BGF INDUSTRIES INC, S-4/A, 1999-04-27

BGF INDUSTRIES INC
S-4/A, 1999-04-27
BROADWOVEN FABRIC MILLS, MAN MADE FIBER & SILK

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<PAGE>

As filed with the Securities and Exchange Commission on April 26, 1999

Registration Statement No. 333-72321

----------------

PRE-EFFECTIVE

AMENDMENT NO. 1

TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

----------------

BGF INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)

Delaware 2221 56-1600845
(State of Formation) (Primary Standard (I.R.S. Employer
Industrial Identification No.)
Classification Code
Number)

3802 Robert Porcher Way
Greensboro, North Carolina 27410
(336) 545-0011
(Name, address, including zip code, and telephone number, including area code,
of Registrant's Principal Executive Offices)

With a copy to:
Richard L. Cromer, President B. Lynn Walsh, Esq.
BGF Industries, Inc. Alston & Bird LLP
3802 Robert Porcher Way One Atlantic Center
Greensboro, North Carolina 27410 1201 West Peachtree Street
(336) 545-0011 Atlanta, Georgia 30309-3424
(404) 881-7185
(Name, address, including zip code, and telephone number, including area code,
of Registrant's agent for service)

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

CALCULATION OF REGISTRATION FEE

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price per Aggregate Offering Amount of
Securities to be Registered Registered Note(1) Price Registration Fee(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/4% Series B Senior
Subordinated Notes due 2009..... $100,000,000 100% $100,000,000 $27,800
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f), based upon the book value of such securities.

(2) Filing fee previously paid.

----------------

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the SEC +
+is effective. This prospectus is not an offer to sell these securities and we +
+are not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED APRIL 26, 1999

PROSPECTUS

BGF INDUSTRIES, INC.

Exchange Offer for $100,000,000 of
10 1/4% Senior Subordinated Notes due 2009

The Exchange Notes:

. The terms of the exchange notes we issue will be substantially identical to
the outstanding notes that we issued on January 21, 1999, except for the
elimination of transfer restrictions, registration rights and liquidated
damages provisions relating to the old notes.

The Exchange Offer:

. The exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless extended.

. Upon our completion of the exchange offer, all old notes that are validly
tendered and not withdrawn will be exchanged for an equal principal amount of
exchange notes that are registered under the Securities Act.

. Tenders of old notes may be withdrawn at any time prior to the expiration of
the exchange offer.

. The exchange of notes will not be a taxable exchange for U.S. federal income
tax purposes.

. There is no existing trading market for the exchange notes and we do not
intend to list the exchange notes on any national securities exchange or
Nasdaq.

. We will not receive any cash proceeds from the exchange offer.

Notice to Investors:

. You should consider carefully the risk factors beginning on page 11 of this
prospectus before tendering your old notes in the exchange offer.

. Neither the SEC nor any state securities commission has approved or
disapproved of the exchange notes or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.

The date of this prospectus is , 1999.
<PAGE>

We have not authorized any person to make a statement that differs from what
is in this prospectus. If any person makes a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, the exchange notes in any
state where such offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.

This exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.

TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 11
The old notes outstanding after the exchange offer will not have
registration rights and we expect the market for the old notes to be
illiquid................................................................ 11
We have a significant level of indebtedness and may incur additional
indebtedness............................................................ 11
Our level of indebtedness is significant to you.......................... 11
Your exchange notes will be subordinate to our senior debt............... 12
Our indebtedness may prevent us from satisfying our obligations under the
notes................................................................... 12
Market downturns could reduce demand for our products.................... 13
We compete in highly competitive markets................................. 13
Our operating performance is dependent upon a limited number of
customers............................................................... 14
We may experience a decline in the supply of the raw materials we use to
make our products....................................................... 14
The Year 2000 problem may adversely affect our business operations and we
may incur significant costs to make our systems Year 2000 compliant..... 14
We may be responsible for environmental and safety and health costs that
could adversely affect us............................................... 16
We may have conflicts of interest with our controlling equity holders
that could adversely affect us.......................................... 16
We may not have sufficient funds to repay the exchange notes upon a
change of control....................................................... 16
We may be adversely affected by changes in technology.................... 16
The issuance of the old notes and any note guarantee may be subject to
fraudulent conveyance laws.............................................. 17
You cannot be sure that an active trading market will develop for the
exchange notes.......................................................... 17
Where You Can Find More Information........................................ 18
Cautionary Statement Regarding Forward Looking Statements.................. 18
Market and Industry Data................................................... 18
Use of Proceeds............................................................ 19
Capitalization............................................................. 20
Selected Financial and Operating Information............................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 23
Business................................................................... 34
Management................................................................. 43
Certain Relationships and Related Party Transactions....................... 48
Stock Ownership............................................................ 50
Description of Other Indebtedness Senior to the Exchange Notes............. 51
Description of Exchange Notes.............................................. 55
United States Federal Tax Considerations................................... 93
The Exchange Offer......................................................... 96
Plan of Distribution....................................................... 105
Legal Matters.............................................................. 106
Experts.................................................................... 106
Index to Financial Statements.............................................. F-1
</TABLE>

i
<PAGE>

PROSPECTUS SUMMARY

This summary highlights some information from this prospectus. It may not
contain all the information that is important to you. For a more complete
understanding of the exchange offer, we encourage you to read the entire
prospectus carefully, including the risk factors and financial statements.

The Exchange Offer

In this prospectus (1) "old notes" refer to the 10 1/4% Senior Subordinated
Notes due 2009 that we issued on January 21, 1999, (2) "exchange notes" refer
to the 10 1/4% Series B Senior Subordinated Notes due 2009 that we previously
registered under the Securities Act of 1933 and that we are offering in
exchange for the old notes, and (3) "notes" refer to the old notes and the
exchange notes collectively.

The Exchange Offer..... We are offering to exchange $1,000 principal
amount of our exchange notes for each $1,000
principal amount of old notes. As of the date of
this prospectus, $100,000,000 in aggregate
principal amount of old notes are outstanding.

We have registered the exchange notes under the
Securities Act and they are substantially
identical to the old notes, except for transfer
restrictions, registration rights and liquidated
damages provisions relating to the old notes.

Resale of the Exchange Under existing SEC interpretations set forth in
Notes................. no-action letters, we believe that the exchange
notes may be offered for resale, resold and
otherwise transferred by you without compliance
with the registration and prospectus delivery
provisions of the Securities Act; provided that:

. you are acquiring the exchange notes in the
ordinary course of business;

. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the exchange notes
issued to you in the exchange offer; and

. you are not an affiliate of ours.

If our belief is inaccurate and you transfer any
exchange note without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from registration of your
exchange notes, you may incur liability under the
Securities Act. We do not assume or indemnify you
against such liability.

1
<PAGE>

"underwriter" within the meaning of the
Securities Act. A participating broker-dealer may
use this prospectus for an offer to resell,
resale or other retransfer of the exchange notes.
We will make this prospectus and any amendment or
supplement to this prospectus available for a
period of 180 days after the date of this
prospectus to any participating broker-dealer for
use in connection with any such resales. We
believe that no registered holder of the old
notes is an "affiliate" of ours, as defined in
Rule 405 of the Securities Act.

Any broker-dealer that is not a participating
broker-dealer may not rely on existing SEC
interpretations set forth in no-action letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in order to resell the old notes
or the exchange notes. Such requirements include
being named as a selling security holder in a
registration statement related to any such
resales.

The exchange offer is not being made to, nor will
we accept surrenders for exchange from, holders
of old notes in any jurisdiction in which this
exchange offer or the acceptance thereof would
not be in compliance with the securities or blue
sky laws of such jurisdiction.

Accrued Interest on the
Exchange Notes and the Old
Notes................. Interest on the exchange notes will accrue from
the last interest payment date on which interest
was paid on the old notes, or, if no interest was
paid on the old notes, from January 21, 1999, the
date of issuance of the old notes. Holders whose
old notes are accepted for exchange will be
deemed to have waived the right to receive any
interest accrued on the old notes.

No Minimum Condition... We are not conditioning the exchange offer on the
tender of any minimum aggregate principal amount
of old notes.

Expiration Date........ The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999, unless we decide
to extend the exchange offer.

We can keep the exchange offer open for up to 30
business days after the effective date of our
exchange offer registration statement without
incurring liquidated damages under our
registration rights agreement. If we begin the
exchange offer immediately after the registration
statement is effective, we will then be able to
extend the exchange offer for an additional 10
business days after , 1999 without incurring
liquidated damages.

Withdrawal Rights...... You may withdraw your tender at any time prior to
5:00 p.m., New York City time, on the expiration
date.

<PAGE>

Conditions to the Exchange We are not required to accept for exchange any
Offer................. old notes, and we may terminate or amend the
exchange offer if:

. we are faced with any legal action or
proceeding that might materially impair our
ability to proceed with the exchange offer
or if any material adverse development occurs in
an existing action or proceeding with respect to
us;

. the exchange offer violates applicable law or
any applicable SEC interpretations; or

. we do not obtain any governmental or quasi-
governmental approvals that we deem necessary
to consummate the exchange offer.

We may waive these conditions, but we currently
anticipate that each of the conditions will be
satisfied. We reserve the right to terminate or
amend the exchange offer at any time before the
expiration date if any of these conditions occur.

Procedures for Tendering If you are a holder of old notes who wishes to
Old Notes............. accept the exchange offer, you must:

. complete, sign and date the accompanying letter
of transmittal, or a facsimile thereof, and
mail or otherwise deliver such documentation,
together with your old notes to the exchange
agent at the address set forth under "The
Exchange Offer--Exchange Agent;" or

. arrange for the Depository Trust Company to
transmit all required information, including an
agent's message forming part of a book-entry
transfer in which you agree to be bound by the
terms of the letter of transmittal, to the
exchange agent in connection with a book-entry
transfer.

By tendering your old notes, in either manner,
you will be representing, among other things,
that:

. you are acquiring the exchange notes in the
ordinary course of business;

. you are not an affiliate of ours.

Special Procedures for
Beneficial Owners..... If you beneficially own old notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender your old notes in the exchange offer, you
should contact the registered holder promptly and
instruct it to tender on your behalf. If you wish
to tender on your own behalf, you must, prior to
completing and executing the letter of
transmittal and delivering your old notes, either
arrange to have your old notes registered in your
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time.

3
<PAGE>

Guaranteed Delivery If you wish to tender your old notes and time
Procedures............ will not permit your required documents to reach
the exchange agent by the expiration
date, or the procedures for book-entry transfer
cannot be completed on time, you may tender your
old notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."

Use of Proceeds............. We will not receive any proceeds from the
exchange of notes in the exchange offer. We will
pay all our expenses incurred in connection with
the exchange offer.

Federal Income Tax The exchange of notes in the exchange offer will
Consequences............... not result in any gain or loss to you for U.S.
federal income tax purposes. See "United States
Federal Tax Considerations."

Effect on Holders of Old As a result of this exchange offer, we will have
Notes...................... fulfilled an obligation under the registration
rights agreement with the initial purchaser of
the old notes and, accordingly, there will be no
increase in the interest rate on the old notes.

If you do not tender your old notes in the
exchange offer:

. you will continue to hold the old notes and
will be entitled to all the rights and
limitations applicable to the old notes under
the indenture governing the notes, except for
any rights under the registration rights
agreement that terminate as a result of the
completion of the exchange offer; and

. you will not have any further registration or
exchange rights and your old notes will be
subject to restrictions on transfer.
Accordingly, the trading market for untendered
old notes could be adversely affected.

Shelf Registration In some situations, holders of old notes may
Statement.................. require us to file, and cause to become
effective, a shelf registration statement under
the Securities Act, which would cover resales of
old notes by such holders.

Exchange Agent.............. The Bank of New York is serving as exchange agent
in connection with the exchange offer.

4
<PAGE>

The Exchange Notes

Issuer................. The exchange notes will be the obligations of
BGF.

Securities Offered..... Up to $100,000,000 in principal amount of 10 1/4%
Series B Senior Subordinated Notes due 2009.

Maturity Date.......... January 15, 2009.

Interest Payment Dates...... January 15 and July 15, beginning on July 15,
1999.

Optional Redemption.... We may redeem:

. all or part of the exchange notes beginning on
January 15, 2004, at the redemption prices
described in "Description of Exchange Notes--
Redemption;" and

. up to 35% of the exchange notes originally
issued at any time prior to January 15, 2002 at
the price of 110.5% of their face amount, plus
accrued and unpaid interest, with money we
raise in public equity offerings.

Ranking................ The exchange notes are, and any note guarantees
will be, senior subordinated debt. They rank
behind all of our current and future
indebtedness, other than trade payables, except
indebtedness that expressly provides that it is
not senior to the exchange notes. The exchange
notes will effectively rank behind any of our
future indebtedness that is secured by any of our
assets to the extent of the value of such assets,
even if such indebtedness expressly provides that
it is not senior to the exchange notes.

As of March 31, 1999, the amount of our
indebtedness that ranked senior to the exchange
notes was $53.0 million. On that date, we did not
have any debt that ranked equal with or junior to
the exchange notes.

If we are in compliance with our financial
covenants, we have the ability to incur up to an
additional $72 million of debt under our senior
credit facility, which would be senior to the
exchange notes. We have no immediate intention to
enter into any additional senior or junior debt
aside from what may be available under our senior
credit facility.

Note Guarantees........ If we form any U.S. subsidiaries, they will
guarantee the exchange notes on an unsecured
basis. The note guarantees will be senior
subordinated debts. They will rank behind:

. all of the indebtedness of the note
guarantors, other than trade payables, except
indebtedness that expressly provides that it
is not senior to the note guarantees and

. any indebtedness of the note guarantors that
is secured by any assets to the extent of the
value of such assets.

Mandatory Offer to If we sell assets not in the ordinary course of
Purchase.............. business or experience a change of control, we
may be required to offer to purchase the exchange
notes at a purchase price equal to 101% of

<PAGE>

their face amount, plus interest within 30 to 60
days after these events. If we are required to
offer to purchase the exchange notes, we cannot
assure you that we will have adequate funds to do
so at that time or that we will be able to obtain
funds from third party sources on reasonable
terms, if at all.

Basic Covenants of We will issue the exchange notes under an
Indenture.................. indenture that will contain covenants for your
benefit. Such covenants, among other things,
could limit or restrict our ability and the
ability of our subsidiaries to:

. incur additional debt;

. pay dividends and make distributions;

. repurchase securities;

. make investments;

. create liens;

. transfer or sell assets;

. enter into transactions with affiliates;

. issue or sell stock of subsidiaries; or

. merge or consolidate.

However, these restrictions will be subject to a
number of important qualifications and
exceptions. For more details, see "Description of
Exchange Notes--Material Covenants."

6
<PAGE>

BGF Industries, Inc.

We produce specialty woven and non-woven fabrics made from glass, carbon and
aramid yarns for use in a variety of electronic, filtration, composite,
insulation, construction and commercial products. Both in revenue and market
share, we are the second largest manufacturer of glass fiber fabrics and a
leading producer of other high performance fabrics in North America. Some of
our customers use glass fiber fabrics to construct multi-layered and rigid
printed circuit boards, which are an integral component to virtually all
advanced electronic products, including computers and cellular telephones.
Other of our customers use our fabrics to strengthen, insulate and enhance the
dimensional stability of hundreds of products that they make for various
downstream markets, such as aerospace, transportation, construction, power
generation and oil refining. For a thorough description of our products and
markets, see "Business."

We sell our products to over 400 customers, including Cytec Fiberite,
Polyclad Laminates, Isola USA, General Electric, BHA Group, Chemfab and 3M. For
the year ended December 31, 1998, our net sales were $201.8 million. Sales of
glass fiber fabrics accounted for 84.6% of our net sales in that period. Sales
of glass fiber fabrics for the electronics industry, primarily for use in
printed circuit boards, accounted for approximately half of our net sales in
1998.

Porcher Industries S.A. of Badinieres, France owns 100% of BGF through its
United States holding company, Glass Holdings Corp. Porcher Industries is a
worldwide leader in the industrial fabrics industry and has manufacturing
facilities in France, Brazil, China, the United Kingdom and, through our
facilities, the United States.

The following chart shows the organizational structure of Porcher
Industries.

[CHART SHOWING THE ORGANIZATIONAL STRUCTURE OF PORCHER INDUSTRIES HERE]

<PAGE>

The Affiliated Transaction

On September 30, 1998, AGY Holdings, Inc., a wholly owned subsidiary of our
parent company, Glass Holdings, acquired a 51% ownership interest in Advanced
Glassfiber Yarns LLC from Owens Corning for aggregate consideration of $338.9
million, including post-closing adjustments. Advanced Glassfiber owns and
operates the glass yarns and specialty materials business formerly owned by
Owens Corning. Advanced Glassfiber is our largest supplier of glass yarns, the
principal material we use to produce glass fiber fabrics. Owens Corning, which
formed Advanced Glassfiber to own and operate its glass yarns and specialty
materials business, owns the remaining 49% interest through its wholly owned
subsidiary, Jefferson Holdings, Inc.

To fund AGY Holdings' purchase of the 51% ownership interest in Advanced
Glassfiber:

. we borrowed $88.4 million, including $1.4 million to fund a post-closing
purchase price adjustment, under our $125.0 million senior credit
facility with First Union National Bank;

. we borrowed $65.0 million under our $65.0 million senior subordinated
credit facility with First Union Investors, Inc.;

. we then loaned $138.6 million to Glass Holdings and Glass Holdings then
loaned this amount to AGY Holdings;

. AGY Holdings used the proceeds from this loan, along with an additional
$198.9 million intra-day loan from First Union National Bank and $4.7
million in other borrowings, to purchase the 51% interest in Advanced
Glassfiber; and

. after the completion of the purchase, Advanced Glassfiber paid AGY
Holdings a $203.6 million dividend and AGY Holdings used this money to
repay the $198.9 million intra-day loan and the $4.7 million in other
borrowings.

The cash outlay by BGF for the 51% ownership interest in Advanced Glassfiber
was $135.3 million plus costs of $3.3 million, for a total cash outlay of
$138.6 million. The net proceeds from the offering of the old notes were used
to repay all amounts outstanding under our senior subordinated credit facility
and a portion of the amounts outstanding under our senior credit facility
incurred in connection with the affiliated transaction.

8
<PAGE>

Summary Historical Financial Information

We present below our summary historical and as adjusted information for the
periods indicated.

We derived the historical information for the years ended December 31, 1996,
1997 and 1998 from our audited financial statements which appear elsewhere in
this prospectus. We derived the historical information for each of the years in
the two year period ended December 31, 1995 from our audited financial
statements which are not included in this prospectus.

Our summary unaudited as adjusted financial information as of and for the
year ended December 31, 1998 gives effect to the issuance and sale of the old
notes and the exchange of old notes for exchange notes and the affiliated
transaction as if such events occurred on January 1, 1998, except for balance
sheet data, which gives effect to the issuance and sale of the old notes and
the exchange of old notes for exchange notes as if such events had occurred on
December 31, 1998.

The summary unaudited as adjusted financial information does not purport to
be indicative of what our results of operations would actually have been had
the affiliated transaction and the offering of the old notes been completed on
such date, or to project our results of operations for any future period.

We have presented EBITDA in our summary historical and as adjusted other
data because it is a widely accepted financial indicator of a company's ability
to service and/or incur indebtedness. EBITDA does not represent and should not
be considered as an alternative to net income or cash flow from operations as
determined by generally accepted accounting principles, and EBITDA does not
necessarily indicate whether cash flow will be sufficient for cash
requirements. EBITDA presented below may not necessarily be comparable to
similarly titled measures reported by other companies as they are not
calculated identically by all companies. We define EBITDA as net income before
income taxes, interest expense, depreciation and amortization expense,
cumulative effect of an accounting change, and other (income) expenses, net.

You should read the summary historical financial information together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements, the related notes, and
other information contained in this prospectus.

Other Data:
Capital expenditures.... $ 1,942 $ 8,311 $ 21,983 $ 7,275 $ 11,299 $ 11,299
Depreciation and
amortization(3)........ 7,801 8,223 6,085 6,759 7,399 7,399
EBITDA(4)............... 25,640 31,543 46,236 44,423 36,975 36,975
Cash flows from
operating activities... 11,705 17,561 22,791 19,898 29,471 23,528
Cash flows from
investing activities... (1,925) (8,268) (25,425) (7,275) (11,283) (11,283)
Cash flows from
financing activities... (6,500) (16,666) 2,778 (12,759) (18,199) (18,199)
</TABLE>

9
<PAGE>

(continued)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1998
------------ ------------ ------------ ------------ ------------ ------------
As
Actual Adjusted(5)
------------ ------------
(dollars in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (at
period end):
Working capital......... $45,534 $40,745 $ 39,702 $ 51,799 $ 53,424 $ 54,072
Total assets............ 95,592 97,029 123,784 136,476 136,766 138,234
Total debt:
Senior credit
facility.............. -- -- -- -- $ 86,000 $ 56,150
Senior subordinated
credit facility....... -- -- -- -- 65,000 --
Exchange notes......... -- -- -- -- -- 98,000
Other.................. $35,000 $17,500 $36,276 $25,000 -- --
------- ------- -------- -------- -------- --------
Total.................. $35,000 $17,500 $ 36,276 $ 25,000 $151,000 $154,150
======= ======= ======== ======== ======== ========
Stockholder's equity
(deficit).............. 45,030 57,614 66,480 83,297 (38,176) (39,210)
</TABLE>
- --------

(1) As adjusted interest expense was calculated by multiplying the additional
financing required to fund the affiliated transaction and related costs
times the interest rate on the financing facilities (i.e., the senior
credit facility and the exchange notes). Interest on the senior credit
facility was estimated at 8.0% based on an average 90 day LIBOR rate
through September 30, 1998 and an estimated applicable margin as outlined
in the facility's credit agreement. The interest on the exchange notes was
based on the effective interest rate of 10.58%. If the interest rate on
the senior credit facility changed 1/8%, interest expense would change by
$134 for the year ended December 31, 1998.

(2) Attributable to BGF's adoption in 1994 of Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits other than Pensions."

(3) Amounts do not include amortization of debt issuance costs and original
issue discount, which is included in interest expense.

(4) EBITDA is calculated as follows:

(5) As adjusted assets, total debt, and stockholder's equity at December 31,
1998 are calculated by using the historical financials at December 31,
1998 and adjusting for the issuance and the sale of the old notes and the
exchange of old notes for exchange notes ($98,000), repayments of the
senior subordinated credit facility ($65,000), repayments of the senior
credit facility ($29,850), write-off of debt issuance costs related to the
senior subordinated credit facility ($1,034, net of tax), and payment of
fees related to the old notes ($3,150).

10
<PAGE>

RISK FACTORS

Before you tender your old notes, you should be aware that there are various
risks involved in such an investment, including those we describe below. You
should consider carefully these risk factors together with all of the other
information included in this prospectus before you decide to tender your old
notes in the exchange offer.

The old notes outstanding after the exchange offer will not have registration
rights and we expect the market for the old notes to be illiquid.

If you do not exchange your old notes for exchange notes pursuant to the
exchange offer, your old notes will continue to be subject to the restrictions
on transfer of old notes. In general, you may not offer or sell old notes
unless they are registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. We do
not currently intend to register the old notes under the Securities Act.

Under existing SEC interpretations, we believe that you may offer for
resale, resell or otherwise transfer the exchange notes without compliance with
the registration and prospectus delivery requirements of the Securities Act;
provided that:

.you are acquiring the exchange notes in the ordinary course of business;

.you are not participating, do not intend to participate, and have no
arrangement or understanding with anyone to participate, in the
distribution of the exchange notes issued to you in the exchange offer;
and

.you are not an affiliate of ours.

Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, where such old notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such exchange notes. See "Plan of Distribution." To the extent that
old notes are tendered and accepted in the exchange offer, the trading market
for untendered and tendered but unaccepted old notes may be adversely affected.

We have a significant level of indebtedness and may incur additional
indebtedness.

We incurred significant debt in connection with AGY Holdings' purchase of a
51% ownership interest in Advanced Glassfiber and as a result, we have
significant debt service obligations. Our annual debt service for 1999 will be
$1.0 million and will increase each year based on the payment schedule of the
term loan under the senior credit facility, until its maturity in 2004. As of
March 31, 1999, we had $153.0 million of indebtedness, including the old notes.
We also had $72.0 million of additional borrowing availability under our senior
credit facility as of such date. As of March 31, 1999, the old notes were
subordinated to $53.0 million of senior debt. In addition, the indenture
governing the notes does not fully prohibit us from incurring substantial
additional indebtedness. If we add new debt to our current debt levels, the
related risks that we now face could intensify. See "Capitalization," "Selected
Financial and Operating Information" and "Description of Other Indebtedness
Senior to the Exchange Notes."

Our level of indebtedness is significant to you.

Our substantial indebtedness poses important consequences to you, including
the risks that:

. we will use a substantial portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the funds available
for working capital, capital expenditures, acquisitions, research and
development and other general corporate purposes;

<PAGE>

. our indebtedness may limit our ability to obtain additional financing on
satisfactory terms and to otherwise fund working capital, capital
expenditures, acquisitions, research and development, and other general
corporate requirements;

. our level of indebtedness may make us more vulnerable to economic
downturns and may limit our ability to withstand competitive pressures;

. our debt may bear interest at variable rates which creates higher debt
service requirements if market interest rates increase; and

. our failure to comply with the financial and other covenants applicable
to our debt could result in an event of default, which, if not cured or
waived, could have a material adverse effect on us.

Our ability to pay principal and interest on the exchange notes and to
satisfy our other debt obligations will depend on our future operating
performance. Our operating performance will be affected by prevailing economic
conditions and financial, business and other factors which may be beyond our
control. If we cannot generate sufficient cash flow from operations to meet our
obligations, we may be forced to reduce or delay capital expenditures, sell
assets, restructure or refinance our debt, or seek additional equity capital.
We cannot assure you that any of these remedies would be satisfactory or could
be effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Description of Other Indebtedness Senior to the Exchange
Notes" and "Description of Exchange Notes."

Your exchange notes will be subordinate to our senior debt.

Before paying principal and interest on the exchange notes, we must first
make payments on any of our existing and future senior debt that is in default,
including all outstanding amounts under our senior credit facility. As of March
31, 1999, we had $53.0 million of senior debt outstanding. In addition, we had
approximately $72.0 million of additional borrowing availability under our
senior credit facility on that date.

Substantially all of our real and personal property secures our obligations
under our senior credit facility. If we default on any payments required under
any of our secured debt, the secured lenders could declare all amounts
outstanding, together with accrued and unpaid interest, immediately due and
payable. If we are unable to repay the amounts due, the lenders could proceed
against the collateral securing the debt. If the lenders proceed against any of
the collateral, we may not have enough assets left to pay you or the other
noteholders. Moreover, if we become bankrupt or similarly reorganize, we may
not be able to use our assets to pay you or the other noteholders until after
we repay all of our senior debt, including all indebtedness under the existing
senior credit facility or any replacement senior credit facility. In addition,
the existing senior credit facility and any replacement senior credit facility
may prohibit us from paying amounts due on the exchange notes, or from
purchasing, redeeming or otherwise acquiring the exchange notes if a default
exists under our senior debt. None of our non-United States subsidiaries will
guarantee the exchange notes and the exchange notes will be effectively
subordinated in right of payment to all debt and other liabilities, excluding
trade payables, of these subsidiaries. See "Description of Exchange Notes--
Subordination of the Exchange Notes and the Note Guarantees."

Our indebtedness may prevent us from satisfying our obligations under the
notes.

Our senior credit facility and the indenture governing the old notes and the
exchange notes each contain a number of significant covenants that may
adversely affect our ability to finance our future operations or capital needs
or engage in other business activities that may be in our best interests. These
covenants could limit or restrict our ability to:

. incur additional debt;

. pay dividends and make distributions;

. repurchase securities;

12
<PAGE>

. make investments;

. create liens;

. transfer or sell assets;

. enter into transactions with affiliates;

. issue or sell stock of subsidiaries; or

. merge or consolidate.

In addition, our senior credit facility requires us to comply with financial
ratios. Events beyond our control may prevent us from complying with these
ratios. If we breach any of the covenants in the senior credit facility or the
indenture, or if we are unable to comply with the required financial ratios, we
may be in default under the senior credit facility and the indenture. If we
default under the senior credit facility, the lenders can declare all
borrowings outstanding, including accrued interest and other fees, due and
payable. If we use all of our available cash to repay borrowings under the
senior credit facility, we may not be able to make payments on the exchange
notes. See "Description of Other Indebtedness Senior to the Exchange Notes" and
"Description of Exchange Notes."

Market downturns could reduce demand for our products.

We sell our products for use in a wide range of applications in the
electronics, composites, filtration, commercial, insulation and construction
markets. Any downturn in these markets, which are susceptible to cyclical and
general economic downturns, would reduce demand for our products. A reduction
in overall demand will likely result in increased competition for customers. If
we fail to meet satisfactorily the challenges of increased competition, our
business, financial condition and results of operations could be adversely
affected. For example, according to recent press reports, a significant number
of aircraft orders placed by Asian buyers have been, or could be, cancelled.
These cancellations could adversely affect the aerospace industry and, in turn,
could adversely affect the demand for our composite products, the majority of
which are ultimately used by end-users in the aerospace industry. If that
demand were to decrease, it could have a material adverse effect on our results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Competition."

We compete in highly competitive markets.

The markets in which we compete are highly competitive and some of our
competitors may have greater financial and other resources than we do. We
cannot assure you that we will be able to continue to compete effectively in
the future or that other competitors will not enter the markets in which we
compete.

We believe that the principal competitive factors affecting our markets
include the:

. quality, performance, price and consistency of products;

. responsiveness to customer requirements; and

. ability to maintain customer relationships.

Our primary domestic competitor is Hexcel Corporation. In September 1998,
Hexcel acquired the assets and operating liabilities of the glass fiber fabrics
manufacturing business of Clark-Schwebel. Prior to the acquisition, Clark-
Schwebel was our primary domestic competitor in the glass fiber fabrics market.
Our major competitors globally are Hexcel/Clark-Schwebel, Nitto Boseki (Japan),
Nan Ya Plastics (Taiwan) and Taiwan Glass (Taiwan).

Historically, imports of glass fiber fabrics into the U.S. have been limited
because of import quotas, restrictions, duties and tariffs. Recently, however,
imports of goods such as laminates and rigid printed circuit

13
<PAGE>

boards from Asia have increased and are negatively affecting demand for
domestically produced heavyweight glass fiber fabrics. Increased competition
from Asian producers, particularly in heavyweight glass fiber fabrics for the
electronics market, has also resulted from:

. their increased vertical integration of glass yarn manufacturing and
weaving operations;

. greater price competition due to currency fluctuations; and

. their increased heavyweight manufacturing capacity.

As a result of these competitive pressures, in 1998, our net sales of
heavyweight glass fiber fabrics declined 36.2% from 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Competition."

Our operating performance is dependent upon a limited number of customers.

Sales to our top ten customers accounted for 54.9% of our total sales in
1998. A decrease in business from, or the loss of one or more of our major
customers could have a material adverse effect on our business, financial
condition and results of operations. Our customers are not contractually
required to purchase any of our products and may terminate their relationship
with us at any time. We have been advised by one of our top three customers
that it intends to terminate its heavyweight laminates business. Consequently,
this customer will no longer purchase heavyweight fiber fabrics from us for use
in producing rigid printed circuit boards. We estimate that approximately $13.2
million of our total sales of heavyweight fiber fabrics to this customer in
fiscal 1998 were used to produce rigid printed circuit boards. We believe this
termination resulted from competitive pressures from Asian laminate producers.
However, we believe that this customer will continue to purchase other fabrics
from us.

In addition, our future business, financial condition and results of
operations will depend to a significant extent upon the commercial success of
our major customers and their continued willingness to purchase our products.
Any significant downturn in the business of our major customers could cause
them to reduce or discontinue their purchases from us. This could have a
material adverse effect on our business, financial condition and results of
operations. See "Business--Sales and Marketing."

We may experience a decline in the supply of the raw materials we use to make
our products.

We purchase the vast majority of our glass yarns from Advanced Glassfiber
and PPG Industries. We also purchase glass yarns from Nitto Boseki and
Compagnie de Saint Gobain, which is also known as Vetrotex; aramid yarns from
DuPont and Akzo Nobel; and carbon yarns from Amoco Performance Products, Toho
Carbon Fibers and Hexcel. We do not have long-term contracts with any of our
suppliers for the delivery of glass, aramid or carbon yarns and our suppliers
can stop selling us glass, aramid and carbon yarns at anytime. If our suppliers
are unable or unwilling to deliver us glass, aramid or carbon yarns, our
business, financial condition and results of operations could be materially
adversely affected. We experienced shortages of glass yarns from the fourth
quarter of 1994 through the second quarter of 1996. Due in part to such
shortages, the price of glass yarns increased in 1996 at a higher than
historical rate. In addition, during 1996, shortages of carbon yarns occurred.
We cannot assure you that glass, carbon and aramid yarns will continue to be
available or that they will be available at prices that will not have a
material adverse effect on our profitability. Additionally, we have generally
been able to pass through increases in the cost of yarn to our customers. Our
inability to do so in the future could have a material adverse effect on our
business, financial condition and results of operations.

The Year 2000 problem may adversely affect our business operations and we may
incur significant costs to make our systems Year 2000 compliant.

14
<PAGE>

"1900s." If not corrected, computer applications making calculations and
comparisons in different centuries may cause inaccurate results, or fail by or
at the Year 2000.

These Year 2000 issues are of particular importance to us. We recognized that
many of the systems and equipment we use to conduct and manage our business
were at risk for Year 2000 compliance. If these risks are not assessed and
remediated, our ability to continue normal business operations could be
substantially impaired, including our ability to manufacture our products. We
also recognized that Year 2000 related issues could adversely affect the
operations and financial performance of our material suppliers and customers.
Any of these issues, if not addressed properly, could have a material adverse
effect on our business, financial condition and results of operations.

We operate two mission-critical systems to run our business. Our business
systems also include other third-party software that has been installed on
approximately 250 personal computers located throughout our various facilities.
Approximately 1,200 programs make up these business systems. We also employ a
large amount of manufacturing equipment, as well as systems which operate
business functions such as e-mail, telephones and security. These pieces of
manufacturing equipment and systems, as well as the computer hardware we use in
our business, could contain embedded technology that is not Year 2000
compliant.

Since 1997, we have been working to achieve Year 2000 readiness. Our Year
2000 efforts have been focused on mission-critical issues and are being
directed by our Information Systems Department, with frequent interaction with
our senior management. As a result of our efforts, we have identified and are
addressing Year 2000 issues related to (1) date fields in approximately 45% of
the programs making up our business systems, (2) the loom monitoring system at
one of our manufacturing facilities and (3) the telephony system at our
corporate offices. Other than these, to date we have not identified any other
necessary material modifications or replacements pertaining to our business
systems and embedded technology. However, we cannot guarantee you that we will
not discover further material Year 2000 related issues as we continue through
our Year 2000 efforts.

We also face risks in connection with the Year 2000 issues of third parties
on whom we rely. Aside from the manufacturers of the personal computers and
manufacturing equipment we use to run our business, we rely heavily on our
material suppliers of raw materials, energy and other services, as well as our
material customers. If a significant number of these parties fail to be Year
2000 ready, it could prevent or substantially impair our ability to transact
business with them as usual. We would then need to find alternatives for our
supplies and products and if we were unable to do so, or delayed in doing so,
it could have a material adverse effect on our business, results of operations
and financial condition. We have already begun to contact our material
suppliers and customers to survey their readiness for the Year 2000. Although
we have not identified any material issues regarding these vendors and
customers to date, we cannot assure you that all of these third parties will be
Year 2000 ready. If any or our material vendors or customers fail to be Year
2000 ready, it could have an adverse material effect on our business and
results of operations.

Although we believe we are taking the necessary steps to become Year 2000
ready and are on schedule to complete our Year 2000 efforts no later than
September 30, 1999, if our identification and evaluation efforts have not
adequately detected material Year 2000 issues and a material number of our
mission-critical systems and equipment fail due to the Year 2000, our business
could suffer a material adverse effect. We are in the process of developing
contingency plans if such an event were to occur, including manual work-arounds
to back-up our mission-critical business systems. We cannot assure you,
however, that, when finalized, our contingency plans will be adequate for all
possible Year 2000 scenarios. These risks are heightened by our inability to
control the Year 2000 readiness of material third parties on whom we rely.

As of March 31, 1999, we had incurred approximately $350,000 in costs to
address our Year 2000 issues and we expect that the overall costs related to
our efforts will be approximately $440,000. Although these costs are not
material to us, we cannot assure you that, as we progress through the final
phases of our Year 2000 efforts, we will not identify further issues that could
cause our costs to become material. A material increase in our Year 2000 costs
could have a material adverse effect on our financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000."

<PAGE>

The disclosures contained herein concerning Year 2000 are designated as
"Year 2000 Readiness Disclosures" and are made pursuant to the Year 2000
Information and Readiness Disclosure Act.

We may be responsible for environmental and safety and health costs that could
adversely affect us.

We are required to comply with various federal, state and local
environmental laws and requirements that govern the use of our facilities. Such
laws and requirements govern:

. discharges to air and water;

. the handling and disposal of solid and hazardous substances and wastes;
and

. the remediation of contamination associated with releases of hazardous
substances at our facilities and off-site disposal locations.

Laws and requirements relating to workplace safety and worker health also
govern our operations. These laws and requirements establish formaldehyde,
asbestos and noise standards and regulate the use of hazardous chemicals in the
workplace. We cannot assure you that existing and future laws and requirements,
ordinances or regulations will not give rise to compliance or remediation
capital expenditures which could have a material adverse effect on our
business, financial condition and results of operations.

We may have conflicts of interest with our controlling equity holders that
could adversely affect us.

Glass Holdings owns 100% of BGF and the Porcher family, through its
controlling interest in Porcher Industries, controls Glass Holdings. As a
result, the Porcher family has the power to elect all of our directors and
appoint new management. Consequently, the Porcher family has the ability to
control our policies and operations. In addition to controlling Advanced
Glassfiber, the Porcher family also controls companies in Europe and Asia which
manufacture products competitive to ours. Circumstances may occur in which the
interests of the Porcher family could be in conflict with the interests of our
noteholders. See "Management--Directors, Executive Officers and Senior Managers
of BGF," "Certain Relationships and Related Party Transactions" and "Stock
Ownership."

We may not have sufficient funds to repay the exchange notes upon a change of
control.

If we experience a change of control, you may have the right to require us
to purchase your exchange notes at a purchase price equal to 101% of the
principal amount of your exchange notes plus accrued and unpaid interest. If
this occurs, we may also be required to (1) repay our outstanding senior debt
or (2) obtain our lender's consent to our purchase of the exchange notes. If we
cannot repay our debt or cannot obtain the needed consents, we may be unable to
purchase the exchange notes. This would be an event of default under the
indenture. Upon a change of control, we cannot guarantee you that we will have
sufficient funds to make any debt payment as described above, including
purchases of the exchange notes. To avoid default, we would try to refinance
our debt. We cannot guarantee you, however, that such refinancing, if
available, would be on favorable terms. See "Description of Exchange Notes--
Change of Control."

The events that qualify as a change of control under the indenture may also
be events of default under our senior credit facility or other indebtedness. An
event of default under our senior credit facility would permit our lenders to
accelerate our indebtedness. If we cannot repay such borrowings when due, the
lenders could proceed against the collateral securing the debt.

We may be adversely affected by changes in technology.

We cannot assure you that we will be able to maintain our current
technological position. Rapid technological advances in the markets we serve
place rigorous demands on the weight, quality and consistency of our products.
For example, technological changes in the printed circuit board industry are
rapid and continuous and require extensive technological and manufacturing
capability and expertise. In addition, we

16
<PAGE>

could face increased competition if cost-effective alternatives to glass,
carbon or aramid fiber fabrics are developed for our products. If competitors
develop and introduce cost-effective alternatives to our products or if we do
not anticipate and respond to technological changes, our business, financial
condition and results of operations could suffer a material adverse effect.

The issuance of the old notes and any note guarantee may be subject to
fraudulent conveyance laws.

Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if we, at the time
we issued the old notes:

(1) incurred such indebtedness with the intent to hinder, delay or
defraud creditors; or

(2) received less than reasonably equivalent value or fair consideration
for incurring such indebtedness, and:

. were insolvent at the time of incurrence;

. were rendered insolvent by reason of such incurrence and the
application of the proceeds thereof;

. were engaged or were about to engage in a business or transaction
for which our remaining assets constituted unreasonably small
capital to carry on our businesses; or

. intended to incur, or believed that we would incur, debts beyond
our ability to pay such debts as they matured,

a court of competent jurisdiction could:

(1) void, in whole or in part, the notes, and direct the repayment of
any amounts paid thereunder to our creditors;

(2) subordinate the notes to our obligations to our existing and future
creditors; or

(3) take other actions detrimental to the holders of the notes.

The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in such case. Generally, however, we would be considered
insolvent if the sum of our debts, including contingent liabilities, was
greater than all of our assets at fair valuation or if the present fair
saleable value of our assets was less than the amount that would be required to
pay the probable liability on our existing debts, including contingent
liabilities, as they become absolute and matured. A note guarantee, at the time
it is issued by one of our subsidiaries, would also be subject to the same
fraudulent transfer or conveyance laws as the notes.

You cannot be sure that an active trading market will develop for the exchange
notes.

The old notes were offered to a small number of institutional buyers and are
eligible for trading in the PORTAL Market. The exchange notes will be a new
issue of securities for which there is no existing trading

market. We cannot assure you as to the liquidity of markets that may develop
for the exchange notes, your ability to sell the exchange notes or the price at
which you would be able to sell the exchange notes. If such markets were to
exist, the exchange notes could trade at prices that may be lower than their
principal amount or purchase price depending on many factors, including
prevailing interest rates and the market for similar securities. First Union
Capital Markets has advised us that it currently intends to make a market with
respect to the exchange notes. However, it is not obligated to do so, and any
market making with respect to the exchange notes may be discontinued at any
time without notice. In addition, such market making activity may be limited
during the pendency of the exchange offer or the effectiveness of a shelf
registration statement in lieu thereof. We do not intend to apply for listing
of the exchange notes on any national securities exchange or on Nasdaq. The
liquidity of, and trading market for, the exchange notes also may be adversely
affected by changes in the market for high yield securities and by changes in
our financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for the exchange notes.

17
<PAGE>

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement on Form S-4 that we have
filed with the SEC. This prospectus does not contain all of the information set
forth in the registration statement. For further information about us and the
exchange notes, you should refer to the registration statement. This prospectus
summarizes material provisions of contracts and other documents to which we
refer you. Since these summaries may not contain all of the information that
you may find important, you should review the full text of these documents. We
have filed certain of these documents as exhibits to our registration
statement.

In addition, for so long as any notes remain outstanding, we will furnish to
you and the trustee and file with the SEC all such information, documents and
reports specified in Section 13 or 15(d) of the Exchange Act, including Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K.

You should direct any request for information to our Chief Financial Officer
at least 10 business days before you tender your old notes in the exchange
offer. Our mailing address and telephone number are:

BGF Industries, Inc.

3802 Robert Porcher Way

Greensboro, North Carolina 27410

(336) 545-0011

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

Some of the information in this prospectus may contain forward looking
statements. Such statements include, in particular, statements about our plans,
strategies and prospects under the headings "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Business." You can identify forward looking statements by our use of forward
looking terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward looking
statements are reasonable, we cannot assure you that our plans, intentions or
expectations will be achieved. Important factors that could cause our actual
results to differ materially from the forward looking statements we make in
this prospectus are set forth in the "Risk Factors" section and elsewhere in
this prospectus. All forward looking statements attributable to us or persons
acting for us are expressly qualified in their entirety by our cautionary
statements.

MARKET AND INDUSTRY DATA

Unless we indicate otherwise, we derived the industry data in this
prospectus from our internal surveys and estimates. We believe there are no
industry-wide publications or trade associations that report data on the
markets in which we compete and therefore no independent sources have verified
our internal surveys or our market data. Our methodology in estimating market
and industry data, including data in this prospectus, include, among other
things, the following sources:

. routine discussions with manufacturers of glass yarns to estimate
existing and projected purchases of glass yarns;

. information from third parties, when possible, to estimate existing
industry manufacturing capacity; and

. public statements by competitors and independent financial analysts.

We believe that our competitors use a similar methodology to estimate market
and industry data. However, we cannot guarantee the accuracy of any of the
market or industry data in this prospectus.

18
<PAGE>

USE OF PROCEEDS

We will not receive any cash proceeds from the exchange of old notes
pursuant to the exchange offer. The net proceeds to us from the sales of the
old notes were approximately $94.9 million, after deducting the initial
purchaser's discount and expenses of the offering of the old notes. We used the
net proceeds from the offering to repay all $65.0 million of indebtedness under
the term loan under our senior subordinated credit facility and $29.9 million
of indebtedness under the revolver under our senior credit facility. This
indebtedness was incurred on September 30, 1998 to fund the purchase by AGY
Holdings of the 51% ownership interest in Advanced Glassfiber. Upon the
repayment of the $65.0 million of indebtedness under the senior subordinated
credit facility, the facility was terminated. Affiliates of First Union Capital
Markets are a lender and the agent under the senior credit facility and were a
lender and the agent under the senior subordinated credit facility.

The term loan under the senior credit facility expires on September 30,
2004, and the revolver under the senior credit facility expires September 30,
2003. As of March 31, 1999, debt outstanding under the term loan and the
revolver each accrued interest at approximately 7.7% per annum. Had we not
repaid and then terminated the senior subordinated credit facility, it would
have expired on September 30, 2008. As of January 21, 1999, the date of our
repayment of the term loan under the senior subordinated credit facility, the
term loan accrued interest at approximately 9.8% per annum.

19
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998
and as adjusted to give effect to the issuance and sale of the old notes and
the exchange of old notes for exchange notes as if such events had occurred on
December 31, 1998.

You should read this table together with our historical consolidated
financial statements, the related notes, and other information contained
elsewhere in this prospectus. See "Where You Can Find More Information,"
"Summary Historical Financial Information," "Selected Financial and Operating
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

<TABLE>
<CAPTION>
At December 31, 1998
----------------------
Actual As Adjusted
--------- -----------
(unaudited)
(dollars in
thousands)
<S> <C> <C>
Long-term debt (including current portion):
Senior credit facility................................ $ 86,000 $ 56,150
Senior subordinated credit facility................... 65,000 --
Exchange notes, net of original issue discount........ -- 98,000
--------- ---------
Total long-term debt................................ 151,000 154,150
--------- ---------
Stockholder's equity:
Common stock, $1.00 par value, authorized 3,000
shares; issued and outstanding 1,000 shares.......... 1 1
Capital in excess of par value........................ 34,999 34,999
Retained earnings(1).................................. 63,614 62,580
Loan to parent(2)..................................... (136,790) (136,790)
--------- ---------
Total stockholder's deficit......................... (38,176) (39,210)
--------- ---------
Total capitalization.............................. $ 112,824 $ 114,940
========= =========
</TABLE>
- --------

(1) Write-off of deferred financing fees related to senior subordinated credit
facility.

(2) Loan to parent related to the affiliated transaction of $138.6 million net
of an existing outstanding loan from parent.

20
<PAGE>

SELECTED FINANCIAL AND OPERATING INFORMATION
(dollars in thousands)

The following selected historical financial information, except for the as
adjusted amounts, for the fiscal years ended December 31, 1996, 1997 and 1998,
and as of December 31, 1997 and 1998, are derived from our consolidated
financial statements which have been audited by PricewaterhouseCoopers LLP,
independent certified public accountants, and are included in this prospectus.
The following selected historical financial information for the fiscal years
ended December 31, 1994 and 1995, and as of December 31, 1994 and 1995, were
derived from our consolidated financial statements which have been audited and
are not included in this prospectus.

The unaudited as adjusted financial information for the year ended December
31, 1998 gives effect to the issuance and sale of the old notes and the
exchange of old notes for exchange notes and the affiliated transaction as if
such events had occurred on January 1, 1998, except for balance sheet data
which gives effect to the issuance and sale of the old notes and the exchange
of old notes for exchange notes as if such events had occurred on December 31,
1998.

EBITDA, as presented below, is defined as net income before interest
expense, income taxes, depreciation, amortization expense, accounting changes
and other (income) expenses, net. We believe that EBITDA is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA does not necessarily
indicate whether cash flow will be sufficient for cash requirements. Not every
company calculates EBITDA in exactly the same fashion. As a result, EBITDA as
presented below may not necessarily be comparable to similarly titled measures
of other companies.

The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income before taxes and changes in
accounting principles and fixed charges, excluding capitalized interest. Fixed
charges consists of interest expense, capitalized interest, amortization of
debt issuance costs and one-third of rental expense (the portion deemed
representative of the interest factor).

You should read the selected financial data together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements, the related notes, and other information
contained in this prospectus.

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1998
------------ ------------ ------------ ------------ ------------ ------------
Actual As Adjusted
------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $150,023 $176,792 $195,196 $217,889 $201,754 $201,754
Cost of goods sold........... 124,611 144,323 144,825 170,486 162,478 162,478
-------- -------- -------- -------- -------- --------
Gross profit................. 25,412 32,469 50,371 47,403 39,276 39,276
Selling, general and
administrative expenses..... 7,573 9,149 10,220 9,739 9,700 9,700
-------- -------- -------- -------- -------- --------
Operating income............. 17,839 23,320 40,151 37,664 29,576 29,576
Interest expense(1).......... 4,311 2,979 1,993 2,355 4,517 15,526
Other (income) expenses,
net......................... 1,663 664 (1,868) (73) (112) (112)
-------- -------- -------- -------- -------- --------
Income before taxes and cumu-
lative effect of change in
accounting principle........ 11,865 19,677 40,026 35,382 25,171 14,162
Income tax expense........... 4,478 7,093 15,996 13,652 9,854 5,616
-------- -------- -------- -------- -------- --------
Income before cumulative ef-
fect of change in
accounting principle........ 7,387 12,584 24,030 21,730 15,317 8,546
Cumulative effect of change
in accounting for
post-retirement benefits(2).. 600 -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net income................... $ 6,787 $ 12,584 $ 24,030 $ 21,730 $ 15,317 $ 8,546
======== ======== ======== ======== ======== ========
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1998
------------ ------------ ------------ ------------ ------------ ------------
Actual As Adjusted(6)
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Other Data: (unaudited)
Depreciation and
amortization (3)....... $ 7,801 $ 8,223 $ 6,085 $ 6,759 $ 7,399 $ 7,399
Capital expenditures.... 1,942 8,311 21,983 7,275 11,299 11,299
EBITDA (4).............. 25,640 31,543 46,236 44,423 36,975 36,975
Cash flows from
operating activities... 11,705 17,561 22,791 19,898 29,471 23,528
Cash flows from
investing activities... (1,925) (8,268) (25,425) (7,275) (11,283) (11,283)
Cash flows from
financing activities... (6,500) (16,666) 2,778 (12,759) (18,199) (18,199)
Ratio of earnings to
fixed charges (5)...... 3.4x 6.8x 17.4x 14.5x 6.1x 1.9x
Balance Sheet Data (at
period end):
Working capital......... $45,534 $40,745 $ 39,702 $ 51,799 $ 53,424 $ 4,072
Total assets............ 95,592 97,029 123,784 136,476 136,766 138,234
Total debt:
Senior credit
facility.............. -- -- -- -- $ 86,000 $ 56,150
Senior subordinated
credit facility....... -- -- -- -- 65,000 --
Exchange notes......... -- -- -- -- -- 98,000
Other.................. $35,000 $17,500 $ 36,276 $ 25,000 -- --
------- ------- -------- -------- -------- -----------
Total................. $35,000 $17,500 $ 36,276 $ 25,000 $151,000 $154,150
======= ======= ======== ======== ======== ===========
Stockholder's equity
(deficit).............. 45,030 57,614 66,480 83,297 (38,176) (39,210)
</TABLE>
- --------

(2) Attributable to BGF's adoption in 1994 of Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits other than Pensions."

(3) Amounts do not include amortization of debt issuance costs and original
issue discount, which is included in interest expense.

(4) EBITDA is calculated as follows:

(5) Earnings were adequate to cover fixed charges for the years ended
December 31, 1994, 1995, 1996, 1997 and 1998 by $11.3 million, $19.6
million, $39.8 million, $35.4 million and $25.0 million, respectively.

(6) As adjusted assets, total debt, and stockholder's equity at December 31,
1998 are calculated by using the historical financials at December 31,
1998 and adjusting for the issuance of the sale of the old notes and the
exchange of old notes for exchange notes ($98,000), repayments of the
senior subordinated credit facility ($65,000), repayments of the senior
credit facility ($29,850), write-off of debt issuance costs related to the
senior subordinated credit facility ($1,034, net of $648 tax), and payment
of fees related to the old notes ($3,150).

22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated
financial statements and related notes contained in this prospectus. You should
carefully read the "Risk Factors" section of the prospectus for trends and
uncertainties known to us that could cause our future results to differ
materially from our reported financial information.

Overview

Both in revenue and market share, we are the second largest manufacturer of
glass fiber fabrics and a leading producer of other high performance fabrics in
North America. Our fabrics are a critical component in the production of a
variety of electronic, filtration, composite, insulation, construction and
commercial products. In 1998, we derived approximately half of our net sales
and EBITDA from sales of glass fiber fabrics for use in printed circuit boards.

Over the last five years, the demand for multi-layer printed circuit boards,
which primarily use lightweight glass fiber fabrics, has been increasing. In
contrast, over the last eighteen months, the demand for our heavyweight fabrics
has been decreasing due to competitive pressures from Asian laminate producers.
As a result, we have shifted our electronics glass fiber fabrics manufacturing
capacity mix in recent years from heavyweight fabrics, which are typically used
in rigid printed circuit boards, toward more technologically advanced and
higher-margin lightweight fabrics. Beginning in the fourth quarter of 1997, we
have experienced downward pricing pressures on our heavyweight glass fiber
fabrics due to foreign exchange fluctuations between the dollar and various
Asian currencies and over-capacity in Asian heavyweight fabrics manufacturing,
which has led to increased imports of laminates and printed circuit boards into
the U.S. from Asia. However, our sales of the higher-margin, lightweight glass
fiber fabrics used in multi-layer printed circuit boards have continued to
increase. We believe that currently, there is no cost-effective substitute for
glass fiber fabrics that can satisfy the stringent quality and performance
criteria demanded of printed circuit boards.

From 1993 to 1998, our net sales of glass fiber fabrics to the electronics
industry increased at a compound annual growth rate of 7.7%, from $73.2 million
to $101.3 million. Over the same time period, net sales of heavyweight glass
fiber fabrics to the electronics industry decreased slightly from $42.6 million
to $41.9 million, and net sales of lightweight glass fiber fabrics to the
electronics industry increased from $30.6 million to $59.4 million. In 1998,
net sales of glass fiber fabrics to the electronics industry represented 50.2%
of our net sales.

In 1998, we derived approximately 35.9% of our net sales from the sale of
products to the composites and filtration markets. Our sales to the composites
market are dependent on new aircraft building programs and the refurbishment of
existing aircraft. Our sales to the filtration market are dependent on
environmental laws regulating emissions by industrial customers into the
environment. We have continued to direct resources to these markets, which is
demonstrated by an increase in net sales from $37.6 million in 1993 to $72.5
million in 1998.

We purchase glass yarns, our principal raw material, primarily from two
suppliers. While glass yarns have been in short supply from time to time,
currently the supply is adequate. We generally have been able to pass through
price increases in raw materials to our customers.

23
<PAGE>

The following table summarizes approximate net sales for each of the markets
we serve, as classified by us, for the fiscal years ended December 31, 1996,
1997 and 1998.

<TABLE>
<CAPTION>
Fiscal Year Ended
December 31,
--------------------
1996 1997 1998
------ ------ ------
(dollars in
millions)
<S> <C> <C> <C>
Electronics:
Lightweight fabrics...................................... $ 46.1 $ 57.6 $ 59.4
Heavyweight fabrics...................................... 69.0 65.7 41.9
Composites................................................. 31.2 45.7 52.3
Filtration................................................. 21.7 22.8 20.2
Commercial................................................. 11.5 11.0 10.1
Insulation................................................. 10.3 9.0 8.1
Construction............................................... 5.4 6.1 9.8
------ ------ ------
Total net sales........................................ $195.2 $217.9 $201.8
====== ====== ======
</TABLE>

Results of Operations

The following table summarizes our historical results of operations as a
percentage of net sales for the years ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
Fiscal Year Ended
December 31,
-------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Net sales.................................................. 100.0% 100.0% 100.0%
Cost of goods sold......................................... 74.2 78.2 80.5
----- ----- -----
Gross profit............................................. 25.8 21.8 19.5
Selling, general and administrative expenses............... 5.2 4.5 4.8
----- ----- -----
Operating income......................................... 20.6 17.3 14.7
Other (income) expenses:
Interest expense......................................... 1.1 1.1 2.2
Other expenses, net...................................... (1.0) 0.0 0.0
----- ----- -----
Income before taxes.................................... 20.5 16.2 12.5
Income tax expense......................................... 8.2 6.2 4.9
----- ----- -----
Net income............................................. 12.3% 10.0% 7.6%
===== ===== =====
</TABLE>

Fiscal Year Ended December 31, 1998 Compared to Fiscal Year Ended December 31,
1997

Net Sales. Net sales decreased $16.1 million, or 7.4% to $201.8 million in
1998 from $217.9 million in 1997, due primarily to a decrease of $23.8 million,
or 36.2%, in sales of heavyweight fabrics used in rigid printed circuit boards.

Sales of our products in the composites market increased $6.6 million, or
14.4%, from $45.7 million in 1997 to $52.3 million in 1998 due to strong
purchases of carbon, aramid and glass fabrics by the aerospace industry.

Sales in the construction market increased $3.7 million, or 60.7%, from $6.1
million in 1997 to $9.8 million in 1998 primarily due to strong export sales.
Sales in our other markets decreased $2.6 million due to decreased sales in the
filtration, commercial, and insulation markets, partially offset by increases
in sales of lightweight fabrics used in the electronics market.

24
<PAGE>

Gross Profit Margins. Gross profit margins decreased from 21.8% in 1997 to
19.5% in 1998 due primarily to lower capacity utilization and price pressures
in heavyweight fabrics used in rigid printed circuit boards.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses have remained relatively constant at 4.8% and 4.5% of
net sales for the years ended 1998 and 1997, respectively.

Operating Income. As a result of the aforementioned factors, operating
income decreased $8.1 million to $29.6 million, or 14.7% of net sales in 1998
from $37.7 million or 17.3% of net sales in 1997.

Interest Expense. Interest expense increased $2.1 million to $4.5 million in
1998 from $2.4 million in 1997. This increase was primarily due to the increase
in our debt, which was incurred on September 30, 1998, in order to loan our
parent company, Glass Holdings, funds to enable AGY Holdings, a wholly owned
subsidiary of Glass Holdings, to purchase a 51% ownership interest in Advanced
Glassfiber Yarns.

Income Tax Expense. The effective tax rate in 1998 of 39.1% and in 1997 of
38.6% was higher than the federal statutory tax rate of 35.0% primarily due to
state income taxes.

Net income. As a result of the aforementioned factors, net income decreased
$6.4 million to $15.3 million in 1998 from $21.7 million in 1997.

Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended December 31,
1996

Net Sales. Net sales increased $22.7 million, or 11.6%, to $217.9 million in
1997 from $195.2 million in 1996. Sales in the electronics market increased
$8.2 million, or 7.1%, to $123.3 million in 1997 from $115.1 million in 1996
due primarily to strong demand in the electronics industry, as well as a shift
in product mix toward higher margin lightweight fiber fabrics. The effect of
this increased volume was offset in part by price decreases in sales of
heavyweight fabrics to Asia in the electronics market. Sales in the composites
market increased $14.5 million, or 46.5%, from $31.2 million in 1996 to $45.7
million in 1997, due primarily to increased purchases of carbon fabrics by the
aerospace industry. Net sales in other markets remained relatively unchanged.

Gross Profit Margins. Gross profit margins decreased from 25.8% in 1996 to
21.8% in 1997 due to a decrease in the price of heavyweight fiber fabrics sold
to Asia and start-up costs associated with the South Hill, Virginia facility.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.5 million to $9.7 million, or 4.5% of net
sales, in 1997 from $10.2 million, or 5.2% of net sales, in 1996. This decrease
was primarily due to continued cost controls by management and lower
professional service expenses.

Operating Income. As a result of the aforementioned factors, operating
income decreased $2.5 million to $37.7 million, or 17.3% of net sales, in 1997
from $40.2 million or 20.6% of net sales, in 1996.

Interest Expense. Interest expense increased $0.4 million to $2.4 million in
1997 from $2.0 million in 1996. This increase was primarily due to an increase
in the interest rates on outstanding debt in 1997 and higher average borrowings
throughout the year as a result of a distribution to Glass Holdings to fund the
equity of Shanghai Porcher Industries Co., Ltd., a PRC Company and Belmont of
America, Inc.

Income Tax Expense. The effective tax rate in 1997 of 38.6% and in 1996 of
40.0% was higher than the federal statutory tax rate of 35.0% primarily due to
state income taxes.

Net Income. As a result the aforementioned factors, net income decreased
$2.3 million to $21.7 million in 1997 from $24.0 million in 1996.

25
<PAGE>

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been cash flow from
operations and borrowings under our credit facilities. Our future need for
liquidity will arise primarily from interest payable on the notes and our
senior credit facility, principal payments on the senior credit facility
beginning in December 1999 and the funding of our capital expenditures and
working capital requirements. See "Description of Other Indebtedness Senior to
the Exchange Notes." We have no mandatory payments of principal on the notes
scheduled prior to their maturity.

Net Cash Provided by Operating Activities. Net cash provided by operating
activities was $29.5 million in 1998. Our net operating cash was primarily a
result of net income of $15.3 million, depreciation of $7.2 million and
decreases in accounts receivable of $11.9 million. Net cash provided by
operating activities was $19.9 million for the year ended December 31, 1997 and
was primarily the result of net income of $21.7 million and depreciation of
$6.6 million, offset by increases in working capital. Net cash provided by
operating activities was $22.8 million for the year ended December 31, 1996,
and was primarily the result of net income of $24.0 million and depreciation of
$6.0 million, offset by increases in working capital.

Net Cash Used in Investing Activities. Net cash used in investing activities
was $11.3 million in 1998, and was primarily the result of purchases of
property, plant and equipment. Net cash used in investing activities was $7.3
million for the year ended December 31, 1997, and was the result of purchases
of property, plant and equipment. Net cash used in investing activities was
$25.4 million for the year ended December 31, 1996, and was primarily the
result of purchases of property, plant, and equipment of $22.0 million, of
which $13.9 million was related to the construction of phase one of our
lightweight fabrics facility in South Hill, Virginia. Net cash used in
investing activities in 1996 was also impacted by our payment of approximately
$3.5 million in connection with a U.S. federal income tax settlement relating
to Porcher Industries' purchase of us in 1988.

Net Cash Used in Financing Activities. Net cash used in financing activities
was $18.2 million in 1998, resulting primarily from a loan to our parent, Glass
Holdings, of $136.8 million, payments on long-term debt and other debt of $37.0
million and $4.6 million of debt issuance costs offset by borrowings under our
senior credit facility and senior subordinated credit facility of $163.0
million. Net cash used in financing activities was $12.8 million for the year
ended December 31, 1997, and was primarily a result of net payments on debt of
$11.3 million, as well as a distribution to Glass Holdings of $4.9 million.
This was offset by an increase in the book overdraft of $3.5 million. Net cash
provided by financing activities was $2.8 million for the year ended December
31, 1996, which was primarily due to the net borrowings on the working capital
line of credit of $27.5 million offset by payments on long-term debt of $8.8
million and a distribution to Glass Holdings of $15.2 million.

Certain Indebtedness and Other Matters. At December 31, 1998, we had
outstanding $151.0 million of long-term debt, consisting of $86.0 million under
our senior credit facility and $65.0 million under our senior subordinated
credit facility. We repaid in February 1999 all amounts outstanding under the
senior subordinated credit facility with the proceeds of the offering of the
old notes and then terminated this facility. The credit agreement governing the
senior credit facility requires us to maintain certain minimum net worth, debt
to equity, cash flow and current ratio requirements.

We do not believe that our current exposure to changes in interest rates
under the senior credit facility will have a material adverse effect on our
business, financial condition or results of operations. We have entered into
interest rate swap agreements to hedge our exposure to changes in interest
rates under the senior credit facility term loan such that our exposure under
the term loan will not have a material adverse effect on our business,
financial condition or results of operations.

On September 30, 1998, we entered into a credit agreement with certain
lenders and First Union National Bank, as Agent, pursuant to which such lenders
have provided us with our senior secured credit facility in an aggregate amount
of up to $125.0 million. This senior credit facility consists of: (1) a five-
year revolving credit facility in an aggregate principal amount of up to $75.0
million and (2) a six-year amortizing term loan in an

26
<PAGE>

aggregate principal amount of $50.0 million. The revolver includes (a) a
swingline loan facility with a $5.0 million sublimit and (b) a letter of credit
facility with a $20.0 million sublimit. The term loan is payable in twenty
consecutive fiscal quarterly installments commencing on December 31, 1999 and
ending on September 30, 2004. Installments one through four are each $1.0
million; five through eight are each $1.75 million; nine through twelve are
each $2.5 million; thirteen through sixteen are each $3.25 million; and
seventeen through twenty are each $4.0 million. As of December 31, 1998, we had
outstanding borrowings under the revolver of $36.0 million ($39.0 million
remained available for borrowings) and had fully drawn down the term loan. See
"Description of Other Indebtedness Senior to the Exchange Notes."

We also entered into a senior subordinated credit facility on September 30,
1998 which provided for a loan in the aggregate principal amount of $65.0
million. The senior subordinated credit facility, which was drawn down in full
on December 31, 1998 in connection with the affiliated transaction, was repaid
with the proceeds of the offering of the old notes and then terminated. See
"Description of Other Indebtedness Senior to the Exchange Notes."

Interest on the term loan under the senior credit facility and the exchange
notes is anticipated to approximate $14.3 million in 1999. Principle payments
committed under the term loan for 1999 are $1.0 million.

On September 30, 1998, AGY Holdings purchased a 51% ownership interest in
Advanced Glassfiber for aggregate consideration of approximately $338.9
million, including post-closing adjustments. In connection with the
acquisition, we loaned Glass Holdings approximately $138.6 million to provide
Glass Holdings a portion of the capital necessary to fund the acquisition. We
raised the proceeds for this loan by borrowing (1) $88.4 million under the
senior credit facility, and (2) $65.0 million under the senior subordinated
credit facility. Our loan to Glass Holdings is evidenced in part by promissory
notes that bear interest at our "cost of funds rate" for the calendar year
immediately preceding the date on which any interest is due. With respect to
any period of determination, the "cost of funds rate" means a rate per annum
equal to the blended interest rate, as reasonably calculated by us, applicable
to our borrowings during such period related to indebtedness we incurred to
fund the loan to Glass Holdings. Accrued interest is due and payable on the
first business day of February of each year commencing on February 1, 1999 and
on any date on which any principal is due. The promissory notes are payable on
October 31, 2008 or such later date as we and Glass Holdings may agree to.
Payments made pursuant to the promissory notes are expected to be offset by
other of our cash distributions to Glass Holdings, if any, and therefore, the
promissory notes should not be considered a source of liquidity. Further, we
have no commitment or plans to make dividends or other distributions in 1999
and the senior credit facility restricts our ability to pay dividends and other
distributions. See "Prospectus Summary--The Affiliated Transaction," "Use of
Proceeds," "Capitalization" and "Certain Relationships and Related Party
Transactions."

In connection with its purchase of a 51% ownership interest in Advanced
Glassfiber, AGY Holdings intends to make a partnership election to step up the
basis of certain of its intangible assets. The resulting increase in
amortization expense will allow the consolidated U.S. tax group of Porcher
Industries (which includes BGF, hereinafter "Porcher U.S.") to significantly
reduce its tax liability, and as a result, Porcher U.S. has agreed to defer the
receipt of annual distributions which AGY Holdings was otherwise required to
make in order to fund those taxes, to the extent that such taxes relate to
income earned by AGY Holdings (the "Deferred Distributions"). The amortization
deductions may be challenged by the Internal Revenue Service; however, our tax
advisor has informed us, without providing a formal opinion, that the
amortization deductions are valid and that AGY Holdings is likely ultimately to
prevail in any challenge. If, however, the amortization deductions are
disallowed, AGY Holdings will be required to distribute all accumulated annual
Deferred Distributions to the extent that both before and after such
distribution there is not a default under its senior credit facility or its
senior subordinated notes. Moreover, all Deferred Distributions would cease,
and AGY Holdings would have to pay in full all future distributions for taxes
to Porcher U.S. Based on the purchase price paid by AGY Holdings for its
purchase of a 51% ownership interest in Advanced Glassfiber, and a 15

27
<PAGE>

year amortization period, the maximum annual Deferred Distribution will be $6.8
million. The actual amounts of Deferred Distributions may be less if Porcher
U.S.'s share of taxes due with respect to income earned by BGF is less than
$6.8 million.

We believe that Advanced Glassfiber will have sufficient funds available
under its senior credit facility and available cash to fund any potential tax
liability resulting from the disallowance of the amortization deductions.
However, since we are a member of the same consolidated group as AGY Holdings
for U.S. federal income tax purposes, we may be liable for any unpaid amounts
in the event Advanced Glassfiber has insufficient funds to make distributions
to AGY Holdings to pay its tax liability in full or if all accumulated annual
Deferred Distributions are less than the tax liability. Based on our current
level of operations, we believe that cash flow from operations and borrowings
under our senior credit facility will be adequate to fund any tax liability
imposed upon us as a result of the IRS disallowing the amortization deductions.
However, we cannot assure you that we will generate sufficient cash from
operations or that our future borrowings will be available under the senior
credit facility to pay any tax liability resulting from the disallowance of the
amortization deductions.

Capital Expenditures. We have historically financed our capital expenditures
through cash flow from operations and borrowings under our credit facilities.
Capital expenditures were $22.0 millions, $7.3 million and $11.3 million for
the years ended December 31, 1996, 1997 and 1998, respectively. The principal
capital expenditures during this period included:

(1) a total of $16.2 million in 1996 and 1997 for the construction of
the first phase of our lightweight fabrics facility in South Hill,
Virginia and the acquisition of new weaving looms and finishing
equipment;

(2) a total of $0.8 million and $3.7 million in 1997 and 1998,
respectively, for the construction of the yarns manufacturing facility
at the lightweight fabrics facility;

(3) $1.8 million in 1998 of a $4.0 million new non-woven line for
insulation applications; and

(4) $1.4 million in 1998 for the beginning of the second phase of our
lightweight fabrics facility in South Hill, Virginia.

We are anticipating total capital expenditures in 1999 to be approximately
$10.0 million.

Our ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages, if any, on, or to refinance our indebtedness,
including the notes, or to fund planned capital expenditures will depend on our
future performance. Our future performance, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control. Based upon the current level of our
operations, we believe that cash flow from operations and available cash,
together with availability under the senior credit facility, will be adequate
to meet our future liquidity needs for at least the next two years. However, we
cannot assure you that we will generate sufficient cash flow from operations or
that future borrowings will be available under the senior credit facility in an
amount sufficient to enable us to service our indebtedness, including the
notes, or to fund our other liquidity needs. In addition, we may need to
refinance all or a portion of the principal of the notes on or prior to
maturity. We cannot assure you that we will be able to effect any such
refinancing on commercially reasonable terms or at all. See "Risk Factors--We
have a significant level of indebtedness and may incur additional
indebtedness," "Risk Factors--Our level of indebtedness is significant to you,"
"Risk Factors--Our indebtedness may prevent us from satisfying our obligations
under the notes," "Description of Other Indebtedness Senior to the Exchange
Notes" and "Description of Exchange Notes."

28
<PAGE>

Market Risk

Our senior credit facility is subject to market risks, including interest
rate risk. Our financial instruments are not currently subject to foreign
currency risk or commodity price risk. We have no financial instruments held
for trading or speculative purposes.

We are exposed to market risk related to changes in interest rates on
borrowings under our senior credit facility. The senior credit facility bears
interest based on LIBOR.

We entered into an interest rate swap agreement to manage our exposure to
interest rate changes under the senior credit facility. The swap involves the
exchange of fixed and variable interest rate payments based on a contractual
principal amount and time period. Payments or receipts on the agreement are
recorded as adjustments to interest expense. At December 31, 1998, we had an
interest rate swap agreement effective through September 30, 2004 on an initial
notional amount of $50.0 million. Under this agreement, we have secured a fixed
LIBOR rate of interest of 5.04% on the notional amount which is reduced in a
manner consistent with the amortization of the principal on our term loan. This
swap effectively changes our payment of interest on $50.0 million of variable
rate debt for the contract period.

The fair value of the interest rate swap agreement represents the estimated
receipts or payments that would be made to terminate the agreement. At December
31, 1998, we would have received approximately $349,000 to terminate the
agreement. A 1% decrease in LIBOR would decrease the amount received by
approximately $82,000. The fair value is based on dealer quotes, considering
current interest rates.

Impact of Inflation

We generally attempt to pass cost increases on to our customers. Costs are
affected by, among other things, inflation, and we may experience the effects
of inflation in future periods. We believe, however, that inflation has not had
a material impact on us during the past three years.

Impact of New Accounting Pronouncements

Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" became effective in 1998. We
have provided comparative disclosures in accordance with the provisions of this
statement.

SFAS No. 132, "Employers' Disclosure About Pensions and Other Postretirement
Benefits," became effective in 1998. We have provided comparative disclosures,
which include prior period information, in accordance with the provisions of
this statement.

On June 15, 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. SFAS 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. We anticipate that, due to our
limited use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on our results of operations or financial position.

Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"'
defines such costs and requires that they be expensed as incurred. This
pronouncement is effective for financial statements for fiscal years beginning
after December 15, 1998 although earlier adoption is encouraged. We will adopt
this pronouncement effective January 1, 1999 and do not believe that it will
materially affect our reported results of operations or financial condition
upon adoption.

Seasonality

Our business is not materially subject to seasonality.

29
<PAGE>

Year 2000

Many computer programs use only two digits to identify a year in a date
field within the program (e.g., "98" or "02") often meaning that the program
will fail to distinguish dates in the "2000s" from dates in the "1900s." If not
corrected, computer applications making calculations and comparisons in
different centuries may cause inaccurate results, or fail by or at the Year
2000.

Risks Presented. These Year 2000 issues are of particular importance to us.
We recognized that many of the systems and equipment we use to conduct and
manage our business were at risk for Year 2000 compliance. If these risks are
not assessed and remediated, our ability to continue normal business operations
could be substantially impaired, including our ability to manufacture our
products. We also recognized that Year 2000 related issues could adversely
affect the operations and financial performance of our material suppliers and
customers. Any of these issues, if not addressed properly, could have a
material adverse effect on our business, financial condition and results of
operations.

Business Systems. We operate two mission-critical business systems to run
our business. We purchased the primary of these two systems in 1990, modified
the system to conform it to our business needs and then installed it in stages
between 1990 and 1993. This system is necessary for us to successfully process
orders, manufacture products, ship products, bill customers and collect data
for both internal and external reporting requirements. Our other mission-
critical business system is a financial package which we purchased and
installed recently in January 1999. This system is used for general accounting
purposes. We have developed an interface between these two systems, so that
relevant data can be transported from one to the other. Our business systems
also include other third-party software that has been installed on
approximately 250 personal computers located throughout our various facilities.
Our employees using such software have also at times modified various modules
of such software to improve business functions. We do not consider these
modified applications as mission-critical, however.

Embedded Technology. We employ a large amount of manufacturing equipment, as
well as systems which operate business functions such as e-mail, telephones and
security. As mentioned above, we also utilize approximately 250 personal
computers in our business. These systems, pieces of equipment and computer
hardware could contain embedded technology that is not Year 2000 compliant.

Our Year 2000 Efforts. Since 1997, we have been working to achieve Year 2000
readiness. Our Year 2000 efforts have been focused on mission-critical issues
and are being directed by our Information Systems

Department, with frequent interaction with our senior management. The
Information Systems Department is responsible for:

(1) identifying systems and applications that may be affected by Year 2000
issues;

(2) evaluating and/or developing alternatives for affected systems, including
modifying, replacing or discontinuing the systems; and

(3) converting, testing and implementing affected systems to ensure that the
systems and their applications are Year 2000 compliant.

We refer to these phases as (1) The Identification Phase; (2) The Evaluation
Phase; and (3) The Conversion, Testing and Implementation Phase.

Our Information Systems Department is also responsible for evaluating the
Year 2000 readiness of our primary vendors and customers. It is also
responsible for developing contingency plans in the event we or our primary
vendors or customers are not Year 2000 ready on a timely basis.

Specifics of Phases.

.Business Systems.

Identification Phase. With regard to our business systems, in 1997, we
purchased specialty software to run against the "library" of approximately
1,200 programs that make up our business systems. This

30
<PAGE>

specialized software is designed to identify programs that contain fields
that could be date-oriented and thus susceptible to Year 2000 issues.
Approximately 50% of our 1,200 programs were identified as containing date-
oriented fields. We completed this work in March 1998.

Evaluation Phase. The Evaluation Phase then consisted of our
individually reviewing the date fields of each of the identified programs
to determine whether that program would need to be modified, replaced or
discontinued. We prioritized our review of the programs by difficulty
level, reviewing the more complex of the programs first. As a result of
these evaluations, we determined that we would need to address
approximately 80-90% of the programs identified as containing date fields.
This phase was complete as of June 1998.

Conversion, Implementation and Testing Phase. We completed the
remediations necessary to programs relating to our PC-based software in
March 1999 and are about 95% complete with the remediations necessary to
programs relating to our other business systems. We expect to complete this
phase by the end of April 1999. As programs are modified, they are put back
into operation and tested. Based on our evaluation efforts, we were not
required to replace or discontinue any of our business systems.

.Embedded Technology.

Identification Phase. Beginning in early 1998, we developed a list of
specific manufacturing equipment and computer hardware that might contain
technology susceptible to Year 2000 issues. We developed this list through
communications among our various plant managers, machinery operators, MIS
personnel and other of our personnel, as well as discussions with the
various manufacturers of our equipment and hardware. After the list was
compiled, we created an internal database outlining the specifics on the
equipment and hardware and assigned responsibility for evaluating and
performing the necessary remedial efforts for each one. This phase was
completed in November 1998.

Evaluation Phase. We have consistently updated our database of equipment
and hardware as our Evaluation Phase progresses. We have evaluated
approximately 86% of the items identified as potentially having Year 2000
related issues. Typically, our evaluation involves seeking representatives
from the manufacturer that their equipment or hardware is Year 2000
compliant and/or manually running Year 2000 regression tests ourselves
against the equipment/hardware. We expect to complete this phase concurrent
with our Conversion, Testing and Implementation Phase by the end of June
1999.

Conversion, Testing and Implementation Phase. As a result of our
evaluation efforts, we determined that the computers/equipment used to
monitor some of our looms at one of our manufacturing facilities would need
to be upgraded. The manufacturer of this hardware is scheduled to perform
and complete this upgrade in September 1999. We are already operating the
same, upgraded, loom monitoring equipment at another of our manufacturing
facilities. The upgraded equipment passed our Year 2000 tests. Other than
this loom monitoring system, we are currently replacing the telephony
system for our corporate offices. So far, we have not identified any other
necessary material modifications or replacements pertaining to embedded
technology. Otherwise, we are making some immaterial modifications to
equipment and purchasing some hardware to upgrade some of our older PCs
because of Year 2000 issues. Other than the upgrade of the loom monitoring
equipment, we expect to complete this phase by the end of June 1999, and as
each of these projects are completed, we have and will continue to put the
specific equipment back into operation and run tests for Year 2000
compliance.

State of Readiness. The following table shows our progress as of April 26,
1999 through each phase of our Year 2000 efforts for our business systems and
PC-based software, as well as for embedded technology:

<TABLE>
<CAPTION>
Business Systems Embedded Technology
----------------------------------- ---------------------------
Actual/Estimated % Actual/Estimated
Phase % Complete Completion Date Complete Completion Date
----- ------------------ ---------------- -------- ------------------
<S> <C> <C> <C> <C>
Identification.......... 100% 3/31/1998 100% 11/30/1998

Evaluation.............. 100% 6/30/1998 86% 6/30/1999

Conversion, Testing and PC-based software: 3/31/1999 82% Loom monitoring
Implementation......... 100% systems: 9/30/1999

Other: 95% 4/30/1999 Other: 6/30/1999
</TABLE>

31
<PAGE>

Third Parties. Aside from the manufacturers of the personal computers and
manufacturing equipment we use to run our business, the third parties which we
rely on most heavily are our suppliers of raw materials, energy and services,
as well as our customers. We purchase our resources from several vendors and
sell our products to a number of customers for a wide variety of applications.
However, if a significant number of these vendors or customers fail to be Year
2000 ready, it could prevent or substantially impair our ability to transact
business with them as usual. We would then need to find alternative supplies of
these resources or customers for our products. If we could not find or were
delayed in finding, alternatives, it could have a material adverse effect on
our business, results of operations and financial condition.

In addition to our suppliers of equipment, which we discussed above, we have
also identified our key vendors of raw materials, energy and services. We have
contacted each of these suppliers regarding their plans for dealing with Year
2000 issues and have received responses from substantially all of them. We are
in the process of following up with suppliers who have not yet responded to us.
Also, beginning in the first quarter of 1999, we began to survey our major
customers as to their preparations for the Year 2000 and any anticipated
changes in their purchases from us related to this issue. Of the responses we
have received to date, we have not identified any material issues regarding the
Year 2000 readiness of our major vendors and customers. However, we cannot
assure you that our vendors and customers will be Year 2000 ready. If any of
our material vendors or customers fail to be Year 2000 ready, it could have an
adverse material effect on our business and results of operations.

Costs. We are currently using mainly internal resources to address our Year
2000 issues. We estimate that we have and will continue to use the equivalent
of 2 full time members of our Information Systems Department to implement our
Year 2000 efforts. Also, in October 1998, we retained a programmer on a
temporary basis to assist us on Year 2000 modifications. We retained this
programmer through mid-April 1999. Costs associated with our Year 2000 efforts
are being expensed as incurred through our normal budget with no additional
funding allocated to the Information Systems Department. We currently estimate
that our total overall costs related to our Year 2000 efforts will be
approximately $440,000. Expenses incurred through March 31, 1999 were
approximately $350,000. We cannot assure you, however, that as we progress
through the final phases of our Year 2000 efforts, that we will not identify
further issues that could cause our costs to become material. A material
increase in our Year 2000 costs could have a material adverse effect on our
financial condition and results of operations.

Worst Case Scenario and Contingency Plans. If our systems and equipment, or
our material vendors and customers, are not Year 2000 ready on a timely basis,
it could have a material adverse effect on our business, financial condition
and results of operation. Excluding the potential impact of the Year 2000
issues of material third parties, which we are unable to control, a reasonable
worst case scenario for our company would be if our identification and
evaluation efforts had not adequately detected material Year 2000 issues and a
material number of our mission-critical systems and equipment were rendered
inoperable.

In order to be ready for such a scenario, we are currently developing
contingency plans, which we expect to have in place by the end of September
1999. Our contingency plans will include the development, where necessary, of
additional manual work-arounds in the event of system failures. We plan to
ensure that our staff is up-to-date on any such new procedures, as well as the
manual procedures that already back-up our systems and have previously received
ISO certification. Despite these efforts, because of the uncertain nature of
the Year 2000, as well as the potential impact of third party Year 2000 issues,
we cannot assure you that, when finalized, our contingency plans will be
adequate.

As we discuss above, currently, we are not aware of any Year 2000 issues
that would materially affect our business or financial condition. However, we
cannot assure you that our systems will be Year 2000 compliant on schedule,
that Year 2000 related costs will not become material or that our contingency
plans, when finalized, will be adequate. Furthermore, we are currently unable
to anticipate the magnitude of the effect on us of the failure of any of our
material vendors and customers to be Year 2000 ready. If any such risks, either
with respect to our systems or our vendors or customers, materialize, they
could have a material adverse effect on our business, financial condition and
results of operations.

32
<PAGE>

The disclosures contained herein concerning Year 2000 are designated as
"Year 2000 Readiness Disclosures" and are made pursuant to the Year 2000
Information and Readiness Disclosure Act. The estimates and conclusions related
to our Year 2000 efforts contain forward looking statements and are based on
our management's best estimates of future events. Risks to achieving Year 2000
compliance include the availability of resources, our ability to discover and
correct potential Year 2000 sensitive problems which could have a serious
impact on specific systems, equipment or facilities, and the ability of our
material vendors and customers to make their systems Year 2000 compliant.

33
<PAGE>

BUSINESS

General

Our business focuses on the production of value-added specialty woven and
non-woven fabrics made from glass, carbon and aramid yarns. Both in both
revenue and market share, we are the second largest manufacturer of glass fiber
fabrics and a leading producer of other high performance fabrics in North
America. Our fabrics are a critical component in the production of a variety of
electronic, filtration, composite, insulation, construction and commercial
products. Our glass fiber fabrics are used in printed circuit boards, which are
integral to virtually all advanced electronic products, including computers and
cellular telephones. Our fabrics are also used to strengthen, insulate and
enhance the dimensional stability of hundreds of products in a variety of other
downstream markets, such as aerospace, transportation, construction, power
generation and oil refining.

We began our glass fiber product development efforts in cooperation with
Owens Corning in 1938. As a result of our combined research and development
efforts, glass fiber fabrics were available to the market by 1941. In 1947, we
began to manufacture and sell glass fiber fabrics independently of Owens
Corning. In 1951, we merged with Horace Linton & Brothers, a narrow tape
manufacturer that had teamed with Owens Corning to develop and market glass
fiber electrical insulation tapes. In 1956, we were acquired by Burlington and
remained a division of Burlington until we were purchased in 1988 by Porcher
Industries.

BGF is a Delaware corporation. Our headquarters are located at 3802 Robert
Porcher Way, Greensboro, North Carolina 27410, and our telephone number is
(336) 545-0011.

The following is a glossary of technical terms we use throughout this
prospectus and in our business:

"Aramid yarn" means a category of man-made fibers, the most commonly
recognized of which is Kevlar(R).

"Carbon yarn" means yarn made from carbonized fibers used in woven fabrics
to make composites.

"Composite" means the use of fabric in conjunction with resin to make
moulded parts, primarily for aircraft and aerospace applications.

"Composites market" means the market for composites. Applications include
aircraft interiors, helicoptor rotor blades and brake linings.

"Filtration market" means the market for filtration applications, including
cement production and carbon black production.

"Heavyweight glass fiber fabric" means fabric made of fiberglass yarns used
primarily in rigid printed circuit boards.

"Lightweight glass fiber fabric" means fabric made of fiberglass yarns used
primarily in multi-layer printed circuit boards.

"Multi-layer printed circuit board" means a printed circuit board having
multiple (more than two) layers of circuitry produced by stacking thin copper
clad laminate cores.

"Printed circuit board" means a plastic substrate on which electronic
components are mounted within electronic devices.

"Rigid printed circuit board" means a printed circuit board that has
circuitry on one or both sides.

Industry Overview

Glass fiber fabrics are a critical component in the production of numerous
products in the electronics industry, including primarily printed circuit
boards, as well as products in a variety of other downstream

<PAGE>

markets, such as aerospace, transportation, construction, power generation and
oil refining. In general, the industry we compete in is characterized by:

. a limited number of domestic producers;

. barriers to entry consisting primarily of a limited supply of raw
materials;

. diversified downstream markets; and

. a lack of product substitutes.

Limited Number of Domestic Producers. We are one of a limited number of
major domestic manufacturers of glass fiber fabrics. We and our primary
competitor, Hexcel/Clark-Schwebel, account for approximately 90% of domestic
capacity, which is estimated to be 400 million yards. We estimate domestic
market share as follows:

<TABLE>
<CAPTION>
Glass Fabric Domestic Market Share
----------------------------------
<S> <C>
Hexcel/Clark-Schwebel..................... 50%
BGF....................................... 40%
JPS Converter and Industrial.............. <10%
</TABLE>

The major competitors in the global glass fabric weaving industry are
BGF/Porcher Industries, Hexcel/Clark-Schwebel, Nitto Boseki (Japan), Nan Ya
Plastics (Taiwan) and Taiwan Glass (Taiwan). Although currently direct imports
of glass fiber fabrics into the U.S. have been limited, increasing imports of
laminates and rigid printed circuit boards from Asia have been impacting demand
for domestically produced heavyweight glass fiber fabrics used in rigid printed
circuit boards.

Barriers to Entry. There are a limited number of major global suppliers of
glass and carbon yarns to fabric producers such as BGF, and we have experienced
supply shortages from time to time. Accordingly, we believe that it would be
difficult for new competitors to ensure a constant and adequate supply of glass
and carbon yarns. Additionally, the process of producing high quality glass
fiber and other high performance fabrics requires extensive technological
expertise and research and development capability, both of which require
substantial know-how and capital compared to many less complex businesses.

Diversified Downstream Markets. The unique characteristics of our fabrics
make them critical components in a variety of products manufactured for sale in
the electronics, composites, filtration, commercial, insulation and
construction markets. Within each of these markets, our fabrics have a variety
of downstream applications, including:

. helicopter blades
. printed circuit boards

. reinforced concrete
. telecommunications equipment

. roofing materials
. filtration bags

. wall coverings
. heat shields

. filtration equipment
. welding curtains

. sporting goods
. aircraft laminates
</TABLE>

Lack of Product Substitutes. For many applications of our products, there
are a limited number of economical product substitutes, if any. For example,
substantially all printed circuit boards for high-end electronics applications
use glass fiber fabrics. The unique properties of glass fiber also make it a
critical component in high temperature filtration and insulation products. In
many composite products, only glass, carbon and aramid fibers can meet the
requisite strength-to-weight ratios.

Glass fiber fabrics are the reinforcement for the vast majority of high-end
electronic products. Demand for electronics products has experienced
substantial growth in recent years and is expected to continue to grow due to
expanded applications, technological advancements and new computer products and
systems introductions.

35
<PAGE>

We believe this growth is primarily attributable to the development of more
complex and sophisticated electronic products, including cellular telephones,
pagers, personal computers and portable computing devices, as well as the
increasing electronic content of products in which such use has been
historically absent or limited, such as automobiles, home appliances and
medical equipment.

The following chart illustrates the role of glass fiber fabric producers in
the U.S. electronics industry supply chain based on estimated 1998 sales:

[In the document to be delivered to investors, a reverse pyramid appears here
that contains the following information from top to bottom:]
Electronics $ 403 Billion
Printed Circuit Boards $ 7.8 Billion
High Pressure Laminates $1.14 Billion
Glass Fiber Fabrics $ 210 Million
Glass Fiber Yarn $ 155 Million

Sources: BGF estimates

Glass fiber fabrics offer an excellent combination of properties from high
strength to fire resistance. Wide ranges of yarn sizes and weave patterns
provide broad design potential, enabling customers to choose the best
combination of material performance, economics and product flexibility. Carbon
fiber fabrics possess many of the same characteristics of glass fiber fabrics
and provide higher strength, higher modulus and lighter weight in the products
in which they are incorporated. Aramid fiber fabrics also share many of the
same characteristics as glass fiber fabrics and are lighter in weight and
provide greater impact resistance in the products in which they are
incorporated.

Company Strengths

We attribute our strong historical results and positive outlook for growth
and profitability to the following factors:

Leading Market Position. We have been a technological leader in producing
glass fiber fabrics since we pioneered the industry with Owens Corning in the
1930s. We were the first to produce glass fiber fabrics, the first glass fiber
fabric weaver to become ISO 9002 certified and the first to bring a variety of
innovative products and manufacturing techniques to the market. We continue to
capitalize on our strong position as the second largest North American
manufacturer of glass fiber fabrics with an estimated 40% of domestic capacity.

Attractive Industry Fundamentals. The glass fiber fabrics industry is
characterized by a limited number of domestic manufacturers; barriers to entry
consisting primarily of a limited supply of raw materials; diverse downstream
markets; and a limited number of product substitutes. In addition, the
electronics industry, which accounted for approximately half of our net sales
and EBITDA in 1998, has experienced substantial growth in recent years and is
expected to continue to grow due to expanded applications, technological
advancements, and new computer products and systems introductions. According to
PCI Quarterly Forecast, First Quarter 1999, the United States printed circuit
board market is forecasted to grow from approximately $8.5 billion in 1998 to
approximately $11.5 billion in 2003, representing a 6.2% compound annual growth
rate. We cannot assure you, however, that our sales of glass fiber fabrics to
this market will grow at a comparable rate. See "--Competition."

36
<PAGE>

State-of-the-Art Facilities. To maintain our position as a technological
leader in producing glass fiber fabrics for the electronics industry, we
commenced operations at our 128,000 square foot facility in South Hill,
Virginia in 1996. This facility is dedicated to the production of lightweight
glass fiber fabrics for the electronics industry. Advanced Glassfiber leases
segregated space at the South Hill facility to manufacture glass yarns
exclusively for our production of lightweight glass fiber fabrics. We also
built a state-of-the-art research and development laboratory as part of our new
corporate headquarters in 1995 to focus on the development of new products.

Strong Cash Flow Generator in a Leveraged Environment. Our strong cash flow
characteristics and experienced management team have enabled us to successfully
operate as a leveraged company in the past. In 1988, Porcher Industries
acquired us from Burlington in a leveraged buyout. Immediately following the
buyout, our total debt was $88.0 million. Between 1988 and September 30, 1998,
not adjusted for the affiliated transaction, we reduced our debt by $75.0
million, while making significant investments in our business, including a new
corporate headquarters and research and development facility and the first
phase of the South Hill, Virginia lightweight fabric facility.

Long-Term Customer Relationships. Due to the high quality of our products,
our ability to meet the unique quality specifications required by our
customers, the emphasis we place on customer service, and a limited number of
domestic producers, we have been able to maintain long-term relationships with
many of our customers. Each of our top ten customers in 1998 has been a
customer since 1989.

Unique Physical Properties of Glass Fiber Fabrics. Glass fiber fabrics
possess several desirable characteristics including:

. dimensional stability;

. heat resistance;

. moisture resistance;

. chemical resistance;

. electrical resistance;

. thermal conductivity; and

. when combined with other composite materials, a high strength-to-weight
ratio.

These unique characteristics make glass fiber fabrics the material of choice
for a variety of downstream applications, including:

<TABLE>
<S> <C>
. printed circuit boards . automotive part
reinforcement

. telecommunications equipment
. muffler insulation

. structural aircraft parts and interiors
. filtration bags

. window coverings
</TABLE> . sporting goods

Business Strategy

Our goal is to be the preferred supplier to markets that require a
technically complex application of fabrics made of glass, carbon and aramid
yarns. To achieve this goal, we intend to pursue the following key strategies:

Continue to Focus on Lightweight Fabrics for the Multi-Layer Printed Circuit
Board Market. We seek to continue to expand our sales of lightweight glass
fiber fabrics to meet the growing demand for multi-layer printed circuit
boards. Our investment in the South Hill, Virginia lightweight fabrics facility
is an important part of this strategy. In addition, we have leased a portion of
this facility to Advanced Glassfiber to manufacture glass yarns exclusively for
our production of lightweight glass fiber fabrics. We believe that this
arrangement strengthens the compatibility between our weaving process and the
glass yarns we use in such process, thereby enabling us to produce the highest
quality lightweight glass fiber fabrics. We also believe that the quality of
the products we manufacture at the South Hill facility will enable us to
enhance and expand our relationships with customers in the multi-layer printed
circuit board market. We have increased our net sales of lightweight glass
fiber fabrics by 94.1%, from $30.6 million in 1993 to $59.4 million in 1998.

37
<PAGE>

Capitalize on the Growth in the Filtration and Composites Markets. We
believe substantial opportunities exist to increase our sales and market share
in both the filtration and composites markets, which together accounted for
approximately 35.9% of our net sales in 1998.

We intend to leverage our already strong position in the high temperature
filtration market by developing new woven and non-woven high performance
fabrics for environmental applications in power generation, steel mills and
other industries that are subject to strict environmental regulations. In
addition, we believe that there may be increased opportunities internationally
in this market as lesser developed countries adopt stricter environmental
regulations.

We also believe that we have substantial opportunities to increase our sales
in the composites market for applications in the transportation industry. In
the composites market, we are pursuing strategic relationships with key
suppliers to the aerospace and automobile industries for the design and
manufacture of new products. We have increased net sales in the filtration and
composites markets by 92.8%, from $37.6 million in 1993 to $72.5 million in
1998.

Developing New Applications for Fabrics. We plan to continue to leverage the
technical expertise and experience of our research and development and sales
and marketing staff to develop new applications for existing fabrics and to
develop new fabrics that meet customer requirements for strength, weight, fire
resistance and durability. We believe that many opportunities exist to continue
to develop both woven and non-woven fabrics to replace traditional materials in
markets which have historically not utilized fabrics such as those we produce.
For example, we have begun selling certain of our fabrics for use in the
reinforcement of metal automobile body parts.

Products and Markets

We sell our products primarily in North America and focus on the following
markets:

Electronics. We produce glass fiber fabrics for multi-layer and rigid
printed circuit boards for use in the electronics industry. The demand for
multi-layer printed circuit boards, which primarily use lightweight glass fiber
fabrics, has been increasing. Furthermore, the demand for our heavyweight
fabrics has decreased due to competitive pressures from Asian laminate
producers. As a result of the increasing demand for multi-layer printed circuit
boards, which primarily use lightweight glass fiber fabrics, we have shifted
our electronics glass fiber fabrics manufacturing capacity mix in recent years
from heavyweight fabrics, which are typically used in rigid printed circuit
boards, toward more technologically advanced and higher margin lightweight
fabrics. Sales of glass fiber fabrics to the electronics industry were $101.3
million in 1998, representing 50.2% of our net sales.

Composites. Our glass, carbon and aramid fiber fabrics are used in various
composite materials, which are used in various applications, including
structural aircraft parts and interiors, helicopter rotor blades, tooling,
brake linings and ducting. Sales of fabrics for composites were $52.3 million
in 1998, representing 25.9% of our net sales.

Filtration. We produce fabrics for high temperature dust filtration used by
industrial customers to control emissions into the environment. Our filtration
bags are sold to utilities, producers of asphalt and carbon black, cement
plants and steel mills. Sales of our filtration fabrics were $20.2 million in
1998, representing 10.0% of our net sales.

Commercial. Our glass fiber fabrics are used in commercial applications
where fire resistance and dimensional stability are critical. Applications for
these products include ceiling tile and acoustical facing fabrics, window
coverings and movie screens. Sales of our commercial fabrics were $10.1 million
in 1998, representing 5.0% of our net sales.

Insulation. We produce materials for high-temperature, fire-resistant
insulation. Applications for these products include insulation for joints,
pipes, valves, transportation exhaust systems, heat shields and home
appliances. Sales of our insulation fabrics were $8.1 million in 1998,
representing 4.0% of our net sales.

38
<PAGE>

Construction. The fire resistant qualities of glass fiber fabrics make them
a critical component of products used in the construction industry.
Applications for these products include smoke and fire barrier curtains,
drywall bonding tape, rubber mat backing and fabric structures, such as
commercial tents and roofs. Sales of our construction fabrics were $9.8 million
in 1998, representing 4.9% of our net sales.

Sales and Marketing

We sell our products through a direct sales force of eight sales
representatives, four market managers and two telemarketing representatives.
All of the sales representatives and three of the four market managers have
been with us for more than ten years. Our sales representatives have geographic
territories, while the market managers are responsible for specific product
lines. The sales representatives are compensated on a salary and commission
basis and the market managers are compensated on a salary and bonus basis. Each
sales representative has a technical orientation and the necessary expertise to
sell our full line of products. We maintain an internet web site, located at
www.bgf.com, which contains extensive product information.

We sell our products to over 400 customers, including many leading companies
in their respective industry segments such as Cytec Fiberite, Polyclad
Laminates, Isola USA and General Electric. We continually seek to strengthen
and expand our relationships with our customers. Due to the stringent quality,
delivery and performance standards demanded by many of our customers and users
of our products in downstream markets, customers are increasingly moving toward
single source supply and collaborative agreements among both fabric producers,
such as BGF, and downstream users. We believe that we are well positioned to
benefit from this trend because of our strong competitive position within the
industry, our investment in technical and manufacturing expertise and our long-
term relationships with customers and suppliers. In 1998, two of our customers,
Cytec Fiberite and Polyclad Laminates, each accounted for more than 10% of our
net sales and our top ten customers accounted for 54.9% of our total sales.

Manufacturing Facilities and Processes

We own and operate four manufacturing facilities and a research and
development facility, together occupying over 786,000 square feet. By
exchanging manufacturing technology and expertise with our international
affiliates within Porcher Industries, we are able to develop innovative,
efficient and flexible manufacturing processes. We were the first weaver of
glass fiber in the United States to be ISO 9002 certified, which evidences our
strong focus on high-quality manufacturing processes. The following table sets
forth the general location, principal uses and approximate size of our
properties and whether such properties are leased or owned.

<TABLE>
<CAPTION>
Approximate Leased
Area In Or
Facility Use Square Feet Owned
- -------- --- ----------- ------
<S> <C> <C> <C>
Greensboro, North Headquarters; Research and Development Facility 36,000 Owned
Carolina

Altavista, Virginia Weaving glass fiber and aramid fibers 399,000 Owned

South Hill, Virginia
Heavyweight Fiber Weaving heavyweight glass fibers 147,000 Owned
Fabrics Facility

Lightweight Fiber Weaving lightweight glass fibers 128,000 Owned
Fabrics Facility

Cheraw, South Carolina Weaving carbon fibers 76,000 Owned

Altavista, Virginia Warehouse 101,000 Leased

Altavista, Virginia Warehouse 24,000 Leased

Los Angeles, California Warehouse 20,000 Leased

South Hill, Virginia Warehouse 18,000 Leased
</TABLE>

39
<PAGE>

South Hill, Virginia--Lightweight Fabrics Facility. This facility is
dedicated to producing lightweight glass fiber fabrics for the multi-layer
printed circuit board market. Lightweight glass fiber fabrics are manufactured
through a multi-step process applied to glass yarns which consist of glass
filaments gathered together in twine-like strands. We first purchase glass
yarns and then add a protective coating to protect the yarns during the weaving
process. We then weave the yarns into various patterns and constructions
generally established by industry standards. The woven fabric is then sent
through a heat cleaning process where organic materials are burned away. After
the cleaning process is completed, the fabric may be treated with a finishing
process at our Altavista, Virginia facility if required by the particular
application or end-use of the fabric. The specific finishing agent that is used
depends upon the chemistry and processes of the customer's products. We have
developed several proprietary finishing agents that we believe allow our
fabrics to interact more effectively with certain of our customers' processes
than our competitors' finishes.

The first phase of the lightweight fabrics facility has been operating for
approximately two years. We expect the second phase of the facility, which will
provide finishing capability and additional weaving capacity for lightweight
fabrics, to be completed in 2000. We expect the third phase of the facility,
which will provide distribution capabilities as well as additional finishing
capabilities, to be completed by the end of 2002. Currently, Advanced
Glassfiber leases approximately 27,200 square feet of segregated space at the
lightweight fiber fabric facility for the purpose of manufacturing glass yarns
for exclusive supply to us under a supply contract, extendible at the option of
Advanced Glassfiber, that expires on December 31, 2008. We also provide
Advanced Glassfiber with leased employees and administrative and technical
support services.

South Hill, Virginia--Heavyweight Fabrics Facility. This facility produces
heavyweight glass fiber fabrics used primarily for rigid printed circuit board
applications and utilizes some of the same manufacturing processes as our
lightweight fabric facility. This facility also produces certain lightweight
glass fiber fabrics, which production can be increased if necessary.

Altavista, Virginia. This facility produces specialty woven and non-woven
glass fiber fabrics for high temperature filtration, scrim, glass mat and
general industrial fabrics. The Altavista facility is fitted with modern
twisting and texturing equipment to provide the flexibility necessary for
processing a variety of yarns to produce fabrics for multiple markets. For
woven products, the manufacturing process is similar to the process utilized at
our South Hill, Virginia facilities, except that some of the yarns undergo a
preparation stage whereby we twist and ply the yarns prior to the weaving
process to produce the desired texture and thickness to meet specific customer
needs and product designs. After the weaving process is completed, the fabric
may be sold with or without a finishing process. We also manufacture a non-
woven fabric made of glass fiber, and others made of glass, aramid and other
synthetic fibers, at the Altavista facility. We also weave Kevlar(R) and
Twaron(R) aramid fibers at our Altavista facility. The Altavista facility has
the capability to finish all of the fabric types we manufacture and currently
finishes all of our products, including products manufactured at our other
facilities that are shipped by truck to the Altavista facility.

Cheraw, South Carolina. This facility handles all stages of weaving carbon
yarns for the highly technical aerospace, transportation and composites
markets. To produce carbon fiber fabrics, we purchase carbon yarns and, upon
confirming that the yarns are of a sufficient quality to meet our customer
needs, weave the yarns to the customer's specifications. Unlike glass and
aramid yarns, carbon yarns are conductors of electricity and therefore, are
isolated from our other manufacturing facilities to ensure quality and safety
in the production process.

Leased Warehouses. We lease four warehouses from third party lessors that
are used to store raw materials and finished products. We pay $14,200 in rent
per month for the larger warehouse in Atlavista, Virginia and our lease for
this warehouse expires on March 20, 2002. The rent for the smaller warehouse in
Atlavista, Virginia is $1,000 per month and our lease is on a month to month
basis. The rent for the Los Angeles, California warehouse is $5,500 per month
and our lease expires on December 1, 2001. The South Hill, Virginia warehouse
costs $2,200 per month and the lease expires on February 1, 2000.

40
<PAGE>

Research and Development

Throughout our history, we have demonstrated that we are one of the
industry's leading innovators, by becoming the first to:

. weave glass fabrics;

. develop a patented process for heat cleaning glass fabrics to improve
the physical properties of composites;

. weave single yarns by developing warp size;

. develop unidirectional fabrics; and

. develop a product using "DE" size filaments to improve composite
strengths.

We believe our innovations have enhanced existing customer relationships and
created new applications for our fabrics.

We maintain a research and development staff of seven chemical and four
laboratory technicians who work under our Director of Research and Development.
We have a modern, well-equipped research and development facility, located at
our headquarters in Greensboro, North Carolina, that divides its efforts among
developing new products and improving current products. The research and
development facility is divided into seven state-of-the-art laboratories
focusing on the following strategic areas of product development:

<TABLE>
<S> <C>
. Applications Development; . Pilot Processing;

. Physical Testing; . Composites Development; and

. Microscopy; . Filtration Technology.

. Analytical Testing;
</TABLE>

Raw Materials

The principal materials we use to manufacture our products are glass, aramid
and carbon yarns. We purchase glass yarns from Advanced Glassfiber, PPG
Industries, Nitto Boseki and Vetrotex. Beginning in September 1998, Advanced
Glassfiber began to supply us with glass yarns produced at the South Hill,
Virginia lightweight fiber fabrics facility. The supply agreement for such
yarns expires on December 31, 2008, unless extended by Advanced Glassfiber.
Glass Holdings, our parent corporation, through a wholly owned subsidiary,
purchased a 51% interest in Advanced Glassfiber from Owens Corning on September
30, 1998. Our main suppliers of carbon yarns are Amoco, Toho and Hexcel and our
main suppliers of aramid yarns are DuPont and Akzo Nobel.

Competition

Both in revenue and market share, we are the second largest domestic
manufacturer of glass fiber fabrics and a leading producer of other high
performance fabrics. Our primary competitor is Hexcel/Clark-Schwebel. Other
competitors are smaller and generally compete in niche markets. The major
competitors in the global glass fabric weaving industry are BGF/Porcher
Industries, Hexcel/Clark-Schwebel, Nitto Boseki (Japan), Nan Ya Plastics
(Taiwan) and Taiwan Glass (Taiwan).

Beginning in the fourth quarter of 1997, we have experienced downward
pricing pressures on our heavyweight glass fiber fabrics due to foreign
exchange fluctuations between the dollar and various Asian currencies and over-
capacity in Asian heavyweight fabrics manufacturing, which has led to increased
Asian imports of laminates and printed circuit boards into the United States.

Employees

As of March 31, 1999, we employed 1,123 full time and part time employees,
207 of which are salaried employees and 916 of which are paid on an hourly
basis. All of our employees are located in the United States. Of these
employees, 1,017 were engaged in manufacturing and manufacturing related
services, and 106 were

41
<PAGE>

engaged in sales, marketing and administrative functions. None of our employees
is represented by a labor union. We consider our relationship with our
employees to be strong and from January 1994 through March 31, 1999, we
experienced an annual turnover rate of 5.7%.

Environmental and Safety and Health Matters

Our past and present operations, including our ownership and operation of
real properties, are subject to extensive and changing federal, state, local
and foreign environmental laws and requirements including those governing
discharges to air and water, the handling and disposal of soils and hazardous
substances and wastes, and the remediation of contamination associated with
releases of hazardous substances at our facilities and off-site disposal
locations. Our operations are also governed by laws and requirements relating
to workplace safety and health. We believe that we are generally in material
compliance with currently applicable environmental laws and requirements.

We may incur costs or liabilities relating to environmental or safety and
health matters in the future, including those relating to compliance with laws
and requirements, remediation of contamination or claims by third parties.

Like all weavers of glass, carbon and aramid fibers, we are subject, in
certain jurisdictions, to laws and regulations designed to reduce solid wastes
by requiring, among other things, certain wastes to be degradable in landfills,
minimum levels of recycled content, various recycling requirements, disposal
fees and limits on the use of certain products. In addition, various consumer
and special interest groups have lobbied from time to time for the
implementation of additional environmental protection measures. We do not
believe that the legislation promulgated to date and currently pending
initiatives will have a material adverse effect on our business, financial
condition and results of operations. We cannot assure you, however, that any
future legislation or regulatory efforts will not have a material adverse
effect on our business, financial condition and results of operations.

Legal Proceedings

From time to time, we are involved in various legal proceedings arising in
the ordinary course of business. None of the legal matters in which we are
currently involved, either individually or in the aggregate, is expected to
have a material adverse effect on our business, financial condition and results
of operations. See "Environmental and Safety and Health Matters."

Patents and Trademarks

We have several United States patents, patent applications and trademarks.
While we consider our patents to be valuable assets, we do not believe that our
competitive position is dependent on patent protection or that our operations
are dependent on any individual patent or group of related patents. However, in
some instances, patents and patent protection may serve as a barrier to entry
in certain of our product lines. Our policy is to obtain patents on our new
products and enforce our patent rights.

42
<PAGE>

MANAGEMENT

Directors, Executive Officers and Senior Managers of BGF

The following sets forth information with respect to our directors,
executive officers and other senior managers.

<TABLE>
<CAPTION>
Name Age Positions with BGF
- ---- --- ------------------
<S> <C> <C>
Robert T. Porcher....... 70 Chairman of the Board, Chief Executive Officer and Director
Philippe Porcher........ 45 Vice Chairman
Graham A. Pope.......... 65 Director
Richard L. Cromer....... 56 President
Philippe R. Dorier...... 42 Senior Vice President, Chief Financial Officer, Secretary and Treasurer
James R. Henderson...... 62 Executive Vice President Sales and Merchandising
Gerald F. Mitchell...... 51 Vice President Manufacturing
Robert A. Frank......... 56 Vice President Operations
Charles H. Alligood..... 59 Vice President Quality Assurance and Industrial Engineering
Lee-Pei H. Chou, Ph.D... 51 Vice President Research and Development
Edward P. Cardille...... 59 Vice President Information Systems
Thomas E. Mann, Jr...... 45 Vice President Human Resources
</TABLE>

Robert T. Porcher has been our Chairman of the Board and Chief Executive
Officer and one of our directors since 1988. Mr. Porcher has maintained various
positions with Porcher Industries, including Chairman of the Board of Directors
and Chief Executive Officer of Porcher Industries, since 1952. Mr. Porcher,
together with certain members of his family, beneficially owns a controlling
interest in Porcher Industries, which owns 100% of the outstanding capital
stock of our parent, Glass Holdings. Since December 9, 1998, Mr. Porcher has
served as Chairman of the Supervisory Board of Porcher Industries.

Philippe Porcher has been our Vice Chairman since April 1998. He has also
served as Vice President of Porcher Industries since March 1993. Before
becoming Vice President of Porcher Industries, Mr. Philippe Porcher served as
Director of Porcher Industries' industrial division. Mr. Philippe Porcher is
the son of Robert Porcher, who is our Chairman of the Board and Chief Executive
Officer and one of our directors. Since December 9, 1998, Mr. Philippe Porcher
has served as Chairman of the Executive Board of Porcher Industries.

Graham A. Pope has been one of our directors since 1989. From 1989 until
1998, Mr. Pope served as our President and Chief Operating Officer. From 1959
to 1988, Mr. Pope served in various positions with Burlington, including
Division Manufacturing Manager of Burlington's Glass Division. Since December
9, 1998, Mr. Pope has served as a member of the Supervisory Board of Porcher
Industries.

Richard L. Cromer was named President of BGF in April 1998. Prior to joining
BGF, Mr. Cromer was employed by Owens Corning for 31 years in various
capacities, including as Director of Operations Strategy from 1997 to 1998,
General Manager-Textiles from 1994 to 1997 and Director of Operations Support
from 1989 to 1994. Since December 9, 1998, Mr. Cromer has served as a member of
the Executive Board of Porcher Industries.

Philippe R. Dorier has been our Senior Vice President, Chief Financial
Officer, Secretary and Treasurer since 1993. From 1988 to 1993, he served as
our Vice President International Audit. From 1984 until 1988, Mr. Dorier served
as the Vice President of Finance of Babolat VS, S.A., and from 1980 until 1983,
as the Administration and Finance Manager of Syva-Biomerieux S.A. Since
December 9, 1998, Mr. Dorier has served as a member of the Executive Board of
Porcher Industries.

James R. Henderson has been Executive Vice President Sales and Merchandising
since joining BGF in 1989. Prior to joining BGF, Mr. Henderson was employed for
31 years with United Merchants and Manufacturers, Inc., a company engaged in
the textile business. Mr. Henderson served as the Senior Vice

43
<PAGE>

President of United Merchants and Manufacturers, President of their Uniglass
Division, and as Chairman of the Board of United's Marglass subsidiary in
England.

Gerald F. Mitchell has been our Vice President Manufacturing since 1991.
From 1970 until 1991, Mr. Mitchell was employed with Burlington in various
capacities, including as a Plant Manager of Burlington's Knit Division from
1989 to 1991 and as the Vice President, Manufacturing of Burlington's Lees
Carpet Division from 1986 to 1989.

Robert A. Frank has been our Vice President Operations since 1988. From 1967
until 1988, Mr. Frank held various planning and marketing positions with
Burlington, including Marketing Manager of Burlington's Electronics
Applications Department, Operations Manager of Burlington's Glass Division and
Vice President of Operations.

Charles H. Alligood has been our Vice President Quality Assurance and
Industrial Engineering since 1988. From 1964 until 1988, Mr. Alligood was
employed by Burlington and served in various positions including as Division
Industrial Engineer for Burlington's Glass Division from 1983 until 1988 and as
Cost Reduction Coordinator for Burlington's Industrial Division from 1981 to
1983.

Lee-Pei H. Chou, Ph.D. has been our Vice President Research and Development
since 1997. From 1986 until 1996, Dr. Chou served as the Research and
Development Director/Manager of Elk Corporation. From 1984 until 1986, Dr. Chou
served as the Research and Development Leader of Trenco, Inc. a subsidiary of
BF Goodrich Co. From 1979 until 1984, Dr. Chou served as the Research and
Development Project Leader of Ferro Corporation and from 1976 until 1979, Dr.
Chou was a Senior Research Chemist within the Coatings & Resins Division of PPG
Industries, Inc.

Edward P. Cardille has been our Vice President Information Systems since
1997. From 1991 until 1997, Mr. Cardille served as our Director of Information
Systems. From 1968 until 1991, Mr. Cardille served in various positions with
Burlington, including as Manager of Systems and Programming for Burlington's
Carpet Division from 1983 until 1991.

Thomas E. Mann, Jr. was named Vice President Human Resources of BGF in
December 1998. Since 1997, he had served as our Director of Human Resources.
From 1993 until 1997, Mr. Mann served as our Corporate Planning Manager, and
from 1988 until 1993, as a Plant Personnel Manager of BGF.

44
<PAGE>

Executive Compensation

The following table shows, for the fiscal year ended December 31, 1998, the
compensation paid to or earned by our Chief Executive Officer and our four
other most highly compensated executive officers who were serving at the end of
1998, as well as Mr. Graham Pope, who served as our President and Chief
Operating Officer until April 1998 (the "Named Executive Officers").

<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Salary(1) Bonus Compensation
- --------------------------- --------- ----- ------------
<S> <C> <C> <C>
Robert T. Porcher........................ $120,000(2) $200,000(5) $49,505(6)
Chairman of the Board, Chief
Executive Officer and Director

Philippe Porcher......................... $120,000(2) $120,000(5)
Vice Chairman

Graham A. Pope........................... $204,452(3) $150,000 $19,200(7)
Director; former President
and Chief Operating Officer

Richard L. Cromer........................ $155,331(4) $110,500
President

Philippe R. Dorier....................... $141,828(5) $ 90,000(5) $16,524(7)
Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer

James R. Henderson....................... $146,058 $120,000 $16,940(7)
Executive Vice President Sales and
Marketing
</TABLE>
- --------
(1) Includes the following amounts deferred at the election of the following
Named Executive Officers pursuant to BGF's Profit Sharing and Tax Savings
Plan (the "401(k) Plan"): Mr. Pope--$10,000; Mr. Dorier--$7,738; and Mr.
Henderson--$10,000.
(2) Represents a "management fee" paid by BGF Services, Inc., an affiliate of
BGF, to Messrs. Robert and Philippe Porcher and reimbursed by BGF to cover
services provided by Messrs. Robert and Philippe Porcher to BGF. See
"Certain Relationships and Related Party Transactions."
(3) Mr. Pope remained an employee of BGF after retiring from the offices of
President and Chief Operating Officer.
(4) Based on an annualized gross salary of $207,108. Mr. Cromer has served as
President of BGF since April 1, 1998.
(5) Paid for by BGF Services and reimbursed by BGF to BGF Services in the form
of "management fees" to cover services rendered to BGF. See "Certain
Relationships and Related Party Transactions."
(6) Includes $3,086 for club membership fees; $932 for maintenance of
automobile; $25,824 depreciation associated with cost of residence; and
$19,663 associated with maintenance of residence.
(7) Represents gross annual profit sharing distributions. Named Executive
Officers contributed the following portions of such amounts to the 401(k)
Plan: Mr. Pope--$19,200; Mr. Dorier--$10,328; and Mr. Henderson--$16,940.

Retirement Plans

Retirement System. The Retirement System of BGF Industries, Inc. covers
substantially all employees of BGF after they have completed one year of
service. Employees with five or more years of service are entitled to benefits
beginning at normal retirement age. This plan also provides reduced benefits to
participants electing to retire early, beginning at age 55. Participants are
required to contribute three percent of covered compensation per year and
interest is credited on employee contributions. In general, the normal
retirement benefit is payable as an annuity. Participants may also elect a
lump-sum distribution of their accrued benefit.

45
<PAGE>

Normal retirement benefits are determined by reference to an employee's
"accumulated contributions." Accumulated contributions are the sum of all
required employee contributions plus interest credited on such contributions,
compounded annually at the rate of 120% of the federal mid-term rate in effect
under section 1274 of the Internal Revenue Code for the first month of the plan
year. In general, the annual normal retirement benefit is equal to 50% of the
accumulated employee contributions, plus 3/4% of employee plan compensation up
to $6,600 for plan year 1989.

The estimated annual benefits payable upon retirement at normal retirement
age for the Named Executive Officers is as follows: Mr. Pope--$24,160.56; Mr.
Cromer--$21,800.00; Mr. Dorier--$54,932.40; and Mr. Henderson--$23,508.36.
These calculations are based on 1998 compensation, assume benefits are payable
as a straight-life annuity, and assume that each individual will work until age
65. As of December 31, 1998, Mr. Cromer had not completed a qualifying year of
service required to participate in the Retirement System. The benefit shown is
based on his electing to participate in the Retirement Plan effective April 1,
1999. Mr. Robert Porcher and Mr. Philippe Porcher do not participate in the
Retirement System.

401(k) Plan. The Employees' Profit Sharing and Tax Savings Plan of BGF
Industries, Inc. covers most employees of BGF, after they have completed one
year of service. Employees may defer up to 15% of their plan compensation each
year, subject to Internal Revenue Code limitations. We may, in our discretion,
match employees' elective deferrals up to a specified limitation each year and
may make a discretionary employer contribution. All contributions are 100%
vested and nonforfeitable at all times. Benefits are payable after separation
from service in a lump sum in cash.

Compensation of Directors

Our directors did not receive separate compensation for their services as
directors in 1998.

Compensation Committee Interlocks and Insider Participation

Mr. Robert Porcher, who serves as both an executive officer and as a member
of the board of directors of BGF, serves as the Chairman of the Supervisory
Board of Porcher Industries, which is the equivalent of a board of directors .
Mr. Pope also serves on the Supervisory Board of Porcher Industries. Messrs.
Cromer and Dorier also serve as members of the Executive Board of Porcher
Industries, whose members are equivalent to executive officers. Mr. Philippe
Porcher serves as Chairman of the Executive Board. Mr. Robert Porcher serves as
the President and Chairman of the Board of Directors of BGF Services, Inc., an
affiliate of BGF. Mr. Philippe Dorier serves as Secretary/Treasurer and as a
director of BGF Services. See also "Certain Relationships and Related Party
Transactions."

Deferred Compensation Agreements

We have entered into Deferred Compensation Agreements with Messrs. Pope,
Cromer and Henderson and we are the guarantor of Mr. Dorier's Deferred
Compensation Agreement with BGF Services. The agreements provide for both pre-
retirement survivor benefits, as well as post-retirement benefits to the
executive. The agreements also contain a non-competition provision. Generally,
under each of the agreements, if the executive dies before the age of 65, his
beneficiary or, if none, his estate will receive monthly payments for a 10-year
period of an amount equal to 50% of the greater of:

(A) the executive's monthly base salary in effect on the January 1 prior
to his death; or

(B) the executive's average monthly base salary on January 1 of the five
years prior to his death.

46
<PAGE>

This amount is decreased by certain percentages if the executive dies after
the age of 60 but before 65. The agreements also provide for post-retirement
benefits in the form of:

(1) monthly payments over 10 years, the sum of which is equal to the
"applicable percentage" multiplied by the greater of (a) the executive's
annual base salary on January 1 immediately preceding or concurrent with
his retirement or (b) the average of the executive's annual base salary
on January 1 of the five years prior to his retirement; and

. (2) a payment on death equal to three-quarters of his annual base salary
on the January 1 immediately preceding or concurrent with his
retirement.

The "applicable percentage" for Mr. Pope is two and one quarter. The
"applicable percentage" for Mr. Cromer, Mr. Dorier and Mr. Henderson is one and
one-half. Mr. Pope's agreement has been amended to pay his death benefit over
the 10-year period mentioned in (1) above. If the executive dies prior to
receiving all of the monthly payments, the payments are made to his designated
beneficiary or, if none, his estate. Reduced benefits are paid if the executive
retires prior to age 65.

47
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We are wholly owned by Porcher Industries through its U.S. holding company,
Glass Holdings. As such, we have on-going financial, managerial and commercial
agreements and arrangements with Porcher Industries, Glass Holdings and other
wholly-owned subsidiaries of Glass Holdings, as well as other affiliates of
Porcher Industries. Mr. Robert Porcher, our Chairman of the Board and Chief
Executive Officer, together with certain members of his family, beneficially
owns a controlling interest in Porcher Industries.

We pay management fees to BGF Services, Inc., a wholly owned subsidiary of
Glass Holdings, that cover the periodic management services of Robert Porcher
and his son Philippe Porcher, the Vice President of Porcher Industries, and the
full time services of Philippe Dorier, our Chief Financial Officer. We also
reimburse BGF Services for the costs associated with automobiles provided to
Messrs. Robert Porcher and Dorier and maintenance and upkeep of Robert
Porcher's Greensboro, North Carolina residence, which is owned by BGF Services
and has a net book value of $1.0 million. In connection with these
arrangements, we paid an aggregate of $1.0 million, $1.0 million and $948,000
to BGF Services in 1996, 1997 and 1998, respectively. Such payments are based
on the estimated value of services provided and are comparable to that which
would be given to third parties.

Porcher Industries and its French parent company provide general management
and strategic planning advice to us in exchange for management fees that
reimburse such companies for a portion of the compensation of Robert Porcher,
Philippe Porcher and other employees who allocate their time among us and other
Porcher Industries affiliates. We paid an aggregate of $388,000, $304,000 and
$324,000 to such companies in management fees in 1996, 1997 and 1998,
respectively. Such amounts billed are based on the estimated value of services
provided and are comparable to that which would be given to third parties.
However, we believe that Porcher Industries and its parent would not provide
such services to a third party.

We provide management, accounting and administrative services to Belmont, a
wholly owned subsidiary of Glass Holdings that produces non-woven glass and
carbon products for reinforcement applications in exchange for fees that
reimburse us for our costs associated with these services. We also sublease
approximately 12,800 square feet of our Cheraw, South Carolina facility to
Belmont for its production facilities and lease to Belmont 11 employees that
work at such facility. Belmont paid us an aggregate of $13,000, $360,000 and
$658,000 in fees, leased employee payments, rent and its proportionate share of
utilities costs at the Cheraw plant in 1996, 1997 and 1998, respectively. We
believe that the sublease to Belmont is on no more favorable terms than would
be given to third parties. The leased employees are provided at cost and are
thus leased on terms more favorable than what would be given to a third party.
Currently, Belmont is in the process of winding down its operations, which is
expected to be complete by the end of April 1999. BGF and Glass Holdings are
also guarantors of a $5.0 million industrial revenue bond originally issued by
Belmont in June 1997. As of December 31, 1998, approximately $4.6 million
remained outstanding on this bond.

We provide on-going senior management, technological support and
administrative assistance to Shanghai-Porcher, a joint venture company between
Glass Holdings, which owns 85% of such company and China Worldbest Development
Co., LTD, that produces glass fiber fabrics for the electronics markets in
Asia. Porcher Industries and Shanghai-Porcher have entered into a ten year
Technology Know-How Agreement, dated February 7, 1996, under to which Porcher
Industries is entitled to receive royalty payments of up to 3% of net sales
revenue in years in which Shanghai-Porcher achieves a pre-tax profit. Under the
agreement, Shanghai-Porcher is required to reimburse Porcher Industries for all
travel, lodging and other reasonable expenses of Porcher Industries personnel
that conduct on-site training visits. We anticipate that Porcher Industries
will assign its rights and obligations under the Technology Know-How Agreement
to us. From time to time, we have acted as Shanghai-Porcher's billing agent at
no cost to Shanghai-Porcher. Shanghai-Porcher paid us a total of $705,000,
$349,000 and $52,000 in 1996, 1997 and 1998, respectively. We are reimbursed
only for expenses in this arrangement. Such terms are comparable to that which
would be provided to a third party.

We paid dividends to Glass Holdings of $15.2 million, $4.9 million and $0 in
1996, 1997 and 1998, respectively, approximately all of which was used to fund
start up costs of Shanghai-Porcher and Belmont.

48
<PAGE>

On June 23, 1997, Glass Holdings loaned us $2.0 million for working capital
purposes. This loan is non-interest bearing. On September 30, 1998, we repaid
the remaining $1.8 million outstanding on the loan. The loan, because it is
non-interest bearing, was provided on terms more favorable than would have been
provided to a third party.

We purchase carbon fibers and finished products from Porcher Industries. We
paid Porcher Industries $5.7 million, $8.1 million and $7.0 million in 1996,
1997 and 1998, respectively, for such purchases. We sell finished goods and
occasionally unfinished goods directly to Porcher. Porcher Industries paid us
$484,000, $329,000 and $1.7 million in 1996, 1997 and 1998, respectively. We
have paid Porcher Industries commissions for sales of its products in Asia,
Europe, and Australia of $307,000, $380,000 and $363,000 in 1996, 1997 and
1998, respectively. We believe that prices and commissions paid or received by
us for these transactions are comparable to those paid to third parties.

We collect and deposit customer payments on behalf of two wholly owned
subsidiaries of Porcher Industries in exchange for fees equal to 2% of amounts
collected. We received $17,000, $23,000 and $43,000 in fees for these services
in 1996, 1997 and 1998, respectively. We believe that these fees are comparable
to those that would be paid to third parties.

On April 14, 1998, we loaned $365,258 to Richard L. Cromer, our President,
for the purchase of a residence in Greensboro, North Carolina. The loan bears
no interest and is payable upon the sale of Mr. Cromer's residence in Toledo,
Ohio and thus is on terms more favorable than we would provide to third
parties.

On September 30, 1998, AGY Holdings purchased its 51% ownership interest in
Advanced Glassfiber for aggregate consideration of approximately $338.9
million, including post-closing adjustments. We loaned Glass Holdings
approximately $138.6 million to provide it with a portion of the capital
necessary to fund the acquisition. Our loan to Glass Holdings is evidenced in
part by promissory notes that bear interest at "our cost of funds rate" for the
calendar year immediately preceding the date on which any interest is due. With
respect to any period of determination, the "cost of funds rate" means a rate
per annum equal to the blended interest rate, as reasonably calculated by us,
applicable to our borrowings during such period in respect of indebtedness we
incurred to fund the loan to Glass Holdings. Accrued interest is due and
payable on the first business day of February of each year commencing on
February 1, 1999 and on any date on which any principal is due. The promissory
notes are payable on October 31, 2008 or such later date as we and Glass
Holdings may agree to. Payments made pursuant to the promissory notes are
expected to be offset by other of our distributions to Glass Holdings. We
believe that these transactions were on terms no more favorable than if Glass
Holdings had borrowed the funds directly from a third party. See "Prospectus
Summary--The Affiliated Transaction," "Use of Proceeds" and "Capitalization."

Currently, Advanced Glassfiber leases approximately 27,200 square feet of
segregated space at our South Hill, Virginia lightweight fiber fabric facility
for the purpose of manufacturing glass yarns for exclusive supply to us under a
supply contract, extendible at the option of Advanced Glassfiber, that expires
on December 31, 2008. We also provide Advanced Glassfiber with leased employees
and administrative and technical support services. Advanced Glassfiber paid us
approximately $340,000 pursuant to this arrangement from October 1, 1998 to
December 31, 1998. We also purchased approximately $11,185,000 of raw materials
from Advanced Glassfiber from October 1, 1998 to December 31, 1998. We believe
that each of these arrangements are on terms no more favorable than those that
would be provided to third parties.

49
<PAGE>

STOCK OWNERSHIP

The following table sets forth information regarding each person or entity
that beneficially owns more than a 5% ownership interest in BGF. The indicated
entity has sole voting and investment power with respect to its ownership
interest.

<TABLE>
<CAPTION>
Name of Beneficial Owner Ownership Interest
------------------------ ------------------
<S> <C>
Porcher Industries S.A.(/1/).............................. 100%
</TABLE>
- --------

(1) Address is Badinieres, F-38300 Bourgoin-Jallieu, France. Porcher Industries
owns 100% of the outstanding capital stock of Glass Holdings Corp., which
owns 100% of the outstanding capital stock of BGF. Mr. Robert Porcher may
be deemed to beneficially control voting and investment power of 56.05% of
the outstanding capital stock of Porcher Industries, and therefore, Glass
Holdings and BGF, pursuant to the ownership structure of Porcher
Industries, as reflected in the following graphic. Mr. Porcher's address is
c/o Porcher Industries S.A., Badinieres, F-38300, Bourgoin-Jallieu, France.

[CHART SHOWING THE OWNERSHIP STRUCTURE OF PORCHER INDUSTRIES HERE]

* Mr. Robert Porcher effectively controls the voting and investment power of
this entity.
50
<PAGE>

DESCRIPTION OF OTHER INDEBTEDNESS SENIOR TO THE EXCHANGE NOTES

We entered into a credit agreement on September 30, 1998, with a syndicate
of lenders and First Union National Bank, as agent. The lenders under this
senior credit facility have agreed to provide us with up to $125.0 million of
credit.

The senior credit facility consists of (1) a five-year revolving credit
facility, or "revolver," for up to $75.0 million and (2) a six-year amortizing
term loan in the amount of $50.0 million. The revolver contains two sub
facilities: (1) a $5.0 million swingline facility for working capital
requirements and (2) a $20.0 million letter of credit facility. As of December
31, 1998, the term loan was fully funded, and $36.0 million was outstanding
under the revolver.

Repayment

Under the senior credit facility, we may have to prepay the term loan and
the revolver if:

. we sell assets in transactions outside the ordinary course of business;

. we issue debt or equity securities;

. we receive insurance proceeds for casualty losses and do not repair or
replace the damaged facilities; or

. our EBITDA for a fiscal year exceeds certain expenditures and payments.

These prepayments would be applied first to the term loan, and upon payment of
the term loan, to permanently pay outstanding loans under the revolver.

The term loan has a quarterly scheduled amortization and is payable on the
following dates in the following amounts:

<TABLE>
<CAPTION>
Term Loan
Payment
Term Loan Payment Date Amount
---------------------- -----------
<S> <C>
December 31, 1999................................................ $ 1,000,000
March 31, 2000................................................... 1,000,000
June 30, 2000.................................................... 1,000,000
September 30, 2000............................................... 1,000,000
December 31, 2000................................................ 1,750,000
March 31, 2001................................................... 1,750,000
June 30, 2001.................................................... 1,750,000
September 30, 2001............................................... 1,750,000
December 31, 2001................................................ 2,500,000
March 31, 2002................................................... 2,500,000
June 30, 2002.................................................... 2,500,000
September 30, 2002............................................... 2,500,000
December 31, 2002................................................ 3,250,000
March 31, 2003................................................... 3,250,000
June 30, 2003.................................................... 3,250,000
September 30, 2003............................................... 3,250,000
December 31, 2003................................................ 4,000,000
March 31, 2004................................................... 4,000,000
June 30, 2004.................................................... 4,000,000
September 30, 2004............................................... 4,000,000
-----------
$50,000,000
===========
</TABLE>

51
<PAGE>

Security

The senior credit facility is secured by a first priority lien on
substantially all of our real and personal property. The lien also covers (1)
100% of the capital stock of each of our direct or indirect domestic
subsidiaries, (2) 65% of the capital stock of each of our first tier foreign
subsidiaries and (3) promissory notes issued by our affiliates. The senior
credit facility is also secured by a non-recourse pledge by Glass Holdings, our
parent, of capital stock of two of our affiliates, Belmont of America, Inc. and
AGY Holdings, Inc.

Interest and Fees

The annual interest rate applicable to the revolver and the term loan is a
fluctuating rate of interest. The rate is measured, at our option, by reference
to either (1) LIBOR or (2) the greater of the published prime rate of First
Union National Bank or the overnight federal funds rate plus 0.5% ("ABR"),
plus, in either case, an additional amount which fluctuates based upon our
leverage ratio. This additional amount ranges from 2.00% to 2.75% for LIBOR
based borrowings and 0.75% to 1.50% for ABR based borrowings. We have entered
into an interest rate hedging agreement that effectively fixes the interest
rate on the term loan at 5.04% per annum plus the applicable additional amount.

Our senior credit facility provides for an annual administrative fee to be
paid to the agent, an unused commitment fee payable to the lenders and certain
other fees payable in connection with letters of credit issued under the
revolver.

Covenants and Events of Default

The senior credit facility contains affirmative and negative covenants
customary for agreements of its type. Such covenants include, among others:

. covenants restricting our and our subsidiaries' ability to incur debt,
including guarantees;

. the creation of liens;

. substantially changing the nature of our or our subsidiaries' businesses;

. the consummation of certain transactions such as dispositions of
substantial assets, mergers, acquisitions, reorganizations and
recapitalizations;

. the making of certain investments and loans, non-ordinary course asset
sales and capital expenditures;

. the making of dividends and other distributions; and

. transactions with affiliates and our ability to prepay certain debt.

The senior credit facility also requires us to comply with the following
financial tests and maintain the following financial ratios. These tests and
ratios include:

. maintaining a maximum leverage ratio as of the last day of each fiscal
quarter of the fiscal years set forth below in the corresponding amounts set
forth below:

<TABLE>
<CAPTION>
Fiscal Quarter(s) Ending Leverage Ratio
------------------------ --------------
<S> <C>
March 31, 1999............................................... 5.00 to 1.00
June 30 and September 30, 1999............................... 4.75 to 1.00
December 31, 1999 and March 31, 2000......................... 4.50 to 1.00
June 30 and September 30, 2000............................... 4.00 to 1.00
December 31, 2000 and March 31, June 30 and September 30,
2001........................................................ 3.75 to 1.00
December 31, 2001 and March 31, June 30 and September 30,
2002........................................................ 3.50 to 1.00
December 31, 2002 and each fiscal quarter thereafter......... 3.25 to 1.00
</TABLE>

52
<PAGE>

. maintaining a minimum consolidated net worth as of the end of each fiscal
quarter in an amount equal to:

. negative $43,000,000 plus

. 50% of quarterly consolidated net income (less tax payments) beginning
with the fiscal quarter ended December 31, 1998 plus

. 100% of the net proceeds of any equity issuance after September 30,
1998;

. maintaining a minimum interest coverage ratio as of the last day of each
fiscal quarter of the fiscal years set forth below in the corresponding
amounts set forth below:

<TABLE>
<CAPTION>
Fiscal Quarter(s) Ending Interest Coverage
------------------------ -----------------
<S> <C>
March 31, June 30, September 30 and December 31, 1999..... 2.25 to 1.00
March 31, June 30 and September 30, 2000.................. 2.25 to 1.00
December 31, 2000 and March 31, June 30 and September 30, 2.50 to 1.00
2001.....................................................
December 31, 2001 and March 31, June 30 and September 30, 2.75 to 1.00
2002.....................................................
December 31, 2002 and each fiscal quarter thereafter...... 3.00 to 1.00
</TABLE>

. maintaining a minimum fixed charge coverage ratio as of the last day of each
fiscal quarter of the fiscal years set forth below in the corresponding
amounts set forth below:

<TABLE>
<CAPTION>
Fiscal Quarter(s) Ending Fixed Charge Coverage Ratio
------------------------ ---------------------------
<S> <C>
March 31, June 30, September 30 and December 31,
1999........................................... 1.05 to 1.00
March 31, June 30 and September 30, 2000........ 1.05 to 1.00
December 31, 2000 and March 31, June 30 and Sep-
tember 30, 2001................................ 1.10 to 1.00
December 31, 2001 and March 31, June 30 and Sep-
tember 30, 2002................................ 1.20 to 1.00
December 31, 2002 and March 31, June 30 and Sep-
tember 30, 2003................................ 1.30 to 1.00
December 31, 2003 and each fiscal quarter there-
after.......................................... 1.40 to 1.00
</TABLE>

Our senior credit facility also contains customary events of default
including:

. failing to make payments under the senior credit facility when due;

. making material misrepresentations in the senior credit facility
documents;

. failing to comply with any other covenants or provisions of the senior
credit facility;

. failing to make payments under the indenture or any other indebtedness
in the aggregate in excess of $3,000,000;

. failing to comply with any other covenants or provisions of the
indenture or any other indebtedness in the aggregate in excess of
$3,000,000 which causes or permits the acceleration of the indebtedness
or notes; or

. the occurrence of:

- voluntary and involuntary bankruptcy events;

- judgments or decrees against us and our subsidiaries in excess of
$3,000,000 over insurance coverage which are not satisfied, vacated,
discharged, stayed or bonded within 30 days;

- materially adverse ERISA events;

- a change in control;

- the senior credit facility documents failing to be in full force and
effect or enforceable;

- the senior credit facility ceasing to be designated as senior
indebtedness.

The senior credit facility also includes cross defaults to the Advanced
Glassfiber Yarns, LLC senior credit facility and the indenture.

53
<PAGE>

An event of default under the senior credit facility permits the lenders to
accelerate or, in the case of bankruptcy related defaults, triggers an
automatic acceleration of, the maturity of the indebtedness under the senior
credit facility. An event of default may also restrict our and any note
guarantors' ability to meet our and their obligations to the holders of the
notes.

As of March 31, 1999, we were in compliance with all of the financial
covenants, ratios and other provisions of the senior credit facility.

Senior Subordinated Credit Facility

On September 30, 1998, we also entered into a senior subordinated credit
agreement with First Union Investors, Inc. as agent. Subsequently, other
institutions became lenders under this senior subordinated credit facility. The
senior subordinated credit facility, which provided us with $65.0 million of
credit, was fully drawn by us in connection with the closing of the affiliated
transaction. The senior subordinated credit facility is an unsecured senior
subordinated obligation of ours. We repaid the senior subordinated credit
facility in full with the net proceeds of the offering. Upon such repayment,
the senior subordinated credit facility was terminated.

54
<PAGE>

DESCRIPTION OF EXCHANGE NOTES

The exchange notes will be issued under the indenture, dated as of the issue
date, among us and The Bank of New York, as trustee. The terms of the notes
include those stated in the indenture and those incorporated by reference to
the Trust Indenture Act, as in effect on the date of the indenture.

The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of the exchange notes. We have filed a copy of the indenture as an
exhibit to the registration statement which includes this prospectus.

The definitions of the material capitalized terms used in the following
summary are set forth below under "Material Definitions."

The exchange notes will be issued solely in exchange for an equal principal
amount of old notes pursuant to the exchange offer. The form and terms of the
exchange notes will be identical in all material respects to the form and terms
of the old notes except that:

(1) the exchange notes will have been registered under the Securities
Act; and

(2) the registration rights and liquidated damages provisions applicable
to the old notes are not applicable to the exchange notes.

The exchange notes will be unsecured senior subordinated obligations of
ours. The exchange notes will be unconditionally guaranteed, jointly and
severally on an unsecured senior subordinated basis by all future direct and
indirect Restricted Subsidiaries other than Foreign Subsidiaries of ours.

As of the date hereof:

.there are no Restricted Subsidiaries providing note guarantees; and

.we have one Foreign Subsidiary which will be a Restricted Subsidiary.

Initially, the trustee will act as paying agent and registrar for the
exchange notes. We may change any paying agent and registrar without notice to
holders of the exchange notes. Holders must surrender notes to a paying agent
to collect principal payments and premium, if any. Principal, premium, if any,
and interest on the exchange notes will be paid by check mailed to the
registered holders at their registered addresses; but all payments to holders
who have given wire transfer instructions to us will be made by wire transfer
of immediately available funds to the accounts specified by those holders.

Principal, Maturity and Interest

The exchange notes will mature on January 15, 2009. Interest on the exchange
notes will accrue at the rate of 10 1/4% per annum. Interest will be payable
semi-annually in arrears on each January 15 and July 15 commencing on July 15,
1999, to the persons who are registered holders at the close of business on the
January 1 and July 1, respectively, immediately preceding the applicable
interest payment date. Interest on the exchange notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from and including January 21, 1999, the date of issuance. The exchange notes
will not be entitled to the benefit of any mandatory sinking fund.

Additional Notes

Subject to the limitations set forth under "--Material Covenants--Limitation
on Incurrence of Additional Indebtedness," we may Incur additional Indebtedness
which, at our option, may consist of additional notes, in one or more series,
having identical terms as old notes or exchange notes. Holders of the
additional notes will have the right to vote together with holders of the old
notes and the exchange notes as one class.

55
<PAGE>

No offering of any additional notes is being or shall be deemed to be made
by this prospectus. In addition, we cannot assure you as to when or whether we
will issue any additional notes or as to the aggregate principal amount of the
additional notes.

Ranking

The exchange notes will rank:

(1) junior to, and be subordinated in right of payment to, all existing
and future senior Indebtedness;

(2) pari passu in right of payment with all Senior Subordinated
Indebtedness; and

(3) senior in right of payment to all Subordinated Indebtedness.

As of March 31, 1999, we had $53.0 million of senior Indebtedness
outstanding, exclusive of unused commitments. All debt Incurred under the
senior credit facility is senior Indebtedness of ours, is guaranteed by all
Note Guarantors on a senior basis and is secured by substantially all of our
assets.

Note Guarantees

In the event that any Person shall become a Restricted Subsidiary, other
than Foreign Subsidiaries, but including a Subsidiary which becomes a
Restricted Subsidiary upon a revocation of the designation of a Subsidiary as
an unrestricted Subsidiary, we will cause the Restricted Subsidiary to execute
and deliver to the trustee a supplemental indenture in a form reasonably
satisfactory to the trustee pursuant to which the Restricted Subsidiary shall
become a party to the indenture and thereby unconditionally guarantee all of
our obligations under the exchange notes and the indenture on the terms set
forth in the indenture. Thereafter, the Restricted Subsidiary shall, unless
released in accordance with the terms of the indenture, be a "Note Guarantor"
for all purposes of the indenture.

Each Note Guarantor will irrevocably and unconditionally guarantee, jointly
and severally, on an unsecured senior subordinated basis the punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all our
obligations under the indenture and the exchange notes, whether for principal
of, premium, if any, or interest on the exchange notes, expenses,
indemnification or otherwise. Each Note Guarantor will agree to pay, on a
senior subordinated basis and in addition to the "Guaranteed Obligations"
stated above, any and all expenses, including reasonable counsel fees and
expenses, incurred by the trustee or the holders in enforcing any rights under
such Note Guarantor's note guarantee.

The Guaranteed Obligations will rank:

(1) junior to, and be subordinated in right of payment to, all existing
and future senior Indebtedness of the Note Guarantors;

(2) pari passu in right of payment with all Senior Subordinated
Indebtedness of the Note Guarantors; and

(3) senior in right of payment to all Subordinated Indebtedness of the
Note Guarantors.

All debt Incurred under the senior credit facility will be guaranteed by
each Note Guarantor on a senior basis and will be secured by substantially all
of the assets of each Note Guarantor.

The Guaranteed Obligations of each Note Guarantor will be limited to the
maximum amount as will,

. after giving effect to all other contingent and fixed liabilities of
such Note Guarantor; and

. after giving effect to any collections from or payments made by or on
behalf of any other Note Guarantor in respect of the Guaranteed
Obligations of such other Note Guarantor under its note guarantee or
pursuant to its contribution obligations under the indenture,

56
<PAGE>

result in the Guaranteed Obligations of such Note Guarantor not
constituting a fraudulent conveyance or fraudulent transfer under federal,
state or other applicable law.

Each Note Guarantor that makes a payment or distribution under a note
guarantee will be entitled to a contribution from each other Note Guarantor in
a pro rata amount, based on the net assets of each Note Guarantor determined
in accordance with GAAP. For further information, you should review the
section "Risk Factors" under the heading "Issuance of old notes and any note
guarantee may be subject to fraudulent conveyance laws."

In the event:

(1) there is a defeasance of the exchange notes as described under
"Legal Defeasance and Covenant Defeasance,"

(2) there is a sale or other disposition of all or substantially all of
the assets of any Note Guarantor,

(3) there is a sale or other disposition of all of the capital stock or
other equity interests of any Note Guarantor, or

(4) a Note Guarantor is designated as an unrestricted Subsidiary as
described under "Material Covenants-Designation of Unrestricted
Subsidiaries,"

the Note Guarantor will be released and relieved of its obligations under its
note guarantee if, in the case of clauses (2) or (3), the transaction is
carried out pursuant to and in accordance with "Material Covenants--Limitation
on Asset Sales" and, if applicable, "Material Covenants--Merger, Consolidation
and Sale of Assets."

Subordination of the Exchange Notes and the Note Guarantees

The payment of the principal of, premium, if any, and interest on the
exchange notes is subordinated in right of payment, to the prior payment in
full in cash of all our existing and future obligations in respect of senior
Indebtedness, whether outstanding on the issue date or thereafter Incurred. In
addition, the payment of the Guaranteed Obligations of each future Note
Guarantor, if any, under its note guarantee will be subordinated and junior in
right of payment to the prior payment in full of all senior Indebtedness of
that Note Guarantor to substantially the same extent as the exchange notes are
subordinated to all existing and future obligations in respect of our senior
Indebtedness. As a result, the exchange notes will be effectively subordinated
to all senior Indebtedness of any Note Guarantor and to all debt of any other
Subsidiaries that we may have in the future.

Upon any payment or distribution of our assets or the assets of a Note
Guarantor upon a total or partial liquidation, dissolution or reorganization
of, or similar proceeding relating to us, our property or a Note Guarantor or
its property, the holders of our senior Indebtedness or the senior
Indebtedness of a Note Guarantor will be entitled to receive payment in full
of all obligations due in respect of that senior Indebtedness before the
holders are entitled to receive any payment, and until all obligations due in
respect of the senior Indebtedness is paid in full in cash, any payment or
distribution to which holders would be entitled but for the subordination
provisions of the indenture will be made to holders of our senior Indebtedness
or the senior Indebtedness of that Note Guarantor as their interests may
appear. If a distribution is made to holders that, due to the subordination
provisions, should not have been made to them, the holders are required to
hold it in trust for the holders of our senior Indebtedness or the senior
Indebtedness of the Note Guarantor and pay it over to them as their interests
may appear.

However, neither we nor any Note Guarantor may pay principal of, premium,
if any, or interest on the exchange notes or make any deposit pursuant to the
provisions described under "Legal Defeasance and Covenant Defeasance" below or
repurchase, redeem or otherwise retire any exchange notes (collectively, "pay
the exchange notes") if

(1) any Designated Senior Indebtedness is not paid when due or

57
<PAGE>

(2) any other default on Designated Senior Indebtedness occurs and the
maturity of that Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been
cured or waived and any such acceleration has been rescinded or that
Designated Senior Indebtedness has been paid in full in cash.

However, we and any Note Guarantor may pay the exchange notes without regard to
the foregoing if we and the Note Guarantor and the trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (1)
or (2) of the immediately preceding sentence has occurred and is continuing.

During the continuance of any other default with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice or the expiration of any applicable grace
periods, except such notice as may be required to effect such acceleration,
neither we nor any Note Guarantor may pay the exchange notes for a period which
commences upon the receipt by the trustee, with a copy to us and each Note
Guarantor, of written notice of that default from the Representative of the
holders of that Designated Senior Indebtedness specifying an election to effect
a payment blockage period and ending 179 days thereafter, or earlier if the
prohibition on payments is terminated in any of the following ways:

(1) by written notice to the trustee, the Note Guarantors and us from
the Person or Persons who gave such Blockage Notice,

(2) because the Representative of the holders of the Designated Senior
Indebtedness has notified the trustee that the default giving rise to the
notice blocking payments is no longer continuing, or

(3) because the Designated Senior Indebtedness has been repaid in full
in cash.

Notwithstanding the provisions described in the immediately preceding sentence,
but subject to the first sentence of the previous paragraph, unless the holders
of the Designated Senior Indebtedness or the Representative of those holders
have accelerated the maturity of such Designated Senior Indebtedness, we and
any Note Guarantors may resume payments on the exchange notes after the end of
the period during which we are prohibited by the holders of that Designated
Senior Indebtedness from making any payments on the notes. The exchange notes
and any note guarantees shall not be subject to more than one of these periods
in any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during that 360-day period.

If payment of the exchange notes is accelerated because of an Event of
Default, we or the trustee shall promptly notify the holders of Designated
Senior Indebtedness or the Representative of such holders of the acceleration.

By reason of the subordination provisions contained in the indenture:

. in the event of an insolvency, bankruptcy, reorganization, or liquidation
of us, or

. upon the occurrence of a change of control or an Asset Sale requiring
repurchase by us of any exchange notes, or

. in the event that any Note Guarantors are required to make payments under
their note guarantees,

there may not be sufficient assets remaining to satisfy the claims of the
holders after satisfying the claims of creditors of ours and those of the Note
Guarantors who are holders of senior Indebtedness and claims of creditors of
our other Subsidiaries. For more information, you should review "Risk Factors--
Your exchange notes will be subordinate to our senior debt."

The terms of the subordination provisions described above will not apply to
any payment or distribution of Permitted Junior Securities or to payment from
money or the proceeds of U.S. government obligations held in trust by the
trustee for the payment of principal of, premium, if any, and interest on the
exchange notes pursuant to the provisions described under "Legal Defeasance and
Covenant Defeasance."

58
<PAGE>

Redemption

Optional Redemption. The exchange notes will be redeemable, at our option,
in whole at any time or in part from time to time, on and after January 15,
2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices, plus, in each case, accrued interest to the date of
redemption, subject to the right of holders of record on a record date to
receive interest due on the related interest payment date that is on or prior
to the date of redemption. The redemption prices are expressed as percentages
of the principal amount of the exchange notes if redeemed during the twelve-
month period commencing on January 15 of the year set forth below:

<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.............................................................. 105.250%
2005.............................................................. 103.500%
2006.............................................................. 101.750%
2007 and thereafter............................................... 100.000%
</TABLE>

Optional Redemption upon Public Equity Offerings. In addition, at any time,
or from time to time, on or prior to January 15, 2002, we may, at our option,
use the net cash proceeds of one or more Public Equity Offerings, as defined
below, to redeem in the aggregate up to 35% of the aggregate principal amount
of the exchange notes originally issued. The redemption price will be equal to
110.5% of the principal amount of the

exchange notes, plus accrued and unpaid interest thereon to the date of
redemption, subject to the right of holders of record on a record date to
receive interest due on the related interest payment date that is on or prior
to such date of redemption. After giving effect to the redemption at least 65%
of the aggregate principal amount of the exchange notes originally issued must
remain outstanding. In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, we shall make such redemption not more
than 60 days after the consummation of the Public Equity Offering.

As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of our Qualified Capital Stock pursuant to a
registration statement filed with the Securities and Exchange Commission in
accordance with the Securities Act of 1933, as amended, or any successor
statute.

In the event that less than all of the exchange notes are to be redeemed at
any time, selection of the exchange notes for redemption will be made by the
trustee in compliance with the requirements of the principal national
securities exchange, if any, on which those exchange notes are listed or, if
those exchange notes are not then listed on a national securities exchange, on
a pro rata basis, by lot or by such method as the trustee shall deem fair and
appropriate, but no exchange notes of a principal amount of $1,000 or less
shall be redeemed in part and exchange notes of a principal amount in excess of
$1,000 may be redeemed in part in multiples of $1,000 only. If a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the exchange notes or portions of the exchange notes for redemption shall,
subject to the preceding proviso, be made by the trustee only on a pro rata
basis or on as nearly a pro rata basis as is practicable, subject to the
procedures of DTC or a successor depositary, unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least
30 but not more than 60 days before the redemption date to each holder of
exchange notes to be redeemed at its registered address. If any exchange note
is to be redeemed in part only, the notice of redemption that relates to that
exchange note shall state the portion of the principal amount of that exchange
note to be redeemed. A new exchange note in a principal amount equal to the
unredeemed portion of that exchange note will be issued in the name of the
holder of that exchange note upon cancellation of the original exchange note.
On and after the redemption date, interest will cease to accrue on exchange
notes or portions of exchange notes called for redemption as long as we have
deposited with the paying agent funds in satisfaction of the applicable
redemption price pursuant to the indenture.

59
<PAGE>

Change of Control

The indenture provides that upon the occurrence of a change of control, as
defined in "Material Definitions", each holder will have the right to require
that we purchase all or a portion, in integral multiples of $1,000, of that
holder's notes in connection with the "Change of Control Offer" described
below, at a purchase price equal to 101% of the principal amount of the notes
plus accrued and unpaid interest thereon to the date of purchase, subject to
the right of holders of record on a record date to receive interest due on the
related interest payment date that is on or prior to such date of purchase.
Within 30 days following the date upon which the change of control occurred, we
must send a notice by first-class mail to each holder, with a copy to the
trustee, which notice shall govern the terms of the Change of Control Offer.
The notice shall state, among other things, the "Change of Control Payment
Date", which must be no earlier than 30 days nor later than 60 days from the
date such notice is mailed, other than as may be required by law. Holders
electing to have a note purchased pursuant to a Change of Control Offer will be
required to surrender the note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the note completed, to the paying agent at
the address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.

The senior credit facility contains, and our future senior Indebtedness may
contain, prohibitions on the occurrence of events that would constitute a
change of control and requires that the senior Indebtedness to be repaid or
repurchased upon a change of control. Moreover, the exercise by the holders of
their right to require us to repurchase the notes would cause a default under
the senior credit facility and could cause a default under such other senior
Indebtedness, even if the change of control itself does not, due to the
financial effect of such repurchase on us.

If a Change of Control Offer is made, there can be no assurance that we will
have available funds sufficient to pay the change of control purchase price for
all the notes that might be delivered by holders seeking to accept the Change
of Control Offer. In the event that we are required to purchase outstanding
notes in connection with a Change of Control Offer, we expect that we would
seek third-party financing to the extent we do not have available funds to meet
our purchase obligations and any other obligations in respect of senior
Indebtedness. However, there can be no assurance that we would be able to
obtain this financing.

If we cannot obtain the necessary consents of senior lenders under the
senior Indebtedness outstanding at the time of the change of control and we
cannot obtain the necessary third-party financing to repay the borrowings under
that senior Indebtedness, we will remain prohibited from purchasing the notes.
In such case, our failure to purchase tendered notes would constitute an Event
of Default under the indenture which may only be waived by the holders of not
less than a majority in principal amount of the outstanding notes. The Event of
Default may not be waived merely by us or the Trustee.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the purchase of notes
pursuant to a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Change of Control" provisions
of the indenture, we shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached our obligations under the
"Change of Control" provisions of the indenture by virtue thereof.

Material Covenants

Limitation on Incurrence of Additional Indebtedness.

(1) We will not, and will not cause or permit any of our Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness other than
Permitted Indebtedness, including Acquired Indebtedness; but we and any
Note Guarantor may Incur Indebtedness if, at the time of and immediately
after giving pro forma effect to the Incurrence of Indebtedness and the
application of the proceeds therefrom, the Consolidated Fixed Charge
Coverage Ratio is greater than 2.0 to 1.0.

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(2) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, the amount of Indebtedness issued at a
price that is less than the principal amount thereof will be equal to the
amount of the liability in respect thereof determined in accordance with
GAAP.

Limitation on Restricted Payments. We will not, and will not cause or permit
any of our Restricted Subsidiaries to, directly or indirectly:

.declare or pay any dividend or make any distribution on or in respect
of shares of our capital stock or capital stock or other equity interest of
any Restricted Subsidiary to holders of that capital stock or other equity
interest, other than

(a)dividends or distributions payable in

-- our Qualified Capital Stock or

-- in warrants, rights or options to purchase or acquire shares
of our Qualified Capital Stock; or

-- to us or a Restricted Subsidiary; and

(b) pro rata dividends or distributions to us and/or our Restricted
Subsidiaries and to minority holders of capital stock of Restricted
Subsidiaries;

.purchase, redeem or otherwise acquire or retire for value

(a) any of our capital stock or any capital stock or other equity
interests of our Restricted Subsidiary; or

(b) any warrants, rights or options to purchase or acquire shares of
any class of that capital stock or other equity interests and

other than any capital stock or other equity interests, warrants, rights or
options owned by us or any Restricted Subsidiary and other than any such
purchase, redemption, acquisition or retirement that constitutes a Permitted
Investment;

.make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, as
the case may be, any Subordinated Indebtedness, or

.make any Investment (other than Permitted Investments)

if at the time of any of the foregoing "Restricted Payments" or immediately
after giving effect thereto,

(1) a Default or an Event of Default shall have occurred and be
continuing or

(2) we are not able to Incur at least $1.00 of additional Indebtedness,
other than Permitted Indebtedness, in compliance with the covenant
described under "--Limitation on Incurrence of Additional Indebtedness"; or

(3) the aggregate amount of cash or fair market value of any other
property comprising the Restricted Payments, including such proposed
Restricted Payment, made subsequent to the issue date shall exceed the sum
of:

(a) 50% of cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of the loss)
accrued during the period beginning on January 1, 1999 to the end of
the most recent fiscal quarter for which our consolidated financial
information is available; plus

(b) 100% of the aggregate net cash proceeds received by us from any
Person, other than a Restricted Subsidiary, from any of the following:

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.a capital contribution to us or

. the issuance and sale of our Qualified Capital Stock subsequent
to the issue date, or

. the issuance and sale of any warrants, rights or options to
purchase or acquire shares of our capital stock, or

. the issuance and sale subsequent to the issue date of any of
our Indebtedness or any Indebtedness of a Restricted Subsidiary
that has been converted into or exchanged for our Qualified
Capital Stock (excluding any net cash proceeds applied in
accordance with the following paragraph); plus

(c) without duplication of any amounts included in clause (a) above
or clause (d) below, in the case of the disposition or repayment of, or
the receipt by us or any Restricted Subsidiary of any dividends or
distributions from, any Investment constituting a Restricted Payment
made after the issue date, an amount equal to the lesser of the amount
of such Investment and the amount received by us or any Restricted
Subsidiary upon such disposition, repayment, dividend or distribution;
plus

(d) without duplication of any amounts included in clause (c) above,
in the event we or any Restricted Subsidiary make any Investment in a
Person that, as a result of or in connection with that Investment,
becomes a Restricted Subsidiary, an amount equal to our or any
Restricted Subsidiary's existing Investment in such Person that was
previously treated as a Restricted Payment; plus

(e) so long as the designation of any Subsidiary as an unrestricted
Subsidiary was treated as a Restricted Payment made after the issue
date, with respect to any unrestricted Subsidiary that has been
redesignated as a Restricted Subsidiary after the issue date in
accordance with "--Designation of Unrestricted Subsidiaries," an amount
equal to our Investment in such unrestricted Subsidiary, but such
amount shall not in any case exceed the Designation Amount with respect
to such Restricted Subsidiary upon its designation; plus

(f) $3.0 million; which amount shall not be reduced by any negative
amounts occurring pursuant to clause (a) above; minus

(g) the Designation Amount (measured as of the date of designation)
with respect to any of our Subsidiaries which have been designated as
an unrestricted Subsidiary after the issue date in accordance with "--
Designation of Unrestricted Subsidiaries."

Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:

(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;

(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of our capital stock or any
warrants, rights or options to purchase or acquire shares of our capital
stock:

(a) in exchange for shares of our Qualified Capital Stock or any
warrants, rights or options to purchase or acquire shares of our
Qualified Capital Stock or

(b) through the application of the net proceeds of a substantially
concurrent sale for cash, other than to a Restricted Subsidiary, of

. shares of our Qualified Capital Stock or

. any warrants, rights or options to purchase or acquire shares
of our Qualified Capital Stock;

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but the value of that Qualified Capital Stock or those warrants, rights and
options issued in exchange for the acquired capital stock, warrants, rights or
options and any such net cash proceeds shall be excluded from clause (3)(b) of
the preceding paragraph (and were not included in clause 3(b) at any time);

(3) if no Default or Event of Default shall have occurred and be
continuing, the voluntary prepayment, purchase, defeasance, redemption or
other acquisition or retirement for value of any Subordinated Indebtedness:

(a) solely in exchange for shares of our capital stock or any
warrants, rights or options to purchase or acquire shares of our
capital stock; however if that capital stock is, or those warrants,
rights or options to purchase that capital stock are convertible into
or exchangeable at the option of the holder for Disqualified Capital
Stock then such Disqualified Capital Stock shall not

. by its terms, or upon the happening of any event, mature or be
mandatorily redeemable pursuant to a sinking fund obligation or
otherwise, or be redeemable at the option of the holder of the
Disqualified Capital Stock, in any case, on or prior to the
final maturity of the Indebtedness permitted to be prepaid,
purchased, defeased, redeemed or acquired pursuant to this
clause (3) and

. have a Weighted Average Life to Maturity less than the
Indebtedness permitted to be prepaid, purchased, defeased,
redeemed or acquired pursuant to this clause (3) or

(b) in exchange for Refinancing Indebtedness or through the
application of net proceeds of a substantially concurrent sale for
cash, other than to a Restricted Subsidiary, of:

. shares of our Qualified Capital Stock or any warrants, rights
or options to purchase or acquire shares of our Qualified
Capital Stock or

. Refinancing Indebtedness; but the value of the capital stock or
warrants, rights or options issued in exchange for the
Subordinated Indebtedness and any such net cash proceeds shall
be excluded from clause (3)(b) of the preceding paragraph (and
were not included in that clause 3(b) at any time);

(4) the making of loans or advances to officers and directors of ours or
any Restricted Subsidiary in the ordinary course of business in an amount
not to exceed $1.0 million at any one time outstanding;

(5) the repurchase, redemption or other acquisition or retirement for
value of

(a) any of our capital stock, or interests under any stock
appreciation rights plan, held by any member of our management under
any management equity subscription agreement or stock option agreement
in effect as of the date of the indenture or entered into thereafter
with members of the management of any Person acquired after the issue
date in connection with the acquisition of that Person or

(b) our capital stock held by employees, former employees, directors
or former directors pursuant to the terms of agreements, including
employment agreements, approved by the board of directors; but the
aggregate price paid for all of that repurchased, redeemed, acquired or
retired capital stock, or interests under any stock appreciation rights
plan, set forth in clauses 5 (a) and (b) shall not exceed $750,000 in
any twelve-month period and no Default or Event of Default shall have
occurred and be continuing immediately after any such transaction and

(6) the making of book-entry dividends to Glass Holdings Corporation to
make payments of interest on the Acquisition Loan so long as

(a) Glass Holdings Corporation makes a book-entry contribution to
AGY Holdings to enable AGY Holdings to pay interest on the Purchase
Price Loan,

(b) AGY Holdings uses such contribution to pay interest on the
Purchase Price Loan,

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(d) after giving effect to the dividend and the application of the
interest payment on the Acquisition Loan, there is no change to the
retained earnings of our Consolidated Net Income solely as a result of
the making of the dividend and the payment of the interest.

In determining the aggregate amount of Restricted Payments made subsequent to
the issue date in accordance with clause (3) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1) (without duplication for
the declaration of the relevant dividend), (4) and (5) shall be included in the
calculation and amounts expended pursuant to clauses (2), (3) and (6) shall not
be included in the calculation.

Limitation on Asset Sales. We will not, and will not permit any Restricted
Subsidiary to, consummate an Asset Sale unless:

(1) we or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of that Asset Sale at least equal to the
Fair Market Value of the assets sold or otherwise disposed of and

(2) at least 75% of the consideration received for the assets sold by us
or the Restricted Subsidiary, as the case may be, in that Asset Sale shall
be in the form of:

(a) cash or Cash Equivalents or

(b) "Replacement Assets" of

. long-term assets, including intellectual property associated
with the use of such long-term assets, to be used by us or any
Restricted Subsidiary in a Permitted Business or

. capital stock or other equity interests of a Restricted
Subsidiary or a Person engaged primarily in a Permitted
Business that will become, upon such purchase, a Restricted
Subsidiary; but any securities, notes or other obligations
received by us or a Restricted Subsidiary from such transfers
that are converted within 90 days of receipt thereof by us or
the Restricted Subsidiary into cash or Cash Equivalents, to the
extent so received, shall be deemed to be cash or Cash
Equivalents for purposes of this provision.

The amount of any Indebtedness of us or that Restricted Subsidiary that is
actually assumed by the transferee in that Asset Sale and from which we or that
Restricted Subsidiary is fully and unconditionally released shall be deemed to
be cash for purposes of determining the percentage of cash consideration
received by us or that Restricted Subsidiary. The foregoing shall not apply to
Subordinated Indebtedness assumed by the transferee.

We or such Restricted Subsidiary, as the case may be, may apply the Net Cash
Proceeds of any Asset Sale within 270 days of such Asset Sale to:

(1) repay any senior Indebtedness and permanently reduce the
commitments, if any, with respect thereto,

(2) purchase from a Person other than us and our Restricted Subsidiaries
Replacement Assets or

(3) any combination of (1) and (2).

If we or a Restricted Subsidiary make an investment in Replacement Assets
not earlier than 90 days prior to:

(1) the Asset Sale, or

(2) the execution by us or a Restricted Subsidiary of a binding
commitment to consummate that Asset Sale, which commitment is not subject
to any conditions precedent other than obtaining necessary financing and
the closing in respect of the Asset Sale that is the subject of such
binding commitment occurs within 90 days of the date such commitment is
executed,

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then the investment shall satisfy, to the extent of the amount of such
investment, the requirements of clause (2) of the preceding sentence.

To the extent all or a portion of the Net Cash Proceeds of any Asset Sale
are not applied within 270 days of such Asset Sale as described in clause (1),
(2) or (3) of the immediately preceding paragraph (the "Net Proceeds Offer
Trigger Date"), we will make an offer to purchase from all holders on a pro
rata basis (and on a pro rata basis with the holders of any other Senior
Subordinated Indebtedness with similar provisions requiring us to offer to
purchase the Senior Subordinated Indebtedness with the proceeds of Asset
Sales), the principal amount of notes and such other Indebtedness equal to the
unapplied Net Cash Proceeds at a price, in the case of the notes, equal to 100%
of the principal amount of the notes to be purchased, plus accrued and unpaid
interest thereon, to the date of purchase. The interest payment will be subject
to the right of holders of record on a record date to receive interest due on
an interest payment date that is on or prior to such date of purchase. This
"Net Proceeds Offer" shall occur on the "Net Proceeds Offer Payment Date" which
is a date not less than 20 business days following the date on which such offer
is made, or such longer period as may be required by law, nor more than 60 days
following such Net Proceeds Offer Trigger Date.

We may defer the Net Proceeds Offer until there is an aggregate amount of
unapplied Net Cash Proceeds equal to or in excess of $5.0 million resulting
from one or more Asset Sales, at which time, the entire amount of unapplied Net
Cash Proceeds, and not just the amount in excess of $5.0 million, shall be
applied as required pursuant to this paragraph.

Each Net Proceeds Offer will be mailed to the record holders as shown on the
register of holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set
forth in the indenture. Upon receiving notice of the Net Proceeds Offer,
holders may elect to tender their notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent holders of notes and
holders of other Senior Subordinated Indebtedness, if any, which are or is the
subject of a Net Proceeds Offer properly tender notes or the other Senior
Subordinated Indebtedness in an aggregate amount exceeding the amount of
unapplied Net Cash Proceeds, notes of tendering holders and the other Senior
Subordinated Indebtedness of tendering holders will be purchased on a pro rata
basis based on amounts tendered.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the purchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
indenture, we shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached our obligations under the "Assets
Sale" provisions of the indenture by virtue thereof.

Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds
will be reset at zero. Accordingly, to the extent that the aggregate amount of
notes and other Senior Subordinated Indebtedness tendered pursuant to a Net
Proceeds Offer is less than the aggregate amount of unapplied Net Cash
Proceeds, we may use any remaining Net Cash Proceeds for general corporate
purposes.

In the event of the transfer of substantially all, but not all, of our
property and assets and the property and assets of our Restricted Subsidiaries
as an entirety to a Person in a transaction permitted under "--Merger,
Consolidation and Sale of Assets," the entity which survives the transaction
shall be deemed to have sold our properties and assets and the properties and
assets of our and our Restricted Subsidiaries not so transferred for purposes
of this covenant, and shall comply with the provisions of this covenant with
respect to that deemed sale as if it were an Asset Sale. In addition, the Fair
Market Value of our properties and assets or the properties and assets of our
Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant. If at any time any non-cash
consideration received by us or any Restricted Subsidiary, as the case may be,
in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash, other than interest received with respect to any non-cash
consideration, then the

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conversion or disposition shall be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof shall be applied in accordance with this
covenant.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. We will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:

(1) pay dividends or make any other distributions on or in respect of
its capital stock or other equity interests to us or any other Restricted
Subsidiary or pay any Indebtedness owed to us or any other Restricted
Subsidiary;

(2) make loans or advances to, or guarantee any Indebtedness or other
obligations of, or make any Investment in, us or any other Restricted
Subsidiary; or

(3) transfer any of its property or assets to us or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or
by reason of:

(a) applicable law;

(b) the indenture;

(c) the senior credit facility as in effect on the issue date, and
any amendments or restatements of the senior credit facility; so long
as any amendment or restatement is not materially more restrictive with
respect to encumbrances or restrictions than those in existence on the
issue date;

(d) customary non-assignment provisions of any contract and
customary provisions restricting assignment or subletting in any lease
governing a leasehold interest of any Restricted Subsidiary, or any
customary restriction on the ability of a Restricted Subsidiary to
dividend, distribute or otherwise transfer any asset which secures
Purchase Money Indebtedness of that Restricted Subsidiary;

(e) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired;

(f) restrictions with respect to any Restricted Subsidiary of ours
imposed pursuant to a binding agreement which has been entered into for
the sale or disposition of capital stock or assets of that Restricted
Subsidiary; but the restrictions apply solely to the capital stock or
assets of that Restricted Subsidiary which are being sold;

(g) customary restrictions imposed on the transfer of copyrighted or
patented materials;

(h) secured Indebtedness otherwise permitted to be incurred under
the covenants described under "--Limitation on the Incurrence of
Additional Indebtedness" and "--Limitation on Liens," which encumbrance
or restriction is not applicable to any property or assets other than
the property or assets subject to the Lien securing the Indebtedness;
or

(i) an agreement governing Indebtedness Incurred to Refinance the
Indebtedness issued, assumed or Incurred pursuant to an agreement
referred to in clause (c), (e) or (h) above; but that refinancing
agreement shall not be materially more restrictive with respect to
encumbrances or restrictions than those contained in the agreement
referred to in such clause (3), (5) or (8) as determined by the board
of directors in their reasonable good faith judgment.

Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. We will not sell or otherwise dispose of any shares of capital
stock or other equity interests of a Restricted Subsidiary, and will not cause
or permit any Restricted Subsidiary, directly or indirectly, to issue or sell
or otherwise dispose of any shares of its capital stock or other equity
interests, except:

(1) to us or a Wholly Owned Restricted Subsidiary;

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(2) the sale of 100% of the shares of the capital stock or other equity
interests of any Restricted Subsidiary owned by us or any Restricted
Subsidiary effected in accordance with the covenants described under "--
Limitation on Asset Sales" and "--Merger, Consolidation and Sale of
Assets";

(3) in the case of Restricted Subsidiaries other than Wholly Owned
Restricted Subsidiaries, issuance of capital stock or other equity
interests on a pro rata basis to us and our Restricted Subsidiaries and
minority shareholders of that Restricted Subsidiary (or on less than a pro
rata basis to any minority holder if such minority holder does not acquire
its pro rata amount);

(4) the sale of capital stock or other equity interests of a Restricted
Subsidiary or issuance by a Restricted Subsidiary of capital stock or other
equity interests if following such sale or issuance,

(a) that Restricted Subsidiary is no longer a Subsidiary,

(b) our continuing Investment in that former Restricted Subsidiary
is in compliance with "--Limitations on Restricted Payments" and

(c) any sale of capital stock or other equity interests by us or
that Restricted Subsidiary is made in compliance with the covenant
described under "--Limitation on Asset Sales".

Designation of Unrestricted Subsidiaries. We may designate after the issue
date any Subsidiary of ours as an "unrestricted Subsidiary" under the indenture
only if:

(1) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to the designation:

(2) at the time of and after giving effect to the designation, we could
Incur $1.00 of additional Indebtedness, other than Permitted Indebtedness,
under the covenant described under "--Limitation on Incurrence of
Additional Indebtedness"; and

(3) we would be permitted to make an Investment at the time of
designation, assuming the effectiveness of such designation and treating
such designation as an Investment at such time, pursuant to the first
paragraph of "-Limitation on Restricted Payments" in an amount (the
"Designation Amount") equal to the amount of our Investment in that
Subsidiary on such date.

Neither we nor any Restricted Subsidiary shall at any time

(1) provide credit support for, subject any of its property or assets
other than the capital stock of any unrestricted Subsidiary to the
satisfaction of, or guarantee, any Indebtedness of any unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing
that Indebtedness) unless such credit support or guarantee constitutes an
Investment permitted under the covenant described under "--Limitation on
Restricted Payments,"

(2) be directly or indirectly liable for any Indebtedness of any
unrestricted Subsidiary or

(3) be directly or indirectly liable for any Indebtedness which provides
that the holder thereof may, upon notice, lapse of time or both, declare a
default thereon or cause the payment thereof to be accelerated or payable
prior to its final scheduled maturity upon the occurrence of a default with
respect to any Indebtedness of any unrestricted Subsidiary, except for any
non-recourse guarantee given solely to support the pledge by us or any
Restricted Subsidiary of the capital stock or other equity interests of any
unrestricted Subsidiary.

For purposes of the foregoing, the designation of a Subsidiary of ours as an
unrestricted Subsidiary shall be deemed to include the designation of all of
the Subsidiaries of that Subsidiary.

We may revoke any designation of a Subsidiary as an unrestricted Subsidiary
only if:

(1) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to the revocation; and

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(2) all Liens and Indebtedness of such unrestricted Subsidiary
outstanding immediately following the revocation would, if Incurred at such
time, have been permitted to be Incurred for all purposes of the indenture.

All designations and revocations must be evidenced by resolutions of our
board of directors, delivered to the trustee certifying compliance with the
foregoing provisions.

Limitation on Layered Indebtedness. We shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness that
is subordinate in right of payment to any other Indebtedness, unless that
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the notes or, in the case of Restricted Subsidiaries that are Note Guarantors,
that Indebtedness is subordinate in right of payment to, or ranks pari passu
with, the note guarantees of those Note Guarantors.

No Note Guarantor will, directly or indirectly, guarantee any of our
Indebtedness that is subordinate in right of payment to any of our other
Indebtedness unless the guarantee is subordinate in right of payment to, or
ranks pari passu with, the note guarantee of the Note Guarantor.

Limitation on Liens. We will not, and will not cause or permit any
Restricted Subsidiaries to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets, whether owned on
the issue date or acquired after the issue date, or any proceeds therefrom, to
secure any Indebtedness unless contemporaneously therewith effective provision
is made,

(1) in the case of us, to secure the notes and all other amounts due
under the indenture and

(2) in the case of a Note Guarantor, to secure such Note Guarantor's
note guarantee and all other amounts due under the indenture,

in each case, equally and ratably with such Indebtedness or, in the event that
the Indebtedness is subordinated in right of payment to the notes or the note
guarantee, prior to such Indebtedness with a Lien on the same properties and
assets securing the Indebtedness for so long as the Indebtedness is secured by
that Lien, except for:

(1) Liens securing senior Indebtedness and

(2) Permitted Liens.

Merger, Consolidation and Sale of Assets. We will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, whether or not we are the surviving Person, or sell, assign,
transfer, lease, convey or otherwise dispose of, or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of, all or substantially all of our and our Restricted Subsidiaries'
properties and assets (determined on a consolidated basis for us and our
Restricted Subsidiaries) to any Person unless:

(1) either

(a) we shall be the surviving or continuing entity or

(b) the Person, if other than us, formed by such consolidation or
into which we are merged or the Person which acquires by sale,
assignment, transfer, lease, conveyance or other disposition of our
properties and assets and the properties and assets of our Restricted
Subsidiaries substantially as an entirety

. shall be a corporation organized and validly existing under the
laws of the United States or any State thereof and

. shall expressly assume, by supplemental indenture, executed and
delivered to the trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the
notes and the performance and observance of every covenant of
the notes and the indenture and the registration rights
agreement to be performed or observed by us;

(2) immediately after giving effect to the transaction and the
assumption contemplated by clause (1)(b) above, including giving effect on
a pro forma basis to any Indebtedness, including any Acquired Indebtedness,
Incurred in connection with or in respect of such transaction,

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(a) we or the Person formed by or surviving the transaction, as the
case may be, shall be able to Incur at least $1.00 of additional
Indebtedness, other than Permitted Indebtedness, pursuant to the
covenant described under "--Limitation on Incurrence of Additional
Indebtedness" or

(b) the Consolidated Fixed Charge Coverage Ratio for us or or the
Person formed by or surviving the transaction, as the case may be,
would be greater than our Consolidated Fixed Charge Coverage Ratio
immediately prior to such transaction;

(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(b) above,
including giving effect on a pro forma basis to any Indebtedness, including
any Acquired Indebtedness, Incurred and any Lien granted in connection with
or in respect of the transaction, no Default or Event of Default shall have
occurred or be continuing;

(4) each Note Guarantor, including Persons which become Note Guarantors
as a result of the transaction, shall have confirmed by supplemental
indenture that its note guarantee shall apply for the obligations in
respect of the indenture and the notes or the Person formed by or surviving
the transaction; and

(5) we or the Person formed by or surviving the transaction shall have
delivered to the trustee an Officers' Certificate and an Opinion of
Counsel, each stating that the consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with the transaction, the supplemental
indenture, comply with the applicable provisions of the indenture and that
all conditions precedent in the indenture relating to the transaction have
been satisfied.

For purposes of the foregoing, the transfer by lease, assignment, sale or
otherwise, in a single transaction or series of transactions of all or
substantially all of the properties or assets of one or more of our Restricted
Subsidiaries, the capital stock or other equity interests of which constitute
all or substantially all of our properties and assets, shall be deemed to be
the transfer of all or substantially all of our properties and assets.

The provisions of clause (2) above shall not apply to:

(a) any transfer of the properties or assets of a Restricted
Subsidiary to us or to a Wholly Owned Restricted Subsidiary,

(b) any merger of a Restricted Subsidiary into us or

The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of our properties and assets and the
properties and assets of our Restricted Subsidiaries in accordance with the
foregoing, in which we are not the continuing corporation, the successor Person
formed by that consolidation or into which we are merged or to which such
conveyance, lease or transfer is made shall succeed to, and be substituted for,
and may exercise all of our rights and powers under the indenture and the notes
with the same effect as if such surviving entity had been named as such.

Each Note Guarantor, unless that Note Guarantor's note guarantee is to be
released in accordance with the terms described under "Note Guarantees", will
not, and we will not cause or permit any Note Guarantor to, consolidate with or
merge into any Person that is not a Note Guarantor unless that Person (if such
Person is the surviving entity) assumes by supplemental indenture all of the
obligations of the Note Guarantor in respect of its note guarantee.

Limitations on Transactions with Affiliates.

(1) We will not, and will not permit any of our Restricted Subsidiaries
to, directly or indirectly, enter into any transaction or series of related
transactions with, or for the benefit of, any of its Affiliates, unless:

(a) the terms of the Affiliate transaction are no less favorable
than those that could reasonably be expected to be obtained in a
comparable transaction at that time on an arm's-length basis from a
Person that is not an Affiliate of ours;

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(b) in the event that the Affiliate transaction involves aggregate
payments, or transfers of property or services with a Fair Market Value
in excess of $2.5 million during any twelve-month period, the terms of
that Affiliate transaction shall be approved by a majority of the
members of our board of directors, including a majority of the
disinterested members of our board of directors, the approval to be
evidenced by a Board Resolution stating that such board of directors has
determined that such transaction complies with the foregoing provisions;
and

(c) in the event that the Affiliate transaction involves aggregate
payments, or transfer of property or services with a fair market value,
in excess of $7.0 million during any twelve-month period, we shall,
prior to the consummation of the Affiliate transaction, obtain a
favorable opinion as to the fairness of such transaction or series of
related transactions to us and the relevant Restricted Subsidiary, if
any, from a financial point of view from an Independent Financial
Advisor and file the same with the trustee.

(2) Notwithstanding the foregoing, the restrictions set forth in
paragraph (1) shall not apply to:

(a) transactions with or among us and any Restricted Subsidiary or
between or among Restricted Subsidiaries;

(b) reasonable fees and compensation paid to, and any indemnity
provided on behalf of, officers, directors, employees, consultants or
agents of ours or any Restricted Subsidiary as determined in good faith
by our board of directors;

(c) any transactions undertaken pursuant to any contractual
obligations or rights in existence on the issue date (as in effect on
the issue date);

(d) any Restricted Payments made in compliance with "Limitation on
Restricted Payments";

(e) loans and advances to officers, directors and employees ours or
any Restricted Subsidiary for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of
business; and

(f) the entering into by us and any of our consolidated Restricted
Subsidiaries of a tax sharing or similar arrangement.

Conduct of Business. We and our Restricted Subsidiaries will not engage in
any businesses other than a Permitted Business.

Reports to Holders. Notwithstanding that we may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as
any notes remain outstanding, we shall:

(1) provide the trustee, the holders and the initial purchaser with
annual reports and any information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to those sections within 15 days after the times
specified for the filing of such information, documents and reports under
such sections and

(2) beginning on the earlier of

(a) the effective date of the exchange offer registration statement
and

(b) 150 days following the issue date,

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file with the Securities and Exchange Commission, to the extent permitted, the
information, documents and reports referred to in clause (1) within the periods
specified under those sections. In addition, at any time when

we are subject to or are not current in our reporting obligations under clause
(2) of the preceding sentence, we will make available, upon request, to any
holder and any prospective purchaser of notes the information required pursuant
to Rule 144A(d)(4) under the Securities Act.

Payments for Consent. Neither we nor any of our Subsidiaries shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any notes for or as an inducement
to any consent, waiver or amendment of any terms or provisions of the notes,
unless the consideration is offered to be paid or agreed to be paid to all
holders of the notes that so consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to the consent, waiver or
agreement.

Events of Default

The following events are defined in the indenture as "Events of Default":

(1) the failure to pay the principal of, or premium, if any, on any note
when due, at Stated Maturity, upon redemption or otherwise, including the
failure to make a required payment to purchase notes tendered pursuant to a
Change of Control Offer or a Net Proceeds Offer, whether or not prohibited
by the provisions of the indenture described under "Subordination of the
Notes and the Note Guarantees";

(2) the failure to pay any interest on any notes when due, continued for
30 days or more, whether or not prohibited by the provisions of the
indenture described under "Subordination of the Notes and the Note
Guarantees";

(3) the failure to perform or comply with any of the provisions
described under "Material Covenants--Merger, Consolidation and Sales of
Assets";

(4) the failure to perform or comply with any other covenant or
agreement contained in the indenture or in the notes for 30 days or more
after written notice to us from the trustee or the holders of at least 25%
in aggregate principal amount of the outstanding notes;

(5) the failure to pay at final maturity, giving effect to any
applicable grace periods and any extensions of the maturity, the principal
amount of any Indebtedness of ours or any Restricted Subsidiary, or the
acceleration of the final stated maturity of that Indebtedness by reason of
a default or event of default in respect of that Indebtedness, in any case,
if the aggregate principal amount of that Indebtedness, together with the
principal amount of any other Indebtedness in default for failure to pay
principal at final maturity or which has been so accelerated, aggregates
$5.0 million or more at any time;

(6) one or more judgments in an aggregate amount in excess of $5.0
million (to the extent not covered by third-party insurance as to which a
financially sound insurer has not disclaimed coverage) shall have been
rendered against us or any Restricted Subsidiary and the judgment or
judgments remain undischarged, unpaid or unstayed for a period of 60 days
after the judgment or judgments become final and non-appealable;

(7) certain events of bankruptcy affecting us or any of our Significant
Subsidiaries or group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary; or

(8) the note guarantee of any Note Guarantor is held or declared to be
unenforceable or invalid in a judicial proceeding or ceases for any reason
to be in full force and effect or any Note Guarantor or any Person acting
on behalf of any Note Guarantor denies or disaffirms that Note Guarantor's
obligations under its note guarantee, but this clause (8) does not apply to
note guarantees under which the Note Guarantor is released from its note
guarantee in accordance with the terms of the indenture; or

(9) at any time prior to the repayment in full of the Acquisition Loan,
the Acquisition Loan Pledge is held or declared to be unenforceable or
invalid in a judicial proceeding or ceases for any reason to be in full
force and effect.

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If an Event of Default specified in clauses (1) through (6), (8) or (9)
above shall occur and be continuing, the trustee or the holders of at least 25%
in principal amount of outstanding notes may declare the principal of, and
premium, if any, and accrued and unpaid interest on all the notes to be due and
payable by notice in writing to us and the trustee. The notice shall specify
the respective Event of Default and that it is a "notice of acceleration", and
the notes shall become immediately due and payable. If an Event of Default
specified in clause (7) relating to us occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest on
all of the outstanding notes shall automatically become and be immediately due
and payable without any declaration or other act on the part of the trustee or
any holder.

The indenture provides that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the holders
of a majority in principal amount of the notes may rescind and cancel the
declaration and its consequences:

(1) if all existing Events of Default have been cured or waived other
than the nonpayment of principal or interest that has become due solely
because of the acceleration,

(2) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by the declaration of acceleration, has been paid and

(3) if we have paid the trustee its reasonable compensation and
reimbursed the trustee for its reasonable expenses, disbursements and
advances.

No rescission shall affect any subsequent Default or impair any right
arising therefrom.

The holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the indenture, and its consequences,
except a default in the payment of the principal of, premium, if any, or
interest on any notes.

Subject to the provisions of the indenture relating to the duties of the
trustee, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request, order or direction of any of the
holders, unless those holders have offered to the trustee reasonable indemnity.
Subject to all provisions of the indenture and applicable law, the holders of a
majority in aggregate principal amount of the then outstanding notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee.

No holder of any notes will have any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless:

(1) that holder gives to the trustee written notice of a continuing
Event of Default,

(2) holders of at least 25% in principal amount of the then outstanding
notes make a written request to pursue the remedy,

(3) those holders of the notes provide to the trustee satisfactory
indemnity,

(4) the trustee does not comply within 60 days and

(5) during the 60 day period the holders of a majority in principal
amount of the outstanding notes do not give the trustee a written direction
which, in the opinion of the trustee, is inconsistent with the request.

Otherwise, no holder of any note will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, except

(1) a holder of a note may institute suit for enforcement of payment of
the principal of and premium, if any, or interest on the holder's note on
or after the respective due dates expressed in that note or

(2) the institution of any proceeding with respect to the indenture or
any remedy thereunder, including acceleration, by the holders of a majority
in principal amount of the outstanding notes; however,

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upon institution of any proceeding or exercise of any remedy, the holder or
holders provide the trustee with prompt notice thereof.

We are required to deliver to the trustee written notice of any event which
would constitute a Default, its status and what action we are taking or propose
to take in respect of the Default. In addition, we are required to deliver to
the trustee, within 120 days after the end of each fiscal year, a certificate
indicating whether the signers of the certificate know of any Default that
occurred during the previous fiscal year.

The indenture provides that if a Default occurs, is continuing and is known
to the trustee, the trustee must mail to each holder a notice of the Default
within five days after it is known to a trust officer or written notice of it
is received by the trustee. Except in the case of a Default in the payment of
principal of, premium, if any, or interest on any note, the trustee may
withhold notice if and so long as a committee of its trust officers in good
faith determines that withholding notice is not opposed to the interest of the
holders.

Legal Defeasance and Covenant Defeasance

We may, at our option and at any time, elect to have our obligations
discharged with respect to the outstanding notes. This "defeasance" means that
we shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding notes, except for:

(1) the rights of holders to receive payments in respect of the
principal of, premium, if any, and interest on the notes when the payments
are due,

(2) our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments,

(3) the rights, powers, trust, duties and immunities of the trustee and
our obligations in connection with those rights, powers, trust, duties and
immunities of the trustee and

(4) the defeasance provisions of the indenture.

In addition, we may, at our option and at any time, elect a "covenant
defeasance" which means we would have our obligations released with respect to
certain covenants that are described in the indenture and thereafter any
omission to comply with those obligations shall not constitute a Default or
Event of Default with respect to the notes. In the event a covenant defeasance
occurs, certain events described under "Events of Default" will no longer
constitute an Event of Default with respect to the notes. Non-payment,
bankruptcy, receivership, reorganization and insolvency events, however, shall
continue to be "Events of Default" with respect to the notes.

In order to exercise either a defeasance or a covenant defeasance:

(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders cash, in U.S. dollars, direct non-callable
obligations of, or guaranteed by, the United States, or a combination of
the foregoing, in amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the notes on the stated date
for payment thereof or on the applicable redemption date, as the case may
be;

(2) in the case of defeasance, we shall have delivered to the trustee an
Opinion of Counsel in the United States reasonably acceptable to the
trustee to the effect that we have received from, or there has been
published by, the Internal Revenue Service a ruling or since the issue
date, there has been a change in the applicable federal income tax law, in
either case to the effect that and based thereon such Opinion of Counsel
shall state that, the holders will not recognize income, gain or loss for
federal income tax purposes as a result of the defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the defeasance had not
occurred;

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(3) in the case of covenant defeasance, we shall have delivered to the
trustee an Opinion of Counsel in the United States reasonably acceptable to
the trustee to the effect that the holders will not recognize income, gain
or loss for federal income tax purposes as a result of the covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if the
covenant defeasance had not occurred;

(4) the trustee shall have received an Officers' Certificate stating
that no Default or Event of Default shall have occurred and be continuing
on the date of deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;

(5) the trustee shall have received an Officers' Certificate stating
that the defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, the indenture or any other
material agreement or instrument to which we or our Subsidiaries are a
party or by which we or our Subsidiaries are bound (and in that connection,
the trustee shall have received a certificate from the agent under the
senior credit facility to that effect with respect to the senior credit
facility then in effect);

(6) we shall have delivered to the trustee an Officers' Certificate
stating that the deposit was not made by us with the intent of preferring
the holders over any other creditors of our or any Subsidiary of ours or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of ours or others;

(7) we shall have delivered to the trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided
for or relating to the defeasance or the covenant defeasance have been
complied with;

(8) we shall have delivered to the trustee an Opinion of Counsel to the
effect that after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and

(9) other customary conditions precedent are satisfied.

Satisfaction and Discharge

The indenture will be discharged and will cease to be of further effect,
except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture, as to all outstanding notes
when

(1) either

(a) all the notes previously authenticated and delivered, except
lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has previously been deposited in trust or
segregated and held in trust by us and thereafter repaid to us or
discharged from the trust, have been delivered to the trustee for
cancellation or

(b) all notes not previously delivered to the trustee for
cancellation have become due and payable, or will be due and payable
within one year or are to be called for redemption within one year
under arrangements satisfactory to the trustee for the giving of notice
of redemption, and we have irrevocably deposited or caused to be
deposited with the trustee funds or direct, non-callable obligations
of, or guaranteed by, the United States sufficient to pay and discharge
the entire Indebtedness on the notes not previously delivered to the
trustee for cancellation, for principal of, premium, if any, and
interest on the notes to the earlier of the Stated Maturity or the
redemption date together with irrevocable instructions from us
directing the trustee to apply the funds and/or the proceeds of the
direct, non-callable obligations to the payment of the principal,
premium, if any, and any interest at maturity or redemption, as the
case may be;

(2) we have paid all other sums payable under the indenture by us; and

(3) we have delivered to the trustee an Officers' Certificate stating
that all conditions precedent under the indenture relating to the
satisfaction and discharge of the indenture have been complied with.

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Modification of the Indenture

From time to time, we and the trustee, without the consent of the holders,
may amend the indenture or the notes for specified purposes, including:

. curing ambiguities, defects or inconsistencies,

. providing for additional Note Guarantors and

. making other changes which do not, in the opinion of the trustee,
adversely affect the rights of any of the holders in any material
respect.

In formulating its opinion on these matters, the trustee will be entitled to
rely on evidence it deems appropriate, including, solely on an Opinion of
Counsel. Other modifications and amendments of the indenture or the notes may
be made with the consent of the holders of a majority in principal amount of
the then outstanding notes issued under the indenture, except that, without the
consent of each holder affected thereby, no amendment may:

(1) reduce the amount of notes whose holders must consent to an
amendment or waiver;

(2) reduce the rate of or change or have the effect of changing the time
for payment of interest, including defaulted interest, on any notes;

(3) reduce the principal of or change or have the effect of changing the
fixed maturity of any notes, or change the date on which any notes may be
subject to redemption, or reduce the redemption price therefor;

(4) make any notes payable in money other than that stated in the notes;

(5) make any change in provisions of the indenture entitling each holder
to receive payment of principal of, premium, if any, and interest on the
notes on or after the due date of the payment or to bring suit to enforce
the payment, or permitting holders of a majority in principal amount of
notes to waive Defaults or Events of Default;

(6) amend, change or modify in any material respect our obligation to
make and consummate a Change of Control Offer in respect of a change of
control that has occurred or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated;

(7) modify the subordination provisions of the indenture with respect to
us or any Note Guarantor in a manner that adversely affects the rights of
any holder; or

(8) eliminate or modify in any manner a Note Guarantor's obligations
with respect to its note guarantee which adversely affects holders in any
material respect.

No amendment may be made to the subordination provisions of the indenture
that adversely affects the rights of any holder of senior Indebtedness of ours
or a Note Guarantor then outstanding unless the holders of the senior
Indebtedness, or their representative, consent to the change.

Governing Law

The indenture provides that the indenture and the notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.

The Trustee

The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only those duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the

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trustee will exercise the rights and powers vested in it by the indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

The indenture and the provisions of the Trust Indenture Act contain certain
limitations on the rights of the trustee, should it become a creditor of ours,
to obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
Trust Indenture Act, the trustee will be permitted to engage in other
transactions; but if the trustee acquires any conflicting interest as described
in the Trust Indenture Act, it must eliminate such conflict or resign.

Material Definitions

The following is a summary of the material defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.

"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries which

(1) exists at the time that Person becomes a Restricted Subsidiary or at
the time it merges or consolidates with us or any of our Restricted
Subsidiaries or

(2) is assumed in connection with the acquisition of assets from that
Person

and in each case not Incurred in connection with, or in anticipation or
contemplation of, the acquisition, merger or consolidation. The Indebtedness
shall be deemed to have been Incurred at the time that Person becomes a
Restricted Subsidiary or at the time it merges or consolidates with us or a
Restricted Subsidiary or at the time that Indebtedness is assumed in connection
with the acquisition of assets from that Person.

"Acquisition Loan" means the secured loan of approximately $136.7 million
from us to Glass Holdings Corporation to fund a portion of the purchase price
payable by AGY Holdings in connection with its acquisition of a 51% interest in
AGY.

"Acquisition Loan Pledge" shall mean the pledge by Glass Holdings
Corporation to us of all of the capital stock of AGY Holdings and Belmont of
America, Inc., a Delaware corporation, as security for the Acquisition Loan.

"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling", "controlled by" and "under common control with" have
meanings correlative of the foregoing. However, the beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control.

"AGY" means Advanced Glassfiber Yarns, LLC, a Delaware limited liability
company.

"AGY Holdings" means AGY Holdings Inc., a Delaware corporation and Wholly-
Owned Subsidiary of Glass Holdings Corporation.

"Asset Acquisition" means:

(1) an Investment by us or any Restricted Subsidiary in any other Person
resulting in that Person becoming a Restricted Subsidiary, or that Person
being merged with or into us or any Restricted Subsidiary, or

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(2) the acquisition by us or any Restricted Subsidiary of the assets of
any Person, other than a Subsidiary of ours, which constitute all or
substantially all of the assets of any Person or comprises any division or
line of business of that Person or any other properties or assets of that
Person other than in the ordinary course of business.

"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, assignment or other transfer for value by us or any of our Restricted
Subsidiaries, including any Sale and Leaseback Transaction, to any Person other
than us or a Restricted Subsidiary, including a Person that is or will become a
Restricted Subsidiary immediately after such sale, issuance, conveyance,
transfer, assignment or other transfer for value, of:

(1) any capital stock of any Restricted Subsidiary; or

(2) any other property or assets (other than cash, Cash Equivalents or
capital stock) of ours or any Restricted Subsidiary other than in the
ordinary course of business;

An Asset Sale shall not include:

(1) the sale, conveyance, disposition or other transfer of all or
substantially all of the assets of ours and its Restricted Subsidiaries as
permitted under "Material Covenants--Merger, Consolidation and Sale of
Assets,"

(2) any sale of capital stock in, or Indebtedness or other securities of
an unrestricted Subsidiary,

(3) a disposition of inventory or leases in the ordinary course of
business,

(4) dispositions of assets in any fiscal year with a Fair Market Value
not to exceed $2.0 million in the aggregate,

(5) for purposes of "Material Covenants--Limitation on Asset Sales"
only, the making of a Permitted Investment or Restricted Payment, and

(6) a disposition in the ordinary course of business of obsolete or
worn-out equipment.

"Asset Sale Transaction" means Asset Sales and, whether or not constituting
an Asset Sale:

(1) any sale or other disposition of capital stock and

(2) any sale or other disposition excluded from the definition of Asset
Sale by clause (1) or (5) of such definition.

"Blockage Notice" has the meaning set forth under "--Subordination of the
Exchange Notes and the Note Guarantees."

"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of that Person (or person
performing a similar function) to have been duly adopted by the board of
directors of that Person and to be in full force and effect on the date of that
certification, and delivered to the trustee.

"Capitalized Lease Obligations" means, as to any Person, the obligations of
that Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of those obligations at any date shall be the capitalized amount of
those obligations at that date, determined in accordance with GAAP.

"Cash Equivalents" means:

(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of their acquisition;

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(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any state or any public
instrumentality of any state maturing within one year from the date of
their acquisition and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's");

(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;

(4) certificates of deposit or bankers' acceptances maturing within one
year from the date of their acquisition issued by any bank organized under
the laws of the United States of America or any state or the District of
Columbia or any U.S. branch of a foreign bank having at the date of
acquisition combined capital and surplus of not less than $500 million;

(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and

(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.

"change of control" means the occurrence of one or more of the following
events:

(1) Prior to the first Public Equity Offering, the permitted holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, in the aggregate at least
of 51% of the total voting power of our Voting Stock, whether as a result
of

. the issuance of securities by us or any parent company of ours,

. any merger, consolidation, liquidation or dissolution of us, or

. any direct or indirect transfer of securities by us or otherwise.

For purposes of this clause (1) and clause (2) below, the permitted holders
shall be deemed to beneficially own any Voting Stock of a corporation held by
any "parent corporation" so long as the permitted holders beneficially own,
directly or indirectly, in the aggregate at least 51% of the voting power of
the Voting Stock of the parent corporation.

(2) Subsequent to the first Public Equity Offering:

(a) any "person", as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than one or more permitted holders, is or
becomes the beneficial owner, as defined in Rule 13d-3 and 13d-5 under
the Exchange Act, directly or indirectly, of more than 35% of the total
voting power of our Voting Stock and

(b) the permitted holders beneficially own, directly or indirectly,
in the aggregate a lesser percentage of the total voting power of our
Voting Stock than that other person.

For purposes of this clause (2):

. a person shall be deemed to have "beneficial ownership" of all shares
that the person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time; and

. a person shall be deemed to beneficially own any Voting Stock of a
specified corporation held by a parent corporation, if that person is
the beneficial owner, directly or indirectly, of more than 35% of the
voting power of the Voting Stock of the parent corporation and the
permitted holders beneficially own, directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock
of the parent corporation.

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(3) During any period of two consecutive years or, if this event occurs
within the first two years after the issue date, such shorter period as
shall have begun on the issue date, individuals who at the beginning of
that period constituted our board of directors, together with any new
directors whose election by the board of directors or whose nomination for
election by our shareholders was approved by a vote of a majority of our
directors then still in office who were either directors at the beginning
of that period or whose election or nomination for election was previously
so approved, cease for any reason to constitute a majority of our board of
directors then in office.

(4) We consolidate with, or merge with or into, another Person, other
than a Wholly Owned Restricted Subsidiary, or we or any Restricted
Subsidiary sell, convey, assign, transfer, lease or otherwise dispose of
all or substantially all of our assets and the assets of our Restricted
Subsidiaries (determined on a consolidated basis) to any Person, other than
us or any Wholly Owned Restricted Subsidiary. The foregoing shall not apply
to any transaction where immediately after the transaction the Person or
Persons that "beneficially owned," as defined in Rules 13d-3 and 13d-5
under the Exchange Act, immediately prior to the transaction, directly or
indirectly, a majority of the total voting power of our then outstanding
Voting Stock "beneficially own" (as so determined), directly or indirectly,
a majority of the total voting power of the then outstanding Voting Stock
of the surviving or transferee Person. For purposes of this clause (3), a
Person shall be deemed to have "beneficial ownership" of all securities
that the Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.

"Change of Control Offer" has the meaning set forth under "Change of
Control."

"Change of Control Payment Date" has the meaning set forth under "Change of
Control."

"Consolidated EBITDA" means, for any period, Consolidated Net Income for
that period, plus the following to the extent deducted in calculating
Consolidated Net Income:

(1) Consolidated Income Tax Expense for that period;

(2) Consolidated Interest Expense for that period; and

(3) Consolidated Non-cash Charges for that period; less

(a) all non-cash items increasing Consolidated Net Income for that
period and

(b) all cash payments during such period relating to non-cash
charges that were added back in determining Consolidated EBITDA in any
prior period.

"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four full fiscal quarters for which financial statements are available most
recently ending prior to the date of that determination to Consolidated Fixed
Charges for the four quarter period. In addition to the foregoing, for purposes
of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges"
shall be calculated after giving effect on a pro forma basis for the period of
the calculation to

(1) the Incurrence or repayment of any Indebtedness of our or any
Restricted Subsidiaries and the application of the proceeds of the
Indebtedness, including the Incurrence of any Indebtedness and the
application of the Indebtedness giving rise to the need to make the
determination, occurring during or after the four quarter period and on or
prior to the date of determination, as if that Incurrence or repayment, as
the case may be, and the application of the proceeds of the Indebtedness,
occurred on the first day of the four quarter period and

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(2) any Asset Sale Transactions or Asset Acquisitions occurring during
the four quarter period or at any time subsequent to the last day of the
four quarter period and on or prior to the date of determination, as if the
Asset Sale Transaction or Asset Acquisition, including the Incurrence of
any Acquired Indebtedness, occurred on the first day of the Four Quarter
Period.

If we or any of our Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
Incurrence of that guaranteed Indebtedness as if we or any of our Restricted
Subsidiaries had directly Incurred that guaranteed Indebtedness, including, any
Asset Acquisition giving rise to the need to make that determination as a
result of our or one of our Restricted Subsidiaries, including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition, Incurring
Acquired Indebtedness, by giving pro forma effect to any Consolidated EBITDA.
The pro forma Consolidated EBITDA shall be calculated in a manner consistent
with the exclusions in the definition of "Consolidated Net Income", but without
giving effect to clause (3) of the definition of Consolidated Net Income,
attributable to the assets which are the subject of the Asset Sale Transaction
or Asset Acquisition during the four quarter period.

Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio,"

(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the date of determination and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
date of determination;

(2) if interest on any Indebtedness actually Incurred on the date of
determination may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate,
or other rates, then the interest rate in effect on the date of
determination will be deemed to have been in effect during the four quarter
period; and

(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent the interest is covered by
Hedging Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.

"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of:

(1) Consolidated Interest Expense, plus

(2) the product of:

(a) the amount of all dividend payments on any series of our
Preferred Stock (other than dividends paid in Qualified Capital Stock)
paid, accrued or scheduled to be paid or accrued during that period
times

(b) a fraction, the numerator of which is one and the denominator of
which is one minus our then current effective consolidated federal,
state and local tax rate, expressed as a decimal.

"Consolidated Income Tax Expense" means, with respect to us for any period,
the provision for Federal, state, local and foreign income taxes payable by us
and our Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.

"Consolidated Interest Expense" means, for any period, the sum of, without
duplication:

(1) our and our Restricted Subsidiaries' aggregate cash and non-cash
interest expense for that period determined on a consolidated basis in
accordance with GAAP, and in any event shall include, whether or not
interest expense in accordance with GAAP,

(a) any amortization of debt discount and any amortization or write
off of deferred financing costs,

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(b) the net costs under Hedging Obligations related to Indebtedness,
including amortization of fees,

(d) the interest portion of any deferred payment obligation,

(e) commissions, discounts and other fees and charges Incurred in
respect of letters of credit or bankers' acceptances and

(f) any interest expense on Indebtedness of another Person that is
guaranteed by us or one of our Restricted Subsidiaries or secured by a
Lien on our or our Restricted Subsidiaries' assets, whether or not such
guarantee or Lien is called upon; and

(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by us and our Restricted
Subsidiaries during that period as determined on a consolidated basis in
accordance with GAAP.

"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of us and our Restricted Subsidiaries for that period on a
consolidated basis, determined in accordance with GAAP; but that there shall
be excluded therefrom:

(1) net after-tax gains from Asset Sale Transactions or abandonments of
reserves relating thereto,

(2) net after-tax items classified as extraordinary or non-recurring
gains or losses,

(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary or
is merged or consolidated with us or any Restricted Subsidiary,

(4) the net income (but not loss) of any Restricted Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by contract, operation
of law or otherwise,

(5) the net income of any Person, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions paid to us or to a
Restricted Subsidiary by that Person,

(6) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the issue date and

(7) all gains and losses from the cumulative effect of any change in
accounting principles.

"Consolidated Non-cash Charges" means, for any period, our and our
Restricted Subsidiaries' aggregate depreciation, amortization and other non-
cash expenses for that period, determined on a consolidated basis in
accordance with GAAP, excluding any such charge which requires an accrual of
or a reserve for cash charges for any future period.

"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which that
Person is a party.

"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.

"Designated Senior Indebtedness" means:

(1) in our respect,

(a) the senior credit facility; and

(b) any other senior Indebtedness of ours which, at the date of
determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are

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committed to lend up to, at least $25.0 million and is specifically
designated by us in the instrument evidencing or governing the senior
Indebtedness as "Designated Senior Indebtedness" and

(2) in respect of any Note Guarantor,

(a) the senior credit facility, and

(b) any guarantee by that Note Guarantor of our Indebtedness
referred to in clause (1) and

(c) any other senior Indebtedness of that Note Guarantor which, at
the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the
holders thereof are committed to lend up to, at least $25.0 million and
is specifically designated by that Note Guarantor in the instrument
evidencing or governing the senior Indebtedness as "Designated Senior
Indebtedness."

"Designation Amount" has the meaning set forth under "--Material Covenants--
Designation of Unrestricted Subsidiaries" above.

"Disqualified Capital Stock" means that portion of any capital stock or
other equity interests which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option of
the holder of the capital stock or other equity interests), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder of the capital stock or other equity interests, in any case, on or
prior to the 91st day after the final maturity date of the notes.

"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to the asset) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; but the Fair Market Value of any asset
or assets may be determined conclusively by our board of directors acting in
good faith, and shall be evidenced by a Board Resolution.

"Foreign Subsidiary" means, with respect to any Person, any direct or
indirect Subsidiary of that Person that is organized under the laws of any
jurisdiction outside the United States or the District of Columbia.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in other statements by another
entity as may be approved by a significant segment of the accounting profession
of the United States, which are in effect as of the issue date.

"GHC" means Glass Holdings Corp., a Delaware corporation.

"Guaranteed Obligations" has the meaning set forth under "note guarantees."

"Hedging Obligations" means the obligations of any Person pursuant to any
Interest Rate Agreement or Currency Agreement.

"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of that
Indebtedness or other obligation on the balance sheet of that Person.
Indebtedness of any Person or any of its Subsidiaries existing at the time that
Person becomes a Restricted Subsidiary or is merged into or consolidated with
us or any Restricted Subsidiary, whether or not the Indebtedness was Incurred
in connection with, as a result of, or in contemplation of, that Person
becoming a Restricted Subsidiary or being merged into or consolidated with us
or any Restricted Subsidiary, shall be deemed Incurred at the time any Person
becomes a Restricted Subsidiary or merges into or consolidates with us or any
Restricted Subsidiary. Accrual of interest,

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the accretion of accreted value and the payment of regularly scheduled interest
in the form of additional Indebtedness of the same instrument will not be
deemed to be an Incurrence of Indebtedness for purposes of the "Limitation on
Incurrence of Additional Indebtedness" covenant.

"Indebtedness" means with respect to any Person, without duplication,

(1) the principal amount (or, if less, the accreted value) of all
obligations of that Person for borrowed money,

(2) the principal amount (or, if less, the accreted value) of all
obligations of that Person evidenced by bonds, debentures, notes or other
similar instruments,

(3) all Capitalized Lease Obligations of that Person,

(4) all obligations of that Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted),

(5) all obligations of that Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,

(6) guarantees and other contingent obligations of that Person in
respect of Indebtedness referred to in clauses (1) through (5) above and
clause (8) below,

(7) all Indebtedness of any other Person of the type referred to in
clauses (1) through (6) which is secured by any Lien on any property or
asset of that Person, the amount of that Indebtedness being deemed to be
the lesser of the Fair Market Value of the property or asset or the amount
of the Indebtedness so secured,

(8) all obligations under Hedging Obligations of that Person and

(9) all Disqualified Capital Stock issued by that Person with the amount
of Indebtedness represented by the Disqualified Capital Stock being equal
to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if
any. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of the Disqualified
Capital Stock as if the Disqualified Capital Stock were purchased on any
date on which Indebtedness shall be required to be determined under the
indenture, and if the price is based upon, or measured by, the fair market
value of the Disqualified Capital Stock, the fair market value shall be the
Fair Market Value of the Disqualified Capital Stock.

"Independent Financial Advisor" means an accounting firm, appraisal firm,
investment banking firm or consultant to Persons engaged in a Permitted
Business, in each case, of nationally recognized standing that is, in the
judgment of our board of directors, qualified to perform the task for which it
has been engaged and which is independent in connection with the relevant
transaction.

"Interest Rate Agreement" of any Person means any interest rate protection
agreement, including, without limitation, interest rate swaps, caps, floors,
collars, derivative instruments and similar agreements, and/or other types of
interest hedging agreements.

"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit, including a guarantee, or capital contribution to
(by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or any purchase or
acquisition by that Person of any capital stock or other equity interests,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude accounts receivable or
deposits arising in the ordinary course of business.

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For purposes of the "Limitation on Restricted Payments" covenant,

(1) "Investment" shall include and be valued at the Fair Market Value of
the net assets of any Restricted Subsidiary at the time that the Restricted
Subsidiary is designated an unrestricted Subsidiary; but upon a
redesignation of the Subsidiary as a Restricted Subsidiary, we will be
deemed to continue to have a permanent "Investment" in an unrestricted
Subsidiary in an amount (if positive) equal to

(a) the total amount of our "Investments" in the Subsidiary made
prior to or at the time of the redesignation less

(b) that portion of the Fair Market Value of the net assets of the
Subsidiary at the time that the Subsidiary is so re-designated a
Restricted Subsidiary that is proportionate to our equity interest in
the Subsidiary; and

(2) any property transferred to or from an unrestricted Subsidiary will
be valued at its Fair Market Value at the time of the transfer.

If we or any Restricted Subsidiary sells or otherwise disposes of any
common stock of a Restricted Subsidiary (including any issuance and sale of
capital stock by a Restricted Subsidiary) in a way that, after giving effect
to any sale or disposition, the Restricted Subsidiary would cease to be our
Subsidiary, we shall be deemed to have made an Investment on the date of that
sale or disposition equal to the Fair Market Value of the common stock of the
Restricted Subsidiary not sold or disposed of.

"issue date" means the first date of issuance of old notes under the
indenture.

"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind, including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest.

"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents received by us or any of our Restricted Subsidiaries from the
Asset Sale, net of:

(1) reasonable out-of-pocket expenses and fees relating to the Asset
Sale, including, without limitation, legal, accounting and investment
banking fees and sales commissions,

(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements,

(3) repayment of Indebtedness that is required to be repaid in
connection with the Asset Sale, and

(4) appropriate amounts to be provided by us or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with the Asset Sale and retained by us
or any Restricted Subsidiary, as the case may be, after the Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with the Asset Sale.

"Net Proceeds Offer" has the meaning set forth under "--Material
Covenants--Limitation on Asset Sales."

"Net Proceeds Offer Payment Date" has the meaning set forth under "--
Material Covenants--Limitation on Asset Sales."

"Net Proceeds Offer Trigger Date" has the meaning set forth under "--
Material Covenants--Limitation on Asset Sales."

"Note Guarantor" has the meaning set forth in the third paragraph of the
introduction to this "Description of Exchange Notes."

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"obligations" means, with respect to any Indebtedness, any principal,
interest (including, without limitation, Post-Petition Interest), penalties,
fees, indemnifications, reimbursements, including, in the case of the notes
and the note guarantees in respect of the foregoing, damages, and other
liabilities payable under the documentation governing the Indebtedness.

"OC"means Owens Corning, a Delaware corporation.

"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the trustee. The counsel may be an employee of or
counsel to us or the trustee.

"Permitted Business" means the business or businesses conducted by us and
our Restricted Subsidiaries as of the issue date and any business ancillary,
complementary or reasonably related thereto.

"Permitted Holders" means:

(1) Robert Porcher;

(2) the spouse, parents, siblings, descendants of Robert Porcher or the
descendants of his spouse or siblings;

(3) in the event of incompetence or death of Robert Porcher or any of
the Persons described in (2) above, that Person's estate, executor,
administrator, committee or other personal representative in each case who
at any particular date shall beneficially own or have the right to acquire,
directly or indirectly, our Voting Stock;

(4) any trusts created for the sole benefit of Robert Porcher or any of
the Persons described in clauses (2) or (3) above or any trust for the
benefit of those trusts;

(5) any Person of which Robert Porcher or any of the Persons described
in clauses (2) or (3) above

(a) "beneficially owns" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) on a fully diluted basis at least 51% of the voting
power of the Voting Stock of that Person or

(b) is the sole trustee or general partner, or otherwise has the sole
power to manage the business and affairs, of that Person.

"Permitted Indebtedness" means, without duplication, each of the following:

(1) Indebtedness in respect of the old notes and exchange notes and any
replacement notes issued pursuant to the indenture, and the note guarantees
in respect of the old notes and exchange notes;

(2) guarantees by any Note Guarantor of our Indebtedness other than the
notes; but if any guarantee is of Subordinated Indebtedness, then the note
guarantee of that Note Guarantor shall be senior to that Note Guarantor's
guarantee of the Subordinated Indebtedness;

(3) Indebtedness Incurred under the senior credit facility in an
aggregate principal amount at any time outstanding not to exceed $125.0
million less the amount of any permanent prepayments of Indebtedness made
with the Net Cash Proceeds of an Asset Sale pursuant to the third sentence
under "Material Covenants--Limitation on Asset Sales;"

(4) other Indebtedness of ours and our Restricted Subsidiaries
outstanding on the issue date, reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereto;

(5) Hedging Obligations entered into in the ordinary course of business
and not for speculative purposes;

(6) Indebtedness of any Restricted Subsidiary owed to and held by us or
any Note Guarantor for so long as the Indebtedness is held by us or any
Note Guarantor, in each case subject to no Lien securing

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Indebtedness other than Permitted Liens; but if as of any date any Person
other than us or any Note Guarantor holds any Indebtedness or holds a Lien
in respect of the Indebtedness securing Indebtedness other than Permitted
Liens, that date shall be deemed the Incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of the Indebtedness;

(7) Our Indebtedness owed to and held by any Note Guarantor that is
unsecured and subordinated in right of payment to the payment and
performance of our obligations under any senior Indebtedness, the
indenture, the notes and the note guarantees and subject to no Lien
securing Indebtedness other than Permitted Liens; but if as of any date any
Person other than any Note Guarantor owns or holds any Indebtedness or any
Person other than any Note Guarantor holds a Lien in respect of the
Indebtedness securing Indebtedness other than Permitted Liens, that date
shall be deemed the Incurrence of Indebtedness not constituting Permitted
Indebtedness by us;

(8) Indebtedness of ours or any of our Restricted Subsidiaries arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently, except in the case of daylight
overdrafts, drawn against insufficient funds in the ordinary course of
business so long as the Indebtedness is extinguished within two business
days of Incurrence;

(9) Indebtedness of ours or any of our Restricted Subsidiaries
represented by letters of credit for our account or the account of any of
our Restricted Subsidiaries, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;

(10) Refinancing Indebtedness in respect of Indebtedness, other than
Permitted Indebtedness Incurred pursuant to the covenant described under
"--Material Covenants--Limitation on Incurrence of Additional Indebtedness"
or Indebtedness Incurred pursuant to clauses (1) or (4) of this definition
of Permitted Indebtedness;

(11) Capitalized Lease Obligations and Purchase Money Indebtedness of
ours and our Restricted Subsidiaries that do not exceed $5.0 million in the
aggregate at any one time outstanding;

(12) Indebtedness arising from agreements of ours or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred in connection with the
disposition of any business, assets, or Restricted Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of the business, assets or Restricted Subsidiary for the purpose of
financing the acquisition; but the maximum aggregate liability in respect
of all that Indebtedness shall at no time exceed the gross proceeds
actually received by us and the Restricted Subsidiary in connection with
the disposition; and

(13) Additional Indebtedness of ours or any Note Guarantor in an
aggregate principal amount not to exceed $5.0 million at any one time
outstanding, which amount may, but need not, be Incurred in whole or in
part under the senior credit facility.

"Permitted Investments" means:

(1) Investments by us or any Restricted Subsidiary in any Person that
is, or that results in any Person becoming, immediately after the
Investment, a Restricted Subsidiary or constituting a merger or
consolidation of that Person into us or with or into a Restricted
Subsidiary;

(2) Investments by any Restricted Subsidiary in us;

(3) Investments in cash and Cash Equivalents;

(4) any extension, modification or renewal of any Investments existing
as of the issue date, but not Investments involving additional advances,
contributions or other investments of cash or property or other increases
thereof, other than as a result of the accrual or accretion of interest or
original issue discount or payment-in-kind pursuant to the terms of that
Investment as of the issue date;

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(5) transactions or arrangements with our officers, directors or
employees or any officers, directors or employees of any of our
Subsidiaries entered into in the ordinary course of business, including
compensation or employee benefit arrangements with any of our officers or
directors or any officers or directors of any of our Subsidiaries permitted
under the covenant described under "--Material Covenants--Limitations on
Transactions with Affiliates";

(6) Investments received as a result of the bankruptcy or reorganization
of any Person or taken in settlement of or other resolution of claims or
disputes, and, in each case, extensions, modifications and renewals
thereof;

(7) Investments made by us or our Restricted Subsidiaries as a result of
non-cash consideration permitted to be received in connection with an Asset
Sale made in compliance with the covenant described under "--Material
Covenants--Limitation on Asset Sales";

(8) Investments consisting of consigned inventory in an aggregate amount
not to exceed $5.0 million at any one time outstanding;

(9) Investments in the form of intercompany Indebtedness permitted to be
issued under the covenant entitled "Limitation on Incurrence of Additional
Indebtedness"; and

(10) other Investments not to exceed $5.0 million at any one time
outstanding.

"Permitted Junior Securities" means any of our securities or that of any
other Person that are:

(1) equity securities without special covenants or

(2) debt securities expressly subordinated in right of payment to all
senior Indebtedness that may at the time be outstanding, to substantially
the same extent as, or to a greater extent than, the notes are subordinated
as provided in the indenture, in any event pursuant to a court order so
providing and as to which

(a) the rate of interest on those securities shall not exceed the
effective rate of interest on the notes on the issue date,

(b) those securities shall not be entitled to the benefits of
covenants or defaults materially more beneficial to the holders of
those securities than those in effect with respect to the notes on the
issue date and

(c) those securities shall not provide for amortization, including
sinking fund and mandatory prepayment provisions commencing prior to
the date six months following the final scheduled maturity date of the
senior Indebtedness, as modified by the plan of reorganization pursuant
to which those securities are issued.

"Permitted Liens" means any of the following:

(1) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if the reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;

(2) Liens Incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government performance
and return-of-money bonds and other similar obligations, exclusive of
obligations for the payment of borrowed money;

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(3) any interest or title of a lessor under any Capitalized Lease
Obligation; so long as the Liens do not extend to any property which is not
leased property subject to that Capitalized Lease Obligation;

(4) purchase money Liens to finance property of ours or a Restricted
Subsidiary acquired in the ordinary course of business as long as

(a) the related purchase money Indebtedness shall not exceed the
cost of that property and shall not be secured by any property of ours
or any Restricted Subsidiary other than the property so acquired and

(b) the Lien securing the Indebtedness shall be created within 90
days of the acquisition;

(5) Liens upon specific items of inventory or other goods and proceeds
of any Person securing that Person's obligations in respect of bankers'
acceptances issued or created for the account of that Person to facilitate
the purchase, shipment or storage of the inventory or other goods;

(6) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
those letters of credit and products and proceeds thereof;

(7) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of ours or a
Restricted Subsidiary, including rights of offset and set-off;

(8) Liens securing Hedging Obligations that relate to Indebtedness that
is Incurred in accordance with the covenant described under "Material
Covenants--Limitation on Incurrence of Additional Indebtedness" and that
are secured by the same assets as secure those Hedging Obligations;

(9) Liens existing on the issue date and Liens to secure any Refinancing
Indebtedness which is Incurred to Refinance any Indebtedness which has been
secured by a Lien permitted under the covenant described under "--Material
Covenants--Limitation on Liens" and which Indebtedness has been Incurred in
accordance with the covenant described under "--Material Covenants--
Limitation on Incurrence of Additional Indebtedness"; if those new Liens:

(a) are not materially less favorable to the holders of notes and
are not materially more favorable to the lienholders with respect to
those Liens than the Liens in respect of the Indebtedness being
Refinanced and

(b) do not extend to any property or assets other than the property
or assets securing the Indebtedness Refinanced by the Refinancing
Indebtedness;

(10) Liens securing Acquired Indebtedness Incurred in accordance with
the covenant described under "Material Covenants--Limitation on Incurrence
of Additional Indebtedness"; so long as:

(a) those Liens secured that Acquired Indebtedness at the time of
and prior to the Incurrence of that Acquired Indebtedness by us or a
Restricted Subsidiary and were not granted in connection with, or in
anticipation of the Incurrence of that Acquired Indebtedness by us or a
Restricted Subsidiary and

(b) those Liens do not extend to or cover any of our property or the
property of any Restricted Subsidiary other than the property that
secured the Acquired Indebtedness prior to the time the Indebtedness
became our Acquired Indebtedness or the Acquired Indebtedness of a
Restricted Subsidiary and are no more favorable to the lienholders than
the Liens securing the Acquired Indebtedness prior to the Incurrence of
that Acquired Indebtedness by us or a Restricted Subsidiary; and

(11) Liens securing other Indebtedness not in excess of $3.0 million at
any one time outstanding.

"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.

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"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any insolvency or liquidation proceeding in accordance with
and at the contract rate, including, without limitation, any rate applicable
upon default, specified in the agreement or instrument creating, evidencing or
governing any Indebtedness, whether or not, under applicable law or otherwise,
the claim for that interest is allowed as a claim in the insolvency or
liquidation proceeding. Post Petition Interest shall also include any interest
that would accrue but for the commencement of any insolvency or liquidation
proceeding.

"Preferred Stock" of any Person means any capital stock of that Person that
has preferential rights over any other capital stock of that Person with
respect to dividends or redemptions or upon liquidation.

"Public Equity Offering" has the meaning set forth under "Redemption."

"Purchase Money Indebtedness" means Indebtedness of us or any Restricted
Subsidiary Incurred for the purpose of financing all or any part of the
purchase price, or other cost of construction or improvement of any property;
as long as the aggregate principal amount of that Indebtedness does not exceed
the lesser of the Fair Market Value of the property or the purchase price or
cost, including any Refinancing of that Indebtedness that does not increase
the aggregate principal amount, or accreted amount, if less, of the
Indebtedness as of the date of Refinancing.

"Purchase Price Loan" means the loan of approximately $135.3 million from
GHC to AGY Holdings to fund AGY Holdings' acquisition of a 51% interest in
AGY.

"Qualified Capital Stock" means any capital stock that is not Disqualified
Capital Stock.

"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, that
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.

"Refinancing Indebtedness" means any Refinancing by us or any Restricted
Subsidiary, to the extent that the Refinancing does not:

(1) result in an increase in the aggregate principal amount of the
Indebtedness of that Person as of the date of the proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing that Indebtedness and plus the amount of reasonable
expenses incurred by us in connection with that Refinancing) or

(2) create Indebtedness with

(a) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced
or

(b) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced;

as long as:

(1) the Indebtedness being Refinanced is our Indebtedness, then the
Refinancing Indebtedness shall be our Indebtedness

(2) the Indebtedness being Refinanced is Indebtedness of a Note
Guarantor, then the RefinancingIndebtedness shall be our Indebtedness
and/or the Indebtedness of that Note Guarantor and

(3) the Indebtedness being Refinanced is subordinate or junior to the
notes or any note guarantee, then the Refinancing Indebtedness shall be
subordinate to the notes or the note guarantee at least to the same extent
and in the same manner as the Indebtedness being Refinanced.

"Replacement Assets" has the meaning set forth under "Material Covenants--
Limitation on Asset Sales."

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"Representative" means any trustee, agent or representative, if any, for an
issue of our senior Indebtedness.

"Restricted Payment" has the meaning set forth under "Material Covenants--
Limitation on Restricted Payments."

"Restricted Subsidiary" means any of our Subsidiaries which at the time of
determination is not an unrestricted Subsidiary.

"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any Person is a party providing for the leasing to
us or a Restricted Subsidiary of any of our property or property owned by any
Restricted Subsidiary at the issue date or later acquired, which has been or is
to be sold or transferred by us or that Restricted Subsidiary to that Person or
to any other Person by whom funds have been or are to be advanced on the
security of the property.

"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto.

"senior credit facility" means the Credit Agreement dated as of September
30, 1998 by and between us, the guarantors from time to time a party thereto,
the lenders from time to time party thereto and First Union National Bank, as
agent, pursuant to which we may, as of the issue date, borrow up to $125.0
million in the aggregate at any one time outstanding, together with the
documents related thereto including any guarantee agreements and security
documents, as those agreements may be amended, restated, supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring, including
adding any of our Subsidiaries as additional borrowers or guarantors thereunder
or increasing the principal amount available thereunder, all or any portion of
the Indebtedness under the agreement(s) or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.

"senior Indebtedness" means, at any date, with respect to any Person

(1) all Obligations of that Person under the senior credit facility;

(2) all Hedging Obligations of that Person;

(3) all Obligations of that Person under stand-by letters of credit; and

(4) all other Indebtedness of that Person permitted under the indenture,
including principal, premium, if any, and interest (including Post-Petition
Interest) on that Indebtedness, unless the instrument under which that
Indebtedness is Incurred expressly provides that that Indebtedness is not
senior or superior in right of payment to the notes in our case or a note
guarantee in the case of a Note Guarantor, and all renewals, extensions,
modifications, amendments or refinancings thereof in whole or in part.

Notwithstanding the foregoing, senior Indebtedness shall not include:

(1) to the extent that it may constitute Indebtedness, any Obligation
for Federal, state, local or other taxes;

(2) any Indebtedness among or between us and any of our Subsidiaries or
any of our Affiliates or any of our Affiliate's Subsidiaries (other than
Indebtedness created by us in connection with the guarantee of Indebtedness
of a Subsidiary); unless and for so long as that Indebtedness has been
pledged to secure obligations under or in respect of senior Indebtedness;

(3) to the extent that it may constitute Indebtedness, any Obligation in
respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business;

(4) that portion of any Indebtedness that is Incurred in violation of
the indenture;

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(5) Indebtedness evidenced by the notes or the note guarantees;

(6) Our Indebtedness or the Indebtedness of a Note Guarantor that is
expressly subordinate or junior in right of payment to any other
Indebtedness of ours or a Note Guarantor;

(7) to the extent that it may constitute Indebtedness, any obligation
owing under leases (other than Capitalized Lease Obligations) or management
agreements;

(8) any obligation that by operation of law is subordinate to any
general unsecured obligations of that Person; and

(9) Our Indebtedness to the extent the Indebtedness is owed to and held
by any Federal, state, local or other governmental authority, excluding
Indebtedness owing to state or local governmental authorities in the form
of industrial revenue bonds or other state or local bond financings.

"Senior Subordinated Indebtedness" means, with respect to us, the notes and,
with respect to any Note Guarantor, any Note Guarantor's note guarantee and any
other Indebtedness of ours or that Note Guarantor that specifically provides
that the Indebtedness is to rank pari passu in right of payment with the notes
or the note guarantee, as the case may be, and is not subordinated by its terms
in right of payment to any Indebtedness or other obligation of ours or that
Note Guarantor which is not senior Indebtedness.

"Significant Subsidiary" shall have the meaning set forth in Rule 1-02(w) of
Regulation S-X under the Securities Act.

"Stated Maturity" means, with respect to any security, the date specified in
that security as the fixed date on which the final payment of principal of that
security is due and payable, including pursuant to any mandatory redemption
provision, but excluding any provision providing for the repurchase of that
security at the option of the holder of the security upon the happening of any
contingency unless the contingency has occurred.

"Subordinated Indebtedness" means, with respect to us or any Note Guarantor,
any Indebtedness of ours or that Note Guarantor which is expressly subordinated
in right of payment to the notes or that Note Guarantor's note guarantee.

"Subsidiary," with respect to any Person, means

(1) any corporation of which the outstanding capital stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by that Person; or

(2) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned
by that Person.

"Voting Stock" with respect to any Person, means securities of any class of
capital stock or other equity interests of that Person entitling the holders of
the capital stock or other equity interests, whether at all times or only so
long as no senior class of stock has voting power by reason of any contingency,
to vote in the election of members of the board of directors or equivalent
governing body of that Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying

(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by

(b) the number of years, calculated to the nearest one-twelfth, that
will elapse between that date and the making of the payment, by

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(2) the then outstanding principal amount or liquidation preference, as
applicable, of the Indebtedness.

"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which all the outstanding capital stock (other than in the case of a foreign
Restricted Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) is
owned by us or any Wholly Owned Restricted Subsidiary.

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UNITED STATES FEDERAL TAX CONSIDERATIONS

The following summary describes material U.S. federal income tax
considerations associated with the exchange of the old notes for the exchange
notes pursuant to the exchange offer and the ownership and disposition of the
notes. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, rulings and judicial decisions as of the date of
this prospectus, all of which may be repealed, revoked or modified with
possible retroactive effect. This summary is limited to investors who will hold
the notes as capital assets within the meaning of Section 1221 of the Code and
does not deal with holders that may be subject to special tax rules including,
but not limited to:

. insurance companies,

. tax-exempt organizations,

. financial institutions,

. dealers in securities or currencies,

. traders in securities electing to mark to market,

. holders whose functional currency is not the U.S. dollar,

. holders who will hold the notes as a hedge against currency risks or as
part of a straddle, synthetic security, conversion transaction or other
integrated investment comprised of the notes and one or more other
investments or,

. except to the extent discussed below, Non-U.S. Holders (as defined
below).

The summary is applicable only to persons who tender their old notes in
exchange for newly issued exchange notes and does not address other purchasers.

This summary is for general information only and does not address all
aspects of federal income taxation that may be relevant to holders of the notes
in light of their particular circumstances. It does not address any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.

You should consult your own tax advisor as to the particular tax
consequences to you of the exchange of old notes for exchange notes and the
ownership and disposition of the notes, including the applicability of any
federal estate or gift tax laws, any state, local, or foreign tax laws, any
changes in applicable tax laws, and any pending or proposed legislation or
regulations. We have not asked for or received an opinion of counsel with
regard to the following discussion of federal income tax consequences.

As used herein, the term "U.S. Holder" means a holder of notes that is:

. a citizen or resident of the United States for U.S. federal income tax
purposes,

. a corporation or entity taxed as a corporation created or organized
under the laws of the United States, any state in the U.S. or the
District of Columbia,

. an estate, the income of which is subject to United States federal
income tax without regard to its source, or

. a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions
of the trust.

A "Non-U.S. Holder" is any beneficial holder that is not a U.S. Holder.

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U.S. Taxation of U.S. Holders and Non-U.S. Holders

There will be no U.S. federal income tax consequences to anyone exchanging
an old note for an exchange note pursuant to the exchange offer. You will have
the same adjusted basis and holding period in the exchange note as you had in
the old note immediately before the exchange.

U.S. Taxation of U.S. Holders

Stated interest on notes. Stated interest on a note generally will be
included in the gross income of a U.S. Holder as ordinary income at the time it
accrues or is received in accordance with the U.S. Holder's method of
accounting for U.S. federal income tax purposes.

Disposition of the notes. Upon the sale, exchange, redemption, retirement or
other disposition of a note (collectively, a "Disposition"), a U.S. Holder
generally will recognize gain or loss equal to the difference between the
amount realized upon the Disposition (except to the extent such amount is
attributable to accrued but unpaid interest which will be taxable as such) and
such holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax
basis in a note will, in general, be the U.S. Holder's cost for that note. This
gain or loss will be capital gain or loss. Net capital gain (i.e., generally
capital gain in excess of capital loss) recognized by an individual U.S. Holder
upon the disposition of a note that has been held for more than one year
generally will be subject to tax at a maximum rate of 20%. A note that has been
held for one year or less will be taxed at ordinary income tax rates. The
deductibility of capital losses is subject to limitations.

Market discount. U.S. Holders, other than original purchasers of the old
notes, should be aware that the sale of the exchange notes may be affected by
the market discount provisions of the Code. The market discount rules generally
provide that if a U.S. Holder of a note

. purchased the note, after the original offering, at a "market discount"
(i.e., at an amount less than the adjusted issue price of the note as
determined on the date of such purchase) exceeding a statutorily defined
de minimis amount, and

. thereafter recognizes gain upon a disposition, including a partial
redemption, of the exchange note received in exchange for an old note,

the lesser of such gain or the portion of the market discount that accrued
while the old note and exchange note were held by such U.S. Holder will be
treated as ordinary interest income at the time of disposition. The rules also
provide that a U.S. Holder who acquires a note at a market discount may be
required to defer a portion of any interest expense that may otherwise be
deductible on any indebtedness incurred or maintained to purchase or carry the
note until the U.S. Holder disposes of such note in a taxable transaction. If a
holder of such a note elects to include market discount in income currently,
both of the foregoing rules would not apply.

Non-U.S. Holders

Under present U.S. federal income tax law, subject to the discussion of
backup withholding and information reporting below:

. payments of principal and interest on the notes to any Non-U.S. Holder
will not be subject to U.S. federal income or withholding tax provided
that:

. the Non-U.S. Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock
entitled to vote of BGF,

. the Non-U.S. Holder is not a controlled foreign corporation that is
related to us, directly or indirectly, through stock ownership,

. such interest payments are not effectively connected with a United
States trade or business, and

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. the beneficial owner of the note provides (either directly or through
a financial institution that holds the note on behalf of the non-U.S.
Holder and that holds customers' securities in the ordinary course of
its trade or business) us or our agent an IRS Form W-8 or a
substantially similar substitute form, signed under penalties of
perjury, that it is not a United States person and provides its name
and address; and

. A Non-U.S. Holder will not be subject to U.S. federal income tax on gain
realized on the sale, exchange, redemption, retirement or other
disposition of a note, unless

. the gain is effectively connected with a trade or business carried on
by such holder within the United States or, if a treaty applies,
attributable to the United States permanent establishment maintained
by the holder, or

. the holder is an individual who is present in the United States for
183 days or more in the taxable year of disposition and certain other
requirements are met.

Backup Withholding and Information Reporting

Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments made in respect of the notes to a holder who is not an "exempt
recipient" and who fails to provide certain identifying information (such as
the Holder's taxpayer identification number) in the required manner. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. Payments made in respect of notes to
a U.S. Holder must be reported to the IRS, unless the U.S. Holder is an exempt
recipient or establishes an exemption. A Non-U.S. Holder who provides an IRS
Form W-8 generally will not be subject to backup withholding.

Upon the sale of a note to (or through) a broker, the broker must withhold
31% of the entire purchase price unless either (1) the broker determines that
the seller is a corporation or other exempt recipient or (2) the seller
provides, in the required manner, certain identifying information and, in the
case of a Non- U.S. Holder, certifies that such seller is a Non-U.S. Holder
(and other conditions are met). Such a sale must also be reported by the broker
to the IRS, unless either (1) the broker determines that the seller is an
exempt recipient or (2) the seller certifies that it is a Non-U.S. Holder.

The amount of any backup withholding imposed on a payment to a holder will
be allowed as a credit against such holder's U.S. federal income tax liability
and may entitle such holder to a refund, provided that the required information
is furnished to the IRS.

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THE EXCHANGE OFFER

Purpose and Effect

We sold the old notes on January 15, 1999 to First Union Capital Markets
Corp., which we refer to as the initial purchaser of the old notes. The initial
purchaser subsequently placed the old notes with qualified institutional buyers
in reliance upon Rule 144A under the Securities Act. When we sold the old notes
to the initial purchaser, we entered into a registration rights agreement that
required us:

. to file a registration statement with the SEC with respect to an exchange
offer; and

. use our best efforts to cause the exchange offer registration statement
to be declared effective by July 1, 1999.

This prospectus is a part of the exchange offer registration statement that
we were required to file. As soon as the exchange offer registration statement
has been declared effective, we will offer the exchange notes in exchange for
the old notes. We will keep the exchange offer open for at least 20 business
days after the date on which notice of the exchange offer is mailed to the
holders of the old notes. For each old note validly tendered to us and not
withdrawn, the holder of the old note will receive an exchange note having a
principal amount equal to the principal amount of the surrendered old note.
Interest on the exchange note will accrue from the last interest payment date
on which interest was paid on the old notes or, if no interest was paid on the
old notes, from January 21, 1999, which was the date of issuance of the old
notes.

Under existing SEC interpretations set forth in no-action letters, we
believe that the exchange notes may be offered for resale, resold and otherwise
transferred by you without compliance with the registration and prospectus
delivery provisions of the Securities Act; provided that:

. you are acquiring the exchange notes in the ordinary course of business;

. you are not participating, do not intend to participate, and have no
arrangement or understanding with anyone to participate, in the
distribution of the exchange notes issued to you in the exchange offer;
and

. you are not an affiliate of ours.

If our belief is inaccurate and you transfer any exchange note without
delivering a prospectus meeting the requirements of the Securities Act or
without an exemption from registration of your exchange notes, you may incur
liability under the Securities Act. We do not assume or indemnify you against
such liability.

Each participating broker-dealer that is issued exchange notes for its own
account in exchange for old notes which were acquired as a result of market-
making or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of the exchange notes. The accompanying letter of transmittal states
that by so acknowledging and be delivering a prospectus, such broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. A participating broker-dealer may use this prospectus for
an offer to resell, resale or other retransfer of the exchange notes. We will
make this prospectus and any amendment or supplement to this prospectus
available for a period of 180 days after the date of this prospectus to any
such participating broker-dealer for use in connection with any such resales.
We believe that no registered holder of the old notes is an affiliate (as such
term is defined in Rule 405 of the Securities Act) of ours.

By tendering your old notes, you will be representing, among other things,
that:

. you are acquiring the exchange notes in the ordinary course of business;

. you are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of the exchange notes issued to you in the exchange offer;

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. you are not an affiliate of ours; and

. if you are a participating broker-dealer, you will deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of the exchange notes.

Any broker-dealer that is not a participating broker-dealer may not rely on
existing SEC interpretations set forth in no-action letters and must comply
with the registration and prospectus delivery requirement of the Securities Act
in order to resell the old notes or the exchange notes. Such requirements
include being named as a selling security holder in a registration statement
related to any such resales.

Registration Rights

The following is a summary of the material terms of the registration rights
agreement. A copy of the registration rights agreement is filed as an exhibit
to the registration statement of which this prospectus is a part.

Under the registration rights agreement, we are obligated to file a "shelf"
registration statement covering resales of the old notes or the exchange notes
if any of the following situations occur:

. new interpretations of the SEC prohibit us from effecting the exchange
offer;

. the exchange offer is not consummated within 30 business days of the date
the exchange offer registration statement became effective;

. the initial purchaser so requests with respect to old notes it acquired
directly from us on or prior to the 20th business day following the
consummation of the exchange offer;

. any holder notifies us on or prior to the 20th business day following the
consummation of the exchange offer that the holder is not eligible to
participate in the exchange offer or the exchange notes the holder would
receive would not be freely tradable; or

. the initial purchaser participates in the exchange offer and does not
receive freely tradable exchange notes in exchange for old notes
constituting any portion of an unsold allotment and the initial purchaser
notifies us on or prior to the 20th business day following the
consummation of the exchange offer.

If any of the events in the preceding paragraph occur, we will file a shelf
registration statement within 75 days. We will also use our reasonable efforts
to cause the shelf registration statement to be declared effective within 135
days. We will keep the shelf registration statement effective until the earlier
of;

. the time when the old notes or the exchange notes covered by the shelf
registration statement can be sold pursuant to Rule 144 without any
limitations under clauses (c), (e), (f) and (h) of Rule 144;

. two years from the date on which the shelf registration statement was
filed; and

. such date as of which all old notes and exchange notes covered by the
shelf registration statement have been sold.

If a shelf registration statement is filed, we will provide to each holder
for whom such shelf registration statement was filed copies of the prospectus
which is a part of the shelf registration statement, notify each holder when
the shelf registration statement has become effective and take other actions as
are required to permit unrestricted resales of the old notes or the exchange
notes. A holder selling such old notes or exchange notes pursuant to the shelf
registration statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers. These holders would also be subject to the civil liability
provisions under the Securities Act and would be bound by the indemnification
provisions of the registration rights agreement.

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If any of the following "registration defaults" occur:

. we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;

. any of the registration statements is not declared effective by the SEC
on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date");

. we fail to consummate the exchange offer within 30 business days of the
Effectiveness Target Date with respect to the exchange offer registration
statement;

. the shelf registration statement or the exchange offer registration
statement has been declared effective but the SEC issues a stop order
suspending such effectiveness or proceedings have been initiated under
Sections 8(d) or 8(e) of the Securities Act with respect to the exchange
offer registration statement or shelf registration statement;

. the aggregate number of days in any suspension period referred to in the
preceding bulletpoint exceeds the number permitted in the registration
rights agreement; or

. the number of suspension periods referred to in the second preceding
bulletpoint exceeds the number permitted in the registration rights
agreement,

then we will pay liquidated damages to each holder of old notes. During the
first 90-day period immediately following the occurrence of such registration
default, we will pay liquidated damages in an amount equal to $0.05 per week
per $1,000 principal amount of old notes held by such holder. The amount of the
liquidated damages will increase by an additional $0.05 per week per $1,000
principal amount of old notes for each subsequent 90-day period until such
registration default has been cured, up to an aggregate maximum amount of
liquidated damages of $0.30 per week per $1,000 principal amount of old notes
for all registration defaults. We will pay all accrued liquidated damages on
each date that interest must be paid on the old notes. Following the cure of
all registration defaults, the accrual of liquidated damages will cease and all
accrued and unpaid liquidated damages will be paid promptly thereafter. At all
other times, the old notes will bear interest at the original interest rate
thereof.

Terms of the Exchange Offer

Subject to the conditions in this prospectus and in the letter of
transmittal, we will accept old notes validly tendered and not withdrawn prior
to 5:00 p.m., New York City time, on the expiration date. We will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding old notes accepted in the exchange offer. You may tender some or
all of your old notes pursuant to the exchange offer. However, tenders of old
notes must be in a minimum principal amount of $1,000 or an integral multiple
of $1,000 in excess thereof.

The form and terms of the exchange notes will be identical in all material
respects to the form and terms of the old notes, except that:

. the exchange notes will bear a different CUSIP number from the old notes;

. the issuance of the exchange notes will be registered under the
Securities Act and, therefore, the exchange notes will not bear legends
restricting transfer; and

. the holders of the exchange notes will not be entitled to rights under
the registration rights agreement, including liquidated damages.

As of the date of this prospectus, $100,000,000 aggregate principal amount
of old notes were outstanding. This prospectus and the letter of transmittal
are being mailed to persons who were holders of old notes on the close of
business on the date of this prospectus. Holders of old notes do not have any
appraisal or dissenters' rights under the Delaware General Corporation Law or
the indenture in connection with the exchange offer. We intend to conduct the
exchange offer in accordance with the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations promulgated thereunder.

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<PAGE>

We will be deemed to have accepted validly tendered old notes when we have
given written notice thereof to The Bank of New York, as exchange agent. The
exchange agent will act as agent for the tendering holders for the purpose of
receiving the exchange notes from us.

If any tendered old notes are not accepted for exchange for any reason, the
certificates for the unaccepted old notes will be returned, without expense, to
the tendering holders as soon as possible.

Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes for
exchange notes. We will pay all charges and expenses, other than transfer
taxes, in connection with the exchange offer. See "--Fees and Expenses."

Expiration Date; Extensions; Amendments

The term "expiration date" means 5:00 p.m., New York City time, on ,
1999, unless we extend the exchange offer, in which case the term "expiration
date" means the latest date and time to which the exchange offer is extended.

In order to extend the exchange offer, we will notify the exchange agent by
written notice and will make a public announcement of such extension, each
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.

We reserve the right, in our sole discretion:

. to delay accepting any old notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "--Conditions" has not been satisfied, by giving written notice of
such delay, extension or termination to the exchange agent; or

. to amend the terms of the exchange offer in any manner, whether before or
after any tender of the old notes.

Any such delay in acceptance, extension, termination or amendment will be
followed as soon as possible by oral or written notice thereof to the
registered holders. If we amend the terms of the exchange offer, we may be
required to file a post-effective amendment to the exchange offer registration
statement.

Accrued Interest on the Exchange Notes

Interest on the exchange notes will accrue from the last interest payment
date on which interest was paid on the old notes, or, if no interest was paid
on the old notes, from the date of interest of the old notes (January 21,
1999). Holders whose old notes are accepted for exchange will be deemed to have
waived the right to receive any interest accrued on the old notes.

Procedures for Tendering Old Notes

Only a holder of old notes may tender old notes in the exchange offer. Each
holder wishing to accept the exchange offer must:

. complete, sign and date the accompanying letter of transmittal, or a
facsimile thereof, in accordance with the instructions in this prospectus
and the letter of transmittal;

. have the signatures thereon guaranteed if required by the letter of
transmittal or transmit an agent's message in connection with a book-
entry transfer; and

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<PAGE>

. mail or otherwise deliver such letter of transmittal or such facsimile or
agent's message, together with the old notes and any other required
documents, to the exchange agent prior to 5:00 p.m., New York City time,
on the expiration date.

Delivery of the old notes may be made by book-entry transfer in accordance with
the procedures described below. Confirmation of book-entry transfer must be
received by the exchange agent prior to the expiration date.

The term "agent's message" means a message transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the old notes that such participant has
received and agrees:

. to participate in the Automated Tender Option Program ("ATOP");

. to be bound by the terms of the letter of transmittal; and

. that we may enforce such agreement against such participant.

By executing the letter of transmittal, each holder will make the
representations set forth under the heading "--Purpose and Effect" to us. Your
tender and our acceptance will constitute an agreement that you will
participate in the exchange offer in accordance with the terms and subject to
the conditions set forth in this prospectus and in the letter of transmittal.

The method of delivery of the old notes and the letter of transmittal and
all other required documents to the exchange agent is at your election and sole
risk. As an alternative to delivery by mail, you may wish to consider overnight
or hand delivery service. In all cases, you should allow sufficient time to
assure delivery to the exchange agent before the expiration date. You may
request your broker, dealer, commercial bank, trust company or nominee to
effect the exchange of old notes for you.

If you are a beneficial owner whose old notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and you wish
to tender your old notes in the exchange offer, you should contact the
registered holder promptly and instruct the registered holder to tender on your
behalf.

Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an "eligible institution." An eligible institution is a member of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a savings institution, commercial bank or trust
company having an office or correspondent in the United States, or otherwise an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act, and which is, in each case, a member of a recognized signature
guarantee program (i.e., Securities Transfer Agents Medallion Program, Stock
Exchange Medallion Program or New York Stock Exchange Medallion Signature
Program). However, signatures on a letter of transmittal or notice of
withdrawal are not required to be guaranteed with respect to old notes that are
tendered:

. by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or the box entitled "Special Delivery
Instructions" on the letter of transmittal; or

. for the account of an Eligible Institution.

If a letter of transmittal is signed by a person other than the registered
holder, such old notes must be endorsed or accompanied by a properly completed
bond power, signed by the registered holder with the signature thereon
guaranteed by an Eligible Institution.

If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, these
persons should so indicate when signing, and evidence satisfactory to us of
their authority to so act must be submitted with the letter of transmittal.

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<PAGE>

We understand that the exchange agent will make a request soon after the
date of this prospectus to establish an account through the facilities of The
Depository Trust Company ("DTC") for receipt of the tender of old notes through
book-entry delivery. For the purpose of facilitating the exchange offer, any
financial institution that is a DTC participant may participate in the exchange
offer through book-entry delivery of old notes by causing DTC to transfer such
old notes into the exchange agent's account for the old notes. Although
delivery of the old notes may be effected through book-entry transfer into the
exchange agent's account at DTC, unless an agent's message is received by the
exchange agent in compliance with the Automated Tender Option Program, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be delivered to the exchange agent on or prior to the expiration date, or, if
the guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures. Delivery of documents to DTC
does not constitute delivery to the exchange agent.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by us. We reserve the absolute right to reject old notes not
properly tendered or any old notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of old notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with respect
to tenders of old notes, neither we, the exchange agent nor any other person
shall incur any liability for failure to give such notification. Tenders of old
notes will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any old notes received by the exchange agent that
are not properly tendered and as to which the defects or irregularities have
not been cured or waived will be returned by the exchange agent to the
tendering holders, unless otherwise provided in the letter of transmittal, as
promptly as practicable following the expiration date.

No letter of transmittal, old notes, notice of guaranteed delivery or other
documents should be sent to us or DTC. Delivery thereof to us or DTC will not
constitute valid delivery.

Guaranteed Delivery Procedures

Holders of old notes who wish to tender their old notes but who cannot,
prior to 5:00 p.m., New York City time, on the expiration date (1) deliver
their old notes, the letter of transmittal or any other documents required by
the letter of transmittal to the exchange agent or (2) deliver a confirmation
of the book-entry tender of their old notes into the exchange agent's account
at DTC and otherwise complete the procedures for book-entry transfer, may
effect a tender of old notes if:

. the tender is made through an eligible institution;

. prior to 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives from such eligible institution a properly
completed and duly executed notice of guaranteed delivery setting forth
the name and address of the holder, the certificate number(s) and the
principal amount of old notes tendered, stating that the tender is being
made thereby and guaranteeing that, within three business days after the
expiration date, the letter of transmittal, together with the
certificate(s) representing the old notes (or a confirmation of book-
entry transfer of such old notes into the exchange agent's account at
DTC), and any other documents required by the letter of transmittal will
be deposited by the eligible institution with the exchange agent; and

. the properly completed and duly executed letter of transmittal, as well
as the certificate(s) representing all tendered old notes in proper form
for transfer (or a confirmation of book-entry transfer of such old notes
into the exchange agent's account at DTC), and all other documents
required by the letter of transmittal are received by the exchange agent
within three business days after the expiration date.

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<PAGE>

Acceptance of Old Notes for Exchange; Delivery of Exchange Notes

Promptly after satisfaction or waiver of all of the conditions to the
exchange offer, we will accept all old notes properly tendered and will issue
the exchange notes. For a description of conditions to the exchange offer, see
"--Conditions" below. We will be deemed to have accepted properly tendered old
notes for exchange when, as and if we have given written notice thereof to the
exchange agent. For each old note accepted for exchange, the holder of such old
note will receive an exchange note having a principal amount equal to that of
the surrendered old note.

In all cases, issuance of exchange notes will be made only after timely
receipt by the exchange agent of certificates for such old notes (or a timely
confirmation that such old notes have been transferred into the exchange
agent's account at DTC), a properly completed and duly executed letter of
transmittal and all other required documents. If any tendered old notes are not
accepted for any reason, or if old notes are submitted for a greater principal
amount than the holder desires to exchange, the unaccepted or non-exchanged old
notes will be returned without expense to the tendering holder soon after the
expiration or termination of the exchange offer.

Withdrawal of Tenders

Except as otherwise provided in this prospectus, you may withdraw a tender
of old notes at any time prior to 5:00 p.m., New York City time, on the
expiration date.

To withdraw a tender of old notes, the exchange agent must receive a
telegram, telex, letter or facsimile transmission notice of withdrawal at its
address set forth herein prior to 5:00 p.m., New York City time, on the
expiration date. A notice of withdrawal must:

. specify the name of the person having deposited the old notes to be
withdrawn (the "Depositor");

. identify the old notes to be withdrawn (including the certificate
number(s) and principal amount of such old notes, or, in the case of old
notes tendered by book-entry transfer into the exchange agent's account
at DTC pursuant to the applicable book-entry procedures, the name and
number of the account at DTC to be credited);

. be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee register the
transfer of such old notes into the name of the person withdrawing the
tender; and

. specify the name in which any such old notes are to be registered, if
different from that of the Depositor.

All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us. Any old notes so withdrawn
will be deemed not to have been validly tendered and no exchange notes will be
issued unless the old notes so withdrawn are validly retendered. Any old notes
which have been tendered but which are not accepted for exchange will be
returned, without expense, to the holder soon after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn old notes may
be retendered by following one of the procedures described above under "--
Procedures for Tendering old notes" at any time prior to the expiration date.

Conditions

Notwithstanding any other term of the exchange offer, we are not required to
accept for exchange any old notes, and may terminate or amend the exchange
offer if:

. any action or proceeding is instituted or threatened in any court or by
any governmental or quasi-governmental agency which might materially
impair our ability to proceed with the exchange offer or any material
adverse development has occurred in any existing action or proceeding
with respect to us;

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. the exchange offer violates applicable law or any applicable SEC
interpretations; or

. any governmental or quasi-governmental approval has not been obtained,
which approval we deem necessary for the consummation of the exchange
offer.

If we determine in our sole, reasonable discretion that any of the foregoing
conditions are not satisfied, we may:

. refuse to accept any old notes and return all tendered old notes to the
tendering holders;

. extend the exchange offer and retain all old notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such old notes (see "--Withdrawal of Tenders"); or

. waive such unsatisfied conditions and accept all properly tendered old
notes which have not been withdrawn.

In addition, we reserve the right, notwithstanding the satisfaction or
failure of any or all of the conditions, to terminate or amend the exchange
offer in any manner.

The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered or accepted for exchange.

Exchange Agent

The Bank of New York, which also acts as trustee under the indenture, has
been appointed as exchange agent for the exchange offer. Each holder wishing to
accept the exchange offer must deliver (1) a letter of transmittal, such
holder's tendered old notes and all other required documents or (2) a notice of
guaranteed delivery and all other documents described under "--Guaranteed
Delivery Procedures," to the exchange agent as follows:

By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E

Facsimile Transmission:
Confirm by Telephone: (212) 815-6339

(212) 815-

Delivery to an address other than as set forth above will not constitute
valid delivery.

If you have any questions or need additional copies of this prospectus, the
letter of transmittal or the notice of guaranteed delivery, please write or
telephone the exchange agent.

Fees and Expenses

The principal solicitation of tenders for the exchange offer is being made
by mail; however, additional solicitations may be made by telegraph, telecopy,
telephone or in person by our officers, employees or agents and our affiliates.
We have not retained any dealer-manager in connection with the exchange offer
and will not make any payments to brokers, dealers or others to solicit
acceptances of the exchange offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection with the exchange offer. We
will pay all other expenses to be incurred in connection with the exchange
offer. Such expenses include fees and expenses of the trustee, accounting and
legal fees and printing costs, among others.

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Accounting Treatment

The exchange notes will be recorded at the same carrying value as the old
notes, which is face value, as reflected in our accounting records on the date
of exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes in connection with the exchange offer. The expenses of the exchange
offer will be amortized over the term of the exchange notes.

Consequences of Failure to Exchange

The old notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities. Accordingly, old notes may
not be reoffered, resold, pledged or otherwise transferred except in accordance
with applicable state securities laws and:

. to a person whom the transferor reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;

. in an offshore transaction meeting the requirements of Rule 903 or Rule
904 of Regulation S;

. to an institution that is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act;

. pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder; or

. pursuant to an effective registration statement under the Securities Act.

Following consummation of the exchange offer, holders of the old notes who
were eligible to participate in the exchange offer but who did not tender their
old notes will generally not have any further registration rights under the
registration rights agreement, and such old notes will continue to be subject
to restrictions on transfer. Accordingly, the liquidity of the market for such
old notes could be adversely affected. See "Risk Factors--Old Notes Outstanding
After the Exchange Offer Will Not Have Registration Rights and We Expect the
Market for the Old Notes to be Illiquid."

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PLAN OF DISTRIBUTION

Except as provided in this prospectus, this prospectus may not be used for
an offer to resell, a resale or other transfer of exchange notes. Under
existing SEC interpretations set forth in no-action letters, we believe that
the exchange notes may be offered for resale, resold and otherwise transferred
(other than by our affiliates within the meaning of Rule 405 under the
Securities Act) without further compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such exchange notes
are acquired in the ordinary course of business and holders have no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the exchange notes. Any holder who is one of
our affiliates or who intends to participate in the exchange offer for the
purpose of distributing the exchange notes:

. will not be able to rely on the existing SEC interpretations set forth in
no-action letters;

. will not be able to tender its old notes; and

. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer transaction
unless such sale or transfer is made pursuant to an exemption from such
requirements.

A participating broker-dealer holding old notes may participate in the
exchange offer provided that it acquired the old notes for its own account as a
result of market-making or other trading activities. In connection with any
resales of exchange notes, any participating broker-dealer who receives
exchange notes in the exchange offer may be an "underwriter" within the meaning
of the Securities Act and must deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of the exchange notes. The SEC
has taken the position that participating broker-dealers may fulfill their
prospectus delivery requirements with respect to the exchange notes with this
prospectus, as amended or supplemented from time to time, other than in a
resale of an unsold allotment from the original sale of the old notes. Under
the registration rights agreement, we are required to allow participating
broker-dealers to use this prospectus, as amended or supplemented from time to
time, in connection with the resale of exchange notes for a period of 180 days.
Each participating broker-dealer wishing to accept the exchange offer must
represent that it will deliver a prospectus meeting the requirements of the
Securities Act if it resells any exchange notes.

Any broker-dealer that is not a participating broker-dealer may not rely on
existing SEC interpretations set forth in no-action letters and must comply
with the registration and prospectus delivery requirements of the Securities
Act in order to resell the old notes or the exchange notes. Such requirements
include being named as a selling security holder in a registration statement
related to any such resales.

The exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
issuance of the exchange notes. In consideration for issuing the exchange
notes, we will receive a like principal amount of old notes. The form and terms
of the exchange notes will be identical in all material respects to the form
and terms of the old notes, except for the elimination of transfer
restrictions, registration rights and liquidated damages provisions relating to
the old notes.

Exchange notes received by broker-dealers for their own account in the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, or at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through broker-dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such exchange notes. Any broker-dealer that
resells exchange notes that were received by it for its own account in the
exchange offer and any person that participates in the distribution of such
exchange notes may be deemed an "underwriter" within the meaning of the
Securities Act. Any profit on such resale and any commissions or concessions
received by any such broker-dealers may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that
any acknowledgment by a participating broker-dealer that it

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will deliver a prospectus in connection with any resale of exchange notes, and
any such delivery of a prospectus, shall not be deemed an admission by such
participating broker-dealer that it is an underwriter.

For a period of 180 days after the expiration date, we will send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any participating broker-dealer that requests these documents in the
participating broker-dealer's letter of transmittal. By acceptance of the
exchange offer, each broker-dealer that receives exchange notes for old notes
agrees that, upon receipt of notice from us of the happening of any event which
makes any statement in this prospectus untrue in any material respect or which
requires the making of any changes in this prospectus in order to make the
statements herein not materially misleading (which notice we have agreed to
deliver to such broker-dealer), such broker-dealer will suspend the use of this
prospectus until we have amended or supplemented this prospectus to correct
such misstatement or omission and have furnished copies of the amended or
supplemented prospectus to such broker-dealer.

We have agreed, pursuant to the registration rights agreement, to pay all
expenses incident to our performance of the exchange offer and the registration
rights agreement other than agency fees and commissions, underwriting discounts
and commissions and the fees and disbursements of counsel and other advisors
and experts retained by the holders. In addition, we have agreed to indemnify
the holders of the exchange notes against some liabilities, including
liabilities under the Securities Act.

The exchange notes are a new issuance of securities for which there is
currently no trading market. The exchange notes will not be listed on any
national securities exchange or Nasdaq. We have been advised by the initial
purchaser that it intends to make a market in the exchange notes; however, the
initial purchaser is not obligated to do so, and any such market making
activities may be discontinued at any time without notice. Accordingly, we
cannot assure you that an active trading market for the exchange notes will
develop or as to the liquidity of any such market. In addition, if the exchange
notes are traded after their initial issuance, they may trade at a discount
from their initial offering price, depending upon prevailing interest rates,
the market for similar securities, our performance and other factors.

LEGAL MATTERS

The validity of the exchange notes offered hereby will be passed upon for us
by Alston & Bird LLP, Atlanta, Georgia.

EXPERTS

The consolidated financial statements of BGF as of December 31, 1997 and
1998, and for each of the three years in the period ended December 31, 1998
included elsewhere in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their report
appearing herein and are included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.

106
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
BGF Industries, Inc.
Report of Independent Accountants....................................... F-2
Consolidated Balance Sheets at December 31, 1997 and 1998 .............. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998.................................................... F-4
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1997 and 1998.................................................... F-5
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1996, 1997 and 1998....................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of

BGF Industries, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows and changes in stockholder's
equity present fairly, in all material respects, the financial position of BGF
Industries, Inc. and its subsidiaries at December 31, 1997 and 1998, 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. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Greensboro, North Carolina

February 26, 1999

F-2
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
CONSOLIDATED BALANCE SHEETS

December 31, 1997 and 1998

(dollars in thousands, except share data)

<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 29 $ 18
Trade accounts receivable, less allowance for
returns and doubtful accounts of $723 and $696,
respectively...................................... 32,686 20,808
Inventories........................................ 40,866 42,532
Other current assets............................... 3,366 5,260
-------- ---------
Total current assets............................. 76,947 68,618
-------- ---------
Property, plant and equipment:
Land............................................... 1,155 1,975
Buildings.......................................... 30,302 35,850
Machinery and equipment............................ 86,197 90,798
-------- ---------
117,654 128,623
Less accumulated depreciation...................... 63,870 70,520
-------- ---------
Net property, plant and equipment................ 53,784 58,103
-------- ---------
Other noncurrent assets.............................. 5,745 10,045
-------- ---------
Total assets..................................... $136,476 $ 136,766
======== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Book overdraft..................................... $ 3,468 $ 657
Accounts payable................................... 8,484 6,794
Accrued liabilities................................ 8,196 6,743
Current portion of long-term debt.................. -- 1,000
Working capital line of credit..................... 5,000 --
-------- ---------
Total current liabilities........................ 25,148 15,194
Long-term debt....................................... 20,000 150,000
Deferred income taxes................................ 6,763 8,354
Postretirement benefit obligation.................... 1,268 1,394
-------- ---------
Total liabilities................................ 53,179 174,942
-------- ---------
Commitments and contingencies (Note 11)
Stockholder's equity (deficit):
Common stock, $1.00 par value. Authorized 3,000
shares; issued and outstanding 1,000 shares....... 1 1
Capital in excess of par value..................... 34,999 34,999
Retained earnings.................................. 48,297 63,614
Loan to parent (Note 13)........................... -- (136,790)
-------- ---------
Total stockholder's equity (deficit)............. 83,297 (38,176)
-------- ---------
Total liabilities and stockholder's equity
(deficit)....................................... $136,476 $ 136,766
======== =========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended December 31, 1996, 1997 and 1998

(dollars in thousands)

<TABLE>
<CAPTION>
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net sales.............................. $195,196 $217,889 $201,754
Cost of goods sold..................... 144,825 170,486 162,478
-------- -------- --------
Gross profit......................... 50,371 47,403 39,276
Selling, general and administrative
expenses.............................. 10,220 9,739 9,700
-------- -------- --------
Operating income..................... 40,151 37,664 29,576
-------- -------- --------
Other (income) expenses:
Interest expense..................... 1,993 2,355 4,517
Other income (Note 7)................ (1,915) (315) (170)
Other expenses....................... 47 242 58
-------- -------- --------
125 2,282 4,405
-------- -------- --------
Income before taxes.................. 40,026 35,382 25,171
Income tax expense..................... 15,996 13,652 9,854
-------- -------- --------
Net income........................... $ 24,030 $ 21,730 $ 15,317
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 1996, 1997 and 1998
(dollars in thousands)

<TABLE>
<CAPTION>
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 24,030 $ 21,730 $ 15,317
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation........................... 6,048 6,565 7,218
Amortization........................... 94 242 370
(Gain) loss on disposal of equipment... (2) 4 23
Deferred income taxes.................. 1,077 1,371 1,027
Postretirement benefit obligation...... 57 98 126
Change in operating assets and
liabilities:
Marketable securities-trading
purposes.............................. 4,639 -- --
Trade accounts receivable.............. 14 (6,819) 11,878
Inventories............................ (11,474) (3,994) (1,666)
Other current assets................... 7 (762) (1,330)
Other noncurrent assets................ (46) (521) (72)
Accounts payable....................... (1,642) 2,266 (1,967)
Accrued liabilities.................... (11) (282) (1,453)
-------- -------- ---------
Net cash provided by operating
activities.......................... 22,791 19,898 29,471
-------- -------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment............................. (21,983) (7,275) (11,299)
Proceeds from sale of equipment........ 12 -- 16
Additional consideration paid relating
to original purchase.................. (3,454) -- --
-------- -------- ---------
Net cash used in investing
activities.......................... (25,425) (7,275) (11,283)
-------- -------- ---------
Cash flows from financing activities:
Book overdraft......................... (834) 3,468 (2,811)
Principal payments of long-term debt... (8,750) (40,750) (20,000)
Proceeds from borrowing of long-term
debt.................................. -- 34,000 50,000
Proceeds from borrowing of revolving
credit................................ -- -- 48,000
Payments on borrowing of revolving
credit................................ -- -- (12,000)
Proceeds from senior subordinated
debt.................................. -- -- 65,000
Net (repayments) borrowings on working
capital line of credit................ 27,526 (4,526) (5,000)
Debt issuance costs.................... -- (38) (4,598)
Loan to parent......................... -- -- (136,790)
Distribution to parent................. (15,164) (4,913) --
-------- -------- ---------
Net cash (used in) provided by
financing activities.................. 2,778 (12,759) (18,199)
-------- -------- ---------
Net (decrease) increase in cash and
cash equivalents...................... 144 (136) (11)
Cash and cash equivalents at beginning
of period............................. 21 165 29
-------- -------- ---------
Cash and cash equivalent at end of
period................................ $ 165 $ 29 $ 18
======== ======== =========
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest.............................. $ 1,981 $ 2,622 $ 3,833
======== ======== =========
Cash paid for income taxes............. $ 17,693 $ 11,679 $ 10,399
======== ======== =========
Supplemental disclosure of non-cash
investing activities:
Property and equipment financed in
accounts payable...................... $ 1,098 $ 421 $ 698
======== ======== =========
Deferred tax liability increase due to
settlement of original purchase
consideration......................... $ 1,200
========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE>

BGF INDUSTRIES, INC.

(a wholly owned subsidiary of Glass Holdings Corp.)

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

December 31, 1996, 1997, and 1998

(dollars in thousands)

<TABLE>
<CAPTION>
Total
Common Paid-In Retained Loan to Stockholder's
Stock Capital Earnings Parent Equity
------ ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 1 $34,999 $ 22,614 $ -- $ 57,614
Net income................. -- -- 24,030 -- 24,030
Distributions to parent.... -- -- (15,164) -- (15,164)
--- ------- -------- --------- ---------

Balance, December 31, 1996 1 34,999 31,480 -- 66,480
Net income................. -- -- 21,730 -- 21,730
Distributions to parent.... -- -- (4,913) -- (4,913)
--- ------- -------- --------- ---------

Balance, December 31, 1997 1 34,999 48,297 -- 83,297
Net income................. -- -- 15,317 -- 15,317
Loan to parent............. -- -- -- (138,590) (138,590)
Non-interest bearing loan
payable reclassed to
offset loan to parent..... -- -- -- 1,800 1,800
--- ------- -------- --------- ---------

Balance, December 31, 1998... $ 1 $34,999 $ 63,614 $(136,790) $ (38,176)
=== ======= ======== ========= =========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

1. Summary of Significant Accounting Policies:

General: BGF Industries, Inc. (the "Company") is a wholly owned subsidiary
of Glass Holdings Corp. ("Glass Holdings"), which is a wholly owned subsidiary
of Porcher Industries, S.A. ("Porcher"). These consolidated financial
statements include the accounts of BGF Industries, Inc. and its wholly owned
subsidiary, BGF Overseas, Inc. All intercompany transactions and balances are
eliminated in consolidation. The Company manufactures high-quality glass,
aramid and carbon fiber fabrics for use in a variety of electronic, composite,
insulation, construction, filtration, and commercial applications. The
principal market is the United States.

Cash and Cash Equivalents: For purpose of the statements of cash flows, the
Company considers cash on hand, cash deposited in financial institutions and
money market accounts with maturities of less than ninety days at date of
purchase to be cash equivalents. These are stated at cost which approximates
market value. The book overdrafts in bank accounts consist of outstanding
checks which have not been presented to a bank for payment.

Inventories: Inventories are stated at the lower of cost or market value.
Cost is determined using the first-in, first-out (FIFO) method.

Property, Plant and Equipment: Property, plant and equipment are stated at
cost and depreciated over the estimated useful lives of the related assets
using the straight-line method. Cost includes expenditures for major
improvements and replacements and the net amount of interest cost associated
with significant capital additions. Capitalized interest was $206, $32 and $127
in 1996, 1997, and 1998, respectively. Total interest incurred in 1996, 1997
and 1998 was $2,199, $2,339, and $4,455, respectively.

The estimated useful lives of the assets are as follows:

<TABLE>
<S> <C>
Buildings........................ 15-40 years
Machinery and equipment.......... 3-10 years
</TABLE>

The costs of renewals and betterments are capitalized, while repair and
maintenance which do not improve or extend useful lives, are charged against
income as incurred. At the time that property, plant and equipment is retired
or otherwise disposed of, the respective cost and accumulated depreciation are
removed from the accounts, and any gain or loss on disposition is recognized.

In the event that facts and circumstances indicate that the cost of long
lived assets may not be recoverable, the estimated future undiscounted cash
flows is compared to the asset's carrying value and if less, an impairment loss
is recognized in an amount by which the carrying value exceeds its fair value.

Income Taxes: Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases based on enacted tax laws and statutory rates. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period in which the legislation is enacted. A
valuation allowance against deferred tax assets is required if, based on the
weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.

Intangible Assets: The excess of acquisition cost over assigned value of net
assets acquired is being amortized over 40 years, using the straight-line
method. Debt issuance costs are being amortized over the terms

F-7
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

1. Summary of Significant Accounting Policies--(Continued):

of the respective debt agreements using the interest method. The Company
assesses the recoverability of long-lived assets, including goodwill, by
determining whether the carrying value of the asset balances over their
remaining lives can be recovered through undiscounted future operating cash
flows.

Revenue Recognition: Revenue from product sales and the related cost of
goods sold are recognized at the time of shipment.

Financial Instruments: The Company selectively enters into interest rate
protection agreements to mitigate changes in interest rates on its variable
rate borrowings. None of these agreements are used for speculative or trading
purposes. The fair value of the Company's interest rate swap agreement is the
estimated amount the Company would have to pay or receive to terminate the
swap agreement as of the reporting date, taking into account current interest
rates, and is disclosed in Note 11. The interest rate swaps are accounted for
as hedges on the basis that such derivatives reduce the risk of changes in
interest rates on the Company's variable rate debt. The interest differentials
from these swaps are recorded in interest expense. Rates currently available
to the Company for debt with similar terms and remaining maturities are used
to estimate fair value of existing debt.

The carrying amounts of the Company's long-term debt approximates fair
value.

Pension Plans and Other Postretirement Benefits: The Company has a
contributory defined benefit pension plan covering most employees. Pension
expense for the plan is determined using the projected unit credit method. The
Company also provides certain retirement health care benefits, the estimated
cost for which is accrued within the employees' active service lives. The
Company's customary funding policy of these plans is to contribute amounts
permitted by the Internal Revenue Code and in conformance with ERISA
guidelines.

Research and Development: The Company expenses research and development
costs as incurred. These costs were approximately $1,209, $1,267, and $1,376
for the years ended December 31, 1996, 1997 and 1998, respectively.

Advertising and Promotion: The Company expenses advertising and promotion
costs as incurred and these costs are included as selling, general and
administrative expenses. Such amounts were not material for 1996, 1997, and
1998.

Foreign Currency Transactions: Gains (losses) resulting from foreign
currency transactions are included in other expenses, net and amounted to $66,
$126, and ($58) in 1996, 1997, and 1998, respectively.

Use of Estimates: The preparation of the consolidated 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 liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

Reclassifications: Certain amounts from the prior consolidated financial
statements have been reclassified to conform to the current presentation.

F-8
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

1. Summary of Significant Accounting Policies--(Continued):

Recently issued accounting standards: SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" became effective in 1998.
Comparative disclosures have been provided in accordance with the provisions of
this statement.

SFAS No. 132 "Employers' Disclosure about Pensions and Other Postretirement
Benefits," became effective in 1998. Comparative disclosures which include
prior period information have been provided in accordance with the provisions
of this statement.

On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether
a derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company anticipates that, due to its limited use
of derivative instruments, the adoption of SFAS 133 will not have a significant
effect on the Company's results of operations or its financial position.

2. Inventories:

Inventories at December 31 consist of the following:

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Supplies..................................................... $ 1,573 $ 1,571
Raw materials................................................ 6,205 4,283
Stock-in-process............................................. 10,043 8,029
Finished goods............................................... 23,045 28,649
------- -------
$40,866 $42,532
======= =======
</TABLE>

3. Other Current Assets:

Other current assets at December 31 consist of the following:

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Deferred income taxes.......................................... $2,100 $2,664
Prepaid expenses and other..................................... 1,266 2,596
------ ------
$3,366 $5,260
====== ======
</TABLE>

F-9
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

4. Other Noncurrent Assets:

Other noncurrent assets at December 31 consist of the following:

<TABLE>
<CAPTION>
1997 1998
------ -------
<S> <C> <C>
Excess of acquisition cost over assigned value of net
assets acquired (Note 7)................................ $5,809 $ 5,809
Debt issuance costs...................................... 38 4,598
Other identified intangible assets....................... -- --
------ -------
5,847 10,407
Accumulated amortization................................. (364) (696)
------ -------
5,483 9,711
Other.................................................... 262 334
------ -------
$5,745 $10,045
====== =======
</TABLE>

Amortization of deferred financing charges of $57, $48, and $189 for the
years ended December 31, 1996, 1997, and 1998, respectively, have been included
in interest expense. In 1996, 1997, and 1998, the Company wrote off $36,
$1,090, and $38, respectively of fully amortized noncurrent assets.

5. Accrued Liabilities:

Accrued liabilities at December 31 consist of the following:

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Income taxes................................................... $2,337 $ 855
Payroll........................................................ 287 117
Pension and 401(k)............................................. 4,788 4,439
Interest....................................................... 57 553
Other.......................................................... 727 779
------ ------
$8,196 $6,743
====== ======
</TABLE>

6. Debt:

Debt at December 31 consists of the following:

<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Senior Credit Facility
Amortizing Term Loan....................................... $ -- $ 50,000
Revolving Credit Facility.................................. -- 36,000
Senior Subordinated Credit Facility......................... -- 65,000
Revolving credit loan, paid in 1998......................... 20,000 --
------- --------
20,000 151,000
Less current portion........................................ -- 1,000
------- --------
$20,000 $150,000
======= ========
</TABLE>

F-10
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

6. Debt--(Continued):

The Company entered into a credit agreement dated as of September 30, 1998,
with a syndicate of lenders and First Union National Bank, as Agent (the
"Senior Credit Facility"). Under the Senior Credit Facility, the lenders have
agreed to provide the Company with a total of up to $125.0 million of credit
consisting of (i) a five-year revolving credit facility for up to $75.0
million (the "Revolver") and (ii) a six-year amortizing term loan in the
amount of $50.0 million (the "Term Loan"). The Revolver contains two sub
facilities: a $5.0 million swingline facility for working capital requirements
and a $20.0 million letter of credit facility. At December 31, 1998 the
Company had $39.0 million of available borrowings under the Revolver.

Under the Senior Credit Facility, the Company may be required to use the
proceeds for the following transactions to prepay in part, the Term Loan and
the Revolver if:

. the Company sells assets in transactions outside the ordinary course of
business;

. the Company issues debt or equity securities; or

. the Company receives insurance proceeds for casualty losses and does not
repair or replace the damaged facilities.

These prepayments would be applied first to the Term Loan, and upon payment
of the Term Loan, to permanently pay outstanding loans under the Revolver.

The Senior Credit Facility is collateralized by a first priority lien on
substantially all of the Company's real and personal property. The lien also
covers (i) 100% of the capital stock of each direct or indirect domestic
subsidiary of the Company, (ii) 65% of the capital stock of each first tier
foreign subsidiary of the Company and (iii) certain promissory notes issued by
affiliates of the Company. The Senior Credit Facility is also collateralized
by a non-recourse pledge by Glass Holdings, the parent of the Company, of
capital stock of certain affiliates of the Company.

The annual interest rate applicable to the Revolver and the Term Loan is a
fluctuating rate of interest measured, at the Company's option, by reference
to either (i) LIBOR or (ii) the greater of the published prime rate of First
Union National Bank or the overnight federal funds rate plus 0.5% ("ABR"),
plus, in either case, an additional amount which fluctuates based upon the
leverage ratio of the Company. This additional amount ranges from 2.00% to
2.75% for LIBOR based borrowings and 0.75% to 1.50% for ABR based borrowings.

The Senior Credit Facility provides for an annual administrative fee to be
paid to the Agent, an unused commitment fee payable to the lenders and certain
other fees payable in connection with letters of credit issued under the
Revolver.

The Senior Credit Facility requires the Company to maintain a certain
maximum leverage ratio and minimum consolidated net worth, interest coverage
and fixed charge coverage ratios. As of December 31, 1998, the Company was in
compliance with these covenants.

On September 30, 1998, the Company also entered into a ten-year senior
subordinated credit agreement with First Union Investors, Inc. as Agent (the
"Senior Subordinated Credit Facility"). Subsequently, other institutions
became lenders under the Senior Subordinated Credit Facility. The Senior
Subordinated Credit Facility is an unsecured senior subordinated obligation of
the Company. Amounts outstanding under the Senior Subordinated Credit Facility
accrued interest at variable rates based on either LIBOR or a treasury based
rate.

F-11
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

6. Debt--(Continued):

As of December 31, 1998, the Company had $65.0 million outstanding under the
Senior Subordinated Credit Facility. The Senior Subordinated Credit Facility
was paid in full on January 21, 1999 (Note 14).

In 1997, the Company with Glass Holdings and its affiliate, Belmont of
America, Inc. ("BOA"), entered into a Global Credit Agreement which allowed
borrowings by the Company up to $35 million. The $35 million of available
borrowings consisted of two separate arrangements as follows:

. Revolving credit loan up to $25 million due April 2002 with interest due
monthly. At December 31, 1997, $20 million of revolving credit loans were
outstanding.

. Working capital commitment loans up to $10 million due April 1998,
including up to $5 million of swingline borrowings for use in daily cash
management, with interest due monthly. At December 31, 1997, $5 million
of working capital commitment loans were outstanding.

All amounts outstanding under the Global Credit Agreement were repaid in
1998 with the proceeds from the Senior Credit Facility described above.

The aggregate maturities of long-term debt at December 31, 1998 are as
follows:

<TABLE>
<S> <C>
1999 $ 1,000
2000 4,750
2001 7,750
2002 10,750
2003 13,750
Thereafter 113,000
--------
$151,000
========
</TABLE>

7. Income Taxes:

Income tax expense for the years ended December 31, 1996, 1997 and 1998
consists of the following:

<TABLE>
<CAPTION>
1996
--------------------------
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Federal........................................... $ 12,819 $ 979 $ 13,798
State............................................. 2,100 98 2,198
-------- ------- --------
$ 14,919 $ 1,077 $ 15,996
======== ======= ========
<CAPTION>
1997
--------------------------
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Federal........................................... $ 10,242 $ 1,340 $ 11,582
State............................................. 2,039 31 2,070
-------- ------- --------
$ 12,281 $ 1,371 $ 13,652
======== ======= ========
</TABLE>

F-12
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

7. Income Taxes--(Continued):

<TABLE>
<CAPTION>
1998
------------------------
Current Deferred Total
------- -------- -------
<S> <C> <C> <C>
Federal............................................. $ 7,649 $ 933 $ 8,582
State............................................... 1,178 94 1,272
------- ------- -------
$ 8,827 $ 1,027 $ 9,854
======= ======= =======
</TABLE>

A reconciliation of the difference between the federal statutory rate and
the effective income tax rate as a percentage of income before taxes is as
follows:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit................. 3.4 3.8 3.9
Other...................................................... 1.6 (0.2) 0.2
---- ---- ----
40.0% 38.6% 39.1%
==== ==== ====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1996, 1997 and 1998 are presented below:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Inventories..................................... $ 792 $ 1,157 $ 1,321
Accounts receivable............................. 186 -- --
Accrued liabilities............................. 538 530 550
Reserve for self-insured medical claims......... 96 96 96
Other........................................... 3 349 537
------- ------- -------
Total gross deferred tax assets............... 1,615 2,132 2,504
------- ------- -------
Deferred tax liabilities:
Accounts receivable............................. -- -- (88)
Depreciation.................................... (4,807) (5,960) (6,956)
Other........................................... (100) (835) (1,150)
------- ------- -------
Total gross deferred tax liabilities.......... (4,907) (6,795) (8,194)
------- ------- -------
Net deferred tax liability.................... $(3,292) $(4,663) $(5,690)
======= ======= =======
</TABLE>

In May 1996, the Company settled an Internal Revenue Service (IRS)
examination of its federal income tax returns for fiscal years 1988, 1989, and
1990, related primarily to the valuation of certain intangible assets acquired
in connection with the purchase of the Company in 1988. The Company also
settled an IRS examination of the 1992, 1993, and 1994 tax returns, related
primarily to the rollout of the 1988-1990 adjustment. The adjustment associated
with these settlements resulted in additional current and deferred tax
liabilities resulting in an increase of $4,654 to goodwill (Note 4) in 1996.
Interest of $1,698 related to these IRS settlements was recorded in prior
years. Further, an additional $1,549 of interest expense was recorded in prior
years related to open IRS examinations. This interest expense was reversed in
1996 when the examinations were settled. Such reversal was included in other
income in 1996.

F-13
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

7. Income Taxes--(Continued):

The Company is included in the consolidated federal tax return of Glass
Holdings. Pursuant to the Company's tax sharing agreement, the Company will be
required to make tax sharing payments to Glass Holdings with respect to the
Company's pro rata share of consolidated federal income tax liabilities which
does not differ significantly from that which would be determined on a stand
alone basis.

8. Employee Benefit Plans:

Defined Contribution Plan: The Company has a savings plan (401(k) Plan) for
all employees which qualifies under Section 401(k) of the Internal Revenue
Code. The 401(k) Plan allows participants to contribute up to a fixed
percentage of their compensation. Company contributions, if any, are made at
the discretion of the Board of Directors. The Company allows participants an
election of receiving their profit sharing, when applicable, in cash or as an
employer contribution to the 401(k) Plan. The Company's contribution to the
401(k) Plan and cash payments to participants for 1996 amounted to $2,674 and
$1,551, respectively, for 1997 amounted to $2,364 and $1,495, respectively, and
for 1998 amounted to $1,743 and $1,061, respectively.

Defined Benefit Pension Plan: The Company has a defined benefit pension plan
(the "Plan") covering substantially all of its employees. Participating
employees are required to contribute to the Plan. Company contributions to the
Plan for 1996, 1997, and 1998 amounted to $546, $183, and $123, respectively.

A summary of the components of the defined benefit pension plans' net
periodic pension cost for the plan is as follows:

<TABLE>
<CAPTION>
1996 1997 1998
----- ---- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period......... $ 800 $777 $ 934
Interest cost on projected benefit obligation.......... 744 888 1,009
Expected return on plan assets......................... (789) (988) (1,191)
Net amortization and deferral.......................... 7 7 7
----- ---- -------
Net periodic pension expense........................... $ 762 $684 $ 759
===== ==== =======
Assumptions used:
Weighted-average discount rates........................ 7.50% 7.00% 6.75%
Rate of increase in compensation levels................ 5.00% 5.00% 5.00%
Expected long-term rate of return on assets............ 8.00% 8.00% 8.00%
</TABLE>

F-14
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

8. Employee Benefit Plans--(Continued):

The change in projected benefit obligation, the change in fair value of plan
assets and the funded status of the Company's pension plans at December 31 is
summarized below:

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Change in projected benefits obligations:
Projected benefit obligation at beginning of year.......... $12,350 $14,621
Service cost............................................... 777 934
Interest cost.............................................. 888 1,009
Actuarial (gain)/loss...................................... 696 703
Benefits paid.............................................. (846) (1,454)
Plan participants' contributions........................... 756 926
------- -------
Projected benefit obligation at end of year................ $14,621 $16,739
======= =======
Change in fair value of plan assets:
Fair value of plan assets at beginning of year............. $12,259 $14,763
Actual return on plan assets............................... 2,411 1,184
Employer contributions..................................... 183 123
Employee contributions..................................... 756 926
Benefits paid.............................................. (846) (1,454)
------- -------
Fair value of plan assets at end of year................... $14,763 $15,542
======= =======
Funded status................................................ $ 142 $(1,197)
Unrecognized prior service cost.............................. 68 61
Unrecognized gain............................................ (874) (164)
------- -------
Net amount recognized in accrued liabilities................. $ (664) $(1,300)
======= =======
</TABLE>

Postretirement Benefits: In addition to providing pension benefits, the
Company provides certain retirement health care benefits to eligible employees.
Employees become eligible for these benefits by attaining specified age and
service requirements.

A summary of the components of the other postretirement benefit plan's net
periodic cost for the plan is as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Other postretirement benefit plans:
Service cost-benefits earned during the period.............. $ 39 $ 43 $ 54
Interest cost on projected benefit obligation............... 59 66 74
Recognized net actuarial (gain) or loss..................... (11) (11) (2)
---- ---- ----
Total postretirement benefit expenses....................... $ 87 $ 98 $126
==== ==== ====
Assumptions used:
Weighted-average discount rates............................. 7.50% 7.00% 6.75%
Medical Trend Rate.......................................... 5.50% 5.50% 5.25%
</TABLE>

F-15
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

8. Employee Benefit Plans--(Continued):

These calculations are based on an assumed medical trend rate which
gradually decreases to an ultimate rate of 5.00% in 1999.

The change in projected benefit obligation, the change in fair value of plan
assets and the funded status of the Company's postretirement benefit plans at
December 31 is summarized below:

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Change in projected benefit obligations:
Projected benefit obligation at beginning of year........... $ 925 $ 1,027
Service cost................................................ 43 54
Interest cost............................................... 66 74
Plan participant contributions.............................. 143 144
Actuarial (gain)/loss....................................... 31 343
Benefits paid............................................... (181) (184)
------- -------
Projected benefit obligation at end of year............... $ 1,027 $ 1,458
======= =======
Change in fair value of plan assets:
Fair value of plan assets at beginning of year.............. $ 0 $ 0
Actual return on plan assets................................ 0 0
Employer contributions...................................... 38 40
Employee contributions...................................... 143 144
Benefits paid............................................... (181) (184)
------- -------
Fair value of plan assets at end of year.................... $ 0 $ 0
======= =======
Funded status................................................. $(1,027) $(1,458)
Unrecognized loss/(gain).................................... (241) 64
------- -------
Net amounts recognized...................................... $(1,268) $(1,394)
======= =======
</TABLE>

Assumed health care trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:

<TABLE>
<CAPTION>
1997 1998
---- -----
<S> <C> <C>
1% increase:
Effect on total of service and interest cost components......... $ 16 $ 19
Effect on postretirement benefit obligation..................... $102 $ 127
1% decrease:
Effect on total of service and interest cost components......... $(16) $ (19)
Effect on postretirement benefit obligation..................... $(88) $(110)
</TABLE>

F-16
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

9. Concentrations:

The Company's cash and cash equivalents are placed in major domestic and
international banks. Deposits in such banks may exceed federally insured
limits.

Substantially all of the Company's raw materials are purchased from two
suppliers. In the event suppliers are unable or unwilling to deliver glass,
aramid or carbon yarns, the business, financial condition and results of
operations could be materially adversely affected.

Substantially all the Company's trade accounts receivable are due from
companies in the electronics, composites, insulation, filtration, construction
and commercial industries. Management periodically performs credit evaluations
of its customers and generally does not require collateral. Credit losses have
historically been within management's expectations.

10. Segment Information:

The Company operates in one business segment that manufactures specialty
woven and non-woven fabrics for use in a variety of industrial and commercial
applications. The Company's principal market is the United States. Information
by geographic area is presented below, with sales based on the location of the
customer.

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
United States...................................... $174,673 $191,632 $183,080
Foreign............................................ 20,523 26,257 18,674
-------- -------- --------
$195,196 $217,889 $201,754
======== ======== ========
</TABLE>

The following table summarizes net sales for each market the Company serves
for the years ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Electronics:
Lightweight fabrics................................ $ 46,127 $ 57,559 $ 59,358
Heavyweight fabrics................................ 68,969 65,739 41,929
Composites......................................... 31,172 45,707 52,322
Filtration......................................... 21,699 22,781 20,227
Commercial......................................... 11,487 11,009 10,092
Insulation......................................... 10,279 8,961 8,040
Construction....................................... 5,463 6,133 9,786
-------- -------- --------
$195,196 $217,889 $201,754
======== ======== ========
</TABLE>

The following table presents a summary of sales of significant customers as
a percentage of the Company's net sales:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 15.6% 12.1% 8.0%
==== ==== ====
Customer B.................................................. 14.2% 14.2% 11.2%
==== ==== ====
Customer C.................................................. 5.8% 9.7% 10.5%
==== ==== ====
</TABLE>

F-17
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

11. Commitments and Contingencies:

Financial Instruments: The Company has an interest rate swap transaction
which expires September 30, 2004, on an initial notional amount on $50,000 in
order to limit its exposure to interest rate fluctuations under the Term Loan
portion of the Senior Credit Facility (Note 6). Under the swap agreement, the
Company has secured a fixed LIBOR rate of interest of 5.04% on the notional
amount which is correlated in a manner consistent with the amortization of the
Term Loan principal. The fair value of the interest rate swap agreement
representing the estimated amount that the Company would receive to terminate
the swap agreement was $349 at December 31, 1998; however, the Company has no
intention of terminating the swap agreement.

Leases: The Company leases facilities and equipment. Generally, such leases
contain renewal options under cancelable and noncancelable operating leases.
Rent expense amounted to $693, $697, and $879 for the years ended December 31,
1996, 1997, and 1998, respectively. Under the terms of noncancelable operating
leases, the Company is committed to the following future minimum lease payments
at December 31, 1998:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1999.................................... $315
2000.................................... 302
2001.................................... 290
2002.................................... 70
2003.................................... 8
----
$985
====
</TABLE>

Guarantees: In 1997, the Company cosigned a debt facility with Glass
Holdings guaranteeing the payment and performance of the obligations of BOA and
Shanghai Porcher Industries Co., Ltd., affiliates of the Company. The
obligations guaranteed by the Company under the debt facility are a $30,000
five year stand-by letter of credit of Shanghai Porcher Industries, Ltd., and a
$5,000 tax-free variable rate demand note for BOA. At December 31, 1997 and
1998, respectively, $20,500 and $28,401 of guaranteed obligations were
outstanding on the books of these affiliates.

Environmental: The Company is currently involved in environmental matters at
two plant locations. Management believes, however, that the ultimate resolution
of such matters will not have a material adverse impact on the Company's
financial position or results of operations.

F-18
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

12. Related Party Transactions:

Glass Holdings provided loan guarantees to the Company during 1996 and 1997.
At December 31, 1996 and 1997, the Company was current on all loan guarantee
fees to Glass Holdings.

Related party balances at December 31, 1996, 1997, and 1998 and transactions
for the years ended December 31, 1996, 1997, and 1998 were as follows:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------ -------
<S> <C> <C> <C>
Trade accounts receivable from Porcher................. $ 162 $ 98 $ 213
======= ====== =======
Trade accounts receivable from other affiliated
companies............................................. $ 1 $ -- $ --
======= ====== =======
Reimbursable expenses payable to Porcher............... $ 84 $ 32 $ 37
======= ====== =======
Sales to Porcher....................................... $ 484 $ 329 $ 1,672
======= ====== =======
Management fees to subsidiaries of Porcher............. $ 388 $ 202 $ 312
======= ====== =======
Management fees included in accounts payable........... $ 62 $ 56 $ 158
======= ====== =======
Management fees overpayment refundable by Porcher...... $ 265 $ -- $ --
======= ====== =======
Management fees to Porcher............................. $ -- $ 102 $ 12
======= ====== =======
Fees to a subsidiary of Glass Holdings................. $ 1,050 $1,000 $ 950
======= ====== =======
Fees included accounts payable......................... $ 112 $ 13 $ --
======= ====== =======
Due from affiliate in other current assets............. $ -- $ 44 $ 1,430
======= ====== =======
Purchases from Porcher and affiliated companies........ $ 5,701 $8,081 $ 7,023
======= ====== =======
Affiliated purchases included in accounts payable...... $ 965 $ 749 $ 1,097
======= ====== =======
Affiliated purchases included in inventory............. $ 974 $1,491 $ 1,824
======= ====== =======
Payable to Glass Holdings, for taxes included in
accrued expenses...................................... $ 1,374 $2,337 $ 855
======= ====== =======
Non-interest bearing loan payable to Glass Holdings.... $ -- $1,800 $ --
======= ====== =======
Payable to Advanced Glassfiber Yarns LLC............... $ -- $ -- $ 2,903
======= ====== =======
Receivable from Advanced Glassfiber Yarns LLC.......... $ -- $ -- $ 110
======= ====== =======
Reimbursable expenses and lease income from Advanced
Glassfiber Yarns LLC.................................. $ -- $ -- $ 340
======= ====== =======
Purchases from Advanced Glassfiber Yarns LLC........... $ -- $ -- $11,185
======= ====== =======
Management accounting and administrative fee income
from a subsidiary of Glass Holdings................... $ 13 $ 360 $ 658
======= ====== =======
Management, technological support and administrative
income from a joint venture of Glass Holdings......... $ 705 $ 349 $ 52
======= ====== =======
Dividends to Glass Holdings............................ $15,164 $4,913 $ --
======= ====== =======
Commissions to Porcher................................. $ 307 $ 380 $ 363
======= ====== =======
Service fees from subsidiary of Porcher................ $ 17 $ 23 $ 43
======= ====== =======
</TABLE>

In 1998, the Company loaned an officer $365. The loan bears no interest and
is payable upon the sale of the officer's former residence.

F-19
<PAGE>

BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)

13. Loan to Parent:

On September 30, 1998, AGY Holdings, an affiliate of the Company, purchased
a 51% ownership interest in Advanced Glassfiber Yarns LLC for aggregate
consideration of $338.9 million (including post-closing adjustments). In
connection with the acquisition, the Company loaned Glass Holdings
approximately $138.6 million to provide Glass Holdings a portion of the capital
necessary to fund the acquisition. The Company raised the proceeds for this
loan by borrowing (i) $88.4 million under the Senior Credit Facility, and (ii)
$65.0 million under the Senior Subordinated Credit Facility (Note 6). The loan
from the Company to Glass Holdings is evidenced by promissory notes that bear
interest at the Cost of Funds Rate for the Company for the calendar year
immediately preceding the date on which any interest is due. With respect to
any period of determination, the Cost of Funds Rate means a rate per annum
equal to the blended interest rate (as reasonably calculated by the Company)
applicable to borrowings of the Company during such period in respect of
indebtedness incurred by the Company to fund the loan to Glass Holdings.
Accrued interest is due and payable on the first business day of February of
each year commencing on February 1, 1999 and on any date on which any principal
is due. The promissory notes are payable on October 31, 2008 or such later date
as may be agreed to by the Company and Glass Holdings. At December 31, 1998,
the loan to Glass Holdings of $136.8 million has been included as a contra
equity account in the financial statements. Accrued interest at December 31,
1998 of approximately $3.2 million on this loan has been fully reserved.

14. Subsequent Events:

On January 15, 1999, the Company issued $100 million of Senior Subordinated
Notes ($98 million net of discount) due 2009. Net proceeds of approximately
$95.3 million were used to repay outstanding indebtedness of $65.0 million
under the Senior Subordinated Credit Facility, interest of $0.5 million under
the Senior Subordinated Credit Facility, and $29.8 million under the Revolver.
Interest is payable semiannually beginning in July, 1999. In addition, debt
issuance costs of $1.7 million ($1.0 net of tax) associated with the
termination of the Senior Subordinated Credit Facility were written off in the
first quarter of 1999.

F-20
<PAGE>

$100,000,000

BGF INDUSTRIES, INC.

Exchange Offer for $100,000,000 of 10 1/4% Senior Subordinated Notes due 2009

, 1999
<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Under Section 145 of the General Corporation Law of the State of Delaware, a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request in such capacities with another enterprise, against
expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. Delaware law
provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful.
In addition, Delaware law does not permit indemnification of any action or suit
by or in the right of the corporation, where such person has been adjudged
liable to the corporation, unless, and only to the extent that, a court
determines that such person fairly and reasonably is entitled to indemnity for
costs the court deems proper in light of liability adjudication. Indemnity is
mandatory to the extent a claim, issue or matter has been successfully
defended.

Article V of BGF Industries, Inc.'s bylaws provide, under certain
circumstances, for the indemnification of BGF Industries, Inc.'s present or
former directors or officers and persons who, at the request of BGF Industries,
Inc., are or were serving in a similar capacity for another corporation or
entity. These provisions also allow the Board of Directors to purchase and
maintain insurance on behalf of BGF Industries, Inc.'s present or former
directors, officers or persons who are or were serving at the request of BGF
Industries, Inc. as a director or officer of another corporation or entity.

Item 21. Exhibits and Financial Statement Schedules

(a) The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
3.1(1) Certificate of Incorporation of BGF Industries, Inc., as amended

3.2(1) Bylaws of BGF Industries, Inc., as amended

4.1(1) Indenture, dated as of January 21, 1999, among BGF Industries,
Inc. and The Bank of New York, as trustee, relating to $100
million principal amount of 10 1/4% Senior Subordinated Notes due
2009

4.2(1) Form of 10 1/4% Series A and Series B Senior Subordinated Notes
due 2009 (included in Exhibit 4.1)

4.3(1) Registration Rights Agreement dated as of January 21, 1999, by and
between BGF Industries, Inc. and the Initial Purchaser

5 Form of opinion of Alston & Bird LLP regarding legality

10.1(1) Deferred Compensation Agreement, dated November 13, 1995, by and
between BGF Industries, Inc. and Graham A. Pope

10.2(1) Deferred Compensation Agreement, dated April 1, 1998, by and
between BGF Industries, Inc. and Richard L. Cromer

10.3(1) Deferred Compensation Agreement, dated April 16, 1990, by and
between BGF Industries, Inc. and James R. Henderson
</TABLE>

II-1
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------

<C> <S>
10.4(1) Deferred Compensation Agreement, dated January 28, 1993, by and
between BGF Services, Inc. and Philippe Dorier

10.5 Lease, dated March 20, 1996, between E.R. English, Sr., as lessor,
and BGF Industries, Inc., as lessee

10.6(1) Purchase Order (Lease), dated November 26, 1996, between K&C
Brokerage, as lessor, and BGF Industries, Inc., as lessee

10.7(1) Lease, dated November 1, 1991, by and between H.V. Johns, Jr., as
lessor, and BGF Industries, Inc., as lessee

10.8 Agreement between Contractor and Owner (Warehouse Lease), dated
February 1, 1998, between Boyd Warehouse/Emmett Williams, as
lessor, and BGF Industries, Inc., as lessee

10.9(1) Note Purchase Agreement dated January 15, 1999 between BGF
Industries, Inc. and the Initial Purchaser

10.10(1) Senior Credit Agreement dated as of September 30, 1998 among BGF
Industries, Inc., as Borrower, its Domestic Subsidiaries from time
to time party thereto, as Guarantors, the Lenders Parties thereto
and First Union National Bank, as Agent

10.11(1) Senior Subordinated Credit Agreement dated as of September 30,
1998 among BGF Industries, Inc., as Borrower, certain subsidiaries
from time to time party thereto, as Guarantors, and First Union
Investors, Inc., as Agent

10.12(1) Promissory Note, dated September 30, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$135,043,844.62

10.13(1) Promissory Note, dated December 23, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$ 2,681,000

12 Statement of Computation of Ratios

21(1) Subsidiaries of BGF

23.1 Consent of PricewaterhouseCoopers LLP

23.2 Consent of Alston & Bird LLP (included in Exhibit 5)

24(1) Powers of Attorney (included on signature page)

25(1) Statement of Eligibility and Qualification (Form T-1) of The Bank
of New York, as Trustee

27 Financial Data Schedule

99(1) Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer
</TABLE>
- --------

(1) Previously filed.

(b) Financial Statement Schedules--None

Item 22. Undertakings

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");

II-2
<PAGE>

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.

(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement No. 333-72321 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Greensboro, State of North Carolina, on April 26, 1999.

BGF INDUSTRIES, INC.

/s/ Philippe R. Dorier
By: _________________________________

Philippe R. Dorier

Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement No. 333-72321 has been signed by the following
persons in the capacities indicated on February 12, 1999:

<TABLE>
<CAPTION>
Signature Title
--------- -----

<S> <C>
* Chairman of the Board of
______________________________________ Directors, Chief
Robert Porcher Executive Officer and
Director (Principal
Executive Officer)

* Director
______________________________________
Graham A. Pope

* President
______________________________________
Richard L. Cromer

/s/ Philippe R. Dorier Chief Financial Officer
______________________________________ (Principal Financial and
Philippe R. Dorier Accounting Officer)

*By: /s/ Philippe R. Dorier
______________________________________
Philippe R. Dorier (Attorney-in-
fact)
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
3.1(1) Certificate of Incorporation of BGF Industries, Inc., as amended

3.2(1) Bylaws of BGF Industries, Inc., as amended

4.2(1) Form of 10 1/4% Series A and Series B Senior Subordinated Notes
due 2009 (included in Exhibit 4.1)

4.3(1) Registration Rights Agreement dated as of January 21, 1999, by and
between BGF Industries, Inc. and the Initial Purchaser

5 Form of opinion of Alston & Bird LLP regarding legality

10.1(1) Deferred Compensation Agreement, dated November 13, 1995, by and
between BGF Industries, Inc. and Graham A. Pope

10.2(1) Deferred Compensation Agreement, dated April 1, 1998, by and
between BGF Industries, Inc. and Richard L. Cromer

10.3(1) Deferred Compensation Agreement, dated April 16, 1990, by and
between BGF Industries, Inc. and James R. Henderson
10.4(1) Deferred Compensation Agreement, dated January 28, 1993, by and
between BGF Services, Inc. and Philippe Dorier

10.5 Lease, dated March 20, 1996, between E.R. English, Sr., as lessor,
and BGF Industries, Inc., as lessee

10.6(1) Purchase Order (Lease), dated November 26, 1996, between K&C
Brokerage, as lessor, and BGF Industries, Inc., as lessee

10.7(1) Lease, dated November 1, 1991, by and between H.V. Johns, Jr., as
lessor, and BGF Industries, Inc., as lessee

10.8 Agreement between Contractor and Owner (Warehouse Lease), dated
February 1, 1998, between Boyd Warehouse/Emmett Williams, as
lessor, and BGF Industries, Inc., as lessee

10.9(1) Note Purchase Agreement dated January 15, 1999 between BGF
Industries, Inc. and the Initial Purchaser

10.12(1) Promissory Note, dated September 30, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$135,043,844.62

10.13(1) Promissory Note, dated December 23, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$ 2,681,000

</TABLE>

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------

<C> <S>
12 Statement of Computation of Ratios

21(1) Subsidiaries of BGF

23.1 Consent of PricewaterhouseCoopers LLP

23.2 Consent of Alston & Bird LLP (included in Exhibit 5)

24(1) Powers of Attorney (included on signature page)

25(1) Statement of Eligibility and Qualification (Form T-1) of The Bank
of New York, as Trustee

27 Financial Data Schedule

99(1) Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer
</TABLE>
- --------

(1) Previously filed.

<PAGE>

EXHIBIT 5

[LETTERHEAD OF ALSTON & BIRD LLP APPEARS HERE]

_____ __, 1999

BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410

Ladies and Gentlemen:

We have acted as counsel to BGF Industries, Inc., a Delaware corporation
("BGF"), in connection with the registration under the Securities Act of 1933,
as amended (the "Securities Act"), of $100,000,000 aggregate principal amount of
a new series of BGF's 10 1/4% Senior Subordinated Notes due 2009 (the "Exchange
Notes") pursuant to a Registration Statement on Form S-4 (the "Registration
Statement"). The Exchange Notes will be issued pursuant to the terms of the
Indenture dated as of January 21, 1999 among BGF and The Bank of New York, as
trustee (the "Trustee"), in exchange for an identical principal amount of any
and all of BGF's outstanding 10 1/4% Senior Subordinated Notes due 2009 (the
"Old Notes"), which were issued and sold by BGF, in a transaction not registered
under the Securities Act in reliance upon exemptions under the Securities Act.

In connection with the foregoing, we have examined the Certificate of
Incorporation and Bylaws of BGF, the proceedings taken by BGF to authorize the
offering, sale and issuance of the Old Notes and the Exchange Notes, the
Indenture (including the form of the Exchange Notes) and the Registration
Statement. We also have examined and relied upon such other records, documents
and other instruments that in our judgment are necessary or appropriate in order
to express the opinions hereinafter set forth.

Based on the foregoing, we are of the opinion that the Exchange Notes have
been duly authorized and, when issued and exchanged for the Old Notes in
accordance with the terms of the Exchange Offer described in the Prospectus
included in the Registration Statement, will be validly issued and binding
obligations of BGF.

The opinions expressed above are subject to (a) applicable bankruptcy,
receivership, conservatorship, fraudulent conveyance, insolvency, moratorium,
reorganization and similar laws affecting the enforcement of creditors' rights
and
<PAGE>

BGF Industries, Inc.
_____ __, 1999
Page 2

remedies generally, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and (c)
certain other limitations that exist relating to the rights of set-off,
indemnity and contribution and by virtue of public policy.

We are licensed to practice law in the State of Georgia and before the
federal courts having jurisdiction in Georgia, and we express no opinion with
respect to the laws of any jurisdiction other than the State of Georgia, the
State of Delaware, the State of New York and the federal laws of the United
States of America.

We hereby consent to the filing of this opinion as an exhibit to the above-
referenced Registration Statement.

Very truly yours,

ALSTON & BIRD LLP

By:
------------------------------
B. Lynn Walsh, Partner

<PAGE>

EXHIBIT 10.5

LEASE

STATE OF VIRGINIA

COUNTY OF CAMPBELL

TOWN OF ALTAVISTA

THIS LEASE, made this 20th day of March, 1996, between E. R. ENGLISH, SR.
(Lessor), and BGF INDUSTRIES, INC. (Lessee);

WITNESSETH:

That for and in consideration of the agreements and covenants hereinafter
mentioned, the Lessor does hereby demise and lease unto the Lessee a certain
building lying and being in Campbell County, Virginia and more particularly
described as follows:

A steel building of approximately 101,000 square feet located at 1523 East
Main Street, Altavista, Virginia 24517.

TO HAVE AND TO HOLD the same with all privileges and appurtenances
thereunto belonging unto the Lessee, for the term hereinafter specified upon the
following terms and conditions:

1. The term of this lease shall begin on March 20, 1996 and shall continue
for three (3) years terminating on the 19th day of March, 1999.

Following the expiration of this three (3) year lease term, Lessee shall
have the option to renew this lease for an additional three (3) years (either
one (1) three (3) year term or three (3) one (1) year terms) at rates to be
negotiated.

Except for the rental, the renewals shall be upon the same terms and
conditions as are set forth herein. The Lessee is to notify the Lessor in
writing twelve (12) months prior to the renewal date if the lease is to be
extended or terminated.

2. The Lessor reserves and the Lessee agrees to pay for and during the
term of this lease as follows:

1st year $12,500.00/month

2nd year $13,300.00/month

3rd year $14,200.00/month
<PAGE>

3. The Lessor at his own cost and expense shall maintain the building on
the premises herein leased in proper condition and repair, but the Lessee shall
at its own cost and expense attend to any minor and incidental internal repairs
which are usually and customarily paid for by the Lessee. The Lessee will be
responsible for repairs to the building resulting from damage by Lessee's
employees or equipment except for that which occurs through normal wear and
tear.

4. During the term of this lease the Lessor shall pay all property taxes
and assessments imposed on the demised premises by any lawful authority. The
Lessee shall pay for all electric current, lights, gas and water used by Lessee
while in possession of said premises.

5. It is understood and agreed that the responsibility and cost of
insuring the building and the premises hereby demised against fire or other
casualty shall be borne by the Lessor. In case of damages to the premises
occasioned during this term by fire or other unavoidable casualty, and such
damage does not render the same unfit for use, the Lessor shall promptly repair
the same. In case said premises, during said term, shall be destroyed or
damaged by fire or other unavoidable casualty so that the same shall be unfit
for use or substantially destroyed, then said rent or a proportionate part
thereof shall be abated until said premise shall have been put in proper repair
by the Lessor, or this lease shall, upon the happening of such event, be
terminated at the election of either of the parties hereto. This clause shall
cover with like provisions the condemnation and/or destruction of the property
ordered by the properly constituted authorities of the State, County, City or
National government.

Lessor is not responsible for water damages to Lessee's goods resulting
from sprinkler leaking or malfunction.

6. The Lessor warrants and agrees that the Lessee shall enjoy said
premises during the said term free from the adverse claim of any person. The
Lessee agrees to make no unlawful or offensive use of the premises and to
deliver up the same at the end of the term hereby demised or upon the earlier
termination of this lease, as herein provided, in substantially as good order
and condition as same are now in, ordinary wear and tear, fire, and other
unavoidable casualties expected, and subject to the responsibility herein fixed
for the making of repairs.

7. The Lessee shall have the right to assign the lease or sublet the
premises herein demised, but such assignment or subletting shall in no way
relieve the Lessee from the obligation to pay the rental herein provided and to
do and perform all other things agreed to be done by Lessee unless the Lessor
herein shall in writing release the Lessee from such obligations.

8. Lessee shall have the right to make alterations to the demised premises
as are necessitated by its business needs, provided, however, that the Lessor
shall have the

-2-
<PAGE>

right to require the Lessee to restore the premises to their original
conditions, less reasonable wear and tear, upon the termination of this lease.

9. The Lessee shall have the right, upon the termination of the lease term
or any renewal thereof, to remove all trade fixtures, machinery and equipment
and installations which the Lessee may have upon the demised premises, except
that the Lessee shall repair any damage to the demised premises which may be
caused by such removal.

10. All communications to the Lessor may be addressed to

E. R. English, Jr., P.O.A.
1522 Main Street
Altavista, Virginia 24517

11. All communications to the Lessee may be addressed to:

BGF Industries, Inc.
401 Amherst Avenue
Altavista, Virginia 24517

Attention: Quintus Wade

IN WITNESS WHEREOF, the parties have caused this lease to be executed in
their corporate names by their corporate. officers thereunto duly authorized
this the day and year first above written.

By: /s/ E.R. English Sr. P.O.A.
by E.R. English Sr. P.O.A.
--------------------------

ATTEST:

/s/ Dolly J. Peak 3/20/96
- -----------------

BGF INDUSTRIES, INC.

BY: /s/ Herman Rogers
-----------------

ATTEST:

/s/ Quintus Wade
- ----------------

cc: N. Ross 3/25/96
J. Woodford 5/7/96

-3-
<PAGE>

BGF INDUSTRIES, INC.

February 24, 1998

Mr. E. R. English, Jr.
1522 Main Street
Altavista, VA 24517

Dear Ralph:

Under the terms of the lease on the English Warehouse, located at 1523 East Main
Street, we are notifying you in writing twelve (12) months prior to the renewal
date of March 20, 1999, of our intentions to extend the lease.

Best regards,

/s/ Quintus Wade

Quintus Wade
Administrative Manager

cc: Herman Rogers-BGF

[logo]
An ISO 9002 Manufacturer
401 Amherst Avenue Altavista, VA 24517-1513 (803) 369-4751 Fax (804) 369-
7032
<PAGE>

BGF Industries, Inc.

October 6, 1998

Mr. E. R. English, Jr.
1522 Main Street
Altavista, VA 24517

Dear Ralph:

Per our phone conversation today, BGF Industries, Inc. will extend the lease on
the English Warehouse, located at 1523 East Main Street, for a period of three
years with an effective date of March 20, 1999. Rate will be $14,200 per month.

Best regards,

/s/ Herman

Herman P. Rogers, Jr.
Plant Manager

Copies: Q. Wade-BGF/AP
N. Ross-BGF/GBO

Date 12 25 99 /s/ Bert
will extend
thru
March 31, 2002

An ISO 9002 Manufacturer
401 Amherst Avenue Altavista, VA 24517-1513 (804) 369-4751 Fax (804) 369-7032

<PAGE>

EXHIBIT 10.8

BGF INDUSTRIES, INC.
AGREEMENT BETWEEN CONTRACTOR AND OWNER

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Plant South Hill No. 0121 February 1, 1998 Contract No. 02-98-0121
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Location South Hill, Va 23970 Acct. No. 01-57-0300-0121 Contract Value $2,200.00/per month
- -------------------------------------------------------------------------------------------------------------------
Boyd Warehouse/Emmett Williams Contractor Boyd Warehouse
5000 Danville Street Emmett Williams
South Hill, Va. 23970
-------------------------------------------------
Contract Date February 1, 1998
-------------------------------------------------
</TABLE>

hereinafter called the "Contractor," and BGF INDUSTRIES, INC., hereinafter
called the "Owner".

1. BASIS OF CONTRACT:
-----------------
A. THE CONTRACT DOCUMENT:
---------------------
The Specifications and the Drawings together with the Terms and
Conditions from the basis of the Contract, and they are as fully a
part of the Contract as if recited herein. The Contractor agrees to
perform all work and provide all materials as required by the below
referenced Documents and Scope of Work.

B. SCOPE OF WORK:
-------------
BGF Industries, Inc. agrees to rent from Boyd Warehouse/Emmett
Williams 18,038 square feet of warehouse space for 1 (one) year
beginning February 1, 1998

C. SPECIAL INSTRUCTIONS:
--------------------
Forty-five (45) days notice must be given by either party in order to
cancel contract.

D. REFERENCED DOCUMENTS:
--------------------
Price is per verbal quote to Mike McCullar.

2. CONTRACT SUM: $2,200.00 per month beginning February 1, 1998.
------------

3. INVOICES: Submitted in duplicate to: REMIT TO ADDRESS
--------

BGF INDUSTRIES, INC. BOYD WAREHOUSE
SOUTH HILL PLANT EMMETT WILLIAMS
800 GOODES FERRY BLVD P.O. BOX 549
SOUTH HILL, VIRGINIA 23970 SOUTH HILL, VIRGINIA 23970

BY: /s/ Richard Walker /s/ Emmett Williams
------------------ -------------------
PLANT MANAGER CONTRACTOR

TITLE: Owner/Partner
-----------------

DATE: 1/28/98
-----------------

<PAGE>

BGF INDUSTRIES, INC.
AGREEMENT BETWEEN CONTRACTOR AND OWNER

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plant South Hill No. 0102 February 1, 1999 Contract No. 01-99-0102
- -----------------------------------------------------------------------------------------------------------------------------
Location South Hill, VA 23970 Acct. No. 01-57-0300-0102 Contract Value $2,200.00/per month
- -----------------------------------------------------------------------------------------------------------------------------
Boyd Warehouse/Emmett Williams $1,000 to 0106 Contractor Boyd Warehouse
500 Danville Street $1,106 to 0.02 Emmett Williams
South Hill, Va. 23970
--------------------------------------------------
Contract Date February 1, 1999
--------------------------------------------------

hereinafter called the "Contractor," and B G F Industries, Inc., hereinafter
called the "Owner".

WITNESSETH, that the Contractor and the Owner agree as follows: Note: See last paragraph $1,830.00 for
1. BASIS OF CONTRACT: Second Site Changed to Corporate
------------------ [illegible]
A. THE CONTRACT DOCUMENTS:
-----------------------
The Specifications and the Drawings together with the Terms and
Conditions form the basis of the Contract, and they are as fully a
part of the Contract as if recited herein. The Contractor agrees to
perform all work and provide all materials as required by the below
referenced Documents and Scope of Work.

B. SCOPE OF WORK:
--------------
BGF Industries, Inc. agrees to rent from Boyd Warehouse/Emmett
Williams 18,038 square feet of warehouse space for 1 (one) year
beginning February 1, 1999

C. SPECIAL INSTRUCTIONS:
---------------------
Forty-five (45) days notice must be given by either party in order to
cancel contract.

D. REFERENCED DOCUMENTS:
---------------------
Price is per verbal quote to Mike McCullar.

2. CONTRACT SUM: $2,200.00 per month beginning February 1, 1999.
-------------

3. INVOICES: Submitted in duplicate to: REMIT TO ADDRESS
-------------------------------------

BGF INDUSTRIES, INC. BOYD WAREHOUSE
SOUTH HILL PLANT EMMETT WILLIAMS
800 GOODES FERRY BLVD P.O. BOX 549
SOUTH HILL, VIRGINIA 23970 SOUTH HILL, VIRGINIA 23970

BY: /s/Richard Walker /s/Emmett Williams
------------------ -------------------
PLANT MANAGER CONTRACTOR

TITLE: Owner
------------------

DATE: 1/26/99
-------------------

OK--Change in Oracle 1-28-99 /s/B. [illegible]

</TABLE>

<PAGE>

EXHIBIT 12

BGF INDUSTRIES, INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)

<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1998
------------ ------------ ------------ ------------ ------------ ------------
Actual As Adjusted
------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income............. $ 6,787 $12,584 $24,030 $21,730 $15,317 $ 8,546
Add:
Taxes................. 4,478 7,093 15,996 13,652 9,854 5,616
Fixed charges......... 4,629 3,392 2,430 2,619 4,937 15,946
Capitalized interest.. -- (100) (206) (32) (127) (127)
------- ------- ------- ------- ------- -------
$15,894 $22,969 $42,250 $37,969 $14,664 $21,435
======= ======= ======= ======= ======= =======
Fixed Charges:
Interest expense(a).... 4,311 2,979 1,993 2,355 4,517 15,526
Capitalized interest... -- 100 206 32 127 127
Portion of rents
representative of
interest factor....... 316 313 231 232 293 293
------- ------- ------- ------- ------- -------
$ 4,629 $ 3,392 $ 2,430 $ 2,619 $ 4,937 $15,946
------- ------- ------- ------- ------- -------
Ratio of earnings to
fixed charges.......... 3.4 6.8 17.4 14.5 6.1 1.9
</TABLE>
- --------
(a) Includes amortization of debt issuance costs and original issue discount
and excludes capitalized interest.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
BGF Industries, Inc.

We consent to the inclusion in this pre-effective amendment No. 1 to the
registration statement on Form S-4 (Registration No. 333-72321) of our report
dated February 26, 1999, on our audits of the financial statements and financial
statement schedules of BGF Industries, Inc. We also consent to the references
to our firm under the captions "Experts" and "Selected Financial and Operating
Information."

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Greensboro, North Carolina
April 26, 1999

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Financial Statements of BGF Industries, Inc. as of December 31, 1997 and 1998
and for each of the three years in the period ended December 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 21,504
<ALLOWANCES> (696)
<INVENTORY> 42,532
<CURRENT-ASSETS> 68,618
<PP&E> 128,623
<DEPRECIATION> (70,520)
<TOTAL-ASSETS> 136,766
<CURRENT-LIABILITIES> 15,194
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (38,177)
<TOTAL-LIABILITY-AND-EQUITY> 136,766
<SALES> 201,754
<TOTAL-REVENUES> 201,754
<CGS> 162,478
<TOTAL-COSTS> 162,478
<OTHER-EXPENSES> 9,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,517
<INCOME-PRETAX> 25,171
<INCOME-TAX> 9,854
<INCOME-CONTINUING> 15,317
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,317
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>