) year period shall be
treated as if he or she had been a Director at the beginning
of such period; or
(iv) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity
other than the Company or a Subsidiary through purchase of
assets, or by merger, or otherwise.
(g) "Change-of-Control Price" means the highest price per
Share of Company Common Stock paid in any transaction reported
on the New York Stock Exchange Composite Tape, or paid in any
transaction related to a Potential or actual Change of Control
of the Company at any time during the preceding sixty (60)
calendar day period, as determined by the Committee.
(h) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(i) "Committee" means the committee of two (2) or more
Directors appointed by the Board to administer the Plan, as
further provided in Article 3 herein. When used herein,
"Committee" shall also include any person or persons to whom
the Committee's authority has been lawfully delegated pursuant
to Article 3.
(j) "Company" means Owens Corning, a Delaware corporation,
and any successor thereto as provided in Article 14 herein.
(k) "Director" means any individual who is a member of the
Board of Directors of the Company.
(l) "Disability" or "Disabled" means disability as determined
under the long-term disability program of the Company, a
Subsidiary or Affiliate applicable to the Employee.
(m) ''Employee'' means any employee of the Company or a
Subsidiary, including part time employees and employees who are
represented by a collective bargaining agent with respect to
such employment.
(n) ''Exchange Act'' means the Securities Exchange Act of
1934, as amended from time to time, or any successor Act
thereto.
(o) ''Fair Market Value'' means, as of any given date, (i)
with respect to Incentive Stock Options, the closing sale price
of the Stock on such date on the New York Stock Exchange
Composite Tape; and (ii) with respect to Nonqualified Stock
Options and any other Awards under the Plan not related to
Incentive Stock Options, the closing sale price of the Stock on
such date on the New York Stock Exchange Composite Tape, or, if
(and only if) the Committee in its discretion so specifies, the
average on such date of the closing price of the Stock on each
day on which the Stock is traded over a period of up to 20
trading days immediately prior to such date. However, if the
foregoing method of determining Fair Market Value is not
consistent with any then applicable regulations of the U.S.
Secretary of the Treasury, then Fair Market Value shall be
determined in accordance with those regulations.
(p) ''Incentive Stock Options'' or ''ISO'' means an option to
purchase Shares, granted under Article 6 herein, which the
Committee designates as an Incentive Stock Option and is
intended by the Committee to qualify for the tax treatment
applicable to incentive stock options under Section 422 of the
Code.
(q) ''Insider'' shall mean an Employee whose transactions in
equity securities of the Company are, at the time an Award is
made under this Plan, subject to Section 16 of the Exchange
Act.
(r) ''Nonqualified Stock Option'' or ''NQSO'' means an option
to purchase Shares, granted under Article 6 herein, which is
not intended by the Committee to qualify for the tax treatment
applicable to incentive stock options under Section 422 of the
Code.
(s) ''Option'' or ''Stock Option'' means an Incentive Stock
Option or a Nonqualified Stock Option granted under Article 6
herein.
(t) ''Option Price'' means the price at which a Share may be
purchased by a Participant pursuant to an Option, as determined
by the Committee, and as further described in Section 6.3
herein.
(u) ''Parent'' shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
(v) ''Participant'' means a current or former eligible
Employee who has outstanding an Award granted under the Plan.
(w) ''Period of Restriction'' means the period during which
the transfer of Shares of Restricted Stock is limited in some
way (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares
are subject to a substantial risk of forfeiture, as provided in
Article 7 herein.
(x) ''Person'' shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d)(3) and 14(d)(2) thereof, including a ''group'' as defined
in Section 13(d).
(y) ''Phantom Stock Bonus Award'' means an amount of cash
that is determined by reference to the Fair Market Value of a
designated number of Shares, which is paid to an Employee or
which the Committee agrees to pay to an Employee in the future
in lieu of, or as a supplement to, any other compensation that
may have been earned by services rendered prior to the payment
date, subject to such terms and conditions (if any) as the
Committee may impose. Phantom Stock Bonus Awards are a specific
type of Stock Bonus Award.
(z) ''Potential Change of Control'' of the Company shall mean
the occurrence of one or more of the following:
(i) The entering into an agreement by the Company, the
consummation of which would result in a Change of Control;
or
(ii) The acquisition of Beneficial Ownership, directly or
indirectly, by any Person (other than the Company, any
Company employee benefit plan (including its trustee), any
Person acting on behalf of the Company in a distribution of
stock to the public, or any entity owned directly or
indirectly by the stockholders (immediately prior to the
acquisition) of the Company in substantially the same
proportions as their ownership of the Company) of securities
of the Company representing five percent (5%) or more of the
combined voting power of the Company's then outstanding
securities, and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change of Control
of the Company has occurred for purposes of this Plan.
(aa) ''Restricted Stock'' means an Award granted to a
Participant pursuant to Article 7 herein.
(bb) ''Retirement'' means termination of employment with the
Company, its Subsidiaries and Affiliates at or after attainment
of age 55 with a vested retirement benefit under a pension plan
of the Company, a Subsidiary or Affiliate.
(cc) ''Share(s)'' or ''Stock'' means the Shares of common
stock, $0.10 par value, of Owens Corning.
(dd) ''Stock Bonus Award'' means Shares, or an amount of cash
that is determined by reference to the Fair Market Value of
Shares, which is distributed or paid to an Employee or which
the Committee agrees to distribute or pay in the future in lieu
of, or as a supplement to, any other compensation that may have
been earned by services rendered prior to the distribution or
payment date, subject to such terms and conditions (if any) as
the Committee may impose. The amount of any Stock Bonus Award
payable in Shares may but need not be determined by reference
to the Fair Market Value of Stock. Phantom Stock Bonus Awards
and Restricted Stock Awards are specific types of Stock Bonus
Awards.
(ee) ''Subsidiary'' means any corporation in which the
Company owns, directly or indirectly, at least fifty percent
(50%) of the total combined voting power of all classes of
stock, or any other entity (including, but not limited to,
partnerships and joint ventures) in which the Company owns at
least fifty percent (50%) of the combined equity thereof.
(ff) ''Year'' or ''Plan Year'' means each consecutive twelve
(12) month period beginning January 1 and ending December 31.
2.2 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine, the plural shall include the singular, and the singular
shall include the plural.
2.3 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
ARTICLE 3. Administration
3.1 The Committee. The Plan shall be administered by the
Compensation Committee of the Board, its lawful designee, or by
any other Committee appointed by the Board consisting of not less
than two (2) Directors who are not Employees. Unless the Board
determines otherwise, the Committee shall be comprised exclusively
of Directors who are not Employees and who (i) qualify to
administer the Plan under Rule 16b-3 under the Exchange Act as
such Rule may be in effect from time to time (''SEC Rule 16b-3''),
and (ii) are ''outside directors'' within the meaning of Section
162(m)(4)(C) of the Code. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion
of, the Board of Directors.
3.2 Authority of the Committee. The Committee, including its
designee, shall have full power, subject to the provisions herein,
to select Employees to whom Awards are granted; to determine the
size, types, and frequency of Awards granted hereunder; to
determine the terms and conditions of such Awards in a manner
consistent with the Plan; to establish and administer any
performance goals applicable to awards hereunder and to certify
that any such goals are attained; to construe and interpret the
Plan and any agreement or instrument entered into under the Plan;
to establish, amend, or waive rules and regulations for the Plan's
administration; and to amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are
within the discretion of the Committee as provided in the Plan.
Further, the Committee shall make all other determinations which
may be necessary or advisable for the administration of the Plan.
To the extent permitted by law, and to the extent allowable by SEC
Rule 16b-3, the Committee may delegate its authorities as
identified hereunder.
3.3 Rule 16b-3 Requirements; Code Section 162(m). Any provision
of the Plan to the contrary notwithstanding: (i) the Committee may
impose such conditions on any Award as it may determine, on the
advice of counsel, are necessary or desirable to satisfy any
exemption from Section 16 of the Exchange Act for which the
Company intends transactions by Insiders to qualify, including
without limitation SEC Rule 16b-3; (ii) transactions by or with
respect to Insiders shall comply with any applicable conditions of
SEC Rule 16b-3 unless the Committee determines otherwise; (iii)
transactions with respect to persons whose remuneration would not
be deductible by the Company but for compliance with the
provisions of Section 162(m)(4)(C) of the Code shall conform to
the requirements of Section 162(m)(4)(C) of the Code unless the
Committee determines otherwise; (iv) the Plan is intended to give
the Committee the authority to grant awards that qualify as
performance-based compensation under Code Section 162(m)(4)(C) as
well as awards that do not so qualify; and (v) any provision of
the Plan that would prevent the Committee from exercising the
authority referred to in clause (iv) above or that would prevent
an award that the Committee intends to qualify as performance-
based compensation under Code Section 162(m)(4)(C) from so
qualifying or that would prevent any transaction by or with
respect to an Insider from complying with any applicable condition
of SEC Rule 16b-3 with which the Committee intends such
transaction to comply, or that would prevent any transaction by or
with respect to an Insider from qualifying for any exemption from
Section 16 of the Exchange Act for which the Company intends such
transaction to qualify (including SEC Rule 16b-3), shall be
administered, interpreted and construed to carry out such
intention and any provision that cannot be so administered,
interpreted and construed shall to that extent be disregarded.
3.4 Decisions Binding. All determinations and decisions made by
the Committee pursuant to the provisions of the Plan and all
related orders or resolutions of the Board of Directors shall be
final, conclusive, and binding on all persons, including the
Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
ARTICLE 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in
Section 4.2 herein, the total number of Shares available for grant
under the Plan in each calendar year, during any part of which the
Plan is effective, shall be two percent (2%) of the total
outstanding Shares as of the first day of such calendar year;
provided, however, that Shares not granted in any calendar year
may be carried forward and granted in any of the three immediately
subsequent calendar years (in addition to the new Shares made
available in those years). The maximum number of Shares with
respect to which Options may be granted to any Employee in any
calendar year shall be twenty-five percent (25%) of the total
number of Shares available for grant under the Plan in such
calendar year.
No more than 500,000 Shares may be issued or transferred
pursuant to Incentive Stock Options granted under this Plan. No
more than one-half percent (.5%) of the total outstanding Shares
as of the first day of any calendar year may be granted in that
year in the form of Stock Bonuses (including Phantom Stock Bonuses
and Restricted Stock). However, unused Shares carried forward from
previous years shall retain their character such that this one-
half percent (.5%) limitation shall increase in direct
relationship to those unused Shares reserved for Stock Bonuses in
the prior three years.
The Company may increase the Shares available for Awards in any
calendar year through an advance of up to twenty-five percent
(25%) of the subsequent year's allocation (determined by using
twenty-five percent (25%) of the current year's allocation), with
such Shares retaining their character as to Stock Bonus grant
availability. Any Shares granted hereunder may consist, in whole,
or in part, of authorized and unissued Shares or Treasury Shares
or Shares purchased in the open market or in private transactions
for purposes of the Plan.
4.2 Adjustments in Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, stock split, Share
combination, or other change in the corporate structure of the
Company affecting the Shares, a substitution or adjustment shall
be made in the number and class of Shares which may be delivered
under the Plan, and in the number and class of and/or price of
Shares subject to outstanding Options and Stock Bonus awards
(including any Restricted Stock granted hereunder), as may be
determined to be appropriate and equitable by the Committee, in
its sole discretion, to prevent dilution or enlargement of rights;
and further provided that the number of Shares subject to any
Award shall always be a whole number.
4.3 Charging of Shares. If any Shares subject to an Award or, in
the case of a Phantom Stock Bonus Award, the cash value of any
Shares on which such Award is based, shall not be issued,
transferred or paid to an Employee and shall cease to be issuable,
transferable or payable to an Employee because of the termination,
expiration or cancellation, in whole or in part, of such Award or
for any other reason, or if any such Shares shall, after issuance
or transfer, be reacquired by the Company because of an Employee's
failure to comply with or satisfy the terms and conditions of an
Award, the Shares not so issuable or transferable or, in the case
of a Phantom Stock Bonus Award, the Shares the cash value of which
has ceased to be payable, or the Shares so reacquired by the
Company, as the case may be, shall no longer be charged against
the limitations provided for in section 4.1 above, may again be
made subject to Awards, and shall be added to the number of Shares
available for grant under the Plan in the calendar year in which
the Shares cease to be issuable or transferable, the cash value
ceases to be payable or the Shares are reacquired (as the case may
be).
ARTICLE 5. Eligibility and Participation
5.1 Eligibility. All Employees shall be eligible to be selected
to participate in this Plan, including Employees who are Directors
but excluding Directors who are not Employees.
5.2 Actual Participation. Subject to the provisions of the Plan,
the Committee may, from time to time, select from all eligible
Employees, those to whom Awards shall be granted and shall
determine the nature and amount of each Award. Awards may be made
on a stand-alone basis or in conjunction with other Awards
hereunder. Except as provided otherwise in Section 6.1 below, the
grant of any award may be effective on the date on which the
Committee acts to grant the award or on any earlier or subsequent
date specified by the Committee, and the effective date specified
by the Committee shall be considered the date of grant of the
award for all purposes of this Plan.
ARTICLE 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the
Plan, the Committee may grant Options under this Plan to eligible
Employees at any time and from time to time, whether or not they
are eligible to receive similar or dissimilar incentive
compensation under any other plan or arrangement of the Company.
Options may be granted in the form of ISOs, NQSOs or a combination
thereof. Nothing in this Article 6 shall be deemed to prevent the
grant of NQSOs in excess of the maximum established by Section 422
of the Code. The grant of any option may be effective on the date
on which the Committee acts to grant the option or on any
subsequent date specified by the Committee, and the effective date
specified by the Committee shall be considered the date of grant
of the option for all purposes of this Plan.
6.2 Options to be in Writing. Each Option grant shall be
evidenced in a writing signed by a representative of the Company
duly authorized to do so, that shall specify or incorporate by
reference the Option Price, the duration of the Option, the number
of Shares to which the Option pertains, and such other provisions
as are provided hereunder and any other terms and conditions that
may be imposed by the Committee. The Option instrument also shall
specify whether the Option is an Incentive Stock Option or a
Nonqualified Stock Option.
6.3 Option Price. In no case shall the Option Price of any
Option granted under this Plan be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date the Option
is granted.
6.4 Duration of Options. Each Option shall expire at such time
as determined at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions,
terms and conditions as the Committee shall in each instance
approve, which need not be the same for each grant or for each
Participant. However, except as provided in Article 8 herein, in
no event may any Option granted under this Plan become exercisable
prior to six (6) months following the date of its grant.
Options shall be exercised by the delivery of a written notice
of exercise to the Company, or by giving the Company notice of
such exercise by such other means as the Company may permit in
accordance with applicable law, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied
by full payment.
The Option Price upon exercise of any Option shall be payable to
the Company in full either: (a) in cash or its equivalent; or (b)
by tendering previously acquired Shares having a Fair Market Value
at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender or
for such other period of time, if any, as the Committee may
direct); or (c) by a combination of (a) and (b).
The Option Price shall also be deemed fully paid if and when the
Company receives documentation that it determines satisfies the
cashless exercise provisions of the Federal Reserve Board's
Regulation T, or when the Option Price is paid by any other means
which the Committee determines to be consistent with the Plan's
purpose and applicable law.
As soon as practicable after receipt of notification of exercise
acceptable to the Company and full payment (including tax
withholding requirements, if any, as further provided in Article
12 herein), the Company shall deliver to the Participant, in the
Participant's name, in the name of the Participant and another
person as joint tenants with rights of survivorship, or in nominee
or street name on behalf of the Participant (as the Participant
may direct and the Committee may permit) Share certificates or
brokerage account credit (electronically, via DWAC
(Deposit/Withdrawal As Custodian) in an appropriate amount based
upon the number of Shares purchased under the Option(s).
6.6 Restrictions. At the time of grant, restrictions may be
imposed on any Shares acquired pursuant to the exercise of an
Option under the Plan, including, without limitation, restrictions
under applicable Federal securities laws, under the requirements
of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities
laws applicable to such Shares.
6.7 Termination of Employment Due to Death, Disability, or
Retirement.
(a) Termination by Death. In the event the employment of a
participant with the Company and its Subsidiaries is terminated by
reason of death, any outstanding Options may thereafter be
immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Committee shall determine at or after
grant), by the legal representative of the estate or by the
legatee of the optionee under the will of the optionee, for a
period of three years and six months (or such shorter period as
the Committee shall specify at or after grant) from the date of
such death or until the expiration of the stated term of such
Option, whichever period is shorter.
(b) Termination by Disability. If a Participant's employment
with the Company and its Subsidiaries terminates by reason of
Disability, any Stock Option held by such Participant may
thereafter be exercised, to the extent it was exercisable at the
time of termination due to Disability (or on such accelerated
basis as the Committee shall determine at or after grant), but may
not be exercised after (i) three years and six months (or such
shorter period as the Committee shall specify at or after grant)
from the date of such termination of employment, or (ii) the
expiration of the stated term of such Stock Option, whichever
period is shorter; provided, however, that, if the Participant
dies within such three-year-and-six-month period (or such shorter
period as the Committee shall specify at or after grant), any
unexercised Stock Option held by such Participant shall thereafter
be exercisable to the extent to which it was exercisable at the
time of death for a period of twelve months (or such shorter
period as the Committee shall specify at or after grant) from the
date of such death or for the stated term of such Stock Option,
whichever period is shorter. If an Incentive Stock Option is
exercised after the expiration of the exercise periods that apply
for purposes of Section 422 of the Code, such Stock Option shall
thereafter be treated as a Nonqualified Stock Option.
(c) Termination by Retirement. If a Participant's employment
with the Company and its Subsidiaries is terminated by reason of
Retirement, any Stock Option held by such Participant may
thereafter be exercised to the extent it was exercisable at the
time of such Retirement (or on such accelerated basis as the
Committee shall determine at or after grant), but may not be
exercised after five years (or such shorter period as the
Committee shall specify at or after grant) from the date of such
termination of employment or the expiration of the stated term of
such Stock Option, whichever period is shorter; provided, however,
that, if the Participant dies within such five year period (or
such shorter period as the Committee may specify at or after
grant), any unexercised Stock Option held by such Participant
shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for the shorter of (i) and (ii)
where (i) is a period of twelve months (or such shorter period as
the Committee shall specify at or after grant) from the date of
such death or, if longer, the remainder of such five year (or
shorter) period from the date of such termination of employment,
and (ii) is the expiration of the stated term of the Stock Option.
In the event of termination of employment by reason of Retirement,
if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option shall thereafter be treated as a
Nonqualified Stock Option.
6.8 Termination of Employment for Other Reasons. Unless
otherwise determined by the Committee at or after grant, if a
Participant's employment with the Company and its Subsidiaries
terminates voluntarily (other than by reason of Retirement or
under circumstances constituting Cause), the Stock Option shall
thereupon terminate, except that such Stock Option may be
exercised to the extent it was exercisable at the time of
termination of employment for the lesser of one year (or such
shorter period as the Committee may specify at or after grant)
from the date of employment termination or the balance of such
Stock Option's term. If a Participant's employment with the
Company and its Subsidiaries is involuntarily terminated by the
Company without Cause, the Option shall thereupon terminate,
except that it may thereafter be exercised to the extent it was
exercisable at the time of termination of employment (or on such
accelerated basis as the Committee shall determine at or after
grant) for the lesser of five years (or such shorter period as the
Committee may specify at or after grant) from the date of
employment termination or the balance of such Stock Option's term.
If the employment of a Participant shall terminate for Cause,
all outstanding Options held by the Participant immediately shall
be forfeited to the Company and no additional exercise period
shall be allowed, regardless of the vested status of the Options.
6.9 Nontransferability of Options. No Option granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all Options granted to a
Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant. Notwithstanding the foregoing
and any other provision of the Plan to the contrary, if the
Committee so permits, Options may be transferred (i) by a
Participant who is a member of a group of Participants
specifically designated by the Committee as eligible to transfer
Options pursuant to such uniform guidelines as the Committee may
establish for this purpose from time to time, or (ii) following
the death of a Participant, to a beneficiary designated by the
Participant in accordance with Article 10 below.
ARTICLE 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and
provisions of the Plan, Restricted Stock may be granted to
eligible Employees at any time and from time to time, whether or
not they are eligible to receive similar or dissimilar incentive
compensation under any other plan or arrangement of the Company.
The purchase price for Shares of Restricted Stock shall be equal
to their par value per Share.
7.2 Restricted Stock Agreement. Each Restricted Stock grant
shall be evidenced by a Restricted Stock Agreement that shall
specify the Period of Restriction, or Periods, the number of
Restricted Stock Shares granted, and such other provisions as
provided hereunder or as the Committee may impose.
7.3 Nontransferability of Restricted Stock. Except as provided
in this Article 7, the Shares of Restricted Stock granted
hereunder may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the
applicable Period of Restriction as specified in the Restricted
Stock Agreement and the satisfaction of any conditions determined
at the time of grant and specified in the Restricted Stock
Agreement. However, except as provided in Article 8 herein, in no
event may any Restricted Stock granted under the Plan become
vested in a Participant prior to six (6) months following the date
of its grant. All rights with respect to the Restricted Stock
granted to a Participant under the Plan shall be available during
his or her lifetime only to such Participant.
7.4 Other Restrictions. The Committee shall impose such other
restrictions on any Shares of Restricted Stock granted pursuant to
the Plan as it may deem advisable including, without limitation, a
required purchase price imposed upon Participants, restrictions
based upon the achievement of specific performance goals (Company-
wide, divisional, and/or individual), and/or restrictions under
applicable Federal or state securities laws; and may legend the
certificates representing Restricted Stock to give appropriate
notice of such restrictions. Further, the Committee at its
discretion, may require that the Shares evidencing such Restricted
Stock grants be held in custody by the Company until any or all
restrictions thereon shall have lapsed.
7.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 7.4 herein, each certificate
representing Shares of Restricted Stock granted pursuant to the
Plan shall bear the following legend:
"The sale or other transfer of the Shares of Stock
represented by this certificate, whether voluntary,
involuntary, or by operation of law, is subject to certain
restrictions on transfer as set forth in the Owens Corning
Stock Performance Incentive Plan, and in the related Restricted
Stock Agreement. A copy of the Plan and such Restricted Stock
Agreement may be obtained from the Secretary of Owens Corning."
7.6 Removal of Restrictions. Except as otherwise provided in
this Article 7, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the Period
of Restriction, provided the applicable conditions to vesting of
such Shares have been fulfilled. Once the Shares are released from
the restrictions, the Participant shall be entitled to have the
legend required by Section 7.5 removed from his or her Share
certificate.
7.7 Voting Rights. During the Period of Restriction and prior to
any forfeiture of the Shares, Participants holding Shares of
Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
7.8 Dividends and Other Distributions. During the Period of
Restriction and prior to any forfeiture of the Shares,
Participants holding Shares of Restricted Stock granted hereunder
shall be entitled to receive all dividends and other distributions
paid with respect to those Shares while they are so held. If any
such dividends or distributions are paid in Shares, the Shares
shall be subject to the same restrictions on transferability and
forfeitability as the Shares of Restricted Stock with respect to
which they were paid.
7.9 Termination of Employment. The Committee may but need not
provide at or after the grant of Restricted Stock for the
restrictions on all or any designated portion of the Shares of
Restricted Stock to lapse in the event of death, Disability,
Retirement or other designated termination of employment.
ARTICLE 7A. Stock Bonuses
7A.1 Except as otherwise provided in section 15.3, Stock Bonus
Awards shall be subject to the following provisions:
(a) An eligible Employee may be granted a Stock Bonus Award
whether or not he is eligible to receive similar or dissimilar
incentive compensation under any other plan or arrangement of
the Company.
(b) Shares subject to a Stock Bonus Award (other than a
Phantom Stock Bonus Award) may be issued or transferred to an
Employee, and the cash value of the Shares on which a Phantom
Stock Bonus Award is based may be paid to an Employee, at the
time such Award is granted, or at any time subsequent thereto,
or in installments from time to time, and subject to such terms
and conditions, as the Committee shall determine. In the event
that any such issuance, transfer or payment shall not be made
to the Employee at the time such Award is granted, the
Committee may but need not provide for payment to such
Employee, either in cash or Shares, from time to time or at the
time or times such Shares shall be issued or transferred or
cash shall be paid to such Employee, of amounts not exceeding
the dividends which would have been payable to such Employee in
respect of such Shares (as adjusted under section 4.2) if such
Shares had been issued or transferred to such Employee at the
time such Award was granted.
(c) Any Stock Bonus Award may, in the discretion of the
Committee, be settled in cash, on each date on which Shares
would otherwise have been delivered or become unrestricted, in
an amount equal to the Fair Market Value on such date of the
Shares which would otherwise have been delivered or become
unrestricted. A Phantom Stock Bonus Award shall be payable only
in the form of cash. Subject to Section 4.3 above, the Shares
subject to a Stock Bonus Award (including a Phantom Stock Bonus
Award) shall be deducted from the number of Shares available
for grant under the Plan, whether the Award is settled in the
form of cash or Shares.
(d) Stock Bonus Awards shall be subject to such terms and
conditions, including, without limitation, restrictions on the
sale or other disposition of any Shares to be issued or
transferred pursuant to such Award, and conditions calling for
forfeiture of the Award or the Shares issued or transferred or
cash paid pursuant thereto in designated circumstances, as the
Committee shall determine; provided, however, that upon the
issuance or transfer of Shares to an Employee pursuant to any
such Award, the recipient shall, with respect to such Shares,
be and become a shareholder of the Company fully entitled to
receive dividends, to vote and to exercise all other rights of
a stockholder except to the extent otherwise provided in the
Award. All or any portion of a Stock Bonus Award may but need
not be made in the form of a Restricted Stock Award or a
Phantom Stock Bonus Award.
(e) Each Stock Bonus Award shall be evidenced in a writing,
signed by a representative of the Company duly authorized to do
so, which shall be consistent with and subject to this Plan.
ARTICLE 8. Change of Control
8.1 Acceleration and Cashout. Subject to the provisions of
Section 8.2 herein, upon the occurrence of a Change of Control of
the Company, or, if and to the extent so determined by the
Committee in writing at or after grant (subject to any right of
approval expressly reserved by the Committee at the time of such
determination), in the event of a Potential Change of Control of
the Company, unless specifically prohibited by the terms of
Article 15 herein:
(a) Any Stock Options awarded under the Plan immediately
shall become fully vested and exercisable;
(b) Any restrictions and other conditions pertaining to
outstanding Stock Bonuses (including Phantom Stock Bonuses and
Restricted Stock), including but not limited to vesting
requirements, immediately shall lapse; and
(c) The value of all outstanding Stock Options and Stock
Bonuses (including Phantom Stock Bonuses and Restricted Stock)
shall, to the extent determined by the Committee at or after
grant, be cashed out by the Company on the basis of the Change-
of-Control Price (or, in the case of Incentive Stock Options,
Fair Market Value) as of the date the Change of Control occurs,
or Potential Change of Control is determined to have occurred,
or such other date as the Committee may determine prior to the
occurrence of the Change of Control or Potential Change of
Control.
Notwithstanding the foregoing provisions of this Section 8.1, the
Committee may determine, in its sole discretion, that no Change of
Control or Potential Change of Control shall be deemed to have
occurred with respect to a Participant (i) by reason of any
actions or events (''Interested Actions'') in which the
Participant acts in a capacity other than as a director, officer
or employee of the Company (or a Subsidiary or Affiliate, where
applicable), or (ii) with respect to any such action or event
occurring within 90 days following the public announcement of any
Interested Actions, regardless of whether the Participant is
interested in such action or event.
8.2 Award Replacement. Notwithstanding Section 8.1 herein, no
acceleration of vesting and exercisability, nor lapse of
restrictions and other conditions, nor cashout shall occur
(pursuant to Sections 8.1(a), (b), and (c) herein) for outstanding
Awards granted hereunder if the Committee reasonably determines in
good faith, prior to the Change of Control or Potential Change of
Control, that such Awards shall be honored or assumed, or new
rights substituted therefor (such honored, assumed, or substituted
award hereinafter called an ''Alternative Award'') by a
Participant's employer (or the parent or a subsidiary of such
employer) simultaneous with or immediately following the Change of
Control or Potential Change of Control, provided, however, that
any such Alternative Award must:
(a) In the event of Stock Options and Stock Bonuses:
(i) Be based on stock which is traded on an established
securities market, or which will be so traded within thirty
(30) days of the Change of Control or Potential Change of
Control; or
(ii) Have a value based directly upon an objective
standard of valuation (including, but not limited to, a
publicly reported stock index) acceptable to the Committee
under the circumstances and provide each Participant,
subject to requirements as to vesting or lapse of
restrictions, with an opportunity to put the Shares or other
securities covered by the Award to his or her employer (or
the parent, general partner, or a subsidiary of such
employer) for purchase with payment to be made in cash
within ten (10) business days of receipt of such employee's
put;
(b) For all Awards:
(i) Provide such Participant (or each Participant in a
class of Participants) with rights and entitlements
substantially equivalent to or better than the rights,
terms, and conditions applicable under such Awards,
including, but not limited to, an identical or better
vesting schedule and identical or better timing and methods
of payment;
(ii) Have substantially equivalent economic value to such
Awards (determined at the time of the Change of Control or
Potential Change of Control);
(iii) Have terms and conditions which provide that in the
event the Participant's employment is involuntarily
terminated without Cause or constructively terminated:
(A) Any conditions on a Participant's rights under, or
any restrictions on transfer or exercisability applicable
to, each such Alternative Award shall be waived or shall
lapse, as the case may be; and
(B) Each Participant shall have the right to surrender
such Alternative Awards within thirty (30) days following
such termination in exchange for a payment in cash equal
to the excess of the Fair Market Value of the stock
subject to the Alternative Award over the price, if any,
that a Participant would be required to pay to exercise
such Alternative Award.
For this purpose, a constructive termination shall mean a
termination by a Participant following a material reduction in the
Participant's compensation, a reduction in the Participant's
responsibilities, or the relocation of the Participant's principal
place of employment to another location, in each case without the
Participant's advance written consent.
8.3 Excise Tax Reimbursement. In the event that any
accelerations, lapse of restrictions, cashouts, Award
replacements, and/or any other event under this Plan will cause a
Participant to be subject to the tax (the ''Excise Tax'') imposed
by Section 4999 of the Code (or any similar tax that may hereafter
be imposed), the Company shall pay to the Participant at the time
specified below an additional amount (the ''Gross-up Payment'')
such that the net amount retained by the Participant, after
deduction of any Excise Tax on the Total Payments (as hereinafter
defined) and any Federal, state, and local income tax and Excise
Tax upon the Gross-up Payment provided for by this Section 8.3,
but before deduction for any Federal, state, or local income tax
on the Total Payments, shall be equal to the Total Payments.
For purposes of determining whether any Participant will be
subject to the Excise Tax and the amount of such Excise Tax:
(a) Any other payments or benefits received or to be received
by a Participant in connection with a Change of Control of the
Company or a Participant's termination of employment (whether
pursuant to the terms of this Plan or any other plan,
arrangement, or agreement with the Company, any Person whose
actions result in a Change of Control of the Company or any
Person affiliated with the Company or such Person) (which
together with the benefits and/or payments provided hereunder,
shall constitute the ''Total Payments'') shall be treated as
''parachute payments'' within the meaning of Section 280G(b)(2)
of the Code, and all ''excess parachute payments'' within the
meaning of Section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax unless, in the opinion of tax counsel
selected by the Committee, such other payments or benefits (in
whole or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the
Code or are otherwise not subject to the Excise Tax;
(b) The amount of the total Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of:
(A) the total amount of the Total Payments; or (B) the amount
of excess parachute payments within the meaning of Section
280G(b)(1) of the Code (after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Section
280G(d)(3) of the Code.
For purposes of determining the amount of the Gross-Up Payment, a
Participant shall be deemed to pay Federal income taxes at the
highest marginal rate of Federal income taxation for the calendar
year in which the Gross-Up Payment is to be made and the
applicable state and local income taxes at the highest marginal
rate of taxation for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state
and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder
at the time the Gross-Up Payment is made, a Participant shall
repay to the Company at the time that the amount of such reduction
in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and Federal, state
and local income tax imposed on the portion of the Gross-Up
Payment being repaid by a Participant if such repayment results in
a reduction in Excise Tax and/or a Federal, state, and local
income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time the Gross-Up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest payable with respect
to such excess) at the time that the amount of such excess is
finally determined.
The Gross-Up Payment or portion thereof provided for in this
Section 8.3 shall be paid no later than the thirtieth (30th)
calendar day following payment of any amounts under this section,
provided, however, that if the amount of such Gross-Up Payment or
portion thereof cannot be finally determined on or before such
day, the Company shall pay to a Participant on such day an
estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of
such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined, but in no event later than the forty-fifth
(45th) calendar day after payment of any amounts under this
Section 8.3. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to each
Participant, payable on the fifth (5th) calendar day after demand
by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
ARTICLE 9. Amendment, Modification and Termination
9.1 Amendment and Termination. The Board, the Committee, or its
lawful designee may, at any time and from time to time, amend or
modify the Plan in any respect without stockholder approval,
unless stockholder approval of the amendment or modification in
question is required under Delaware law, the Code (including
without limitation Code section 162(m)(4) and Code Section 422 and
Treasury regulations issued or proposed thereunder), any
applicable exemption from Section 16 of the Exchange Act
(including without limitation SEC Rule 16b-3) for which the
Company intends transactions by Insiders to qualify, any national
securities exchange or system on which the Stock is then listed or
reported, by any regulatory body having jurisdiction with respect
to the Plan, or under any other applicable laws, rules or
regulations. The Board may also terminate the Plan at any time.
The Committee may amend the terms of any Award granted under the
Plan, prospectively or retroactively, but no such amendment shall
impair the rights of any Participant without such Participant's
consent.
9.2 Awards Previously Granted. No termination, amendment or
modification of the Plan shall in any manner adversely affect any
Award previously granted under the Plan, without the written
consent of the Participant holding such Award
ARTICLE 10. Beneficiary Designation
The Committee may (but need not) permit a Participant, from time
to time and subject to such terms and conditions as it may impose,
to name a beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan
is to be paid in case of his or her death before he or she
receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in
a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Human Resource
Department of the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at
the Participant's death shall be paid to the Participant's estate.
ARTICLE 11. Rights of Employees; Other Plans and Arrangements
11.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any
Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company.
For purposes of the Plan, transfer of employment of a
Participant between the Company and any one of its Subsidiaries or
Affiliates (or between Subsidiaries and Affiliates) shall not be
deemed a termination of employment.
11.2 Participation. No Employee shall have the right to be
selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
11.3 Transferability Restriction. Any derivative security issued
under this Plan (within the meaning of SEC Rule 16b-3(a)(2)) is
not transferable by the participant other than by will or the laws
of descent and distribution. Notwithstanding the foregoing and any
other provision of the Plan to the contrary, if the Committee so
permits, an award under this Plan may be transferred (i) by a
Participant who is a member of a group of Participants
specifically designated by the Committee as eligible to transfer
Options pursuant to such uniform guidelines as the Committee may
establish for this purpose from time to time, or (ii) following
the death of a Participant, to a beneficiary designated by the
Participant in accordance with Article 10 above.
11.4 Other Plans and Arrangements. Nothing in this Plan is
intended to be a substitute for, or shall preclude or limit the
establishment or continuation of, any other plan, practice or
arrangement for the payment of compensation or fringe benefits to
directors, officers, or employees generally, or to any class or
group of such persons, which the Company or any Subsidiary now has
or may hereafter lawfully put into effect, including, without
limitation, any incentive compensation, retirement, pension, group
insurance, restricted stock, stock purchase, stock bonus, stock
incentive or stock option plan.
ARTICLE 12. Withholding
12.1 Tax Withholding. A Participant shall remit to the Company
an amount sufficient to satisfy any taxes the Company determines
are required by law to be withheld with respect to any grant,
exercise, or payment made under or as a result of this Plan.
12.2 Share Withholding. With respect to withholding required
upon the exercise of Options, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event hereunder, the
Committee may permit or require Participants, subject to such
terms and conditions as it may impose, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be
determined equal to the maximum marginal total tax which could be
imposed on the transaction or such greater or lesser amount as the
Committee may permit. If the Committee so provides, such Shares
withheld may be already owned Shares which the Participant tenders
in satisfaction of the withholding requirement or Shares issuable
by the Company in connection with the exercise of Options, the
lapse of restrictions on Restricted Stock or the other taxable
event hereunder, or Shares from any other source.
ARTICLE 13. Indemnification
No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee
and each and any officer or employee of the Company acting on
their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such
action, determination or interpretation.
ARTICLE 14. Successors
All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of
a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or
assets of the Company.
ARTICLE 15. Requirements of Law
15.1 Requirements of Law. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges, as the
Company may determine apply.
15.2 Governing Law. To the extent not preempted by Federal law,
the Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Delaware,
without reference to the principles of conflicts of laws of that
State.
15.3 Non-U.S. Laws. In the event the laws of a foreign country,
in which the Company, a Subsidiary or Affiliate has Employees,
prescribe certain requirements for stock incentives to qualify for
advantageous treatment under the tax or other laws or regulations
of that country, the proper officers of the Company, may restate,
in whole or in part, this Plan and may include in such restatement
additional provisions for the purpose of qualifying the restated
plan and stock incentives granted thereunder under such laws and
regulations; provided, however, that (a) the terms and conditions
of any stock-based incentive granted under such restated plan may
not be more favorable to the recipient than would be permitted if
such stock-based incentive had been granted under the Plan as
herein set forth, (b) all Shares allocated to or utilized for the
purposes of such restated plan shall be subject to the limitations
of Article 4, and (c) the provisions of the restated plan may give
the Board less but not more discretion to amend or terminate such
restated plan than is provided with respect to this Plan by the
provisions of Article 9 hereof
Exhibit 10
KEY MANAGEMENT SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made as of
November 24, 1998 by and between OWENS CORNING, a Delaware
corporation (the "Company"), and Maura J. Abeln, an officer of the
Company ("Executive").
WHEREAS the Compensation Committee of the Board of Directors
of the Company (the "Committee") has approved a severance
agreement to provide Executive with certain protections and to
conform the terms of such agreement to the current policy of the
Company regarding an officer's entitlement to pay, benefits and
privileges on the termination of his employment;
NOW THEREFORE, the parties hereto agree as follows:
1. Termination Absent a Change of Control.
a) If, prior to a Change of Control (as defined in paragraph
7(c) below), (i) the Company terminates Executive's employment for
any reason other than Permanent Total Disability or Cause (as
defined in paragraphs 7(e) and 7(b)(1)&(2), respectively, below),
or (ii) Executive voluntarily terminates her employment under
circumstances involving a Constructive Termination (as defined in
paragraph 7(d), below), Executive will be entitled to the
following compensation, provided that Executive executes a Release
and Non-Competition Agreement satisfactory to the Company:
1) Base salary earned and as yet unpaid through the effective
date of termination; and
2) Two years' Base Pay (as defined in paragraph 7(a) below); and
3) Two times Executive's Separation Incentive Payment (as
defined in paragraph 7(f) below); and
4) Incentive Pay as yet unpaid from the prior fiscal year and
Incentive Pay for the fiscal year of termination, prorated for the
period of Executive's actual employment prior to termination; and
5) Executive's vested Cash Balance Pension Benefit plus an
amount equal to the present value of the additional vested pension
benefits payable to Executive in accordance with the Company's
Supplemental Executive Retirement Plan (the "SERP"), as approved
by the Compensation Committee of the Board of Directors on
December 11, 1997 and referenced in the November 24, 1998 letter
from Glen Hiner, a copy of which is appended to this Agreement.
Executive's regular, vested pension earnings will not be increased
by compensation paid under the SERP.
b) If, prior to a Change of Control, the Company terminates
Executive's employment for Cause (as defined in paragraph 7(b)(3),
below), Executive will only be entitled to base salary earned and
as yet unpaid through the effective date of termination and
Executive's vested Cash Balance and vested SERP Pension Benefits,
UNLESS, (i) the Company exercises its discretion to award
Executive (in addition to the aforementioned base salary and
vested pension amounts) some portion of the following
compensation, based on effort expended and results obtained to
date and (ii) Executive executes a Release and Non-Competition
Agreement satisfactory to the Company:
1) Up to but no more than Twelve months' Base Pay (as defined in
paragraph 7(a) below); and
2) Up to but no more than One times Executive's Separation
Incentive Payment (as defined in paragraph 7(f) below); and
3) Up to but no more than the amount of Incentive Pay as yet
unpaid from the prior fiscal year.
c) The compensation payable under paragraph 1(a) or 1(b), above,
shall be paid as soon as practicable after Executive signs,
returns and does not revoke the requisite Release and Non-
Competition Agreement.
d) In the event of a termination of Executive's employment under
the circumstances described in paragraph 1(a) above:
1) All stock options previously awarded to Executive shall, to
the extent not already vested, immediately vest, and shall be
exercisable (subject to applicable blackout restrictions) for up
to six months following the date of termination or the original
expiration date, whichever is sooner.
2) All shares of restricted stock previously awarded to
Executive shall, to the extent not already vested, immediately
vest and be payable.
3) All outstanding but unearned performance shares shall be
forfeited.
4) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of
termination under any non-qualified deferred compensation plan or
arrangement shall immediately vest and be payable, to the extent
permissible under the terms of such plan or arrangement.
e) In the event of a termination of Executive's employment under
the circumstances described in paragraph 1(b) above:
1) All stock options previously awarded to Executive which are
exercisable on the date of termination shall be exercisable
(subject to applicable blackout restrictions) for up to six months
following the date of termination or the original expiration date,
whichever is sooner.
2) All unvested shares of restricted stock and all outstanding
but unearned performance shares previously awarded to Executive
shall be forfeited.
3) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued and vested through the date
of termination under any non-qualified deferred compensation plan
or arrangement shall be payable, to the extent permissible under
the terms of such plan or arrangement.
f) If Executive's employment ends under circumstances described
in paragraph 1(a) above as a result of the sale by the Company of
a business unit, division or facility, payments will be made under
this paragraph 1 only if Executive is not offered a substantially
equivalent position with the Company or with the new owner of the
business (without regard to whether Executive accepts such a
position). If Executive receives and accepts a suitable offer
from the new owner of the business and is subsequently terminated
within one year of the closing date of the sale under
circumstances that would result in payment of benefits under this
paragraph 1(a), Executive will be treated as though she had been
terminated by the Company and receive the payments provided for in
this Agreement, less any amounts or benefits provided by the new
owner in connection with Executive's termination.
2. Termination On or After a Change of Control.
a) If, within a two-year period after a Change of Control, (i)
the Company (or any successor) terminates Executive's employment
for any reason other than Permanent Total Disability or Cause (as
defined in paragraphs 7(e) and 7(b)(1)&(2), respectively, below),
or (ii) Executive voluntarily terminates her employment under
circumstances involving a Constructive Termination, Executive will
be entitled to the following compensation, provided that Executive
executes a Release and Non-Competition Agreement satisfactory to
the Company:
1) Base salary earned and as yet unpaid through the effective
date of termination; and
2) Two years' Base Pay; and
3) Two times Executive's Separation Incentive Payment; and
4) Incentive Pay as yet unpaid from the prior fiscal year and
Target Level Incentive Pay (as defined in paragraph 7(h) below)
for the fiscal year of termination, prorated for the period of
Executive's actual employment prior to termination; and
5) Executive's vested Cash Balance Pension Benefit plus an
amount equal to the present value of the additional vested pension
benefits payable to Executive in accordance with the Company's
Supplemental Executive Retirement Plan (the "SERP"), as approved
by the Compensation Committee of the Board of Directors on
December 11, 1997 and referenced in the November 24, 1998 letter
from Glen Hiner, a copy of which is appended to this Agreement.
Executive's regular, vested pension earnings will not be increased
by compensation paid under the SERP.
b) If, within a two-year period after a Change of Control, the
Company (or any successor) terminates Executive's employment for
Cause (as defined in paragraph 7(b)(3), below, Executive will only
be entitled to base salary earned and as yet unpaid through the
effective date of termination and Executive's vested Cash Balance
and vested SERP Pension Benefits, UNLESS, (i) the Company
exercises its discretion to award Executive (in addition to the
aforementioned base salary and vested pension amounts) some
portion of the following compensation, based on effort expended
and results obtained to date and (ii) Executive executes a Release
and Non-Competition Agreement satisfactory to the Company:
1) Up to but no more than Twelve months' Base Pay (as defined in
paragraph 7(a) below); and
2) Up to but no more than One times Executive's Separation
Incentive Payment (as defined in paragraph 7(f) below); and
3) Up to but no more than the amount of Incentive Pay as yet
unpaid from the prior fiscal year.
c) The compensation payable under paragraphs 2(a) or 2(b),
above, will be paid as soon as practicable after Executive signs,
returns and does not revoke the requisite Release and Non-
Competition Agreement.
d) In the event of a termination of Executive's employment under
the circumstances described in paragraph 2(a) above:
1) All stock options previously awarded to Executive shall, to
the extent not already vested, immediately vest, and shall be
exercisable (subject to applicable blackout restrictions) for up
to six months following the date of termination or the original
expiration date, whichever is sooner.
2) All shares of restricted stock previously awarded to
Executive shall, to the extent not already vested, immediately
vest and be payable.
3) All outstanding but unearned performance shares shall be
forfeited.
4) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of
termination under any non-qualified deferred compensation plan or
arrangement shall immediately vest and be payable, to the extent
permissible under the terms of such plan or arrangement.
e) In the event of a termination of Executive's employment under
the circumstances described in paragraph 2(b) above:
1) All stock options previously awarded to Executive which are
exercisable on the date of termination shall be exercisable
(subject to applicable blackout restrictions) for up to six months
following the date of termination or the original expiration date,
whichever is sooner.
2) All unvested shares of restricted stock and all outstanding
but unearned performance shares previously awarded to Executive
shall be forfeited.
3) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued and vested through the date
of termination under any non-qualified deferred compensation plan
or arrangement shall be payable, to the extent permissible under
the terms of such plan or arrangement.
f) The Compensation Committee of the Board of Directors, in its
sole discretion, may determine that no Change of Control or
Potential Change of Control shall be deemed to have occurred with
respect to any Executive who, in connection with a Change of
Control or Potential Change of Control, acts in a capacity other
than in their capacity as an employee of the Corporation, its
subsidiaries or affiliates or otherwise fails to act in the
Company's best interests with respect to said Change of Control.
3. Termination For Other Reasons. If Executive voluntarily
terminates her employment (including by reason of retirement)
other than as provided in paragraph 1(a) or 2(a) above, or if
Executive's employment terminates due to death or Permanent Total
Disability, Executive shall not be entitled to any benefits under
this Agreement, but shall be entitled to any other benefits to
which she is otherwise entitled under the terms of any employee
benefit plans or arrangements of the Company.
4. Continuation of Insurance Benefits. In the event Executive's
employment terminates under the circumstances described in
paragraph 1(a) or 2(a) of this Agreement, the Company will
continue Executive's participation and coverage for a period of
two years (the "Severance Period") from Executive's last day of
employment with the Company under all the Company's life, medical
and dental plans ("Insurance Benefits"), in which Executive is
participating immediately prior to such employment termination,
subject to the Company's right to modify the terms of the plans or
arrangements providing these benefits. If Executive is employed by
another entity during the Severance Period, the Company will be a
secondary obligor only with respect to medical and dental
Insurance Benefits.
5. Non-Duplication of Benefits. Any compensation or benefits
payable under the terms of this Agreement will be offset and not
augmented by other compensation or benefits of the same or similar
type payable under any existing plan or agreement of the Company
or any other arrangement between Executive and the Company
covering the Executive (including, but not limited to, any Company
severance policy and the Company's Annual Incentive Plan). It is
intended that this Agreement not duplicate benefits Executive is
entitled to under the Company's regular severance policy, any
related policies, or any other contracts, agreements or
arrangements between Executive and the Company.
6. Term. This Agreement shall be effective from the date hereof
throughout Executive's term of employment as an officer of the
Company, but shall expire and be of no effect immediately after
the second anniversary of a Change of Control.
7. Certain Defined Terms. As used herein, the following terms
shall have the following meanings:
a) "Base Pay" shall mean the greater of the annual salary paid
to Executive as of the date of termination of her employment or
the date of the Change of Control, as the case may be,
notwithstanding any pay reduction that may be related to a
Constructive Termination.
b) "Cause" shall mean:
1) conviction of any felony or failure to contest prosecution
for a felony; or
2) willful misconduct or dishonesty which is directly and
materially harmful to the business or reputation of the Company;
or
3) willful or continued failure to substantially perform her
duties as an executive of the Company, other than as a result of
total or partial incapacity due to physical or mental illness
(abuse of alcohol, drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph), unless within three to six months after written notice
has been provided to Executive by the Company, Executive cures
such willful or continued failure to perform.
c) "Change of Control" shall mean:
1) the holders of the voting securities of the Company shall
have approved a merger or consolidation of the Company with any
other entity, unless the proposed merger or consolidation would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, where such merger or consolidation is, in fact,
consummated;
2) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall
have approved an agreement for the sale or disposition by the
Company (in one transaction or a series of transactions) of all or
substantially all of the Company's assets;
3) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "1934 Act")
shall become the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 15% or more of the
combined voting power of the Company's then outstanding shares;
4) during any period of two consecutive years, members who at
the beginning of such period constituted the Board shall have
ceased for any reason to constitute a majority thereof, unless the
election, or nomination for election by the Company's
stockholders, of each director shall have been approved by the
vote of at least two-thirds of the directors then still in office
and who were directors at the beginning of such period (so long as
such director was not nominated by a person who has expressed an
intent to effect a Change of Control or engage in a proxy or other
control contest); or
5) the occurrence of any other change of control of a nature
that would be required to be reported in accordance with Form 8-K
pursuant to Sections 13 or 15(d) of the 1934 Act or in the
Company's proxy statement in accordance with Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or in any successor
forms or regulations to the same effect.
d) A "Constructive Termination" shall be deemed to have occurred
only if:
1) prior to a Change of Control: Executive's Base Pay is
reduced without her written consent; or
2) on or within a two-year period after a Change of Control: (A)
Executive's Base Pay or annual incentive pay opportunity is
reduced without her written consent; (B) Executive is required by
the Company without her written consent to relocate to a new place
of business that is more than fifty miles from Executive's place
of business prior to the Change of Control (or the Company
mandates a substantial increase in the amount of required business
travel); or (C) there is a material adverse change in Executive's
duties or responsibilities in comparison to the duties or
responsibilities which Executive had prior to the Change of
Control.
e) "Permanent Total Disability" shall be deemed to have occurred
if, at the end of any month Executive then is, and has been, for
eighteen (18) consecutive calendar months then ending, unable to
perform her duties in the normal and regular manner due to mental
or physical illness or injury. Any determination of such
inability to perform shall be made by the Company in good faith.
f) "Separation Incentive Payment" shall be the greater of (i)
Executive's average payments under the Company's normal, annual
Corporate Incentive Plan (CIP) for the three years immediately
preceding the year of termination (or annualized for such shorter
period as Executive may have been employed by the Company), or
(ii) one-half of Executive's average participating salary under
such Plan for the three years immediately preceding the year of
termination (or annualized for such shorter period as Executive
may have been employed by the Company).
g) "Participating Salary" is the product of Executive's total
base salary paid during any given incentive year, multiplied by
Executive's incentive pay percentage, at maximum funding.
h) "Target Level Incentive" shall be the greater of (i) one-half
of Executive's participating salary under the Company's Annual
Incentive Plan for the year of termination, or (ii) the payment
Executive would have received under such Plan for the year of
termination based on projected corporate performance for such year
as determined by the Committee in its sole discretion at the time
of the Change of Control.
8. Outplacement Assistance. The Company will arrange
outplacement assistance for Executive, to be provided by a
mutually agreed-upon firm engaged in said business. Such
assistance shall continue for up to one year following Executive's
termination or until such time as suitable employment is attained,
whichever is sooner. Outplacement costs incurred in this
connection will be borne by the Company, but will not include
costs of travel to/from the outplacement firm or in connection
with job interviews, etc. For up to six months following
Executive's termination, the Company will also make available
reasonable office space and administrative and communication
services for Executive's use in seeking suitable employment. In
no event will the Company pay Executive in lieu of outplacement
assistance.
9. Confidentiality. Consistent with Executive's preexisting
legal and contractual obligations and in exchange for the
consideration provided by the Company in this Agreement and for
Executive's continued employment and exposure to confidential
information at the Company, Executive agrees to hold in strict
confidence and not disclose to any other person any confidential
or proprietary information of the Company, including, without
limitation, trade secrets, formulas for Company products,
production techniques or processes or methods and apparatus for
producing any products of the Company, or other non-public
information relating to the business, research and development,
employees and/or customers of the Company and its subsidiaries and
affiliates, except to the extent required by law, or with the
written consent of the Company. Executive will, immediately on
termination, deliver to the Company all files containing data,
correspondence, books, notes, and other written, graphic or
computer records under Executive's control relating to the Company
or its subsidiaries or affiliates, regardless of the media in
which they are embodied or contained.
10. Agreement Not To Compete. In exchange for the consideration
provided by the Company in this Agreement as well as Executive's
continued employment and exposure to confidential information at
the Company, Executive agrees not to, directly or indirectly, for
a period of two years following Executive's termination of
employment, engage or participate in any business that is involved
in research or development activities or in the manufacturing of
any product which competes with any of the Company's products,
except with the written consent of the Company. On termination,
Executive agrees to execute a separate Release and Non-Competition
Agreement in a form acceptable to the Company to memorialize this
agreement and understands that the failure to do so will render
Executive ineligible for any severance pay, benefits or privileges
whatsoever.
11. Mutual Release and Indemnity. In the event of Executive's
termination under circumstances described in paragraphs 1(a),
1(b). 2(a) or 2(b), the Company agrees to release and discharge
Executive from any claim it may then or thereafter have against
Executive with respect to employment with the Company or any of
its subsidiaries or affiliates (other than with regard to
Executive's obligations under this Agreement), and agrees to
indemnify Executive in accordance with its then current policies
or practices for active employees for any claims made against
Executive by third parties arising out of the proper performance
of Executive's duties as an employee of the Company or any of its
subsidiaries or affiliates. In exchange for the consideration
provided by the Company in this Agreement, together with the
Company's release and indemnity, Executive agrees to release and
discharge the Company, and its subsidiaries, affiliates, officers,
directors, employees and agents (the "Released Persons") from any
claim that Executive may then or thereafter have against the
Company or such Released Persons (excluding any claim for the
compensation, benefits and privileges described herein) arising
out of or in connection with Executive's employment or termination
of employment by the Company or any of its subsidiaries or
affiliates. On termination, Executive agrees to execute a
separate Release and Non-Competition Agreement in a form
acceptable to the Company to memorialize this agreement and
understands that the failure to do so will render Executive
ineligible for any severance pay, benefits or privileges
whatsoever.
12. Severability. Whenever possible each provision and term of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or
term of this Agreement shall be held to be prohibited by or
invalid under such applicable law, then such provision or term
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term, or the
remaining provisions or terms of this Agreement.
13. Modification and Waiver of Breach. No waiver or modification
of this Agreement shall be binding unless it is in writing, signed
by the parties hereto. No waiver of a breach hereof shall be
deemed to constitute a waiver of a further breach, whether of a
similar or dissimilar nature.
14. Assignment. This Agreement shall be binding upon and inure
to the benefit of any successors of the Company. As used herein,
"successors" shall include any person, firm, corporation or other
business entity which at any time, whether by merger, purchase or
otherwise, acquires all or substantially all of the assets or
business of the Company.
15. Notice. Any written notice to be given hereunder to
Executive may be delivered to her personally or shall be deemed to
have been given upon deposit thereof in the U.S. mail, certified
mail, postage prepaid, addressed to Executive at the address as it
shall appear on the records of the Company.
16. Construction of Agreement. This Agreement is made and
entered into in the State of Ohio and shall be construed under the
laws of Ohio.
17. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to Executive's
severance pay, benefits and privileges in the event of a
termination of Executive's employment with the Company,
superseding all negotiations, prior discussions and agreements,
written or oral, concerning said severance arrangements. This
Agreement may not be amended except in writing by the parties
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
OWENS CORNING,
Glen H. Hiner
Chairman and CEO
Agreed to and accepted:
___________________________
Date: ____________________
Exhibit 10
KEY MANAGEMENT SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made as of
November 24, 1998 by and between OWENS CORNING, a Delaware
corporation (the "Company"), and Domenico Cecere, an officer of
the Company ("Executive").
WHEREAS the Company and Executive have previously entered
into a Severance Agreement dated as of April 4, 1997 (the "Prior
Agreement") providing for certain benefits to be conferred upon
Executive under specified circumstances in the event that
Executive's employment is terminated by the Company on the terms
and conditions set forth therein, and:
WHEREAS the Compensation Committee of the Board of Directors
of the Company (the "Committee") has approved a new severance
agreement to provide Executive with certain additional protections
and to conform the terms of such agreement to the current policy
of the Company regarding an officer's entitlement to pay, benefits
and privileges on the termination of his employment;
NOW THEREFORE, the parties hereto agree as follows:
1. Termination Absent a Change of Control.
a) If, prior to a Change of Control (as defined in paragraph
7(c) below), (i) the Company terminates Executive's employment for
any reason other than Permanent Total Disability or Cause (as
defined in paragraphs 7(e) and 7(b)(1)&(2), respectively, below),
or (ii) Executive voluntarily terminates his employment under
circumstances involving a Constructive Termination (as defined in
paragraph 7(d), below), Executive will be entitled to the
following compensation, provided that Executive executes a Release
and Non-Competition Agreement satisfactory to the Company:
1) Base salary earned and as yet unpaid through the effective
date of termination; and
2) Two years' Base Pay (as defined in paragraph 7(a) below); and
3) Two times Executive's Separation Incentive Payment (as
defined in paragraph 7(f) below); and
4) Incentive Pay as yet unpaid from the prior fiscal year and
Incentive Pay for the fiscal year of termination, prorated for the
period of Executive's actual employment prior to termination; and
5) The greater of (i) Executive's vested Cash Balance Pension
Benefit, or (ii) an amount equal to Executive's vested Pension
Benefit under the Company's Salaried Employees' (Final Average)
Retirement Plan plus a pension supplement calculated as though
Executive had been credited with three additional years of service
under that Plan and had Executive been three years older at the
date of termination, or (iii) Executive's separately negotiated
Pension Agreement amount, referenced in the December 9, 1997
letter (and attachment) from Glen Hiner, a copy of which is
appended to this Agreement.
b) If, prior to a Change of Control, the Company terminates
Executive's employment for Cause (as defined in paragraph 7(b)(3),
below), Executive will only be entitled to base salary earned and
as yet unpaid through the effective date of termination and
Executive's vested Cash Balance Pension Benefit, or Executive's
vested Final Average Plan Pension Benefit, or Executive's
separately negotiated Pension Agreement amount, whichever is
greater, UNLESS, (i) the Company exercises its discretion to award
Executive (in addition to the aforementioned base salary and
vested pension amounts) some portion of the following
compensation, based on effort expended and results obtained to
date and (ii) Executive executes a Release and Non-Competition
Agreement satisfactory to the Company:
1) Up to but no more than Twelve months' Base Pay (as defined in
paragraph 7(a) below); and
2) Up to but no more than One times Executive's Separation
Incentive Payment (as defined in paragraph 7(f) below); and
3) Up to but no more than the amount of Incentive Pay as yet
unpaid from the prior fiscal year.
c) The compensation payable under paragraph 1(a) or 1(b), above,
shall be paid as soon as practicable after Executive signs,
returns and does not revoke the requisite Release and Non-
Competition Agreement.
d) In the event of a termination of Executive's employment under
the circumstances described in paragraph 1(a) above:
1) All stock options previously awarded to Executive shall, to
the extent not already vested, immediately vest, and shall be
exercisable (subject to applicable blackout restrictions) for up
to six months following the date of termination or the original
expiration date, whichever is sooner.
2) All shares of restricted stock previously awarded to
Executive shall, to the extent not already vested, immediately
vest and be payable.
3) All outstanding but unearned performance shares shall be
forfeited.
4) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of
termination under any non-qualified deferred compensation plan or
arrangement shall immediately vest and be payable, to the extent
permissible under the terms of such plan or arrangement.
e) In the event of a termination of Executive's employment under
the circumstances described in paragraph 1(b) above:
1) All stock options previously awarded to Executive which are
exercisable on the date of termination shall be exercisable
(subject to applicable blackout restrictions) for up to six months
following the date of termination or the original expiration date,
whichever is sooner.
2) All unvested shares of restricted stock and all outstanding
but unearned performance shares previously awarded to Executive
shall be forfeited.
3) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued and vested through the date
of termination under any non-qualified deferred compensation plan
or arrangement shall be payable, to the extent permissible under
the terms of such plan or arrangement.
f) If Executive's employment ends under circumstances described
in paragraph 1(a) above as a result of the sale by the Company of
a business unit, division or facility, payments will be made under
this paragraph 1 only if Executive is not offered a substantially
equivalent position with the Company or with the new owner of the
business (without regard to whether Executive accepts such a
position). If Executive receives and accepts a suitable offer
from the new owner of the business and is subsequently terminated
within one year of the closing date of the sale under
circumstances that would result in payment of benefits under this
paragraph 1(a), Executive will be treated as though he had been
terminated by the Company and receive the payments provided for in
this Agreement, less any amounts or benefits provided by the new
owner in connection with Executive's termination.
2. Termination On or After a Change of Control.
a) If, within a two-year period after a Change of Control, (i)
the Company (or any successor) terminates Executive's employment
for any reason other than Permanent Total Disability or Cause (as
defined in paragraphs 7(e) and 7(b)(1)&(2), respectively, below),
or (ii) Executive voluntarily terminates his employment under
circumstances involving a Constructive Termination, Executive will
be entitled to the following compensation, provided that Executive
executes a Release and Non-Competition Agreement satisfactory to
the Company:
1) Base salary earned and as yet unpaid through the effective
date of termination; and
2) Two years' Base Pay; and
3) Two times Executive's Separation Incentive Payment; and
4) Incentive Pay as yet unpaid from the prior fiscal year and
Target Level Incentive Pay (as defined in paragraph 7(h) below)
for the fiscal year of termination, prorated for the period of
Executive's actual employment prior to termination; and
5) The greater of (i) Executive's vested Cash Balance Pension
Benefit, or (ii) an amount equal to Executive's vested Pension
Benefit under the Company's Salaried Employees' (Final Average)
Retirement Plan plus a pension supplement calculated as though
Executive had been credited with three additional years of service
under that Plan and had Executive been three years older at the
date of termination, or (iii) Executive's separately negotiated
Pension Agreement amount, referenced in the December 9, 1997
letter (and attachment) from Glen Hiner, a copy of which is
appended to this Agreement.
b) If, within a two-year period after a Change of Control, the
Company (or any successor) terminates Executive's employment for
Cause (as defined in paragraph 7(b)(3), below), Executive will
only be entitled to base salary earned and as yet unpaid through
the effective date of termination and Executive's vested Cash
Balance Pension Benefit, or Executive's vested Final Average Plan
Pension Benefit, or Executive's separately negotiated Pension
Agreement amount, whichever is greater, UNLESS, (i) the Company
exercises its discretion to award Executive (in addition to the
aforementioned base salary and vested pension amounts) some
portion of the following compensation, based on effort expended
and results obtained to date and (ii) Executive executes a Release
and Non-Competition Agreement satisfactory to the Company:
1) Up to but no more than Twelve months' Base Pay (as defined in
paragraph 7(a) below); and
2) Up to but no more than One times Executive's Separation
Incentive Payment (as defined in paragraph 7(f) below); and
3) Up to but no more than the amount of Incentive Pay as yet
unpaid from the prior fiscal year.
c) The compensation payable under paragraphs 2(a) or 2(b),
above, will be paid as soon as practicable after Executive signs,
returns and does not revoke the requisite Release and Non-
Competition Agreement.
d) In the event of a termination of Executive's employment under
the circumstances described in paragraph 2(a) above:
1) All stock options previously awarded to Executive shall, to
the extent not already vested, immediately vest, and shall be
exercisable (subject to applicable blackout restrictions) for up
to six months following the date of termination or the original
expiration date, whichever is sooner.
2) All shares of restricted stock previously awarded to
Executive shall, to the extent not already vested, immediately
vest and be payable.
3) All outstanding but unearned performance shares shall be
forfeited.
4) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of
termination under any non-qualified deferred compensation plan or
arrangement shall immediately vest and be payable, to the extent
permissible under the terms of such plan or arrangement.
e) In the event of a termination of Executive's employment under
the circumstances described in paragraph 2(b) above:
1) All stock options previously awarded to Executive which are
exercisable on the date of termination shall be exercisable
(subject to applicable blackout restrictions) for up to six months
following the date of termination or the original expiration date,
whichever is sooner.
2) All unvested shares of restricted stock and all outstanding
but unearned performance shares previously awarded to Executive
shall be forfeited.
3) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued and vested through the date
of termination under any non-qualified deferred compensation plan
or arrangement shall be payable, to the extent permissible under
the terms of such plan or arrangement.
f) The Compensation Committee of the Board of Directors, in its
sole discretion, may determine that no Change of Control or
Potential Change of Control shall be deemed to have occurred with
respect to any Executive who, in connection with a Change of
Control or Potential Change of Control, acts in a capacity other
than in their capacity as an employee of the Corporation, its
subsidiaries or affiliates or otherwise fails to act in the
Company's best interests with respect to said Change of Control.
3. Termination For Other Reasons. If Executive voluntarily
terminates his employment (including by reason of retirement)
other than as provided in paragraph 1(a) or 2(a) above, or if
Executive's employment is terminated due to death or Permanent
Total Disability, Executive shall not be entitled to any benefits
under this Agreement, but shall be entitled to any other benefits
to which he is otherwise entitled under the terms of any employee
benefit plans or arrangements of the Company.
4. Continuation of Insurance Benefits. In the event Executive's
employment terminates under the circumstances described in
paragraph 1(a) or 2(a) of this Agreement, the Company will
continue Executive's participation and coverage for a period of
two years (the "Severance Period") from Executive's last day of
employment with the Company under all the Company's life, medical
and dental plans ("Insurance Benefits"), in which Executive is
participating immediately prior to such employment termination,
subject to the Company's right to modify the terms of the plans or
arrangements providing these benefits. If Executive is employed by
another entity during the Severance Period, the Company will be a
secondary obligor only with respect to medical and dental
Insurance Benefits and life insurance coverage shall immediately
cease.
5. Non-Duplication of Benefits. Any compensation or benefits
payable under the terms of this Agreement will be offset and not
augmented by other compensation or benefits of the same or similar
type payable under any existing plan or agreement of the Company
or any other arrangement between Executive and the Company
covering the Executive (including, but not limited to, any Company
severance policy and the Company's Annual Incentive Plan). It is
intended that this Agreement not duplicate benefits Executive is
entitled to under the Company's regular severance policy, any
related policies, or any other contracts, agreements or
arrangements between Executive and the Company.
6. Term. This Agreement shall be effective from the date hereof
throughout Executive's term of employment as an officer of the
Company, but shall expire and be of no effect immediately after
the second anniversary of a Change of Control.
7. Certain Defined Terms. As used herein, the following terms
shall have the following meanings:
a) "Base Pay" shall mean the greater of the annual salary paid
to Executive as of the date of termination of his employment or
the date of the Change of Control, as the case may be,
notwithstanding any pay reduction that may be related to a
Constructive Termination.
b) "Cause" shall mean:
1) conviction of any felony or failure to contest prosecution
for a felony; or
2) willful misconduct or dishonesty which is directly and
materially harmful to the business or reputation of the Company;
or
3) willful or continued failure to substantially perform his
duties as an executive of the Company, other than as a result of
total or partial incapacity due to physical or mental illness
(abuse of alcohol, drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph), unless within three to six months after written notice
has been provided to Executive by the Company, Executive cures
such willful or continued failure to perform.
c) "Change of Control" shall mean:
1) the holders of the voting securities of the Company shall
have approved a merger or consolidation of the Company with any
other entity, unless the proposed merger or consolidation would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, where such merger or consolidation is, in fact,
consummated;
2) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall
have approved an agreement for the sale or disposition by the
Company (in one transaction or a series of transactions) of all or
substantially all of the Company's assets;
3) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "1934 Act")
shall become the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 15% or more of the
combined voting power of the Company's then outstanding shares;
4) during any period of two consecutive years, members who at
the beginning of such period constituted the Board shall have
ceased for any reason to constitute a majority thereof, unless the
election, or nomination for election by the Company's
stockholders, of each director shall have been approved by the
vote of at least two-thirds of the directors then still in office
and who were directors at the beginning of such period (so long as
such director was not nominated by a person who has expressed an
intent to effect a Change of Control or engage in a proxy or other
control contest); or
5) the occurrence of any other change of control of a nature
that would be required to be reported in accordance with Form 8-K
pursuant to Sections 13 or 15(d) of the 1934 Act or in the
Company's proxy statement in accordance with Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or in any successor
forms or regulations to the same effect.
d) A "Constructive Termination" shall be deemed to have occurred
only if:
1) prior to a Change of Control: Executive's Base Pay is
reduced without his written consent; or
2) on or within a two-year period after a Change of Control: (A)
Executive's Base Pay or annual incentive pay opportunity is
reduced without his written consent; (B) Executive is required by
the Company without his written consent to relocate to a new place
of business that is more than fifty miles from Executive's place
of business prior to the Change of Control (or the Company
mandates a substantial increase in the amount of required business
travel); or (C) there is a material adverse change in Executive's
duties or responsibilities in comparison to the duties or
responsibilities which Executive had prior to the Change of
Control.
e) "Permanent Total Disability" shall be deemed to have occurred
if, at the end of any month Executive then is, and has been, for
eighteen (18) consecutive calendar months then ending, unable to
perform his duties in the normal and regular manner due to mental
or physical illness or injury. Any determination of such
inability to perform shall be made by the Company in good faith.
f) "Separation Incentive Payment" shall be the greater of (i)
Executive's average payments under the Company's normal, annual
Corporate Incentive Plan (CIP) for the three years immediately
preceding the year of termination (or annualized for such shorter
period as Executive may have been employed by the Company), or
(ii) one-half of Executive's average participating salary under
such Plan for the three years immediately preceding the year of
termination (or annualized for such shorter period as Executive
may have been employed by the Company).
g) "Participating Salary" is the product of Executive's total
base salary paid during any given incentive year, multiplied by
Executive's incentive pay percentage, at maximum funding.
h) "Target Level Incentive" shall be the greater of (i) one-half
of Executive's participating salary under the Company's Annual
Incentive Plan for the year of termination, or (ii) the payment
Executive would have received under such Plan for the year of
termination based on projected corporate performance for such year
as determined by the Committee in its sole discretion at the time
of the Change of Control.
8. Outplacement Assistance. The Company will arrange
outplacement assistance for Executive, to be provided by a
mutually agreed-upon firm engaged in said business. Such
assistance shall continue for up to one year following Executive's
termination or until such time as suitable employment is attained,
whichever is sooner. Outplacement costs incurred in this
connection will be borne by the Company, but will not include
costs of travel to/from the outplacement firm or in connection
with job interviews, etc. For up to six months following
Executive's termination, the Company will also make available
reasonable office space and administrative and communication
services for Executive's use in seeking suitable employment. In
no event will the Company pay Executive in lieu of outplacement
assistance.
9. Confidentiality. Consistent with Executive's preexisting
legal and contractual obligations and in exchange for the
consideration provided by the Company in this Agreement and for
Executive's continued employment and exposure to confidential
information at the Company, Executive agrees to hold in strict
confidence and not disclose to any other person any confidential
or proprietary information of the Company, including, without
limitation, trade secrets, formulas for Company products,
production techniques or processes or methods and apparatus for
producing any products of the Company, or other non-public
information relating to the business, research and development,
employees and/or customers of the Company and its subsidiaries and
affiliates, except to the extent required by law, or with the
written consent of the Company. Executive will, immediately on
termination, deliver to the Company all files containing data,
correspondence, books, notes, and other written, graphic or
computer records under Executive's control relating to the Company
or its subsidiaries or affiliates, regardless of the media in
which they are embodied or contained.
10. Agreement Not To Compete. In exchange for the consideration
provided by the Company in this Agreement as well as Executive's
continued employment and exposure to confidential information at
the Company, Executive agrees not to, directly or indirectly, for
a period of two years following Executive's termination of
employment, engage or participate in any business that is involved
in research or development activities or in the manufacturing of
any product which competes with any of the Company's products,
except with the written consent of the Company. On termination,
Executive agrees to execute a separate Release and Non-Competition
Agreement in a form acceptable to the Company to memorialize this
agreement and understands that the failure to do so will render
Executive ineligible for any severance pay, benefits or privileges
whatsoever.
11. Mutual Release and Indemnity. In the event of Executive's
termination under circumstances described in paragraphs 1(a),
1(b), 2(a) or 2(b), the Company agrees to release and discharge
Executive from any claim it may then or thereafter have against
Executive with respect to employment with the Company or any of
its subsidiaries or affiliates (other than with regard to
Executive's obligations under this Agreement), and agrees to
indemnify Executive in accordance with its then current policies
or practices for active employees for any claims made against
Executive by third parties arising out of the proper performance
of Executive's duties as an employee of the Company or any of its
subsidiaries or affiliates. In exchange for the consideration
provided by the Company in this Agreement, together with the
Company's release and indemnity, Executive agrees to release and
discharge the Company, and its subsidiaries, affiliates, officers,
directors, employees and agents (the "Released Persons") from any
claim that Executive may then or thereafter have against the
Company or such Released Persons (excluding any claim for the
compensation, benefits and privileges described herein) arising
out of or in connection with Executive's employment or termination
of employment by the Company or any of its subsidiaries or
affiliates. On termination, Executive agrees to execute a
separate Release and Non-Competition Agreement in a form
acceptable to the Company to memorialize this agreement and
understands that the failure to do so will render Executive
ineligible for any severance pay, benefits or privileges
whatsoever.
12. Severability. Whenever possible each provision and term of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or
term of this Agreement shall be held to be prohibited by or
invalid under such applicable law, then such provision or term
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term, or the
remaining provisions or terms of this Agreement.
13. Modification and Waiver of Breach. No waiver or modification
of this Agreement shall be binding unless it is in writing, signed
by the parties hereto. No waiver of a breach hereof shall be
deemed to constitute a waiver of a further breach, whether of a
similar or dissimilar nature.
14. Assignment. This Agreement shall be binding upon and inure
to the benefit of any successors of the Company. As used herein,
"successors" shall include any person, firm, corporation or other
business entity which at any time, whether by merger, purchase or
otherwise, acquires all or substantially all of the assets or
business of the Company.
15. Notice. Any written notice to be given hereunder to
Executive may be delivered to him personally or shall be deemed to
have been given upon deposit thereof in the U.S. mail, certified
mail, postage prepaid, addressed to Executive at the address as it
shall appear on the records of the Company.
16. Construction of Agreement. This Agreement is made and
entered into in the State of Ohio and shall be construed under the
laws of Ohio.
17. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to Executive's
severance pay, benefits and privileges in the event of a
termination of Executive's employment with the Company,
superseding all negotiations, prior discussions and agreements,
written or oral, concerning said severance arrangements. This
Agreement may not be amended except in writing by the parties
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
OWENS CORNING,
Glen H. Hiner
Chairman and CEO
Agreed to and accepted:
___________________________
Date: ____________________
Exhibit 10
KEY MANAGEMENT SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made as of
November 24, 1998 by and between OWENS CORNING, a Delaware
corporation (the "Company"), and J. Thurston Roach, an officer of
the Company ("Executive").
WHEREAS the Compensation Committee of the Board of Directors
of the Company (the "Committee") has approved a severance
agreement to provide Executive with certain protections and to
conform the terms of such agreement to the current policy of the
Company regarding an officer's entitlement to pay, benefits and
privileges on the termination of his employment;
NOW THEREFORE, the parties hereto agree as follows:
1. Termination Absent a Change of Control.
a) If, prior to a Change of Control (as defined in paragraph
7(c) below), (i) the Company terminates Executive's employment for
any reason other than Permanent Total Disability or Cause (as
defined in paragraphs 7(e) and 7(b)(1)&(2), respectively, below),
or (ii) Executive voluntarily terminates his employment under
circumstances involving a Constructive Termination (as defined in
paragraph 7(d), below), Executive will be entitled to the
following compensation, provided that Executive executes a Release
and Non-Competition Agreement satisfactory to the Company:
1) Base salary earned and as yet unpaid through the effective
date of termination; and
2) Two years' Base Pay (as defined in paragraph 7(a) below); and
3) Two times Executive's Separation Incentive Payment (as
defined in paragraph 7(f) below); and
4) Incentive Pay as yet unpaid from the prior fiscal year and
Incentive Pay for the fiscal year of termination, prorated for the
period of Executive's actual employment prior to termination; and
5) Executive's vested Cash Balance Pension Benefit.
b) If, prior to a Change of Control, the Company terminates
Executive's employment for Cause (as defined in paragraph 7(b)(3),
below), Executive will only be entitled to base salary earned and
as yet unpaid through the effective date of termination and
Executive's vested Cash Balance Pension Benefit UNLESS, (i) the
Company exercises its discretion to award Executive (in addition
to the aforementioned base salary and vested pension amounts) some
portion of the following compensation, based on effort expended
and results obtained to date and (ii) Executive executes a Release
and Non-Competition Agreement satisfactory to the Company:
1) Up to but no more than Twelve months' Base Pay (as defined in
paragraph 7(a) below); and
2) Up to but no more than One times Executive's Separation
Incentive Payment (as defined in paragraph 7(f) below); and
3) Up to but no more than the amount of Incentive Pay as yet
unpaid from the prior fiscal year.
c) The compensation payable under paragraph 1(a) or 1(b), above,
shall be paid as soon as practicable after Executive signs,
returns and does not revoke the requisite Release and Non-
Competition Agreement.
d) In the event of a termination of Executive's employment under
the circumstances described in paragraph 1(a) above:
1) All stock options previously awarded to Executive shall, to
the extent not already vested, immediately vest, and shall be
exercisable (subject to applicable blackout restrictions) for up
to six months following the date of termination or the original
expiration date, whichever is sooner.
2) All shares of restricted stock previously awarded to
Executive shall, to the extent not already vested, immediately
vest and be payable.
3) All outstanding but unearned performance shares shall be
forfeited.
4) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of
termination under any non-qualified deferred compensation plan or
arrangement shall immediately vest and be payable, to the extent
permissible under the terms of such plan or arrangement.
e) In the event of a termination of Executive's employment under
the circumstances described in paragraph 1(b) above:
1) All stock options previously awarded to Executive which are
exercisable on the date of termination shall be exercisable
(subject to applicable blackout restrictions) for up to six months
following the date of termination or the original expiration date,
whichever is sooner.
2) All unvested shares of restricted stock and all outstanding
but unearned performance shares previously awarded to Executive
shall be forfeited.
3) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued and vested through the date
of termination under any non-qualified deferred compensation plan
or arrangement shall be payable, to the extent permissible under
the terms of such plan or arrangement.
f) If Executive's employment ends under circumstances described
in paragraph 1(a) above as a result of the sale by the Company of
a business unit, division or facility, payments will be made under
this paragraph 1 only if Executive is not offered a substantially
equivalent position with the Company or with the new owner of the
business (without regard to whether Executive accepts such a
position). If Executive receives and accepts a suitable offer
from the new owner of the business and is subsequently terminated
within one year of the closing date of the sale under
circumstances that would result in payment of benefits under this
paragraph 1(a), Executive will be treated as though he had been
terminated by the Company and receive the payments provided for in
this Agreement, less any amounts or benefits provided by the new
owner in connection with Executive's termination.
2. Termination On or After a Change of Control.
a) If, within a two-year period after a Change of Control, (i)
the Company (or any successor) terminates Executive's employment
for any reason other than Permanent Total Disability or Cause (as
defined in paragraphs 7(e) and 7(b)(1)&(2), respectively, below),
or (ii) Executive voluntarily terminates his employment under
circumstances involving a Constructive Termination, Executive will
be entitled to the following compensation, provided that Executive
executes a Release and Non-Competition Agreement satisfactory to
the Company:
1) Base salary earned and as yet unpaid through the effective
date of termination; and
2) Two years' Base Pay; and
3) Two times Executive's Separation Incentive Payment; and
4) Incentive Pay as yet unpaid from the prior fiscal year and
Target Level Incentive Pay (as defined in paragraph 7(h) below)
for the fiscal year of termination, prorated for the period of
Executive's actual employment prior to termination; and
5) Executive's vested Cash Balance Pension Benefit.
b) If, within a two-year period after a Change of Control, the
Company (or any successor) terminates Executive's employment for
Cause (as defined in paragraph 7(b)(3), below, Executive will only
be entitled to base salary earned and as yet unpaid through the
effective date of termination and Executive's vested Cash Balance
Pension Benefit UNLESS, (i) the Company exercises its discretion
to award Executive (in addition to the aforementioned base salary
and vested pension amounts) some portion of the following
compensation, based on effort expended and results obtained to
date and (ii) Executive executes a Release and Non-Competition
Agreement satisfactory to the Company:
1) Up to but no more than Twelve months' Base Pay (as defined in
paragraph 7(a) below); and
2) Up to but no more than One times Executive's Separation
Incentive Payment (as defined in paragraph 7(f) below); and
3) Up to but no more than the amount of Incentive Pay as yet
unpaid from the prior fiscal year.
c) The compensation payable under paragraphs 2(a) or 2(b),
above, will be paid as soon as practicable after Executive signs,
returns and does not revoke the requisite Release and Non-
Competition Agreement.
d) In the event of a termination of Executive's employment under
the circumstances described in paragraph 2(a) above:
1) All stock options previously awarded to Executive shall, to
the extent not already vested, immediately vest, and shall be
exercisable (subject to applicable blackout restrictions) for up
to six months following the date of termination or the original
expiration date, whichever is sooner.
2) All shares of restricted stock previously awarded to
Executive shall, to the extent not already vested, immediately
vest and be payable.
3) All outstanding but unearned performance shares shall be
forfeited.
4) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of
termination under any non-qualified deferred compensation plan or
arrangement shall immediately vest and be payable, to the extent
permissible under the terms of such plan or arrangement.
e) In the event of a termination of Executive's employment under
the circumstances described in paragraph 2(b) above:
1) All stock options previously awarded to Executive which are
exercisable on the date of termination shall be exercisable
(subject to applicable blackout restrictions) for up to six months
following the date of termination or the original expiration date,
whichever is sooner.
2) All unvested shares of restricted stock and all outstanding
but unearned performance shares previously awarded to Executive
shall be forfeited.
3) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued and vested through the date
of termination under any non-qualified deferred compensation plan
or arrangement shall be payable, to the extent permissible under
the terms of such plan or arrangement.
f) The Compensation Committee of the Board of Directors, in its
sole discretion, may determine that no Change of Control or
Potential Change of Control shall be deemed to have occurred with
respect to any Executive who, in connection with a Change of
Control or Potential Change of Control, acts in a capacity other
than in their capacity as an employee of the Corporation, its
subsidiaries or affiliates or otherwise fails to act in the
Company's best interests with respect to said Change of Control.
3. Termination For Other Reasons. If Executive voluntarily
terminates his employment (including by reason of retirement)
other than as provided in paragraph 1(a) or 2(a) above, or if
Executive's employment terminates due to death or Permanent Total
Disability, Executive shall not be entitled to any benefits under
this Agreement, but shall be entitled to any other benefits to
which he is otherwise entitled under the terms of any employee
benefit plans or arrangements of the Company.
4. Continuation of Insurance Benefits. In the event Executive's
employment terminates under the circumstances described in
paragraph 1(a) or 2(a) of this Agreement, the Company will
continue Executive's participation and coverage for a period of
two years (the "Severance Period") from Executive's last day of
employment with the Company under all the Company's life, medical
and dental plans ("Insurance Benefits"), in which Executive is
participating immediately prior to such employment termination,
subject to the Company's right to modify the terms of the plans or
arrangements providing these benefits. If Executive is employed by
another entity during the Severance Period, the Company will be a
secondary obligor only with respect to medical and dental
Insurance Benefits.
5. Non-Duplication of Benefits. Any compensation or benefits
payable under the terms of this Agreement will be offset and not
augmented by other compensation or benefits of the same or similar
type payable under any existing plan or agreement of the Company
or any other arrangement between Executive and the Company
covering the Executive (including, but not limited to, any Company
severance policy and the Company's Annual Incentive Plan). It is
intended that this Agreement not duplicate benefits Executive is
entitled to under the Company's regular severance policy, any
related policies, or any other contracts, agreements or
arrangements between Executive and the Company.
6. Term. This Agreement shall be effective from the date hereof
throughout Executive's term of employment as an officer of the
Company, but shall expire and be of no effect immediately after
the second anniversary of a Change of Control.
7. Certain Defined Terms. As used herein, the following terms
shall have the following meanings:
a) "Base Pay" shall mean the greater of the annual salary paid
to Executive as of the date of termination of his employment or
the date of the Change of Control, as the case may be,
notwithstanding any pay reduction that may be related to a
Constructive Termination.
b) "Cause" shall mean:
1) conviction of any felony or failure to contest prosecution
for a felony; or
2) willful misconduct or dishonesty which is directly and
materially harmful to the business or reputation of the Company;
or
3) willful or continued failure to substantially perform his
duties as an executive of the Company, other than as a result of
total or partial incapacity due to physical or mental illness
(abuse of alcohol, drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph), unless within three to six months after written notice
has been provided to Executive by the Company, Executive cures
such willful or continued failure to perform.
c) "Change of Control" shall mean:
1) the holders of the voting securities of the Company shall
have approved a merger or consolidation of the Company with any
other entity, unless the proposed merger or consolidation would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, where such merger or consolidation is, in fact,
consummated;
2) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall
have approved an agreement for the sale or disposition by the
Company (in one transaction or a series of transactions) of all or
substantially all of the Company's assets;
3) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "1934 Act")
shall become the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 15% or more of the
combined voting power of the Company's then outstanding shares;
4) during any period of two consecutive years, members who at
the beginning of such period constituted the Board shall have
ceased for any reason to constitute a majority thereof, unless the
election, or nomination for election by the Company's
stockholders, of each director shall have been approved by the
vote of at least two-thirds of the directors then still in office
and who were directors at the beginning of such period (so long as
such director was not nominated by a person who has expressed an
intent to effect a Change of Control or engage in a proxy or other
control contest); or
5) the occurrence of any other change of control of a nature
that would be required to be reported in accordance with Form 8-K
pursuant to Sections 13 or 15(d) of the 1934 Act or in the
Company's proxy statement in accordance with Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or in any successor
forms or regulations to the same effect.
d) A "Constructive Termination" shall be deemed to have occurred
only if:
1) prior to a Change of Control: Executive's Base Pay is
reduced without his written consent; or
2) on or within a two-year period after a Change of Control: (A)
Executive's Base Pay or annual incentive pay opportunity is
reduced without his written consent; (B) Executive is required by
the Company without his written consent to relocate to a new place
of business that is more than fifty miles from Executive's place
of business prior to the Change of Control (or the Company
mandates a substantial increase in the amount of required business
travel); or (C) there is a material adverse change in Executive's
duties or responsibilities in comparison to the duties or
responsibilities which Executive had prior to the Change of
Control.
e) "Permanent Total Disability" shall be deemed to have occurred
if, at the end of any month Executive then is, and has been, for
eighteen (18) consecutive calendar months then ending, unable to
perform his duties in the normal and regular manner due to mental
or physical illness or injury. Any determination of such
inability to perform shall be made by the Company in good faith.
f) "Separation Incentive Payment" shall be the greater of (i)
Executive's average payments under the Company's normal, annual
Corporate Incentive Plan (CIP) for the three years immediately
preceding the year of termination (or annualized for such shorter
period as Executive may have been employed by the Company), or
(ii) one-half of Executive's average participating salary under
such Plan for the three years immediately preceding the year of
termination (or annualized for such shorter period as Executive
may have been employed by the Company).
g) "Participating Salary" is the product of Executive's total
base salary paid during any given incentive year, multiplied by
Executive's incentive pay percentage, at maximum funding.
h) "Target Level Incentive" shall be the greater of (i) one-half
of Executive's participating salary under the Company's Annual
Incentive Plan for the year of termination, or (ii) the payment
Executive would have received under such Plan for the year of
termination based on projected corporate performance for such year
as determined by the Committee in its sole discretion at the time
of the Change of Control.
8. Outplacement Assistance. The Company will arrange
outplacement assistance for Executive, to be provided by a
mutually agreed-upon firm engaged in said business. Such
assistance shall continue for up to one year following Executive's
termination or until such time as suitable employment is attained,
whichever is sooner. Outplacement costs incurred in this
connection will be borne by the Company, but will not include
costs of travel to/from the outplacement firm or in connection
with job interviews, etc. For up to six months following
Executive's termination, the Company will also make available
reasonable office space and administrative and communication
services for Executive's use in seeking suitable employment. In
no event will the Company pay Executive in lieu of outplacement
assistance.
9. Confidentiality. Consistent with Executive's preexisting
legal and contractual obligations and in exchange for the
consideration provided by the Company in this Agreement and for
Executive's continued employment and exposure to confidential
information at the Company, Executive agrees to hold in strict
confidence and not disclose to any other person any confidential
or proprietary information of the Company, including, without
limitation, trade secrets, formulas for Company products,
production techniques or processes or methods and apparatus for
producing any products of the Company, or other non-public
information relating to the business, research and development,
employees and/or customers of the Company and its subsidiaries and
affiliates, except to the extent required by law, or with the
written consent of the Company. Executive will, immediately on
termination, deliver to the Company all files containing data,
correspondence, books, notes, and other written, graphic or
computer records under Executive's control relating to the Company
or its subsidiaries or affiliates, regardless of the media in
which they are embodied or contained.
10. Agreement Not To Compete. In exchange for the consideration
provided by the Company in this Agreement as well as Executive's
continued employment and exposure to confidential information at
the Company, Executive agrees not to, directly or indirectly, for
a period of two years following Executive's termination of
employment, engage or participate in any business that is involved
in research or development activities or in the manufacturing of
any product which competes with any of the Company's products,
except with the written consent of the Company. On termination,
Executive agrees to execute a separate Release and Non-Competition
Agreement in a form acceptable to the Company to memorialize this
agreement and understands that the failure to do so will render
Executive ineligible for any severance pay, benefits or privileges
whatsoever.
11. Mutual Release and Indemnity. In the event of Executive's
termination under circumstances described in paragraphs 1(a),
1(b). 2(a) or 2(b), the Company agrees to release and discharge
Executive from any claim it may then or thereafter have against
Executive with respect to employment with the Company or any of
its subsidiaries or affiliates (other than with regard to
Executive's obligations under this Agreement), and agrees to
indemnify Executive in accordance with its then current policies
or practices for active employees for any claims made against
Executive by third parties arising out of the proper performance
of Executive's duties as an employee of the Company or any of its
subsidiaries or affiliates. In exchange for the consideration
provided by the Company in this Agreement, together with the
Company's release and indemnity, Executive agrees to release and
discharge the Company, and its subsidiaries, affiliates, officers,
directors, employees and agents (the "Released Persons") from any
claim that Executive may then or thereafter have against the
Company or such Released Persons (excluding any claim for the
compensation, benefits and privileges described herein) arising
out of or in connection with Executive's employment or termination
of employment by the Company or any of its subsidiaries or
affiliates. On termination, Executive agrees to execute a
separate Release and Non-Competition Agreement in a form
acceptable to the Company to memorialize this agreement and
understands that the failure to do so will render Executive
ineligible for any severance pay, benefits or privileges
whatsoever.
12. Severability. Whenever possible each provision and term of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or
term of this Agreement shall be held to be prohibited by or
invalid under such applicable law, then such provision or term
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term, or the
remaining provisions or terms of this Agreement.
13. Modification and Waiver of Breach. No waiver or modification
of this Agreement shall be binding unless it is in writing, signed
by the parties hereto. No waiver of a breach hereof shall be
deemed to constitute a waiver of a further breach, whether of a
similar or dissimilar nature.
14. Assignment. This Agreement shall be binding upon and inure
to the benefit of any successors of the Company. As used herein,
"successors" shall include any person, firm, corporation or other
business entity which at any time, whether by merger, purchase or
otherwise, acquires all or substantially all of the assets or
business of the Company.
15. Notice. Any written notice to be given hereunder to
Executive may be delivered to him personally or shall be deemed to
have been given upon deposit thereof in the U.S. mail, certified
mail, postage prepaid, addressed to Executive at the address as it
shall appear on the records of the Company.
16. Construction of Agreement. This Agreement is made and
entered into in the State of Ohio and shall be construed under the
laws of Ohio.
17. Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to Executive's
severance pay, benefits and privileges in the event of a
termination of Executive's employment with the Company,
superseding all negotiations, prior discussions and agreements,
written or oral, concerning said severance arrangements. This
Agreement may not be amended except in writing by the parties
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
OWENS CORNING,
Glen H. Hiner
Chairman and CEO
Agreed to and accepted:
___________________________
Date: ____________________
Exhibit 10
PERSONAL AND CONFIDENTIAL
December 23, 1997
Ms. Maura Abeln
Via Fax: (413) 442 - 6990
Dear Maura:
It is a pleasure for me to offer to you the position of Senior
Vice President, General Counsel and Secretary of Owens Corning.
The following letter will set forth the specifics of our offer to
you:
1. BASE SALARY
Your annual base salary will be $375,000, subject to regular
review by the Compensation Committee of the Board of Directors
of Owens Corning.
You will also receive a signature bonus of $100,000 (net of
taxes), which will be paid to you upon your first day of
employment with Owens Corning.
2. PLACE OF EMPLOYMENT
Your primary place of employment will be the Owens Corning
World Headquarters located in Toledo, Ohio. However, you may
be required to travel to other locations as directed by Owens
Corning, or as required by your position.
3. ANNUAL INCENTIVE
You will participate in the Owens Corning Annual Corporate
Incentive Compensation Plan (CIP). Annual payouts under the
CIP are presently based on three corporate performance
criteria; earnings per share, cash flow and sales growth, as
well as your individual performance. Your participation in the
CIP will be 100% of your base salary and your target award will
be 50% of base salary. We are guaranteeing a minimum gross
payment of $300,000 for your first two (2) years of employment.
Payment will be made in February of each year when annual
incentive payments are paid. After that period of guarantee,
Corporate business results and your individual performance will
determine actual payments under the CIP. The general terms and
measurements of the CIP will be communicated to you under
separate cover.
4.
EQUITY COMPENSATION
You will be awarded 3,000 shares of restricted stock. These
Restricted Shares will vest assuming continuous employment, 50%
on December 31, 1998 and 50% on December 31, 1999.
You will also be awarded 40,000 options to buy Owens Corning
Stock. The exercise price of these options will be based on
the closing price of Owens Corning stock on February 12, 1998,
the date of our Board Compensation Committee meeting. Vesting
on your options will be 1/3 each year beginning February 12,
1999.
As an officer of Owens Corning, you will be fully eligible to
participate in our Long Term Performance Incentive Plan
(LTPIP). The LTPIP consists of awards of stock options,
restricted stock, and performance restricted stock. The
Details of this plan, and your initial awards thereunder, are
described below.
For the 1998-2000 LTPIP cycle, you will receive the following
awards, with the date of grant as of the Compensation Committee
Meeting which will occur on February 12, 1998:
- 12,000 Stock Options which vest one third each year for three
years. The exercise price of these options will be based on the
closing price of Owens Corning stock on the date the Compensation
Committee approves all grants under the LTPIP, which is expected
to be February 12, 1998.
- 3,500 Shares of Performance Restricted stock. These
Performance shares will vest at the end of three years from the
original grant date based upon the attainment of corporate
objectives under the LTPIP.
- 1,700 Restricted Shares. These Restricted Shares will vest
one-third each year, beginning on December 31, 1998, assuming your
continuous employment with Owens Corning.
As an officer of Owens Corning, you will be subject to a Stock
Ownership requirement of 20,000 shares. You will have five
years to achieve this target.
5. EMPLOYEE BENEFITS
You will have four weeks of annual vacation with Owens Corning.
Upon your commencement of employment, you will be eligible for
Owens Corning's benefit package, which includes a comprehensive
health care plan, Savings and Profit Sharing (401(k)) Plan,
Cash Balance Pension Plan, life insurance plan and both short-
term and long term disability plans.
For purposes of your relocation to Toledo, Ohio, you will be
treated as a transferring employee under the Owens Corning
relocation program, which means we will purchase your home if
you are unable to sell it. More specifics of our relocation
program would be communicated upon acceptance of our offer.
6. OTHER PERQUISITES
You will be eligible for tax preparation/planning assistance,
financial counseling, personal liability insurance and other
benefits provided to Owens Corning officers. You will also be
eligible for personal liability insurance and other benefits
provided to Owens Corning officers. You will also be eligible
for personal usage of the Owens Corning corporate aircraft in
accordance with the Company's policies for similarly situated
officers in effect from time to time.
7. SEVERANCE AGREEMENT
You will also have a severance agreement that provides two full
years of income protection should it become necessary for you
to leave the organization for reasons other than cause or
voluntary resignation.
____________________________
Maura, I am excited about the prospect of you joining the Owens
Corning team. Please let me know if you have any questions, and
return a signed copy of this letter to my attention at the above
address.
Sincerely,
Glen H. Hiner
AGREED TO AND ACCEPTED:
____________________________
Maura Abeln
____________________________
Date
cc: Mr. Gregory Thomson
Exhibit 10
PERSONAL AND CONFIDENTIAL
February 3, 1998
Mr. John Thurston Roach
234 Maiden Lane East
Seattle, WA 98112
Dear Thurston:
It is a pleasure for me to offer to you the position of Senior
Vice President and President, Americas Building Materials Systems
Business of Owens Corning. You will be placed on Owens
Corning's payroll as of February 16, 1998 and are expected to be
in Toledo as of March 2. From February 16 to March 2, you will
be visiting North American Building Material manufacturing
facilities, distribution centers and operating offices. The
following letter will set forth the specifics of our offer to
you:
1. BASE SALARY
Your annual base salary will be $425,000, subject to regular
review by the Compensation Committee of the Board of Directors
of Owens Corning.
You will also receive a signature bonus of $100,000 (gross),
to aid with additional miscellaneous expenses associated with
your acceptance of this job, which will be paid to you upon
your first day of employment with Owens Corning.
2. PLACE OF EMPLOYMENT
Your primary place of employment will be the Owens Corning
World Headquarters located in Toledo, Ohio. However, you may
be required to travel to other locations as directed by Owens
Corning, or as required by your position.
3. ANNUAL INCENTIVE
You will participate in the Owens Corning Annual Corporate
Incentive Compensation Plan (CIP). Your participation in the
CIP will be 110% of your base salary and your target award
will be 55% of base salary. We are guaranteeing a minimum
gross payment of $400,000 for incentive payments earned in
1998 and 1999, assuming a February start date. Payment will
be made in February of each year when annual incentive
payments are paid. After
that period of guarantee, Corporate business results and your
individual performance will determine actual payments under
the CIP. The general terms and measurements of the CIP will
be communicated to you under separate cover.
4. EQUITY COMPENSATION
You will be awarded 50,000 options to buy Owens Corning Stock.
The exercise price of these options will be based on the
closing price of Owens Corning stock on February 16, 1998, the
date of your first day of employment with Owens Corning.
Vesting on your options will be 1/3 each year beginning
February 16, 1999.
As an officer of Owens Corning, you will be fully eligible to
participate in our Long Term Performance Incentive Plan
(LTPIP). The LTPIP consists of awards of stock options,
restricted stock, and performance restricted stock. The
Details of this plan, and your initial awards thereunder, are
described below.
For the 1998-2000 LTPIP cycle, you will receive the following
awards, with the date of approval as of the Compensation
Committee Meeting which will occur on February 12, 1998:
- 18,000 Stock Options which vest one third each year for
three years. The exercise price of these options will be based
on the closing price of Owens Corning stock on your first full
day of employment with Owens Corning.
- 3,000 Restricted Shares. These Restricted Shares will vest
one-third each year, beginning at the end of your third complete
year of continuous employment with Owens Corning.
- 6,000 Shares of Phantom Performance Restricted stock. These
Performance shares will vest at the end of three years from the
original grant date based upon the attainment of corporate
objectives under the LTPIP.
As an officer of Owens Corning, you will be subject to a Stock
Ownership requirement of 20,000 shares. You will have five
years to achieve this target.
5. EMPLOYEE BENEFITS
You will have four weeks of annual vacation with Owens
Corning.
Upon your commencement of employment, you will be eligible for
Owens Corning's benefit package, which includes a
comprehensive health care plan, Savings and Profit Sharing
(401(k)) Plan, Cash Balance Pension Plan, life insurance plan
and both short-term and long term disability plans.
For purposes of your relocation to Toledo, Ohio, you will be
treated as a transferring employee under the Owens Corning
relocation program. I have enclosed a summary of our
Relocation Policy for your review.
6. OTHER PERQUISITES
You will be eligible for tax preparation/planning assistance,
financial counseling, personal liability insurance and other
benefits provided to Owens Corning officers. You will also be
eligible for personal liability insurance and other benefits
provided to Owens Corning officers. You will also be eligible
for personal usage of the Owens Corning corporate aircraft in
accordance with the Company's policies for similarly situated
officers in effect from time to time.
7. SEVERANCE AGREEMENT
You will also have a severance agreement that provides two
full years of income protection should it become necessary for
you to leave the organization for reasons other than cause or
voluntary resignation.
____________________________
Thurston, I am excited about the prospect of you joining the
Owens Corning team. Please let me know if you have any
questions, and return a signed copy of this letter to my
attention via fax at (419) 248-6352.
Sincerely,
Glen H. Hiner
Chairman and CEO
Enclosure
AGREED TO AND ACCEPTED:
____________________________
John Thurston Roach
____________________________
Date
Attachments:
- - Transferring Homeowners Policy Summary
- - Long-Term Performance Incentive Plan Summary
Exhibit 10
November 3, 1998
Mr. Charles H. Dana
xxxxxxxxxxxxxxxxxxx
Perrysburg, OH 43551
RE: RELEASE AND SEPARATION AGREEMENT
Dear Charlie:
In accordance with our discussions concerning your retirement
from Owens Corning (the "Company"), the following summarizes
our agreement (the "Agreement") between yourself and the
Company.
1. TERMINATION OF EMPLOYMENT
Your employment with the Company, its subsidiaries and other
affiliates will terminate when you retire on December 31, 1998
(the "Termination Date"). You will receive your regular base
salary through December 31, 1998. You will be eligible for an
incentive payment under the Corporate Incentive Plan for 1998, as
well as payments under any other annual incentive plan in which
you were a participant during 1998. Payments under all incentive
plans are subject to the attainment of specific Company
performance goals and the discretion of the Chief Executive
Officer. You are not eligible for 1999 incentive participation.
2. SEVERANCE BENEFITS
Consistent with the terms of your amended Key Management
Severance Benefits Agreement dated January 27, 1992 (the
"Severance Agreement"), you will receive an amount equal to
twice your base salary in effect on the Termination Date. This
amount is $730,000. You will also receive a bonus equivalent
equal to the greater of the average of your three previous
years' annual incentive payments, or one-half of your average
annual incentive participating salary for the most recent three
years, whichever is the greater. This amount is $419,333.
These severance payments will be paid in a lump sum on or about
January 15, 1999 and will be subject to applicable withholding
requirements under Federal, state and local law.
3.
HEALTH AND LIFE COVERAGE
In accordance with the terms of your Severance Agreement, you
will continue to receive the same health care coverage (i.e.,
medical, dental, medical flexible spending account and employee
assistance plan) for yourself and your eligible dependents that
is provided to active salaried employees of the Company, at the
same contribution rate applicable to such employees, through
12/31/01. Thereafter you will be eligible to participate in
the same Owens Corning Retiree medical plan as other retirees,
subject to changes in the plan. This period of coverage will
count against any period of COBRA continuation health insurance
coverage to which you may be entitled following the Termination
Date. As such, you will automatically receive a COBRA notice
and election form following the Termination Date, which you may
ignore. You will also have the same life insurance protection
in the amount of $50,000 through 12/31/01. Any change in
active employee programs will also apply to you. The Rewards
and Resources Department in Toledo will be sending information
directly to you as to how your monthly contributions will be
handled. In the event you secure other employment after the
Termination Date, Owens Corning will be the secondary payer
with respect to the benefits described above. You should
contact CIGNA directly to discuss individual payment options
for your Group Universal Life Insurance (1-800-xxxxxxxx).
4. SAVINGS & PROFIT SHARING PLAN
As of October 22, 1998, your total Owens Corning Savings and
Profit Sharing Plan ("SPSP") account balance was $xxxxxxx. Any
contributions made since that date and any change in the market
value of your account will be reflected in your final payment,
which will be made in accordance with the terms of the SPSP.
All Company contributions through the Termination Date will be
vested, but no further contributions may be made to SPSP by you
or the Company after that date. Please note that under the
terms of SPSP, you are not required to receive an immediate
distribution of your account following the Termination Date.
You should contact Fidelity Investments at 1-800-xxxxxxxx.
5. PENSION PLAN
As an employee with vested rights in the Owens Corning Merged
Retirement Plan (the "Pension Plan"), you are entitled to a
benefit under the Plan. The estimated lump-sum present value
of your accrued benefit as of the Termination Date is
$3,975,217. Due to maximums allowed under Pension law, it is
estimated that $2,600,000 of this amount may be paid from the
Company's Executive Supplemental Benefit Plan (the
"Supplemental Plan"). The payment from the Supplemental Plan
will be made on or about January 15, 1999, and is taxable as
ordinary income, and is subject to applicable Federal, state
and local withholding requirements. The payment from the
Supplemental Plan will be offset by amounts already set aside
for you under the Company's Pension Preservation Trust (PPT),
as well as interest payments made to you from the PPT. The
estimated lump sum values shown above are based on the
November, 1998 GATT interest rate of 5.20%. Your pension
amounts will be recalculated using the December, 1998 GATT rate
when it is known, or a later month if you choose to defer
receipt of your retirement benefit. You will accrue no further
benefits under the Pension Plan following the Termination Date.
Payment of your benefits under these plans is governed by the
terms thereof, and not this Agreement.
Please contact Rick Tober of the Rewards and Resources
Department (xxxxxxxx) if you have any questions concerning your
pension benefits.
6. PENSION SUPPLEMENT
As provided in your Severance Agreement, you will receive a
supplemental pension payment in an amount equal to the present
value of the additional benefit that you would have accrued
under the Pension Plan had you been credited with an additional
three years of service and age under the Pension Plan as of the
Termination Date. This will result in an additional payment of
$550,000. Your pension supplement, which will be paid by the
Company in a lump sum on or about January 15, 1999, will be
reduced by applicable withholding requirements under Federal,
state and local law.
7. ADDITIONAL PAYMENTS
You will also receive a lump sum payment equivalent to one year's
base pay and one year's target incentive award, totaling
$565,750. This special payment will be paid on or about January
15, 1999, and will be reduced by applicable withholding
requirements under Federal, state and local law.
Additionally, you will be paid for twenty-five (25 days) of
accrued vacation for 1999 at the rate of $1,404.00 per day,
reduced by applicable withholding requirements under Federal,
state and local law.
Owens Corning will continue to provide you with financial and tax
planning assistance for 1999, with reimbursed expenses for such
purposes up to $7,500, reduced by applicable withholding
requirements under Federal, state and local law.
8. EFFECT ON OTHER EMPLOYEE BENEFITS
Except as provided in this Agreement, you will not be permitted
to participate in any of the Company's employee benefit plans,
programs or arrangements after the Termination Date, including
but not limited to the Corporate Incentive Plan.
9. COMPANY STOCK PLANS
The vesting of Stock Options which are unexercisable at your
Termination Date will be accelerated to that date and your Stock
Option shares will become 100% vested. Subject to applicable
blackout requirements, you will have five (5) years following
your separation date to exercise any vested options, or until the
end of the option term, whichever is earlier.
[Table omitted]
Please call PaineWebber at 1-800-xxxxxxxx, for instructions on
exercising your options and making the required tax payments.
Non-vested Restricted Shares will become vested as of your
Termination Date:
[Table omitted]
You are eligible to receive a payout under Long Term Performance
Incentive Plans for awards made under the 1996 - 1998 cycle, the
1997 - 1999 cycle, and the 1998 - 2000 cycle. Any payout will be
made in February, 1999, February, 2000, and February 2001,
respectively and will be based on Company performance for the
applicable period. Any award under the 1997 - 1999 and the 1998
- - 2000 Long-Term Plan will be prorated based on the number of
months you participated in the Plan. All other awards and non-
prorated portions thereof will be forfeited.
10. OUTSTANDING CHARGES
You are responsible for settling any outstanding charges
against you, such as amounts charged to your corporate American
Express card. If any of your American Express charges are
business expenses, you will process a T&E form as soon as
possible after the Termination Date. Your American Express card
should be turned in as soon as possible after your termination
date.
11. MUTUAL RELEASE AND INDEMNITY
The Company hereby releases and discharges you from any claim
it may now or hereafter have against you with respect to your
employment with the Company or any of its subsidiaries or
affiliates (other than with respect to performance of your
obligations under this Agreement), and agrees to indemnify you
in accordance with its then current policy or practices for
active employees for any claims made against you by third
parties arising out of the proper performance of your duties as
an employee of the Company or any of its subsidiaries or
affiliates.
In consideration of the benefits conveyed to you pursuant to the
terms of this Agreement, together with the Company's release and
indemnity, you hereby fully and forever release and discharge the
Company from any and all claims and actions, of every kind,
nature and description, including by way of illustration and not
limitation, any claim of discrimination, harassment or
discriminatory treatment (including age, race, sex, marital
status, national origin, disability or religious discrimination),
including any claim under the Age Discrimination In Employment
Act as amended, the Older Worker's Benefit Protection Act, breach
of express or implied contract, wrongful or constructive
discharge, interference with contract, breach of public or
corporate policy, practice or procedure, negligence, violation of
ERISA, loss of consortium, loss of pension or other fringe
benefits, fraud, misrepresentation, defamation, libel, slander,
intentional infliction of emotional distress, and/or all other
claims or derivative claims of tortuous conduct, statutory or
constitutional violation, or breach of contract, whether in law
or equity, known or unknown, of every kind, nature and
description, arising out of or in connection with any
relationship, including but not limited to your employment and
termination of employment with the Company, from the beginning of
the world up to the date of the signing of this Agreement. This
Agreement applies to the Company and all subsidiaries,
affiliates, predecessors, successors, related entities, as well
as past, present and future officers, directors, trustees, board
members, employees, attorneys, agents and assigns of the Company.
You understand that the failure to execute and return the
separate Release attached hereto along with this Agreement will
render this Agreement null, void and without effect.
12. CONFIDENTIALITY
You acknowledge that in the course of your employment with the
Company, you acquired confidential and proprietary information
regarding the Company's operations, business and practices and
you understand and agree that you (a) will keep such information
including all the Company files, information, and materials
confidential at all times after your employment with the Company;
(b) will not disclose or communicate the Company information to
any person or persons unless first authorized in writing by the
Company; and (c) will not make use of such information on your
own behalf or on the behalf of any other person, persons or
entities unless you first obtain authorization from the Company
in writing. In view of the nature of your employment and the
nature of the Company's information which you have received and
generated during the course of your employment, you agree that
any unauthorized disclosure to any person or persons of such
Company information, or other violation or threatened violation
of this Agreement would cause irreparable damage to the Company,
and that, therefore, the Company shall be entitled to seek an
appropriate injunction and legal remedies in a court of
appropriate jurisdiction.
13. AGREEMENT NOT TO COMPETE
You agree that during the term of your employment and for a
period of two years thereafter, you will not, directly or
indirectly, engage in, be engaged by (including engagement for
consulting or advising), provide services for or have any
interest in, any other person, firm, corporation or entity which
conducts any activity or makes any product competitive with the
business of the Company (including without limitation research or
development activities in any way relating to products which may
compete with current or developmental products of the Company);
provided however, that nothing contained herein shall restrict
you from owning 1% or less of the corporate securities of any
competitor of the Company where these securities are listed on
any national securities exchange or traded actively in the
national over-the-counter market, if you have no other connection
or relationship with the issuer of such securities.
You recognize the broad scope of the foregoing covenants, but
expressly agree that they are reasonable in light of the world-
wide scope of the business conducted by the Company. If any
court or tribunal of competent jurisdiction shall refuse to
enforce the foregoing covenants because the time limit applicable
thereto is deemed unreasonable, it is expressly understood and
agreed that such covenants shall not be void, but that for the
purpose of such proceedings and in such jurisdictions such time
limitation shall be deemed to be reduced to the extent necessary
to permit enforcement of the covenants. If any court or tribunal
of competent jurisdiction shall refuse to enforce any or all of
the foregoing covenants because they are more extensive (whether
as to geography, the scope of business or otherwise) than is
deemed reasonable, it is expressly understood and agreed between
the parties hereto that such covenants shall not be void, but
that for the purpose of such proceedings and in such
jurisdictions, the restrictions contained herein (whether as to
geography, the scope of business or otherwise) shall be deemed to
be reduced to the extent necessary to permit enforcement of the
covenants.
14. BUSINESS CONDUCT POLICY
You acknowledge that you are familiar with the terms of
the Owens Corning Employee Business Conduct Policy and its
Related Corporate Policies (including any laws applicable to
the Company's activities) (collectively, the "Policies"), and
that the terms of such Policies have been reviewed with you by
a representative of the Company in connection with your
termination of employment, and that, except as disclosed in
writing to the undersigned prior to the date of your
termination, you are not aware of any situation that might be
viewed as a possible violation of the Policies. You understand
that you will not suffer any form of retribution by the Company
for reporting potential violations.
15. MISCELLANEOUS
Except to the extent that your rights to the payments and
benefits described herein are governed by the terms of the
Company's employee benefit plans, programs or arrangements, or
by an agreement issued in accordance with the terms of such a
plan, program or arrangement, or by the Severance Agreement,
this Agreement embodies the entire agreement and understanding
between you and the Company and supersedes all prior
understandings between you and the Company relating to your
employment by, and termination from, the Company. Neither this
Agreement nor any term hereof may be changed, waived or
terminated except by an instrument in writing signed by both
parties hereto. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio.
If the foregoing is entirely satisfactory to you, please sign
both the attached Waiver and Release and one copy of this
letter in the place provided for your signature, and return
them to me. As described in the Waiver and Release, this
Agreement will become effective seven (7) days after your sign
it, unless you should choose to revoke this Agreement within
this seven (7) day period.
Sincerely,
OWENS CORNING
_______________________________
Glen H. Hiner
Chairman and Chief Executive Officer
ACCEPTED AND AGREED TO:
_________________________
Charles H. Dana
Date:____________________
Exhibit (23)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated January 25,
1999, included in Owens Corning's annual report on Form 10-K
for the year ended December 31, 1998, into the Company's
previously filed Registration Statements, File Nos. 33-9563,
33-9986, 33-9987, 33-18262, 33-20997, 33-27209, 33-31687, 33-
48707, 33-57886, 33-60487, 333-09367, 333-24501, 333-48153
and 333-47961
ARTHUR ANDERSEN LLP
Toledo, Ohio
March 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1998
<CASH> 54
<SECURITIES> 0
<RECEIVABLES> 451
<ALLOWANCES> 0
<INVENTORY> 437
<CURRENT-ASSETS> 1,529
<PP&E> 3,498
<DEPRECIATION> 1,880
<TOTAL-ASSETS> 5,101
<CURRENT-LIABILITIES> 1,883
<BONDS> 1,535
<COMMON> 679
194
0
<OTHER-SE> (1,813)
<TOTAL-LIABILITY-AND-EQUITY> 5,101
<SALES> 5,009
<TOTAL-REVENUES> 5,009
<CGS> 3,944
<TOTAL-COSTS> 3,944
<OTHER-EXPENSES> 72
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> (964)
<INCOME-TAX> (306)
<INCOME-CONTINUING> (666)
<DISCONTINUED> 0
<EXTRAORDINARY> (39)
<CHANGES> 0
<NET-INCOME> (705)
<EPS-PRIMARY> (13.16)<F1>
<EPS-DILUTED> (13.16)<F2>
<FN>
<F1> Represents basic earnings per share as defined in FASB Statement No. 128
<F2> Represents diluted earnings per share as defined in FASB Statement No. 128.
</FN>
</TABLE>
