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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2952 22-3276290
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(201) 628-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD A. WEINBERG, ESQ.
BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(201) 628-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
With a copy to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE OFFERING PRICE REGISTRATION FEE
------------------------------- ------------ ---------------- ----------------- ----------------
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Series B 8 5/8% Senior Notes due
2006................................. $100,000,000 99.502% $99,502,000 $30,152
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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.
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A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME
EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 31, 1997
PROSPECTUS
OFFER FOR
ALL OUTSTANDING 8 5/8% SENIOR NOTES DUE 2006
IN EXCHANGE FOR SERIES B 8 5/8% SENIOR NOTES DUE 2006
OF
BUILDING MATERIALS CORPORATION OF AMERICA
THIS EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON , 1997.
------------------------
Building Materials Corporation of America, a Delaware corporation ('BMCA'),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the 'Exchange Offer'), to
exchange $1,000 principal amount of its Series
B 8 5/8% Senior Notes due 2006 (the 'New Notes') for each $1,000 principal
amount of its 8 5/8% Senior Notes due 2006 (the 'Old Notes'), of which an
aggregate principal amount of $100,000,000 is outstanding.
The form and terms of the New Notes are identical to the form and terms of
the Old Notes except that the New Notes have been registered under the
Securities Act of 1933, as amended (the 'Securities Act'), and will not bear any
legends restricting the transfer thereof. The New Notes will evidence the same
debt as the Old Notes and will be issued pursuant to, and entitled to the
benefits of, the Indenture governing the Old Notes (the 'Indenture'). See
'Description of the New Notes.'
The Exchange Offer is being made in order to satisfy certain contractual
obligations of BMCA. There will be no cash proceeds to BMCA from the exchange
pursuant to the Exchange Offer. See 'The Exchange Offer' and 'Description of the
New Notes.' As used herein, the term 'Notes' means the Old Notes and the New
Notes treated as a single class.
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of such New
Notes, such interest to be payable with the first interest payment on such New
Notes, but will not receive any payment in respect of interest on such Old Notes
accrued after the issuance of such New Notes.
BMCA will accept for exchange any and all Old Notes validly tendered and not
withdrawn prior to 12:00 midnight, New York City time, on ,
1997 unless extended (as so extended, the 'Expiration Date'). Tenders of Old
Notes may be withdrawn at any time prior to the Expiration Date. The Exchange
Offer is subject to certain customary conditions. See 'The Exchange Offer.'
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the 'Commission') to third parties, BMCA believes that the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by a holder thereof (other than any such holder
that is an 'affiliate' of BMCA within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder is not engaging in
and does not intend to engage in a distribution of such New Notes and such
holder has no arrangement with any person to participate in the distribution of
such New Notes. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of New Notes cannot rely on such interpretation
by the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transactions. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Notes. The letter of transmittal
accompanying this Prospectus (the 'Letter of Transmittal') states that, by so
acknowledging and by delivering a prospectus meeting the requirements of the
Securities Act, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Notes received 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. BMCA has agreed that, for a period of
180 days after the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See 'Plan of
Distribution.'
The Notes are redeemable, in whole or in part, at the option of BMCA at any
time on or after December 15, 2001 at the redemption prices (expressed as
percentages of principal amount) set forth herein, plus accrued and unpaid
interest to the redemption date. In the event that prior to December 9, 1999, a
sale of common stock of BMCA shall occur, BMCA will have the option to redeem
the Notes using the net cash proceeds received therefrom by BMCA as provided,
and subject to the limitations set forth, in the Indenture.
The New Notes will be general senior unsecured obligations of BMCA, will
rank senior to all subordinated indebtedness of BMCA and pari passu in right of
payment to BMCA's 11 3/4% Senior Deferred Coupon Notes due 2004 (the 'Deferred
Coupon Notes') and to all other unsubordinated indebtedness of BMCA. As of
September 29, 1996, the outstanding indebtedness for money borrowed of BMCA and
its subsidiaries was $326.4 million and the other outstanding liabilities
reflected on BMCA's consolidated balance sheet, including trade payables and
accrued expenses, was $200.6 million. As of September 29, 1996, after giving pro
forma effect to the issuance of the Old Notes and the Spin Off Transactions (as
defined), the outstanding consolidated indebtedness of BMCA and its then
existing subsidiaries would have been $395.2 million. The Indenture limits,
among other things, the incurrence of additional Debt (as defined) and the
issuance of Preferred Stock (as defined) by BMCA and its subsidiaries. See 'Risk
Factors' and 'Description of the New Notes--Certain Covenants.'
Prior to the Exchange Offer, there has been no public market for the Notes.
BMCA does not intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system and there can be
no assurance that an active public market for the New Notes will develop.
SEE 'RISK FACTORS' BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus. As
used in this Prospectus, 'Company' means Building Materials Corporation of
America ('BMCA') and its consolidated subsidiaries.
THE COMPANY
BMCA
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the residential and commercial roofing
markets. The Company's products are produced at 22 strategically located
manufacturing facilities. The Company believes that it holds the number one or
two market position in each of the product lines in which it competes (based on
unit sales), including leadership of the fast growing, premium laminated
residential shingle market. The Company's Timberline(Registered) product is the
leading brand in the residential roofing market, and the Company's
Ruberoid(Registered) product is the leading brand in the modified bitumen
market, the latter being the fastest growing segment in the commercial roofing
industry.
On January 1, 1997, GAF Corporation ('GAF'), the indirect parent of the
Company, effected a series of transactions (collectively, the 'Spin Off
Transactions') involving its subsidiaries that resulted in, among other things,
(1) the Company's glass fiber manufacturing facility in Nashville, Tennessee
(and certain related assets and liabilities) being transferred to GAF Fiberglass
Corporation ('GFC'), a subsidiary of GAF, and (2) U.S. Intec, Inc. ('USI'), an
indirect subsidiary of GAF, becoming a subsidiary of the Company. In connection
with the Spin Off Transactions, GFC entered into a long-term supply agreement
with the Company pursuant to which GFC agreed to produce glass fiber for the
Company. See 'Certain Relationships.' The financial and statistical data
regarding the Company presented herein reflect the results of USI from and after
October 20, 1995, the date on which USI was acquired by a subsidiary of GAF,
except as expressly set forth herein.
The Company has registered, through 1995, eight consecutive years of
increases in operating income. Since 1989 and through December 31, 1995, the
Company's net sales and operating income have increased at average annual
compound rates of approximately 9% and 13%, respectively (without giving effect
to the acquisition of USI), and its gross profit and operating income margins
have increased from 25.2% to 26.4% and from 5.5% to 6.7%, respectively. The
Company believes that its growth is primarily attributable to (i) improvement in
its product mix, driven by a marketing strategy which emphasizes the Company's
higher-margin products; (ii) its low cost manufacturing operations; (iii)
substantial capital spending programs for new property, plant and equipment that
have enabled the Company to expand capacity and reduce manufacturing costs; and
(iv) the strength of its national distribution system.
INDUSTRY OVERVIEW
The United States residential roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 80% of industry residential roofing unit sales in
1995. Residential asphalt roofing materials comprise higher margin, premium
laminated shingles and standard strip shingles, which represented approximately
25% and 75%, respectively, of industry asphalt roofing unit sales in 1995. Total
asphalt residential roofing unit sales grew during the past five years (from
January 1, 1991 through December 31, 1995) at an average annual compound rate of
approximately 4%, during which period unit sales of laminated and strip shingles
grew at average annual compound rates of approximately 15% and 1%, respectively.
While the Company believes that the growth of laminated shingle sales will
continue to exceed the growth of the overall residential asphalt roofing market,
the Company expects increased competition in this area.
The United States commercial roofing industry comprises manufacturers of
asphalt built-up roofing, modified bitumen, single-ply polymer and other roofing
products. Approximately 70% of commercial roofing industry membrane unit sales
utilize asphalt built-up roofing and modified bitumen products, both of which
the Company manufactures. Over the past five years, commercial roofing industry
membrane unit sales experienced a slight decline, primarily as a result of the
weak commercial construction market. During this period, unit sales
1
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of asphalt built-up roofing products declined at an average annual compound rate
of approximately 1%, while unit sales of modified bitumen products grew at a
rate of approximately 5%, the latter due principally to shifts in customer
preferences.
Over the past five years, approximately 80% of industry sales, as well as
those of the Company, of both residential and commercial asphalt roofing
products were for re-roofing, as opposed to new construction. As a result, the
exposure of both the Company and the industry to cyclical downturns in the new
construction market is substantially lower than other building material
manufacturers producing, for example, gypsum, wood and cement. Management
expects that during the late 1990s demand for re-roofing will continue to
increase as the existing housing stock ages and as homeowners upgrade from
standard strip roofing shingles to premium laminated shingles for enhanced
aesthetics and durability.
RESIDENTIAL ROOFING PRODUCTS
Residential roofing represented approximately 73% of the Company's net
sales in 1995 (approximately 64% after giving effect to the acquisition of USI
by the Company). The Company believes that it is the largest manufacturer of
laminated shingles and the second largest manufacturer of strip shingles in the
United States. The Company believes that it has been among the most innovative
industry leaders in terms of the introduction of new products, having been the
first to develop the three-dimensional premium laminated roofing shingle,
Timberline(Registered), which created an entirely new product line within the
asphalt roofing industry. The Company produces two lines of shingles, the
Timberline(Registered) series and the Sovereign(Registered) series, as well as
certain specialty shingles principally for regional markets.
The Company's sales of laminated shingles represented approximately 40% of
its residential sales in 1995, with sales of laminated shingles having grown
during the five years ended December 31, 1995 at an average annual compound rate
of approximately 8%, and over the two years ended December 31, 1995 at an
average annual compound rate of approximately 5%. The Timberline(Registered)
series offers a premium laminated product line that adds dramatic shadow lines
and substantially improves the appearance of a roof. The series includes the GAF
Timberline(Registered) 25 Natural Shadow(Trademark) shingle, a mid-weight
laminated shingle which serves as an economic trade-up for consumers; the
Timberline(Registered) Natural Shadow(Trademark) shingle, offering a wood shake
appearance and enhanced visual depth and contrast simulating shadows and
superior fire resistance and durability; and the Timberline Ultra(Registered)
Natural Shadow(Trademark) shingle, a super heavyweight laminated shingle with
the same design features as the Timberline(Registered) Natural Shadow(Trademark)
shingle, together with added durability.
The Company's sales of strip shingles have grown at an average annual
compound rate of approximately 6% during the past five years, representing
approximately 50% of the Company's residential sales in 1995. The
Sovereign(Registered) series includes the standard 3-tab Sentinel(Registered)
shingle, the Company's residential volume leader; the Royal
Sovereign(Registered) shingle, a heavier weight 3-tab shingle; and the
Marquis(Registered) shingle, a super heavyweight 3-tab shingle.
All of the Company's asphalt roofing shingles have a Class A fire rating
and are made from glass fiber mat, coated with waterproofing asphalt on both
sides and surfaced with colored ceramic-coated mineral granules. The Company's
other residential roofing products include Timbertex(Registered) and
Ridgetex(Registered) Hip & Ridge shingles, Shingle-Mate(Registered)
underlayment, Weather Watch(Registered) ice and water barrier, a waterproof
underlayment, and Cobra(Registered) ridge vent, a ventilation system on a coil,
all of which enable the Company to offer a complete system of residential
roofing components.
COMMERCIAL ROOFING PRODUCTS
Commercial roofing represented approximately 27% of the Company's net sales
in 1995 (approximately 36% after giving effect to the acquisition of USI by the
Company). The Company manufactures a broad line of modified bitumen products,
asphalt built-up roofing and roofing accessories. The Company believes that it
is the second largest manufacturer of asphalt built-up roofing and the largest
manufacturer of modified bitumen products in the United States. The Company also
manufactures perlite roofing insulation products, which consist of low thermal
insulation products installed below the roofing membrane. The Company also
markets isocyanurate foam as roofing insulation, packaged asphalt and
accessories such as vent stacks, roof insulation fasteners, cements and
coatings. The Company has in recent years devoted substantial resources
to the high
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performance end of the commercial roofing market and is now a leading
supplier for major commercial roofing installations.
INCREASING EMPHASIS ON HIGHER MARGIN, PREMIUM PRODUCTS
One of the Company's strategies to grow sales and profitability has been to
improve its product mix, with an increasing emphasis on laminated shingles and
longer-life, high performance premium strip and specialty shingles, which sell
at higher prices and profit margins than standard strip shingles. Since 1989,
and through December 31, 1995, the Company's unit sales of such premium shingles
have increased at an average annual compound rate of approximately 11%. This
growth has enabled the Company to increase its premium product mix of
residential sales. Management expects to continue this strategy to improve
product mix by increasing sales of premium shingles.
LOW COST MANUFACTURING OPERATIONS
The Company believes that its plants are among the most modern in the
industry, due in part to the fact that since 1985 and through December 31, 1995,
the Company has invested in excess of $200 million in new property, plant and
equipment (of which more than $100 million has been invested since the beginning
of 1990), principally in order to increase capacity and implement process
improvements to reduce manufacturing costs.
ACQUISITIONS
The Company's acquisition strategy is focused on niche-type acquisitions,
designed to either complement existing product lines, further the geographic
reach of the Company's business or increase its market shares, and preferably
those which can benefit from the Company's strong national distribution network,
manufacturing technology and marketing expertise. Recent acquisitions by the
Company include the acquisition of USI, a leading national manufacturer of
commercial roofing products, and the acquisition of the International Permalite
business, which is one of only two United States manufacturers of perlite
roofing insulation products whose products consist of low thermal insulation
which is installed on commercial roofs below the roofing membrane.
3
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THE EXCHANGE OFFER
The Exchange Offer is being made with respect to all of BMCA's outstanding
8 5/8% Senior Notes due 2006 (the 'Old Notes'). On December 9, 1996, BMCA issued
and sold $100 million in aggregate principal amount of the Old Notes in a
private placement (the 'Offering'). The form and terms of the New Notes are the
same as the form and terms of the Old Notes, except that the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of the Indenture pursuant to
which the Old Notes were issued. The Old Notes and the New Notes are sometimes
referred to collectively herein as the 'Notes.' See 'Description of the New
Notes.'
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The Exchange Offer..................... $1,000 principal amount of New Notes in exchange for each $1,000
principal amount of Old Notes. As of the date hereof, $100,000,000
aggregate principal amount of the Old Notes are outstanding. The terms
of the New Notes and the Old Notes are substantially identical.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, BMCA believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a
holder thereof (other than any such holder that is an 'affiliate' of
BMCA within the meaning of Rule 405 promulgated under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that (i) such New Notes are
acquired in the ordinary course of business of such holder, (ii) such
holder is not engaging in and does not intend to engage in a
distribution of such New Notes, and (iii) such holder does not have an
arrangement or understanding with any person to participate in the
distribution of such New Notes. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New
Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives New
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 meeting the requirements of the Securities Act in
connection with any resales of such New Notes. See 'The Exchange
Offer--Purpose and Effect' and 'Plan of Distribution.'
Registration Agreement................. In connection with the issuance of the Old Notes pursuant to the
Offering, BMCA agreed to use its best efforts to cause a registration
statement to become effective with respect to an exchange offer of a
new security for the Old Notes (the 'Registration Agreement'). See
'The Exchange Offer--Purpose and Effect.'
Expiration Date........................ The Exchange Offer will expire at 12:00 midnight, New York City time, on
, 1997, or at such later date or time to which it is
extended (as so extended, the 'Expiration Date'). BMCA does not intend
to extend the Exchange Offer, although it reserves the right to do so.
Withdrawal............................. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn
at any time prior to 12:00 midnight, New York City time,
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on the Expiration Date. Any Old Notes not accepted for exchange for
any reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or termination
of the Exchange Offer.
Interest on the New Notes and Old
Notes................................ The Notes will pay interest on the principal thereof at the rate of
8 5/8% per annum, payable on June 15 and December 15 each year,
commencing on June 15, 1997 to the persons who are registered holders
on the immediately preceding June 1 and December 1. See 'Description
of the New Notes--Principal, Maturity and Interest.'
Conditions to the Exchange Offer....... The Exchange Offer is subject to certain customary conditions, each of
which may be waived by BMCA. The Exchange Offer is not conditioned
upon any principal amount of Old Notes being tendered for exchange
pursuant to the Exchange Offer. See 'The Exchange Offer--Conditions.'
Procedures for Tendering
Old Notes............................ Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Old Notes and any other required
documentation, to The Bank of New York (the 'Exchange Agent') at the
address set forth herein. Tendered Old Notes must be received by the
Exchange Agent by 12:00 midnight, New York City time, on the
Expiration Date. By executing the Letter of Transmittal, each holder
will represent to the Company that, among other things, (i) the New
Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of such holder, (ii) the holder is not
engaging in and does not intend to engage in a distribution of such
New Notes, (iii) the holder does not have an arrangement or
understanding with any person to participate in the distribution of
such New Notes, and (iv) the holder is not an 'affiliate', as defined
under Rule 405 promulgated under the Securities Act, of the Company.
Pursuant to the Registration Agreement, the Company is required to
file a registration statement for a continuous offering pursuant to
Rule 415 under the Securities Act in respect of the Old Notes of any
holder that would not receive freely tradeable New Notes in the
Exchange Offer or is ineligible to participate in the Exchange Offer
and indicates that it wishes to have its Old Notes registered under
the Securities Act. See 'The Exchange Offer--Procedures for
Tendering.'
Book-Entry Transfer.................... The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility (as
defined herein) for purposes of the Exchange Offer within two business
days after receipt of this Prospectus, and any financial institution
that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Old Notes by causing the Book-Entry
Transfer Facility to transfer such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Old Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of
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Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
Special Procedures for Beneficial
Owner................................ Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee (with
respect to the New Notes, each, a 'Registered Holder') and who wishes
to tender such Old Notes should contact the Registered Holder promptly
and instruct such Registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and executing
the Letter of Transmittal and delivering such owner's Old Notes,
either make appropriate arrangements to register ownership of the Old
Notes in such beneficial owner's name or obtain a properly completed
bond power from the Registered Holder. The transfer of registered
ownership may take considerable time. See 'The Exchange
Offer--Procedures for Tendering.'
Guaranteed Delivery Procedures......... If a Registered Holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not
permit such holder's Old Notes or other required documents to reach
the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender
may be effected according to the guaranteed delivery procedures set
forth in 'The Exchange Offer--Guaranteed Delivery Procedures.'
Acceptance of Old Notes and Delivery of
New Notes............................ The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 12:00 midnight, New
York City time, on the Expiration Date. The New Notes issued pursuant
to the Exchange Offer will be delivered promptly following the
Expiration Date. See 'The Exchange Offer--Terms of the Exchange
Offer.'
Exchange Agent......................... The Bank of New York is serving as the Exchange Agent in connection with
the Exchange Offer.
Consequences of Failure to
Exchange............................. The liquidity of the market for a holder's Old Notes could be adversely
affected upon completion of the Exchange Offer if such holder does not
participate in the Exchange Offer. See 'The Exchange Offer--
Consequences of Failure to Exchange.'
Federal Income Tax Consequences........ The exchange pursuant to the Exchange Offer should not be a taxable
event for federal income tax purposes. See 'Certain Federal Income Tax
Considerations.'
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TERMS OF THE NEW NOTES
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Issuer................................. Building Materials Corporation of America, a direct wholly-owned
subsidiary of GAF Building Materials Corporation ('GAFBMC') and an
indirect wholly-owned subsidiary of GAF Corporation ('GAF').
Issue.................................. $100,000,000 aggregate principal amount at maturity of Series B 8 5/8%
Senior Notes due 2006 (the 'New Notes').
Maturity............................... December 15, 2006.
Interest Payment Dates................. The New Notes will pay interest in cash at a rate of 8 5/8% per annum,
payable on June 15 and December 15, commencing June 15, 1997.
Optional Redemption.................... The New Notes are redeemable at the Company's option, in whole or in
part, on or after December 15, 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the redemption
date.
In addition, prior to December 9, 1999, an amount of the Notes
representing an aggregate of up to 50% of the then outstanding Notes
will be redeemable, at the Company's option, from the proceeds of a
public offering by the Company of its common stock, at 108.625% of the
principal amount thereof, plus accrued interest, if any, to the date
of redemption, provided that, after giving effect to any such
redemption, not less than a majority of the principal amount of Notes
originally issued would be outstanding.
Change of Control Put and Call......... Upon the occurrence of a Change of Control (as defined), each holder of
the Notes will have the right to require the Company to repurchase
such holder's Notes at a purchase price of 101% of the principal
amount of the Notes (or, if lower, the redemption price then in effect
under the provisions described herein under 'Description of the New
Notes-- Optional Redemption'), plus accrued and unpaid interest, if
any, to the repurchase date, and the Company will have the option to
redeem the Notes in whole at a redemption price equal to 100% of the
principal amount of the Notes, plus the Applicable Premium (as
defined), plus accrued and unpaid interest, if any, to the repurchase
date.
Ranking................................ The Notes will be senior unsecured obligations of the Company and will
rank pari passu with all other unsecured and unsubordinated
obligations of the Company, including the Deferred Coupon Notes.
Immediately following the issuance of the Notes, the Company will not
have any subordinated obligations. As of September 29, 1996, the
Company and its subsidiaries had outstanding indebtedness from
borrowings of $326.4 million and other outstanding liabilities of the
Company and its subsidiaries, as reflected on the Company's
consolidated balance sheet, including trade payables and accrued
expenses, were $200.6 million. As of September 29, 1996, after giving
pro forma effect to the issuance of the Old Notes and the Spin Off
Transactions, the outstanding consolidated indebtedness of BMCA and
its then existing subsidiaries would have been $395.2 million. The
Indenture limits the incurrence of additional Debt (as defined) and
the issuance of Preferred Stock (as defined) by the Company and its
subsidiaries. See 'Description of the New Notes--Certain Covenants.'
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Certain Covenants...................... The Indenture limits the Company and its subsidiaries from incurring
additional Debt, issuing Preferred Stock and incurring Liens (as
defined). The Indenture also contains covenants that, among other
things, limit the ability of the Company and its subsidiaries to pay
certain dividends or make certain other Restricted Payments (as
defined) and Restricted Investments (as defined), engage in
transactions with Affiliates (as defined) and agree to certain
additional limitations on dividends and other payment restrictions
affecting subsidiaries. As of September 29, 1996, the Company would
have been able to make Restricted Payments and Restricted Investments
in the aggregate amount of approximately $23.0 million (and, after
giving effect to the net capital contributions made to the Company as
part of the Spin Off Transactions and the contribution to the Company
in July 1996 of the Houston, Texas facility of USI, approximately
$135.1 million in the aggregate). The Indenture also limits the
ability of the Company to consolidate or merge with, or transfer all
or substantially all of its assets to, another person. However, all
such covenants are subject to a number of important qualifications and
exceptions. See 'Description of the New Notes--Certain Covenants.'
Registration Rights.................... The Company has agreed to use its best efforts to cause to become
effective, by April 8, 1997, a registration statement with respect to
the Exchange Offer. In the event that the Exchange Offer is not
completed by June 7, 1997, the Company will use its best efforts to
cause to become effective a shelf registration statement with respect
to the resale of the Old Notes and to keep such shelf registration
statement effective until three years after the date of original
issuance of the Old Notes.
If by June 7, 1997 (i) the Exchange Offer is not completed and (ii) no
shelf registration statement with respect to the resale of the Old
Notes is declared effective, additional interest will accrue on the
Old Notes from and including June 7, 1997 until but excluding the
earlier of (i) the completion of the Exchange Offer and (ii) the
effective date of such shelf registration statement. Such additional
interest will be payable in cash semiannually in arrears on June 15,
and December 15, at a rate per annum equal to 0.50% of the aggregate
principal amount outstanding of Old Notes. See 'Description of the New
Notes--Principal, Maturity and Interest' and 'The Exchange
Offer--Purpose and Effect.'
Use of Proceeds........................ There will be no cash proceeds to the Company from the exchange pursuant
to the Exchange Offer.
Risk Factors........................... Prospective holders of the New Notes should carefully consider the
specific factors set forth under 'Risk Factors,' as well as the other
information and data included in this Prospectus.
</TABLE>
8
<PAGE>
SUMMARY FINANCIAL DATA
Set forth below are summary consolidated financial data of the Company. The
Company's financial statements have been prepared on a basis which retroactively
reflects the formation of the Company at the beginning of the years presented
prior to 1995. As of January 1, 1997, USI became a subsidiary of the Company
through a capital contribution to the Company by its indirect parent, G-I
Holdings Inc. ('G-I Holdings'). Accordingly, the Company's historical
consolidated financial statements have been restated for the year ended December
31, 1995 and the nine months ended September 29, 1996 to include USI's results
of operations from the date of its acquisition by G-I Holdings, including sales
of $21.8 million for the year ended December 31, 1995 and $76.3 million for the
nine months ended September 29, 1996 and net income (loss) of $(.5) million and
$.8 million, respectively. See Note 1 to Consolidated Financial Statements. The
results of any interim period are not necessarily indicative of the results to
be expected for the full year. The pro forma financial data have been prepared
to give effect to the issuance of the Notes and the Spin Off Transactions. The
pro forma balance sheet data give effect to the Spin Off Transactions and the
issuance of the Notes as if they had been completed as of September 29, 1996.
The pro forma operating data give effect to the Spin Off Transactions and the
issuance of the Notes as if they had been completed as of January 1, 1995. The
pro forma financial information does not purport to project the financial
position or the results of operations for any future period or to represent what
the financial position or results of operations would have been if the Spin Off
Transactions and the issuance of the Notes had been completed at the dates
indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------------
-------------------------- OCT. 1, 1995 SEPT. 29, 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------------ --------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................................... $559.2 $593.1 $687.2 $507.7 $648.4
Operating income............................................ 41.5 44.7 45.9 38.4 51.2
Interest expense............................................ 2.0 13.1 24.8 18.2 23.7
Income before income taxes.................................. 33.0 27.8 16.5 16.6 27.0
Net income.................................................. 20.4 16.7 10.1 10.0 16.5
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
---------------------------
DECEMBER 31, ACTUAL PRO FORMA(4)
1995 (UNAUDITED) (UNAUDITED)
------------ ----------- ------------
(MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments............................................ $ 86.1 $ 42.3 $210.1
Total working capital...................................................... 54.6 89.7 233.9
Total assets............................................................... 559.3 571.2 702.3
Long-term debt less current maturities(2).................................. 310.3 323.0 391.8
Total stockholder's equity................................................. 15.8 44.3 110.0
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------------
-------------------------- OCT. 1, 1995 SEPT. 29, 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------------ --------------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation................................................ $ 14.5 $ 16.8 $ 20.3 $ 14.5 $ 18.1
Goodwill amortization....................................... 0.6 1.1 1.2 0.8 1.2
Capital expenditures and acquisitions....................... 19.0 54.3 54.1 18.9 15.7
Ratio of earnings to fixed charges(1)....................... 8.60 2.72 1.58 1.80 2.01
Adjusted EBITDA(3).......................................... 50.1 58.8 62.8 50.2 70.0
Ratio of Adjusted EBITDA to interest expense(3)............. 24.51 4.47 2.3 2.76 2.95
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, ------------------------------
1995 OCT. 1, 1995 SEPT. 29, 1996
------------ ------------ --------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(4):
Net Sales.................................................................. $783.3 $595.7 $648.4
Operating income........................................................... 34.0 30.1 49.1
Interest expense........................................................... 32.8 24.6 28.3
Income (loss) from continuing operations................................... (5.6) (0.5) 12.3
Ratio of earnings to fixed charges(1)...................................... --(1) --(1) 1.64
Ratio of Adjusted EBITDA to interest expense (3)........................... 1.83 2.01 2.33
</TABLE>
- ------------------
(1) For purposes of these computations, earnings consist of income before income
taxes plus fixed charges. Fixed charges consist of interest on indebtedness
(including amortization of debt issuance costs), plus that portion of lease
rental expense representative of interest (estimated to be one-third of
lease rental expense). Pro forma earnings were inadequate to cover fixed
charges by $9.6 million and $1.1 million, respectively, for the year ended
December 31, 1995 and the nine months ended October 1, 1995, as a result of
$14.8 million and $9.6 million, respectively, of reserves established by USI
prior to its acquisition by the Company.
(2) See 'Capitalization' and Note 9 of Notes to the Company's Consolidated
Financial Statements.
(3) The EBITDA data are being presented because such data relate to debt
covenants under the Indenture. Calculations of the ratio of Adjusted EBITDA
to interest expense have been performed in accordance with the definitions
in the Indenture, except that the ratio of Adjusted EBITDA to interest
expense for the nine months ended October 1, 1995 and September 29, 1996 has
been calculated based on operating data for such nine-month periods rather
than for the most recently completed four fiscal quarters ended on such
dates. See 'Description of the New Notes.' Accordingly, Adjusted EBITDA is
calculated as income before income taxes, increased by interest expense,
depreciation, goodwill amortization, and, in the case of pro forma Adjusted
EBITDA, reserves established by USI prior to its acquisition by the Company.
As an indicator of the Company's operating performance, such supplemental
financial information should not be considered as an alternative to net
income or any other measure of performance under generally accepted
accounting principles.
The Indenture contains covenants which, subject to certain exceptions,
restrict the Company from issuing Debt or Preferred Stock, unless, at the
time of such issuance and after giving effect thereto, the ratio of EBITDA
(as defined in the Indenture) to Consolidated Interest Expense (as defined in
the Indenture) is at least 2 to 1 for its most recently completed four
consecutive fiscal quarters ending at least 45 days prior thereto. See
'Description of the New Notes' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
The details of the calculations of Adjusted EBITDA are as set forth in the
table on the following page.
(4) For an explanation of adjustments to arrive at 'Pro Forma' data, see notes
to 'Selected Financial Data.'
10
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------
NINE MONTHS ENDED YEAR NINE MONTHS NINE MONTHS
------------------------- ENDED ENDED ENDED
YEAR ENDED DECEMBER 31, OCT. 1, SEPT. 29, DEC. 31, OCT. 1, SEPT. 29,
--------------------------- 1995 1996 1995 1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------- ------- ------- ----------- ----------- ----------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from
continuing
operations before
income taxes...... $32,982 $27,819 $16,549 $16,644 $26,956 $(9,143) $ (757) $20,229
Add:
Interest
expense......... 2,045 13,149 24,822 18,203 23,741 32,805 24,633 28,346
Goodwill
amortization.... 641 1,064 1,170 800 1,201 1,170 800 1,201
Depreciation...... 14,465 16,796 20,252 14,545 18,072 20,533 15,302 16,380
Reserves
established by
USI prior to its
acquisition..... -- -- -- -- -- 14,767 9,553 --
------- ------- ------- ----------- ----------- ----------- ----------- -----------
Adjusted EBITDA..... $50,133 $58,828 $62,793 $50,192 $69,970 $60,132 $49,531 $66,156
------- ------- ------- ----------- ----------- ----------- ----------- -----------
------- ------- ------- ----------- ----------- ----------- ----------- -----------
</TABLE>
11
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, the
following risk factors should be carefully considered by each holder of the Old
Notes before accepting the Exchange Offer, although the risk factors set forth
below are generally applicable to the Old Notes as well as the New Notes.
SUBSTANTIAL LEVERAGE
The Company has substantial consolidated debt outstanding. At September 29,
1996, the Company had total outstanding consolidated long-term debt of $326.4
million and common stockholder's equity of $44.3 million. On a pro forma basis,
assuming issuance of the Old Notes and application of the net proceeds therefrom
and after giving effect to the Spin Off Transactions, the Company would have had
as of September 29, 1996 total outstanding consolidated long-term debt of $394.9
million and common stockholder's equity of $110.0 million. The substantial
leverage of the Company has important consequences for holders of the Notes,
including the risk that the Company may not generate sufficient cash flow from
operations to pay principal and interest on its indebtedness or to invest in its
businesses. While the Company believes, based upon its historical and
anticipated performance, that it should be able to satisfy its obligations
(including the Notes) from operations and appropriate refinancings and
otherwise, no assurance to that effect can be given. While other measures to
raise cash to satisfy obligations include potential sales of assets or equity,
the Company's ability to raise funds by selling either assets or equity is
dependent on results of operations, market conditions and other factors. In the
event that the Company is unable to refinance indebtedness or raise funds
through sales of assets or equity or otherwise, its ability to pay principal of
and interest on the Notes would be adversely affected.
CERTAIN AGREEMENTS
BMCA purchases from International Specialty Products Inc., a Delaware
corporation that prior to the Spin Off Transactions was a subsidiary of GAF
('ISP'), all of its colored mineral granules requirements (except for the
requirements of its California roofing plant which are supplied by a third
party) under a requirements contract which was renewed for one year, effective
as of January 1, 1997, and is subject to annual renewal unless terminated by
BMCA or ISP. In December 1995, USI commenced purchasing substantially all of its
requirements for colored roofing granules from ISP (except for the requirements
of its Stockton, California and Corvallis, Oregon plants which are supplied by a
third party) pursuant to a supply contract. In 1996, BMCA and USI purchased in
the aggregate approximately $50.5 million of mineral products from ISP. See
'Certain Relationships--Certain Purchases.'
As part of the Spin Off Transactions, the Company transferred to GFC its
Nashville, Tennessee facility, which manufactures a significant portion of the
Company's glass fiber requirements and entered into a supply contract with GFC
under which GFC produces glass fiber for the Company. See 'Certain
Relationships--Certain Purchases.'
Pursuant to a management agreement which expires at the end of 1997, ISP
provides certain general management, administrative and facilities services to
BMCA and USI (including the use of BMCA's headquarters in Wayne, New Jersey),
for which BMCA and USI paid ISP a management fee of $3.9 million in 1996. As of
January 1, 1997, BMCA and GFC entered into a management agreement under which
BMCA provides certain general management, administrative and financial services
to GFC. Under the management agreement which expires December 31, 1997, GFC is
obligated to pay BMCA an annual management fee of $1,000,000. See 'Certain
Relationships--Management Agreements.'
The Company and its subsidiaries have entered into a Tax Sharing Agreement
(as defined) with GAF and G-I Holdings with respect to the payment of
federal income taxes and certain related matters. See 'Certain
Relationships--Tax Sharing Agreement.'
See 'Description of the New Notes--Certain Covenants--Limitations on
Transactions with Affiliates' for limitations imposed by the Indenture on
transactions with affiliates of the Company.
ASBESTOS CLAIMS FILED AGAINST GAF
In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of GAFBMC's asbestos-related bodily
injury liabilities (whether for indemnity or defense), relating to then pending
cases and previously settled, but not paid, cases as of January 31, 1994, and no
other
12
<PAGE>
asbestos liabilities of GAFBMC. Substantially all of the $204.4 million is
expected to be paid by the end of the second quarter of 1997; $178.8 million had
been paid through September 29, 1996. G-I Holdings and GAFBMC have jointly and
severally agreed to indemnify the Company against any claims related to
asbestos-related liabilities, other than those contractually assumed by the
Company, in the event that claims in connection with liabilities not assumed by
the Company are asserted against it. GAFBMC is administering all
asbestos-related bodily injury claims, including those assumed by the Company,
and has the right to settle or litigate asbestos-related claims and to settle
and allocate recoveries among GAF, the Company and GAFBMC under insurance
policies relating thereto.
As of September 29, 1996, GAF had been named as a defendant in
approximately 59,300 pending lawsuits involving alleged health claims relating
to the inhalation of asbestos fiber ('Asbestos Claims'), having resolved
approximately 221,000 Asbestos Claims. Plaintiffs in approximately 31,200 of the
pending lawsuits were preliminarily enjoined from proceeding with their claims
other than in accordance with the Settlement described below. Since December 31,
1995, GAF has settled approximately 19,900 Asbestos Claims and received notice
of approximately 29,500 new Asbestos Claims (of which approximately 23,800 are
subject to the preliminary injunction).
The consolidated reserves of GAF and G-I Holdings for asbestos bodily
injury claims, as of September 29, 1996, were approximately $357.8 million
(before estimated present value of recoveries from products liability insurance
policies of approximately $211 million and related deferred tax benefits of
approximately $51.4 million). GAF and G-I Holdings have advised the Company that
certain components of the asbestos-related liability and related insurance
recoveries have been reflected on a discounted basis in their financial
statements. See Note 3 to Consolidated Financial Statements.
The estimate of liability for Asbestos Claims is based on the Settlement
described below becoming effective and on assumptions which relate, among other
things, to the number of new cases filed, the cost of resolving (either by
settlement or litigation or through the mechanism established by the Settlement)
pending and future claims, the realization of related tax benefits, the
favorable resolution of pending litigation against certain insurance companies
and the amount of GAF's recoveries from various insurance companies. The reserve
is also premised upon the assumption that GAF and G-I Holdings had available, to
pay asbestos-related bodily injury claims, aggregate insurance coverage, as of
September 29, 1996, totaling $224.3 million before discounting certain coverage
(which amount is reduced as asbestos-related liabilities are satisfied). See
'Business--Legal Proceedings--Insurance Matters.'
The actual cost of resolving pending and future Asbestos Claims is
difficult to estimate. However, based upon the experience of the Center for
Claims Resolution (the 'CCR'), a non-profit organization of asbestos defendant
companies including GAF, in settling approximately 187,000 cases since its
creation in 1988, GAF's recent average settlement costs, and the impact of the
Settlement if it becomes effective, GAF believes that its average future
Asbestos Claim settlements will be approximately $3,000 per case. GAF therefore
believes that its reserves, before discounting, together with anticipated
available insurance proceeds, will be sufficient to satisfy all pending Asbestos
Claims and all claims anticipated to be resolved during the ten-year period of
the Settlement described below. There can be no assurance, however, that the
assumptions referred to above are correct.
On January 15, 1993, the members of the CCR entered into a class-action
settlement agreement (the 'Settlement') to resolve all future Asbestos Claims
(other than claims of those persons who 'opted out' of the class) against GAF
and other members of the CCR. The class action was filed with the United States
District Court in Philadelphia. The Settlement, if effective, would operate to
limit GAF's liability for future Asbestos Claims to persons who did not 'opt
out' of the Settlement by placing a dollar limit on awards to such persons and a
limit on the number of claims that will be paid to such persons in any one year
and over the first ten years of the Settlement. Certain members of the class
filed objections to the Settlement. On August 16, 1994, the District Court
approved the Settlement, holding that the terms of the Settlement are fair to
the class as a whole. The District Court also reaffirmed its prior decision that
it has subject matter jurisdiction over the action, certified the class, found
that counsel for the class had acted without conflict of interest, without
collusion and appropriately in negotiating the Settlement, and determined that
adequate notice of the Settlement had been given to class members. The District
Court thereafter entered a preliminary injunction enjoining class members from
pursuing Asbestos Claims against GAF and other members of the CCR except in
accordance with the Settlement. On May 10, 1996, the United States Court of
Appeals for the Third Circuit (the 'Third Circuit') issued an
13
<PAGE>
opinion, concluding that the class was not certifiable, thus reversing the
decision of the District Court. On November 1, 1996, the United States Supreme
Court granted GAF's petition for a writ of certiorari and agreed to hear GAF's
appeal of the Third Circuit's decision. The appeal is expected to be heard on
February 18, 1997. GAF continues to believe the Settlement should ultimately be
upheld on appeal, although there can be no assurance in this regard.
It is anticipated that substantially all of the payments in connection with
the liability of GAF and G-I Holdings relating to Asbestos Claims will be made
by the end of the year 2004. While GAF is unable to estimate the amount of
liability with respect to claims to be resolved after such period, it believes
that it will resolve, prior to that time, substantially all the court cases
currently pending against GAF, and that it will further resolve substantially
all the claims filed under the Settlement on a relatively current basis, so that
the number of claims pending against GAF at the end of such period will be
substantially diminished from current levels. As a result of these and other
factors, GAF and G-I Holdings believe that the resolution of any claims after
such period will not, individually or in the aggregate, have a material adverse
effect on their respective financial positions, liquidity or results of
operations.
GAF and G-I Holdings believe that their reserves, which reflect the
discounting of a portion of the liabilities, adequately reflect their actual
asbestos-related liabilities. Although any opinion is necessarily judgmental and
must be based on information currently known, it is the opinion of GAF and G-I
Holdings, based on the assumptions referred to above and their analysis of their
future business, financial prospects and cash flows, that asbestos-related
bodily injury claims will not, individually or in the aggregate, have a
materially adverse effect on the respective financial positions, liquidity or
results of operations of GAF and G-I Holdings, after giving effect to the
aforementioned reserves, and will not impair the ability of GAF or G-I Holdings
to meet its respective obligations, to reinvest in its respective businesses or
to grow.
In the event that the Third Circuit's decision is not reversed and the
Settlement is not upheld, or the conditions to the effectiveness of the
Settlement are not satisfied (see 'Business--Legal Proceedings'), GAF and G-I
Holdings could be required to increase their estimates of asbestos-related
liabilities and adjust any related discounts. It is not currently possible to
estimate the range or amount of such possible additional liability.
The Company believes that it will not sustain any liability for damages in
connection with asbestos-related claims in excess of the $204.4 million that it
has contractually assumed. While the Company cannot predict whether any
asbestos-related claims will be asserted against it or its assets, or the
outcome of any litigation relative to such claims, it believes that it has
meritorious defenses to such claims. Moreover, it has been jointly and severally
indemnified by G-I Holdings and GAFBMC with respect to such claims, and GAF and
G-I Holdings have advised the Company that, based on the assumptions referred to
above, they believe they have and will have sufficient resources, principally
through their ownership of the common stock of BMCA, to enable them to satisfy
their asbestos-related liabilities. Should GAF or GAFBMC be unable to satisfy
judgments against it in asbestos-related lawsuits, its judgment creditors might
seek to enforce their judgments against the assets of GAF or GAFBMC, including
its holdings of common stock of the Company, and such enforcement could result
in a change of control with respect to the Company.
For additional information relating to asbestos claims filed against GAF,
see 'Business--Legal Proceedings' and Note 3 to Consolidated Financial
Statements.
PARENTS' DEPENDENCE UPON COMPANY'S CASH FLOW
The parent corporations of the Company are dependent upon the cash flow of
their subsidiaries in order to satisfy their obligations, including
asbestos-related and certain tax liabilities. The parent corporations of the
Company are GAF, G-I Holdings, G Industries Corp. and GAFBMC, and, except for
the Company, the only significant asset of such parent corporations is GFC. In
the event that such parent corporations should become unable to meet their cash
requirements from sources other than the Company, subject to the terms of the
Indenture, they might take various actions, including, among other things,
seeking to cause (i) the Company to make distributions to stockholders by means
of dividends or otherwise, (ii) the Company to make loans to its parent
corporations, or (iii) GAFBMC to sell common stock of the Company. There can be
no assurance that any of the foregoing could be effected on satisfactory terms
or that they would be sufficient to enable such affiliates to satisfy their
obligations. See '--Asbestos Claims Filed Against GAF' and Notes 3, 5 and 12 to
Consolidated Financial Statements.
14
<PAGE>
CONSOLIDATED FEDERAL INCOME TAX LIABILITY
The Company, as a member of the GAF consolidated group for federal income
tax purposes, is jointly and severally liable for all federal income tax
liabilities of the GAF consolidated group (including with respect to the Spin
Off Transactions), but is indemnified under certain circumstances for such tax
liabilities principally by GAF and G-I Holdings. See 'Certain Relationships--Tax
Sharing Agreement' and Notes to Consolidated Financial Statements.
CONTROLLING STOCKHOLDER
The Company is an indirect wholly-owned subsidiary of GAF, which is
controlled by Samuel J. Heyman, Chairman of the Board of Directors and Chief
Executive Officer of GAF, G-I Holdings, GAFBMC and the Company. Accordingly, Mr.
Heyman has the ability to elect the entire Board of Directors of each such
company and determine the outcome of any other matter submitted to their
respective stockholders for approval. In particular, subject to the terms of the
Indenture, Mr. Heyman has the ability to effect certain corporate transactions,
including merger, consolidations and the sale of all, or substantially all, of
the Company's assets. See 'Security Ownership of Certain Beneficial Owners and
Management.'
RESTRICTIONS ON RESALE AND ABSENCE OF A PUBLIC MARKET
Prior to the exchange of the New Notes offered hereby, there has been no
public market for any of the Notes, and there can be no assurance as to (i) the
liquidity of any such market that may develop, (ii) the ability of the holders
of New Notes to sell their New Notes or (iii) the price at which the holders of
New Notes will be able to sell their New Notes. If such market were to exist,
the New Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the market for similar notes, and the financial
performance of the Company. The Company does not intend to list the New Notes on
any securities exchange or to seek approval for quotations through any automated
quotation system and no active market for the New Notes is currently
anticipated. There is no assurance as to the liquidity of the trading market for
the New Notes. Bear, Stearns & Co. Inc., Chase Securities Inc. and Salomon
Brothers Inc have advised the Company that they currently anticipate making a
secondary market for the New Notes, but they are not obligated to do so, and
there is no assurance that an active or liquid public trading market will
develop for the New Notes.
EXCHANGE OFFER PROCEDURES
Issuance of the New Notes in exchange for Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent of
certificates for such Old Notes or a timely Book-Entry Confirmation (as defined)
of such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility, a properly completed and duly executed Letter of Transmittal and all
other required documents. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of Old Notes tendered for exchange
will be determined by the Company in its sole discretion, which determination
will be final and binding on all parties. Therefore, holders of Old Notes
desiring to tender such Old Notes in exchange for the New Notes should allow
sufficient time to ensure timely delivery. Old Notes that are not tendered or
are tendered but not accepted will, following the consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer thereof
and the Company will have no further obligation to provide for the registration
under the Securities Act of such Old Notes except as described herein. See 'The
Exchange Offer--Purpose and Effect.' In addition, any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes will be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New 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 New 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 could be adversely affected. The Company
does not intend to extend the Exchange Offer although it reserves the right to
do so. See 'The Exchange Offer.'
15
<PAGE>
CAPITALIZATION
The following table sets forth the Company's consolidated capitalization as
of September 29, 1996 and as adjusted on a pro forma basis. The pro forma
financial data have been prepared to give effect to the issuance of the Notes
and the Spin Off Transactions. This table should be read in conjunction with the
Company's Consolidated Financial Statements and related notes included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 29, 1996
(UNAUDITED)
--------------------------------------
ACTUAL PRO FORMA(1)
----------------- -----------------
(THOUSANDS)
<S> <C> <C>
Short-term Debt and current maturities of Long-term Debt:
Current maturities of long-term debt.................................................... $ 3,124 $ 3,124
Short-term debt......................................................................... 256 256
----------------- -----------------
Total................................................................................ $ 3,380 $ 3,380
----------------- -----------------
----------------- -----------------
Long-term Debt (excluding current maturities)(2):
8 5/8% Senior Notes due 2006............................................................ $ -- $ 99,502
11 3/4% Senior Deferred Coupon Notes due 2004........................................... 226,553 226,553
Borrowings under revolving credit facilities............................................ 22,164 --
Industrial revenue bonds................................................................ 19,625 11,125
Obligations on mortgaged properties..................................................... 4,693 4,693
Obligations under capital leases........................................................ 49,950 49,950
----------------- -----------------
Total Long-term Debt (excluding current maturities).................................. $ 322,985 $ 391,823
----------------- -----------------
----------------- -----------------
Stockholder's Equity:
Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per
share; 50,000 shares authorized, 0 shares issued..................................... $ -- $ --
Common stock and additional paid-in capital............................................. 92,875 158,657
Excess of purchase price over adjusted historical cost of predecessor company shares
owned by GAF stockholders............................................................ (7,874) (7,874)
Accumulated deficit..................................................................... (40,747) (40,747)
Unfunded pension liability.............................................................. (4) (4)
----------------- -----------------
Total Stockholder's Equity........................................................... $ 44,250 $ 110,032
----------------- -----------------
----------------- -----------------
Total Capitalization................................................................. $ 367,235 $ 501,855
----------------- -----------------
----------------- -----------------
</TABLE>
- ------------------
(1) For an explanation of the assumptions used to arrive at such pro forma
information, see 'Notes to Selected Financial Data.'
(2) For a description of long-term debt, see Note 9 to the Company's
Consolidated Financial Statements.
16
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected consolidated financial data of the Company.
The results of any interim period are not necessarily indicative of the results
to be expected for the full year. The historical financial information gives
effect to the formation of the Company as if it had occurred on January 1, 1991
and the Company's financial statements have been prepared on a basis which
retroactively reflects the formation of the Company at the beginning of the
periods presented prior to 1995, except that the Company's assumption of the
first $204.4 million of liability relating to pending and previously settled
asbestos-related bodily injury cases and related income tax benefits of $79.7
million have been reflected as a charge of $124.7 million to stockholder's
equity upon the Company's formation as of January 31, 1994. As of January 1,
1997, USI became a subsidiary of the Company through a capital contribution to
the Company by G-I Holdings. Accordingly, the Company's historical consolidated
financial statements have been restated for the year ended December 31, 1995 and
the nine months ended September 29, 1996 to include USI's results of operations
from the date of its acquisition by G-I Holdings, including sales of $21.8
million for the year ended December 31, 1995 and $76.3 million for the nine
months ended September 29, 1996 and net income (loss) of $(.5) million and $.8
million, respectively. See Note 1 to the Company's Consolidated Financial
Statements.
The pro forma financial data have been prepared to give effect to the
issuance of the Notes and the Spin Off Transactions. The pro forma balance sheet
data give effect to the Spin Off Transactions and the issuance of the Notes as
if they had been completed as of September 29, 1996. The pro forma operating
data give effect to the Spin Off Transactions and the issuance of the Notes as
if they had been completed as of January 1, 1995. The pro forma financial
information does not purport to project the financial position or the results of
operations for any future period or to represent what the financial position or
results of operations would have been if the Spin Off Transactions and the
issuance of the Notes had been completed at the dates indicated.
17
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
YEAR ENDED DECEMBER 31, OCT. 1, SEPT. 29,
---------------------------------------------- 1995 1996
1991 1992 1993 1994 1995 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ----------- -----------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales........................... $424.8 $508.5 $559.2 $593.1 $687.2 $ 507.7 $ 648.4
Operating income.................... 26.5 34.6 41.5 44.7 45.9 38.4 51.2
Interest expense.................... 4.6 3.6 2.0 13.1 24.8 18.2 23.7
Income before income taxes(1)....... 11.7 23.1 33.0 27.8 16.5 16.6 27.0
Income before cumulative effect of
accounting change(1)............. 7.2 14.1 20.4 16.7 10.1 10.0 16.5
Net income(1)....................... 7.2 6.5 20.4 16.7 10.1 10.0 16.5
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
DECEMBER 31, ---------------------------
---------------------------------------------- ACTUAL PRO FORMA(5)
1991 1992 1993 1994 1995 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ----------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total working capital.............. $ 26.5 $ 33.8 $ 4.8 $ 36.2 $ 54.6 $ 89.7 $233.9
Total assets....................... 285.9 297.3 259.4 452.3 559.3 571.2 702.3
Long-term debt(3).................. 35.8 34.1 38.7 229.2 310.3 323.0 391.8
Stockholder's equity (deficit)..... 103.9 110.0 85.9 (28.9) 15.8 44.3 110.0
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
YEAR ENDED DECEMBER 31, OCT. 1, SEPT. 29,
---------------------------------------------- 1995 1996
1991 1992 1993 1994 1995 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ----------- -----------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation........................ $ 11.7 $ 12.8 $ 14.5 $ 16.8 $ 20.3 $ 14.5 $ 18.1
Goodwill amortization............... 0.6 0.6 0.6 1.1 1.2 0.8 1.2
Capital expenditures and
acquisitions..................... 11.3 15.6 19.0 54.3 54.1 18.9 15.7
Ratio of earnings to fixed
charges(2)....................... 2.82 5.13 8.60 2.72 1.58 1.80 2.01
Adjusted EBITDA(4).................. 28.7 40.2 50.1 58.8 62.8 50.2 70.0
Ratio of Adjusted EBITDA to interest
expense(4)....................... 6.22 11.11 24.51 4.47 2.53 2.76 2.95
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
YEAR ENDED OCT. 1, SEPT. 29,
DECEMBER 31, 1995 1996
1995
------------ ----------- -----------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(5):
Net sales.............................................................. $783.3 $ 595.7 $ 648.4
Operating income....................................................... 34.0 30.1 49.1
Interest expense....................................................... 32.8 24.6 28.3
Income (loss) from continuing operations............................... (5.6) (0.5) 12.3
Ratio of earnings to fixed charges(2).................................. --(2) --(2) 1.6
Ratio of Adjusted EBITDA to interest expense(4)........................ 1.8 2.0 2.3
</TABLE>
18
<PAGE>
- ------------------
(1) Income before income taxes for the year 1992 includes a pre-tax provision of
$6.2 million in connection with the Company's estimated liability related to
warranty claims for a discontinued product. Income before income taxes for
the year 1991 includes a pre-tax provision of $6.7 million for the Company's
estimated obligations related to environmental matters. Income before
cumulative effect of an accounting change in 1992 and 1991 includes the
after-tax effects of the foregoing items. See Note 3 of Notes to the
Company's Consolidated Financial Statements.
Effective January 1, 1992, the Company adopted SFAS No. 106, 'Employers'
Accounting for Postretirement Benefits Other Than Pensions.' The cumulative
effect as of January 1, 1992 of adopting SFAS No. 106 was a one-time charge
against earnings of $7.7 million, after a related income tax benefit of $4.2
million.
(2) For purposes of these computations, earnings consist of income before income
taxes and the cumulative effect of accounting change, plus fixed charges.
Fixed charges consist of interest on indebtedness (including amortization of
debt issuance costs), together with that portion of lease rental expense
representative of interest (estimated to be one-third of lease rental
expense). Pro forma earnings were inadequate to cover fixed charges by $9.6
million and $1.1 million, respectively, for the year ended December 31, 1995
and the nine months ended October 1, 1995, as a result of $14.8 million and
$9.6 million, respectively, of reserves established by USI prior to its
acquisition by the Company.
(3) See 'Pro Forma Capitalization' and Note 9 of Notes to the Company's
Consolidated Financial Statements.
(4) The EBITDA data are being presented because such data relate to debt
covenants under the Indenture. Calculations of the ratio of Adjusted EBITDA
to interest expense have been performed in accordance with the definitions
in the Indenture, except that the ratio of Adjusted EBITDA to interest
expense for the nine months ended October 1, 1995 and September 29, 1996 has
been calculated based on operating data for such nine-month periods rather
than for the most recently completed four fiscal quarters ended on such
dates. See 'Description of the New Notes.' Accordingly, Adjusted EBITDA is
calculated as income before income taxes, increased by interest expense,
depreciation, goodwill amortization and, in the case of pro forma Adjusted
EBITDA, reserves established by USI prior to its acquisition by the Company.
See 'Summary Financial Data' for the details of the calculations of Adjusted
EBITDA. As an indicator of the Company's operating performance, such
supplemental financial information should not be considered as an
alternative to net income or any other measure of performance under
generally accepted accounting principles.
The Indenture contains covenants which, subject to certain exceptions,
restrict the Company from issuing Debt, unless, at the time of such issuance
and after giving effect thereto, the ratio of Adjusted EBITDA (as defined in
the Indenture) to Consolidated Interest Expense (as defined in the
Indenture) is at least 2 to 1 for its most recently completed four
consecutive fiscal quarters ending at least 45 days prior thereto. See
'Description of the New Notes' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
(5) The principal assumptions used in preparing the Pro Forma Operating Data are
as follows: issuance of $100 million principal amount of Notes at an
interest rate of 8 5/8% per annum; the acquisition of USI; the repayment of
approximately $22 million in indebtedness of USI; the distribution by the
Company of its glass fiber manufacturing facility in Nashville, Tennessee
and certain related assets and liabilities and the execution of a long-term
supply agreement between GFC and the Company; and the contribution of cash
and securities by G-I Holdings to the Company (approximately $71 million).
The net effect of such assumptions was to decrease the Company's pro forma
income before income taxes by $25.7, $17.4 and $6.7 million for the year
1995 and the first nine months of 1995 and 1996, respectively. As a result,
the Company's pro forma provision for income taxes decreased by $10.0, $6.9
and $2.6 million for the year ended 1995 and the first nine months of 1995
and 1996, respectively, based on an effective marginal income tax rate of
39%.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Building Materials Corporation of America (the 'Company'), an indirect
subsidiary of GAF Corporation ('GAF') and G-I Holdings Inc. ('G-I Holdings'),
was formed in January 1994 to acquire the operating assets and certain
liabilities of GAF Building Materials Corporation ('GAFBMC'), the Company's
parent. See Note 1 to Consolidated Financial Statements. As a result of the Spin
Off Transactions consummated on January 1, 1997, (1) the Company's glass fiber
manufacturing facility in Nashville, Tennessee (and certain related assets and
liabilities) was transferred to GFC, (2) USI became a subsidiary of the Company
and (3) G-I Holdings made a cash contribution of approximately $57 million to
the Company. In that connection, GFC entered into a long-term supply agreement
with the Company under which GFC has agreed to produce glass fiber for the
Company. See 'Certain Relationships.' As of January 1, 1997, USI became a
subsidiary of the Company through a capital contribution to the Company by G-I
Holdings. Accordingly, the Company's historical consolidated financial
statements have been restated for the year ended December 31, 1995 and the nine
months ended September 29, 1996 to include USI's results of operations from the
date of its acquisition by G-I Holdings, including sales of $21.8 million for
the year ended December 31, 1995 and $76.3 million for the nine months ended
September 29, 1996 and net income (loss) of $(.5) million and $.8 million,
respectively.
RESULTS OF OPERATIONS
First Nine Months of 1996 Compared With First Nine Months of 1995
For the first nine months of 1996, the Company recorded net income of $16.5
million compared with net income of $10 million for the first nine months of
1995. The 65% increase in net income was attributable to improved operating
income and lower other expense, partially offset by higher interest expense.
The Company's net sales for the first nine months of 1996 were $648.4
million compared with $507.7 million for the same period last year. The 28%
sales growth primarily reflected USI sales of $76.3 million and also reflected a
14% sales growth for BMCA due to increased unit volumes of both residential and
commercial roofing products and higher average selling prices.
Gross profit margin improved to 27.4% for the first nine months of 1996
from 27.2% last year, resulting primarily from higher average selling prices.
Selling, general and administrative expenses as a percentage of net sales
decreased slightly from 19.6% to 19.5% for the first nine months of 1996.
Operating income for the first nine months of 1996 was $51.2 million, a 33%
increase over the $38.4 million recorded in the same period of last year. The
higher operating income was attributable to the increased sales and improved
margins and included $3.1 million operating income from USI.
Interest expense increased to $23.7 million in the first nine months of
1996 from $18.2 million last year, reflecting higher debt levels. Other expense,
net decreased to $.5 million from $3.5 million, primarily as a result of higher
investment and interest income (up $4.0 million).
1995 Compared With 1994
The Company recorded net income in 1995 of $10.1 million compared with net
income of $16.7 million in 1994. The lower net income was primarily attributable
to higher interest expense, partially offset by improved operating income.
Net sales for 1995 increased $94.1 million (16%) to $687.2 million,
compared with $593.1 million in 1994. The sales growth primarily reflected
higher unit volumes of both residential and commercial roofing products,
including $21.8 million sales of USI, acquired in October 1995, and those of the
business of International Permalite Inc. ('IPI'), acquired in March 1994, and
higher average selling prices.
Gross profit margin decreased from 28.3% in 1994 to 26.4% in 1995,
resulting principally from higher raw material costs, partially offset by the
higher average selling prices. Selling, general and administrative expenses
increased 9.7% to $135.3 million, primarily reflecting higher distribution and
selling costs to support the increased level of sales, and also reflecting $3.6
million of USI expenses from the date of USI's acquisition. Selling, general and
administrative expenses decreased as a percentage of net sales from 20.8% in
1994 to 19.7% in 1995.
20
<PAGE>
The Company recorded operating income of $45.9 million in 1995, up 3%
compared with $44.7 million in 1994, due principally to the higher sales
volumes, partially offset by the lower margins.
Interest expense was $24.8 million in 1995 compared with $13.1 million in
1994. The increase was attributable to the issuance in June 1994 of the Deferred
Coupon Notes. See Note 9 to Consolidated Financial Statements.
Other expense, net, increased to $4.5 million in 1995 from $3.8 million in
1994. The increase was primarily attributable to increased expenses related to
the sale of the Company's receivables (up $1.2 million) and certain litigation
costs, partially offset by higher interest income from the Company's loan to a
related party (up $0.9 million).
1994 Compared With 1993
In 1994, the Company recorded net income of $16.7 million compared with net
income of $20.4 million in 1993. The lower net income was attributable to higher
interest expense, partially offset by improved operating income and lower other
expense, net.
Net sales for 1994 increased $33.9 million (6%) to $593.1 million, compared
with $559.2 million in 1993, reflecting higher unit volumes of both residential
and commercial roofing products and the acquisition of the business of IPI in
March 1994.
Gross profit margin increased to 28.3% in 1994 from 28.0% in 1993, as a
result of lower manufacturing costs, including raw material costs, and an
improved sales mix of premium products, partially offset by lower average
selling prices.
Selling, general and administrative expenses increased 7% to $123.3
million, primarily reflecting higher distribution and selling costs to support
the increased level of sales in 1994, partially offset by lower management fees
paid to an affiliate, principally reflecting the affiliate's lower costs of
providing services. See Note 11 to Consolidated Financial Statements. Selling,
general and administrative expenses remained relatively constant from year to
year as a percent of net sales, increasing to 20.8% in 1994 from 20.6% in 1993.
The Company recorded operating income of $44.7 million in 1994, up 8%
compared with $41.5 million in 1993, reflecting the higher sales and improved
margins. Operating income margin increased in 1994 to 7.5% from 7.4% in 1993.
Interest expense was $13.1 million in 1994 compared with $2 million in
1993. The increase was attributable to the issuance of the Deferred Coupon Notes
in June 1994.
Other expense, net, in 1994 declined to $3.8 million from $6.4 million in
1993. The decrease resulted from higher income on investments (up $2.1 million),
and a reduction in certain other expenses, partially offset by increased
expenses related to the sale of the Company's trade accounts receivable (up $1.3
million ).
LIQUIDITY AND FINANCIAL CONDITION
The Company generated $18.2 million of cash from operations during the
first nine months of 1996, of which $15.7 million was utilized for capital
programs, and generated $13.8 million of cash from net sales of
available-for-sale securities, for a net cash inflow of $16.3 million before
financing activities. Cash from operations included a cash outflow of $2.9
million for net purchases of trading securities.
Cash invested in additional working capital totaled $46.2 million during
the first nine months of 1996. This amount primarily reflected a seasonal
increase in inventories of $11.9 million and a $33.4 million increase in the
receivable from the trust which purchases the Company's trade accounts
receivable.
Cash used in financing activities for the first nine months of 1996 totaled
$49.3 million, primarily reflecting $43.7 million in payments of asbestos
claims, $11.9 million in repayments of long-term debt and a $22 million loan to
an affiliate, partially offset by $16.4 million in proceeds from the sale of
receivables and an $11.6 million capital contribution from the Company's parent.
As a result of the foregoing factors, cash and cash equivalents decreased
by $33.0 million during the first nine months of 1996 to $13.0 million
(excluding $29.4 million of trading and available-for-sale securities).
21
<PAGE>
The Company generated $50.6 million of funds from operations in 1995. Cash
utilized for working capital totaled $8.1 million in 1995, primarily reflecting
increased inventories and lower payables.
The Company invested $93.5 million in 1995 in capital programs and
acquisitions, including $27.5 million for the acquisition of USI, and for net
purchases of available-for-sale securities. Net cash outflow in 1995 before
financing activities was $42.8 million.
Net cash provided by financing activities in 1995 was $59.8 million,
principally reflecting $40 million of proceeds from a sale-leaseback transaction
(see below), a $34.3 million capital contribution from the Company's parent
(reflecting the cash that was used to make the acquisition of USI), $23.6
million from the repayment of a loan by a related party, a $24.5 million
reduction in restricted cash, and $7.9 million in proceeds from the sale of the
Company's trade receivables. Such cash flow was partially offset by the payment
of asbestos claims of $59.8 million and $10.4 million in repayments of long-term
debt.
As a result of the foregoing factors, cash and cash equivalents increased
by $17.0 million in 1995 to $46.0 million (excluding $40.1 million of trading
and available-for-sale securities).
The Company's investment strategy is to seek to earn returns in excess of
money market rates on its available cash while minimizing market risks. There
can be no assurance that the Company will be successful in implementing such
strategy. The Company invests primarily in hedged utility programs,
international and domestic convertible arbitrage, and securities of companies
involved in acquisition or reorganization transactions, including at times,
common stock short positions which are offsets against long positions in
securities which are expected, under certain circumstances, to be exchanged or
converted into the short positions. With respect to its equity positions, the
Company is exposed to the risk of market loss. See Note 2 to Consolidated
Financial Statements.
Borrowings by the Company are subject to the application of certain
financial covenants contained in the indenture relating to the Deferred Coupon
Notes. As of September 29, 1996, the Company was in compliance with such
covenants.
In June 1996, the Company's bank credit facilities were extended to June
1997 on the same terms and conditions. Such facilities provide for revolving
lines of credit up to $30 million and letters of credit facilities of up to $39
million, provided that total borrowings and outstanding letters of credit may
not exceed $40 million. As of September 29, 1996, $33.1 million of letters of
credit were outstanding and no amounts had been borrowed thereunder. Under the
agreements, the Company is subject to a minimum consolidated net worth test. As
of September 29, 1996, the Company was in compliance with such test.
USI has a revolving credit facility, providing for borrowings of up to
$29.6 million, which expires in January 1999 and is secured by, and subject to
limitations based upon values of, accounts receivable, inventories and certain
manufacturing equipment. As of September 29, 1996, loans of $22.2 million were
outstanding under the facility. The interest rate on that portion of the loans
which is collateralized by accounts receivable and inventories is at the prime
rate; that portion which is collateralized by manufacturing equipment is at a
fixed rate of 7%.
In December 1995, the Company consummated a $40 million sale-leaseback of
certain equipment located at its Chester, South Carolina glass mat manufacturing
facility, in a transaction accounted for as a capital lease. The proceeds were
used for general corporate purposes. The lease term extends to December 2005.
The objectives of the Company in utilizing interest rate swap agreements
are to lower funding costs, diversify sources of funding and manage interest
rate exposure. As of September 29, 1996, the total notional amount of interest
rate swaps outstanding was $100.8 million, and the amount of underlying debt
relating to such swaps was $220.1 million. By utilizing interest rate swap
agreements, the Company reduced its interest expense by $1.6 million in the
first nine months of 1996, $1.5 million in 1995 and $0.2 million in 1994. See
Note 9 to Consolidated Financial Statements.
See Note 9 to Consolidated Financial Statements for further information
regarding the debt instruments of the Company.
Upon its formation on January 31, 1994, the Company assumed the first
$204.4 million of GAFBMC's liabilities relating to then pending cases and
previously settled asbestos-related bodily injury cases, $178.8 million of which
had been paid through September 29, 1996. Accordingly, as of January 31, 1994,
the
22
<PAGE>
Company's stockholder's equity (deficit) reflects a charge of $124.7 million,
representing the Company's assumption of the aforementioned asbestos liabilities
net of a corresponding income tax benefit. At September 29, 1996, the Company
had total outstanding consolidated indebtedness of $326.4 million and
stockholder's equity of $44.3 million; $3.1 million of the Company's
indebtedness matures prior to September 30, 1997. As of September 29, 1996, the
current portion of the reserve for asbestos claims was $20.6 million.
Substantially all of the asbestos-related liabilities assumed by the Company are
expected to be paid by the end of the second quarter of 1997. The Company
anticipates funding such obligations from its cash and investments, operations
and/or borrowings (which may include borrowings from affiliates). See
'Business-- Legal Proceedings' for further information regarding
asbestos-related matters.
In March 1993, the Company sold its trade accounts receivable
('receivables') to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company repurchased the receivables sold pursuant to the 1993
agreement and sold them to a special purpose subsidiary of the Company, BMCA
Receivables Corporation, without recourse, which in turn sold them to a new
trust, without recourse, pursuant to new agreements. The new agreements provide
for a maximum of $115 million in cash to be made available to the Company based
on eligible receivables outstanding from time to time and the facility expires
in December 2001.
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates. As of September 29, 1996, $22 million
in loans were owed to the Company by G-I Holdings and no loans were owed by the
Company to affiliates.
The parent corporations of the Company are essentially holding companies
without independent businesses or operations and, as such, are presently
dependent upon the cash flow of their subsidiaries, including the Company, in
order to satisfy their obligations, including the asbestos-related claims
mentioned above and certain potential tax liabilities including tax liabilities
relating to Rhone-Poulenc Surfactants & Specialties L.P., a Delaware limited
partnership which operates, among other businesses, GFC's former surfactants
chemicals business. The parent corporations of the Company are GAF, G-I
Holdings, G Industries Corp. and GAFBMC, and except for the Company, the only
significant asset of such parent corporations is GFC. GAF has advised the
Company that it expects to obtain funds to satisfy such obligations from, among
other things, refinancings of debt, dividends and loans from subsidiaries, and
from payments pursuant to Tax Sharing Agreements between GAF and its
subsidiaries. The indentures relating to the Notes and the Deferred Coupon Notes
contains restrictions on the amount of dividends, loans and other restricted
payments (as defined) which may be paid by the Company. As of September 29,
1996, after giving effect to the most restrictive of the aforementioned
restrictions, the Company could have paid dividends of up to $23.0 million (and,
after giving effect to the net capital contributions made to the Company as part
of the Spin Off Transactions and the contribution to the Company in July 1996 of
the Houston, Texas facility of USI, approximately $135.1 million in the
aggregate). In the event that the Company's parent corporations should become
unable to meet their cash requirements from sources other than the Company, they
might take various actions, including, among other things, seeking to cause the
Company to make distributions to stockholders by means of dividends or
otherwise, to make loans to its parent corporations, or cause GAFBMC to sell
shares of the Company's common stock. The Company does not believe that the
dependence of its parent corporations on the cash flows of their subsidiaries
should have a material adverse effect on the operations, liquidity or capital
resources of the Company. For further information, see Notes 3, 5, 9 and 12 to
Consolidated Financial Statements.
For further information with regard to income taxes, see Note 5 to
Consolidated Financial Statements.
The Company does not believe that inflation has had a material effect on
its results of operations during the past three years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
relating to accounting for impairment of long-lived assets, which was adopted in
1996. The Company does not anticipate that the implementation of SFAS No. 121
will have a material effect on the Company's results of operations or financial
position.
23
<PAGE>
BUSINESS
The Company, incorporated under the laws of Delaware in 1994, is a
wholly-owned subsidiary of GAF Building Materials Corporation ('GAFBMC'). The
Company acquired the operating assets and certain liabilities of GAFBMC in 1994.
GAFBMC is a wholly-owned subsidiary of G Industries Corp. ('G Industries'),
which is a holding company that also owns all of the capital stock of GAF
Fiberglass Corporation ('GFC'). G Industries is a wholly-owned subsidiary of G-I
Holdings Inc. ('G-I Holdings'), a wholly-owned subsidiary of GAF. GAF is
controlled by Samuel J. Heyman, Chairman of the Board of Directors and Chief
Executive Officer of each of GAF, G-I Holdings, G Industries, GAFBMC, GFC and
the Company. GAF was organized by Mr. Heyman for the purpose of effecting the
acquisition in March 1989 of the predecessor company to GAF in a management-led
buyout.
The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the residential and commercial roofing
markets. The Company's products are produced at 22 strategically located
manufacturing facilities. The Company believes that it holds the number one or
two market position in each of the product lines in which it competes, including
leadership in sales of premium laminated residential shingles and modified
bitumen commercial roofing. Based on brand awareness studies, the Company's
Timberline(Registered) product is the leading brand in residential roofing, and
the Company's Ruberoid(Registered) product is the leading brand in the modified
bitumen commercial roofing, the latter being the fastest growing segment in the
commercial roofing industry. The Company does business under the name 'GAF
Materials Corporation.'
The Company operates 16 roofing manufacturing facilities, two roofing
accessory plants, one glass mat manufacturing plant, two perlite roofing
manufacturing plants and one fiber-cement shingle and siding plant. The Company
has registered, through 1995, eight consecutive years of increases in operating
income. Since 1989 and through December 31, 1995, the Company's net sales and
operating income have increased at average annual compound rates of
approximately 9% and 13%, respectively (without giving effect to the acquisition
of USI), and its gross profit and operating income margins have increased from
25.2% to 26.4% and from 5.5% to 6.7%, respectively. The Company believes that
its growth is primarily attributable to (i) improvement in its product mix,
driven by a marketing strategy which emphasizes its higher-margin products; (ii)
its low cost manufacturing operations; (iii) substantial capital spending
programs for new property, plant and equipment that have enabled the Company to
expand capacity and reduce manufacturing costs; and (iv) the strength of its
national distribution system.
Effective as of January 31, 1994, GAFBMC transferred to the Company all of
its business and assets (other than three closed manufacturing facilities,
certain deferred tax assets and receivables from affiliates). The Company
contractually assumed all of GAFBMC's liabilities, except (i) all of GAFBMC's
environmental liabilities, other than environmental liabilities relating to the
Company's plant sites and its business as then conducted, (ii) any potential
liability relating to certain litigation with Georgia-Pacific Corporation (see
'Business--Legal Proceedings--Other Litigation') and (iii) all of GAFBMC's
asbestos-related liabilities, other than the first $204.4 million of such
liabilities (whether for indemnity or defense) relating to then-pending
asbestos-related bodily injury cases and previously settled asbestos-related
bodily injury cases which the Company contractually assumed and agreed to pay.
G-I Holdings and GAFBMC have agreed, jointly and severally, to indemnify the
Company from liabilities not assumed by the Company, including asbestos-related
and environmental liabilities not expressly assumed by the Company. See Note 3
to Consolidated Financial Statements and 'Risk Factors--Parents' Dependence upon
Company's Cash Flow.'
USI was acquired by G-I Holdings in October 1995 and became a subsidiary of
the Company on January 1, 1997 as part of the Spin Off Transactions. The
financial and statistical data regarding the Company contained herein reflect
the results of USI from and after October 20, 1995, the date on which USI was
acquired by G-I Holdings, except as expressly set forth herein. For pro forma
information, see 'Selected Financial Data.'
INDUSTRY OVERVIEW
The United States residential roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 80% of industry residential roofing unit sales in
1995. Residential asphalt roofing materials comprise higher margin, premium
laminated shingles and standard strip shingles, which represented
approximately 25% and 75%, respectively, of industry asphalt roofing
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<PAGE>
unit sales in 1995. Total asphalt residential unit sales grew during the past
five years (from January 1, 1991 through December 31, 1995) at an average annual
compound rate of approximately 4%, during which period unit sales of laminated
and strip shingles grew at average annual compound rates of approximately 15%
and 1%, respectively. While the Company believes that growth of laminated
shingle sales will continue to exceed the growth of the overall residential
asphalt roofing market, the Company expects increased competition in this area.
The United States commercial roofing industry comprises manufacturers of
asphalt built-up roofing, modified bitumen, single-ply polymer and other roofing
products. Approximately 70% of commercial roofing industry membrane unit sales
utilize asphalt built-up roofing and modified bitumen products, both of which
the Company manufactures and markets. Over the past five years, commercial
roofing industry membrane unit sales experienced modest growth, primarily as a
result of the weak commercial construction market. During this period, unit
sales of asphalt built-up roofing products declined at an average annual
compound rate of approximately 1%, while unit sales of modified bitumen products
grew at a rate of approximately 5%, the latter due principally to shifts in
customer preferences.
Over the past five years, approximately 80% of industry sales, as well as
those of the Company, of both residential and commercial roofing products were
for re-roofing, as opposed to new construction. As a result, the exposure of
both the Company and the industry to cyclical downturns in the new construction
market is substantially lower than other building material manufacturers
producing, for example, gypsum, wood and cement. Management expects that during
the late 1990s demand for re-roofing will continue to increase as the existing
housing stock ages and as homeowners upgrade from standard strip roofing
shingles to premium laminated shingles for enhanced aesthetics and durability.
RESIDENTIAL ROOFING PRODUCTS
Residential roofing represented approximately 73% of the Company's net
sales in 1995 (approximately 64% after giving effect to the acquisition of USI
by the Company). The Company believes that it is the largest manufacturer of
laminated shingles and the second largest manufacturer of strip shingles in the
United States. The Company produces two lines of shingles, the
Timberline(Registered) series and the Sovereign(Registered) series, as well as
certain specialty shingles principally for regional markets.
The Company's sales of laminated shingles represented approximately 40% of
its residential sales in 1995, with sales of such shingles having grown during
the five years ended December 31, 1995 at an average annual compound rate of
approximately 8%. The Timberline(Registered) series offers a premium laminated
product line that adds dramatic shadow lines and substantially improves the
appearance of a roof.
The Company's sales of strip shingles have grown at an average annual
compound rate of approximately 6% during the past five years and represented
approximately 50% of the Company's residential sales in 1995. The
Sovereign(Registered) series includes a line of standard strip shingles and
heavier weight 3-tab shingles designed to capitalize on the demand for quality
shingles.
All of the Company's asphalt roofing shingles have a Class A fire rating
and are made from glass fiber mat, coated with waterproofing asphalt on both
sides and surfaced with colored ceramic-coated mineral granules. The Company's
other residential roofing products include Timbertex(Registered) and
Ridgetex(Registered) Hip & Ridge shingles, Shingle-Mate(Registered)
underlayment, Weather Watch(Registered) ice and water barrier, a waterproof
underlayment, and Cobra(Registered) ridge vent, a ventilation system on a coil,
all of which enable the Company to offer a complete system of residential
roofing components.
COMMERCIAL ROOFING PRODUCTS
Commercial roofing represented approximately 27% of the Company's net sales
in 1995 (approximately 36% after giving effect to the acquisition of USI by the
Company). The Company manufactures a broad line of modified bitumen products,
asphalt built-up roofing and roofing accessories. The Company believes that it
is the second largest manufacturer of asphalt built-up roofing products and the
largest manufacturer of modified bitumen products in the United States. The
Company also manufactures perlite roofing insulation products, which consist
of low thermal insulation products for commercial roofing installation below
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<PAGE>
the roofing membrane. The Company also markets isocyanurate foam as roofing
insulation, packaged asphalt and accessories such as vent stacks, roof
insulation fasteners, cements and coatings. The Company has in recent years
devoted substantial resources to the high performance end of the
commercial roofing market and is now a leading supplier for major
commercial roofing installations.
INCREASING EMPHASIS ON HIGHER MARGIN, PREMIUM PRODUCTS
One of the Company's strategies to grow sales and profitability has been to
improve its product mix, with an increased emphasis on laminated shingles and
longer-life, high performance premium strip and specialty shingles, which sell
at higher prices and profit margins than standard strip shingles. Since 1989 and
through December 31, 1995, the Company's unit sales of premium shingles have
increased at an average annual compound rate of approximately 11%. This growth
enabled the Company to significantly increase its premium product mix of
residential sales. Management expects to continue this strategy to improve
product mix by increasing sales of premium shingles.
SUBSTANTIAL CAPITAL PROGRAMS
The Company believes that its plants are among the most modern in the
industry, due in part to the fact that since 1985 and through December 31, 1995,
the Company has invested in excess of $200 million in new property, plant and
equipment (of which more than $100 million has been invested since the beginning
of 1990), principally in order to increase capacity and implement process
improvements to reduce manufacturing costs and has included the installation of
efficient in-line lamination equipment in a number of its roofing plants, as
well as the modernization of the Company's fiberglass and glass mat facilities.
The Company has been able to reduce its manufacturing costs as a result of this
capital program, the vertical integration discussed above, and the rigorous
application of its process and quality control standards.
NEW PRODUCT DEVELOPMENT
The Company believes that it has been among the most innovative industry
leaders in terms of the introduction of new products, having been the first to
develop the three-dimensional laminated roofing shingle, Timberline(Registered),
which created an entire new product line within the asphalt roofing industry.
New products introduced by the Company in just the last four years include: the
Timberline(Registered) and Timberline Ultra(Registered) Natural
Shadow(Trademark) shingles, which offer wood shake appearance, enhanced visual
depth and contrast simulating shadows; the Marquis(Registered) shingle, a
heavyweight three-tab shingle designed for Northern markets which offers greater
flexibility and added durability in cold temperatures; the
Stonehenge(Registered) shingle, a specialty shingle offering a unique strip
shingle appearance; the Grand Sequoia(Registered) shingle, a premier
architectural shingle; the Floridian(Registered) shingle, a unique 6-tab shingle
that offers a dimensional look; and Ruberoid(Registered) 20/30, a polymer
modified bitumen roofing system which utilizes fiberglass reinforcements coated
with modified asphalt to form a durable high performance two-ply roofing
membrane and which requires no additional treatment or coating to qualify for an
Underwriters Laboratory Class A rating. In 1995, the Company introduced GAF
CompositeRoof(Trademark), a new commercial roofing product that combines the
tensile strength of built-up roofing with the flexibility and superior
elongation of modified bitumen membranes. See '--Legal Proceedings--Other
Litigation.'
ACQUISITIONS
The Company's acquisition strategy is focused on niche-type acquisitions,
designed to either complement existing product lines, further the geographic
reach of the Company's business or increase its market shares, and preferably
those which can benefit from the Company's strong national distribution network,
manufacturing technology and marketing expertise. Recent acquisitions by the
Company include the acquisition of USI, a leading national manufacturer of
commercial roofing products, and the acquisition of the International Permalite
business, which is one of only two United States manufacturers of perlite
roofing insulation products whose products consist of low thermal insulation
which is installed on commercial roofs below the roofing membrane.
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<PAGE>
RESIDENTIAL ROOFING
The Company is a leading manufacturer of a complete line of premium
residential roofing products, with residential roofing product sales
representing approximately 73% of the Company's net sales in 1995 (approximately
64% after giving effect to the acquisition of USI by the Company). The Company
has improved its sales mix of residential roofing products in recent years by
increasing its emphasis on laminated products which generally are sold at higher
prices with more attractive profit margins than its standard strip shingle
products. The Company believes that it is the largest manufacturer of laminated
residential roofing shingles, and the second largest manufacturer of standard
shingles, in the United States.
The Company produces two principal lines of roofing shingles, the
Timberline(Registered) series and the Sovereign(Registered) series, as well as
certain specialty shingles for regional markets.
The Timberline(Registered) Series. The Timberline(Registered) Series
offers a premium laminated product line that adds dramatic shadow lines and
substantially improves the appearance of a roof. The series includes the GAF
Timberline(Registered) 25 Natural Shadow(Registered) shingle, a mid-weight
laminated shingle which serves as an economic trade-up for consumers, with a
25-year limited warranty; the Timberline(Registered) Natural Shadow(Trademark)
shingle, with a 30-year limited warranty, offering a woodshake appearance,
enhanced visual depth and contrast simulating shadows and superior fire
resistance and durability; and the Timberline Ultra(Registered) Natural
Shadow(Trademark) shingle, with a 40-year limited warranty, a super heavyweight
laminated shingle with the same design features as the Timberline(Registered)
Natural Shadow(Trademark) shingle, together with added durability.
The Sovereign(Registered) Series. The Sovereign(Registered) Series
includes the standard 3-tab Sentinel(Registered) shingle with a 20-year limited
warranty; the Royal Sovereign(Registered) shingle, a heavier 3-tab shingle with
a 25-year limited warranty, designed to capitalize on the 'middle market' for
quality shingles; and the Marquis(Registered) shingle, a super heavyweight 3-tab
shingle with a 30-year limited warranty.
Specialty Shingles. The Company's specialty asphalt shingles include:
Slateline(Registered) shingles offering the appearance of slate, labor savings
in installation because of their larger size and a 30-year limited warranty;
Stonehenge(Registered) offering a unique strip shingle appearance and a 25-year
limited warranty; Dubl-Coverage(Registered) Tite-On(Registered) shingles
offering a design feature that enables the shingles to lock together to form a
double layer roof, and a 25-year limited warranty; the Grand Sequoia(Registered)
shingle, a premier architectural shingle with a 40-year warranty; and the
Floridian(Registered) shingle, a unique 6-tab shingle that offers a dimensional
look with a 25-year limited warranty.
SystemRoof(Registered) Component Roofing System. In addition to shingles,
the Company supplies all the components necessary to install a complete roofing
system. The Company's SystemRoof(Registered) begins with Weather
Watch(Registered) ice and water barrier underlayment for eaves, valleys and
flashings to prevent water seepage between the roof deck and the shingles caused
by ice build-ups. The Company's SystemRoof(Registered) also includes
Shingle-Mate(Registered) glass reinforced underlayment, Timbertex(Registered),
Ridgetex(Trademark) and Slateline(Registered) Hip and Ridge shingles which are
significantly thicker and larger than standard hip and ridge shingles and
provide dramatic accents to the slopes and planes of a roof and the
Cobra(Registered) Ridge Vent which provides attic ventilation.
COMMERCIAL ROOFING
The Company manufactures a full line of modified bitumen products, asphalt
built-up roofing and roofing accessories for use in the application of
commercial roofing. Commercial roofing represented approximately 27% of the
Company's net sales in 1995 (36% after giving effect to the acquisition of USI).
Approximately 70% of commercial roofing industry membrane unit sales utilize
asphalt built-up roofing and modified bitumen products, both of which the
Company manufactures. The Company believes that it is the second largest
manufacturer of asphalt built-up roofing products and the largest manufacturer
of modified bitumen products in the United States.
The Company manufactures glass membranes under the trademark
GAFGLAS(Registered), which are made from asphalt impregnated glass fiber mat for
use as a component in asphalt built-up roofing systems. Most of the Company's
GAFGLAS(Registered) products are assembled on the roof by applying successive
layers of roofing membrane with asphalt and topped, in some applications,
with gravel. Thermal insulation may be applied beneath the membrane. The Company
also manufactures base sheets, flashings and other roofing accessories for use
in these systems and perlite roofing insulation products, which consist of low
thermal insulation that is installed as part of a commercial roofing application
below the roofing membrane. In addition, the Company sells isocyanurate foam
27
<PAGE>
as roofing insulation, packaged asphalt and accessories such as vent stacks,
roof insulation fasteners, cements and coating.
Modified bitumen products are sold under the Ruberoid(Registered) trademark
by the Company and under the Brai(Registered) trademark by USI and are used
primarily in re-roofing applications. These products consist of a roofing
membrane utilizing polymer-modified asphalt, which strengthens and increases
flexibility and is reinforced with a polyester non-woven mat or a glass mat.
Modified bitumen systems provide high strength characteristics, such as
weatherability, water resistance, and labor cost savings due to ease of
application.
MARKETING AND SALES
The Company has one of the industry's largest sales forces, which is
supported by a staff of technical professionals who work directly with
architects, general contractors and owner/builders. The Company markets its
roofing products through its own sales force of approximately 125 experienced
full-time employees operating from five regional sales offices located across
the United States. USI markets its roofing products through approximately 50
experienced full-time employees and independent sales representatives. A major
portion of the Company's roofing product sales are to wholesale distributors who
resell the Company's products to roofing contractors and retailers. The Company
believes that the wholesale distribution channel offers the most attractive
margins of all roofing market distribution channels and represents the principal
distribution channel for professionally installed asphalt roofing products, and
that its nationwide coverage has contributed to its roofing products being among
the most recognized and requested brands in the industry.
No single customer accounted for as much as 10% of the Company's 1995
sales.
RAW MATERIALS
The major raw materials required for the manufacture of the Company's
roofing products are asphalt, mineral stabilizer, glass fiber, glass fiber mat
and granules. Asphalt and mineral stabilizer are available from a large number
of suppliers and the Company currently has contracts with several of these
suppliers, with others available as substitutes. Prices of most raw materials
have been relatively stable, rising moderately with general industrial prices,
while the price of asphalt tends to move in step with the price of crude oil.
Five of the Company's roofing plants have easy access to deep water ports
thereby permitting delivery of asphalt by ship, the most economical means of
transport. The Company's Chester, South Carolina plant manufactures glass fiber
mat substrate. The Company currently purchases supplies of raw materials at
reasonable costs, although there can be no assurance that it will continue to do
so. The Company purchases from ISP substantially all its requirements for
colored roofing granules (except for the requirements of its California roofing
plant which are supplied by a third party) under a supply contract that was
renewed for one year effective January 1, 1996 and is subject to annual renewal
unless terminated by the Company or ISP. In addition, in December 1995, USI
commenced purchasing substantially all of its requirements for colored roofing
granules from ISP (except for the requirements of its Stockton, California and
Corvallis, Oregon plants which are supplied by a third party) pursuant to a
supply contract. As part of the Spin Off Transactions, the Company transferred
to GFC its Nashville, Tennessee facility, which manufactures a significant
portion of the Company's glass fiber requirements, and entered into a supply
contract with GFC under which GFC produces glass fiber for the Company.
SEASONAL VARIATIONS AND WORKING CAPITAL
Sales of roofing products in the northern regions of the United States
generally decline during the winter months due to adverse weather conditions.
Generally, the Company's inventory practice includes increasing inventory levels
in the first and the second quarter in order to meet peak season demand (June
through November).
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<PAGE>
WARRANTY CLAIMS
The Company provides certain limited warranties covering most of its
residential roofing products for periods ranging from 20 to 40 years. Although
terms of warranties vary, the Company believes that its warranties generally are
consistent with those offered by its competitors. The Company also offers
limited warranties and guarantees of varying duration on its commercial roofing
products. The Company currently believes that the reserves established for
estimated probable future warranty claims are adequate.
COMPETITION
The roofing products industry is highly competitive and includes a number
of national competitors, which in the residential roofing market are
Owens-Corning, Elcor and Celotex, and in the commercial roofing market are
Schuller International, Celotex, Firestone and Carlisle. In addition, there are
numerous regional competitors.
Competition is based largely upon products and service quality,
distribution capability, price and credit terms and the Company believes that it
is well positioned in the marketplace as a result of its broad product lines in
both the residential and commercial markets, consistently high product quality,
strong sales force and national distribution capabilities. As a result of the
growth in demand for premium laminated shingles, a number of roofing
manufacturers, including the Company, have increased their laminated shingle
production capacity in recent years and the Company expects increased
competition in this area.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are focused primarily on
the development of new products, process improvements and the testing of
alternative raw materials and supplies. The Company's research and development
activities, dedicated to residential, commercial and fiberglass products, are
located at technical centers at Wayne, New Jersey, Nashville, Tennessee and Port
Arthur, Texas. The Company's research and development expenditures were
approximately $2.6 million, $2.5 million and $3.1 million in 1993, 1994 and
1995, respectively.
PROPERTIES
The corporate headquarters and principal research and development
laboratories of the Company are located at a 100-acre campus-like office and
research park owned by a subsidiary of ISP, at 1361 Alps Road, Wayne, New Jersey
07470. The premises are subject to a first mortgage.
The principal real properties either owned by, or leased to, the Company or
its subsidiaries are described below. Unless otherwise indicated, the properties
are owned in fee. In addition to the principal facilities listed below, the
Company maintains sales offices and warehouses, substantially all of which are
in leased premises under relatively short-term leases.
<TABLE>
<CAPTION>
LOCATION FACILITY
- -------------------------------------------------------- ---------------------------------
<S> <C>
Alabama
Mobile................................................ Plant, Warehouse*
Arizona
Chandler.............................................. Warehouse*
California
Fontana............................................... Plant, Sales Office
Ontario............................................... Plant, Sales Office
Stockton.............................................. Plant, Warehouse*
Florida
Tampa................................................. Plant, Sales Office*
Georgia
Monroe................................................ Plant, Warehouse*
Savannah.............................................. Plant, Sales Office
Indiana
Mount Vernon.......................................... Plant, Sales Office
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
LOCATION FACILITY
- -------------------------------------------------------- ---------------------------------
<S> <C>
Illinois
Naperville............................................ Sales Office*
Kentucky
Florence.............................................. Plant
Maryland
Baltimore............................................. Plant, Warehouse*
Massachusetts
Millis................................................ Plant, Sales Office
Minnesota
Minneapolis........................................... Plant, Sales Office, Warehouse*
New Jersey
Branchburg............................................ Warehouse*
North Branch.......................................... Plant
North Brunswick....................................... Sales Office*, Warehouse*
Wayne................................................. Headquarters, Corporate
Administrative Offices,
Research Center*
Ohio
Wadsworth............................................. Plant*, Warehouse*
Oregon
Corvallis............................................. Plant
Pennsylvania
Erie.................................................. Plant, Sales Office, Warehouse*
Wind Gap.............................................. Plant
South Carolina
Chester............................................... Plant
Tennessee
Nashville............................................. Research Center
Texas
Beaumont.............................................. Plant
Dallas................................................ Plant, Sales Office, Warehouse*
Fannett............................................... Warehouse
Houston............................................... Plant, Warehouse, Warehouse*
Port Arthur........................................... Plant, Warehouse, Office
</TABLE>
- ------------------
*Leased Property
The Company believes that its plants and facilities, which are of varying
ages and are of different construction types, have been satisfactorily
maintained, are in good condition, are suitable for their respective operations
and generally provide sufficient capacity to meet production requirements. Each
plant has adequate transportation facilities for both raw materials and finished
products. In 1995, the Company made capital expenditures in the amount of $25.0
million relating to plant, property and equipment.
PATENTS AND TRADEMARKS
The Company owns approximately 73 domestic and 79 foreign patents and owns
or licenses approximately 133 domestic and 44 foreign trademark registrations.
While the Company believes the patent protection covering certain of its
products to be material to those products, such patents are not of material
significance to the overall roofing-related business of the Company.
The Company believes that the duration of the existing patents and patent
licenses is satisfactory.
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<PAGE>
ENVIRONMENTAL COMPLIANCE
Since 1970, a wide variety of federal, state and local environmental laws
and regulations relating to environmental matters (the 'Regulations') have been
adopted and amended. By reason of the nature of the operations of the Company
and its predecessor and certain of the substances that are, or have been used,
produced or discharged at their plants or at other locations, the Company is
affected by the Regulations. The Company has made capital expenditures averaging
approximately $500,000 during each of the last three years in order to comply
with the Regulations (which expenditures are included in additions to property,
plant and equipment) and anticipates that aggregate capital expenditures
relating to environmental compliance in each of 1997 and 1998 will be
approximately $600,000.
The Regulations deal with air and water emissions or discharges into the
environment, as well as the generation, storage, treatment, transportation and
disposal of solid and hazardous waste, and the remediation of any releases of
hazardous substances and materials to the environment. The Company believes that
its manufacturing facilities comply in all material respects with applicable
Regulations, and, while it cannot predict whether more burdensome requirements
will be adopted in the future, it believes that any potential liability for
compliance with the Regulations will not materially affect its business,
liquidity or financial position.
The Company believes that its manufacturing facilities are being operated
in compliance in all material respects with applicable environmental, health and
safety laws and regulations but cannot predict whether more burdensome
requirements will be imposed by governmental authorities in the future.
LEGAL PROCEEDINGS
In connection with its formation, BMCA contractually assumed and agreed to
pay the first $204.4 million of liabilities for Asbestos Claims (whether for
indemnity or defense) of its parent, GAFBMC, relating to pending cases and
previously settled, but not paid, cases as of January 31, 1994, of which $178.8
million had been paid through September 29, 1996. G-I Holdings and GAFBMC have
jointly and severally agreed to indemnify BMCA against any claims related to
asbestos-related liabilities, other than those contractually assumed by BMCA, in
the event that claims in connection with liabilities not assumed by BMCA are
asserted against it.
Bodily Injury Claims. As of September 29, 1996, GAF had been named as a
defendant in approximately 59,300 pending lawsuits involving alleged health
claims relating to the inhalation of asbestos fiber ('Asbestos Claims'), having
resolved approximately 221,000 Asbestos Claims. Plaintiffs in approximately
31,200 of the pending lawsuits were preliminarily enjoined from proceeding with
their claims other than in accordance with the Settlement described below.
The reserves of GAF and G-I Holdings for asbestos bodily injury claims, as
of September 29, 1996, were approximately $357.8 million (before estimated
present value of recoveries from products liability insurance policies of
approximately $211 million as described below and related deferred tax benefits
of approximately $51.4 million). GAF and G-I Holdings have advised the Company
that certain components of the asbestos-related liability and the related
insurance recoveries have been reflected on a discounted basis in their
financial statements. See Note 3 to Consolidated Financial Statements.
The estimate of liability for Asbestos Claims is based on the Settlement
described below becoming effective and on assumptions which relate, among other
things, to the number of new cases filed, the cost of resolving (either by
settlement or litigation or through the mechanism established by the Settlement)
pending and future claims, the realization of related tax benefits, the
favorable resolution of pending litigation against certain insurance companies
and the amount of GAF's recoveries from various insurance companies. The reserve
is also premised upon the assumption that GAF and G-I Holdings had available, to
pay asbestos-related bodily injury claims, aggregate insurance coverage, as of
September 29, 1996, totaling $224.3 million before discounting certain coverage
(which amount is reduced as asbestos-related liabilities are satisfied). See
'--Insurance Matters.'
The actual cost of resolving pending and future Asbestos Claims is
difficult to estimate. However, based upon the experience of the Center for
Claims Resolution (the 'CCR'), a non-profit organization of asbestos defendant
companies including GAF, in settling approximately 187,000 cases since its
creation in 1988, GAF's recent average settlement costs, and the impact of the
Settlement if it becomes effective, GAF believes that its
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<PAGE>
reserves, before discounting, together with anticipated available insurance
proceeds, will be sufficient to satisfy all pending Asbestos Claims and all
claims anticipated to be resolved during the ten-year period of the Settlement
described below. There can be no assurance, however, that the assumptions
referred to above are correct.
On January 15, 1993, the members of the CCR entered into the Settlement to
resolve all future Asbestos Claims (other than claims of those persons who
'opted out' of the class) against GAF and other members of the CCR. The class
action was filed with the United States District Court in Philadelphia. The
Settlement, if effective, would operate to limit GAF's liability for future
Asbestos Claims to persons who do not 'opt out' of the Settlement by placing a
dollar limit on awards to such persons and a limit on the number of claims that
will be paid to such persons in any one year and over the first ten years of the
Settlement. Certain members of the class filed objections to the Settlement. On
August 16, 1994, the District Court approved the Settlement, holding that the
terms of the Settlement are fair to the class as a whole, certified the class
and entered a preliminary injunction enjoining class members from pursuing
asbestos claims against GAF and other members of the CCR except in accordance
with the Settlement. On May 10, 1996, the United States Court of Appeals for the
Third Circuit (the 'Third Circuit') issued an opinion, concluding that the class
was not certifiable, thus reversing the decision of the District Court. On
November 1, 1996, the United States Supreme Court granted GAF's petition for a
writ of certiorari and agreed to hear GAF's appeal of the Third Circuit's
decision. The appeal is expected to be heard on February 18, 1997. GAF continues
to believe the Settlement should ultimately be upheld on appeal, although there
can be no assurance in this regard.
Although approximately 260,000 requests (the 'opt-outs') to be excluded
from the Settlement were initially filed, the United States District Court in
Philadelphia granted the CCR's motion to void the opt-outs and require a second
notice and opt-out period. As a result, the number of individuals who have filed
timely opt-out requests has been reduced to approximately 87,000.
It is anticipated that substantially all of the payments in connection with
the liability of GAF and G-I Holdings relating to Asbestos Claims will be made
by the end of the year 2004. While GAF is unable to estimate the amount of
liability with respect to claims to be resolved after such period, it believes
that it will resolve, prior to that time, substantially all the court cases
currently pending against GAF, and that it will further resolve substantially
all the claims filed under the Settlement on a relatively current basis, so that
the number of claims pending against GAF at the end of such period will be
substantially diminished from current levels. As a result of these and other
factors, GAF and G-I Holdings believe that the resolution of any claims after
such period will not, individually or in the aggregate, have a material adverse
effect on their respective financial positions, liquidity or results of
operations.
GAF and G-I Holdings believe that their reserves, which reflect the
discounting of a portion of the liabilities, adequately reflect their actual
asbestos-related liabilities. Although any opinion is necessarily judgmental and
must be based on information currently known, it is the opinion of GAF and G-I
Holdings, based on the assumptions referred to above and their analysis of their
future business, financial prospects and cash flows, that asbestos-related
bodily injury claims will not, individually or in the aggregate, have a
materially adverse effect on the respective financial positions, liquidity or
results of operations of GAF and G-I Holdings, after giving effect to the
aforementioned reserves, and will not impair the ability of GAF or G-I Holdings
to meet its respective obligations, to reinvest in its respective businesses or
to grow.
In the event that the Third Circuit's decision is not reversed and the
Settlement is not upheld, or the conditions to the effectiveness of the
Settlement are not satisfied (see '--Insurance Matters'), GAF and G-I Holdings
could be required to increase their estimates of asbestos-related liabilities
and adjust any related discounts. It is not currently possible to estimate the
range or amount of such possible additional liability.
The Company believes that it will not sustain any liability for damages in
connection with asbestos-related claims in excess of the $204.4 million that it
has contractually assumed. While the Company cannot predict whether any
asbestos-related claims will be asserted against it or its assets, or the
outcome of any litigation relative to such claims, it believes that it has
meritorious defenses to such claims. Moreover, it has been jointly and severally
indemnified by G-I Holdings and GAFBMC with respect to such claims, and GAF and
G-I Holdings have advised the Company that, based on the assumptions referred to
above, they believe they have and will have sufficient resources, principally
through their ownership of the common stock of BMCA, to enable them to satisfy
their asbestos-related liabilities. Should GAF or GAFBMC be unable to satisfy
judgments against
32
<PAGE>
it in asbestos-related lawsuits, its judgment creditors might seek to enforce
their judgments against the assets of GAF or GAFBMC, including its holdings of
common stock of the Company, and such enforcement could result in a change of
control with respect to the Company.
Asbestos-in-Building Claims. GAF has also been named as a co-defendant in
asbestos-in-buildings cases for economic and property damage or other injuries
based upon an alleged present or future need to remove asbestos containing
materials from public and private buildings ('Building Claims'). Since these
actions were first initiated 13 years ago, GAF has not only successfully
disposed of approximately 140 such cases at an average disposition cost
(including cases disposed of at no cost to GAF) of approximately $15,000 per
case (all of which have been paid by insurance under reservation of rights), but
is a co-defendant in only 8 remaining lawsuits. See '--Insurance Matters.' BMCA
has not assumed any liabilities with respect to Building Claims, and G-I
Holdings and GAFBMC have jointly and severally agreed to indemnify BMCA in the
event any such claims are asserted against it.
Insurance Matters. GAF and G-I Holdings had available, as of September 29,
1996, to pay asbestos-related bodily injury claims aggregate insurance coverage
of $224.3 million (which amount was used in the reserve calculation referred to
in 'Bodily Injury Claims' and is reduced as asbestos-related liabilities are
satisfied), $19.0 million of which is the subject of negotiations with various
insurers and/or the Settlement Coverage Action described below, and which $19.0
million of coverage GAF believes will be available to it either by agreement
with its insurance carriers or, if necessary, by legal action. In addition to
the $224.3 million of insurance referred to above, GAF and G-I Holdings have
$57.2 million of additional insurance which may be available to pay a portion of
the Asbestos Claims, which has not been included in the reserve calculations.
Concurrently with the filing of the class action complaint relating to the
Settlement, the members of the CCR filed a third-party action with the United
States District Court in Philadelphia against certain product liability insurers
whose policies will or may be called upon to respond to asbestos-related bodily
injury claims, including claims to be resolved under the Settlement (the
'Settlement Coverage Action'). The third-party complaint seeks a declaratory
judgment on behalf of certain CCR members, including GAF, against various
third-party defendant product liability insurers to the effect that those
insurers are obligated to provide coverage for Asbestos Claims, including claims
subject to the Settlement. The insurers who are defendants in GAF's third-party
complaint are: Atlanta International, Employers Mutual, Lexington (domestic
coverage), Northbrook, Lexington (London coverage), Commercial Union, and
various London Market Insurers. The insurance carrier third-party defendants
have raised various defenses to the Settlement Coverage Action, including the
impropriety of the Settlement without prior notice to the carriers, the
potential violation of various conditions and obligations of the insured under
their policies, and the inappropriateness of the shares allocated to the CCR
members.
The CCR members, including GAF, and certain products liability insurers
(other than those referred to above) which have agreed in writing to fulfill
their obligations to provide coverage with respect to Asbestos Claims, have
joined in an alternate dispute resolution proceeding ('ADR'), which seeks a
determination similar to that sought in the Settlement Coverage Action. The ADR
insurers have raised certain defenses, and no hearing date is currently
scheduled. GAF's insurers in the ADR are ITT-Hartford, Royal Insurance and the
London Market Insurers. The ADR involves $41.8 million of the $224.3 million of
coverage (and $2.8 million of the additional coverage) described above. A
favorable resolution of the Settlement Coverage Action and the ADR is a
condition to the effectiveness of the Settlement.
In October 1983, GAF filed a lawsuit in Los Angeles, California Superior
Court against its past insurance carriers to obtain a judicial determination
that such carriers were obligated to defend and indemnify it for Building
Claims. GAF is seeking declaratory relief as well as compensatory damages. This
action is presently in the pre-trial pleading stage. The parties have agreed to
hold this action in abeyance until such time as they are better able to evaluate
developments as they may occur in the Building Claims. Because such litigation
is in early stages and evidence and interpretations of important legal questions
are presently unavailable, it is not possible to predict the future of such
litigation.
In all the Building Claims, GAF's defense costs have been paid by one of
its primary carriers. While GAF expects that such primary carrier will continue
to defend and indemnify GAF, such primary carrier has reserved its rights to
later refuse to defend and indemnify GAF and to seek reimbursement for some or
all of the fees paid to defend and resolve the Building Claims. GAF believes
that it will be able to resolve such cases for amounts
33
<PAGE>
within the total indemnity obligations available from such primary carrier. GAF
further believes that it would prevail if the carrier's claims for reimbursement
of fees paid to defend and resolve these cases were determined by a court.
ENVIRONMENTAL LITIGATION
BMCA, together with other companies, is a party to a variety of proceedings
and lawsuits involving environmental matters ('Environmental Claims') under the
Comprehensive Environmental Response Compensation and Liability Act ('CERCLA')
and similar state laws, in which recovery is sought for the cost of cleanup of
contaminated sites, a number of which are in the early stages or have been
dormant for protracted periods.
In connection with its formation, BMCA contractually assumed all
environmental liabilities of GAFBMC relating to existing plant sites and the
business of BMCA as then conducted, and the estimates referred to below reflect
only those environmental liabilities assumed by BMCA. The environmental
liabilities of GAFBMC which were not assumed by BMCA, for which G-I Holdings and
GAFBMC have agreed to indemnify the Company, relate primarily to closed
manufacturing facilities. G-I Holdings estimates that, as of September 29, 1996,
its liability in respect of the environmental liabilities of GAFBMC not assumed
by BMCA was approximately $12.9 million, before insurance recoveries reflected
on its balance sheet of $5.7 million, as compared to BMCA's estimate of its
liability as of September 29, 1996 in respect of assumed environmental
liabilities of $1.4 million, before insurance recoveries reflected on its
balance sheet (discussed below) of $0.5 million ('estimated recoveries').
At most sites, BMCA anticipates that liability will be apportioned among
the companies found to be responsible for the presence of hazardous substances
at the site. Although it is difficult to predict the ultimate resolution of
these claims, based on BMCA's evaluation of the financial responsibility of the
parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, BMCA estimates that its liability in respect of all
Environmental Claims, including certain environmental compliance expenses, will
be as discussed above.
After considering the relevant legal issues and other pertinent factors,
BMCA believes that it will receive the estimated recoveries and it may receive
amounts substantially in excess thereof. BMCA believes it is entitled to
substantially full defense and indemnity under its insurance policies for most
Environmental Claims, although BMCA's insurers have not affirmed a legal
obligation under the policies to provide indemnity for such claims.
The estimated recoveries are based in part upon interim agreements with
certain insurers. BMCA terminated these agreements in 1995, and on March 8, 1995
GAF commenced litigation on behalf of it and its subsidiaries in the United
States District Court for the District of New Jersey seeking amounts
substantially in excess of the estimated recoveries. While BMCA believes that
its claims are meritorious, there can be no assurance that BMCA will prevail in
its efforts to obtain amounts equal to, or in excess of, the estimated
recoveries.
The Company believes that it will not sustain any liability for
environmental liabilities of GAFBMC other than those that it has contractually
assumed. While the Company cannot predict whether any claims for non-assumed
environmental liabilities will be asserted against it or its assets, or the
outcome of any litigation relative to such claims, it believes that it has
meritorious defenses to such claims. Moreover, it has been jointly and severally
indemnified by G-I Holdings and GAFBMC with respect to such claims, and G-I
Holdings has advised BMCA that it believes it has and will have sufficient
resources to enable it to satisfy its environmental liabilities. The possible
consequences to the Company of the failure of G-I Holdings and GAFBMC to satisfy
judgments against them in environmental-related lawsuits are described in the
second to last paragraph of 'Risk Factors-- Asbestos Claims Filed Against GAF.'
OTHER LITIGATION
On March 19, 1993, G-I Holdings and a newly formed subsidiary of G-I
Holdings entered into an agreement to acquire the roofing manufacturing business
of Georgia-Pacific Corporation ('G-P'), including six roofing manufacturing
facilities, which was later terminated by G-I Holdings and such subsidiary. On
July 23, 1993, G-P commenced an action, in the United States District Court for
the Southern District of New York, alleging that G-I
34
<PAGE>
Holdings and such subsidiary did not have the right to terminate the agreement
and seeking unspecified damages. The Company believes that the complaint is
without merit and has counterclaimed for breach of contract. A trial of this
action commenced January 21, 1997. G-I Holdings and GAFBMC have agreed to
indemnify the Company with respect to any liabilities not assumed by the
Company, including any liability in connection with this action.
Litigation is pending between the Company and Elk Corporation of Dallas
('Elk') in the United States District Court for the Northern District of Texas
relating to certain aspects of BMCA's laminated shingles, which Elk claims
infringe design and utility patents recently issued to it, as well as certain
proprietary aspects of its shingles. Elk seeks injunctive relief, damages and
attorneys' fees. The Company has sued for a declaration that Elk's patents are
invalid and unenforceable and that the Company's shingles do not infringe any of
Elk's rights, and has sought money damages for Elk's unfair competition and
certain federal statutory violations. The Company believes that Elk's patents
are invalid and unenforceable, that its shingles do not infringe any of Elk's
rights and that it will prevail in obtaining the requested declaratory relief
and money damages.
On or about April 29, 1996, an action was commenced in the Circuit Court of
Mobile County, Alabama against GAFBMC on behalf of a purported nationwide class
of purchasers of, or current owners of, buildings with asphalt shingles
manufactured by GAFBMC since January 1979. The action alleges, among other
things, that such shingles were defective and seeks unspecified damages on
behalf of the purported class. Plaintiffs have not moved for class certification
in either of these actions. On August 14, 1996, an action was commenced in
Pointe Coupee Parish, Louisiana, against GAF and GAFBMC on behalf of a purported
nationwide class of those who own or did own single family residences on which
GAF Timberline(Registered) shingles were installed. The Company was not served
or otherwise notified of the action until November 1996. Without any notice to
the Company, in August 1996, the court in Pointe Coupee conditionally certified
the nationwide class, reserving the right to decertify the class or otherwise
modify this order. The Company recently removed the action to the United States
District Court for the Middle District of Louisiana. The action alleges that the
shingles were defective and seeks an unspecified amount of compensatory and
punitive damages on behalf of the purported class. On August 30, 1996, an action
was commenced in Johnson County, Texas, against GAF, GAFBMC and the Company on
behalf of a purported statewide class of purchasers of laminated organic
shingles, which GAF ceased manufacturing in 1981. The Company has removed this
action to the United States District Court for the Northern District of Texas,
and the plaintiffs have sought to dismiss this action or, in the alternative, to
remand the case to state court. The action alleges, among other things, that the
shingles were defective and seeks unspecified damages on behalf of the purported
class. On or about January 7, 1997, an action was commenced in the Superior
Court of New Jersey, Middlesex County against GAFBMC on behalf of a purported
nationwide class of owners of buildings with shingles manufactured by GAFBMC who
allegedly have suffered damages since January 1991. The action alleges, among
other things, that such shingles were defective and seeks unspecified damages on
behalf of the purported class. The Company does not believe a class is warranted
in any of these actions, and intends to vigorously oppose them.
* * *
The Company believes that the ultimate disposition of the cases described
above under 'Environmental Litigation,' 'Asbestos-in-Building Claims' and 'Other
Litigation' will not, individually or in the aggregate, have a material adverse
effect on the Company's liquidity, financial position or results of operations.
EMPLOYEES
At December 31, 1996, the Company employed approximately 2,800 people
worldwide, approximately 1,000 of which were subject to 15 union contracts. The
contracts are effective for four-year periods. During 1996, five labor contracts
expired and were renegotiated. The Company expects to renegotiate five labor
contracts during 1997. The Company believes that its relations with its
employees and their unions are satisfactory.
The Company has in effect various benefit plans, which include a
non-qualified retirement plan for a group of executives, a capital accumulation
plan for its salaried and certain hourly employees, a flexible benefit plan for
its salaried employees, a retirement plan for certain of its hourly employees,
and group insurance agreements providing life, accidental death, disability,
hospital, surgical, medical and dental coverage. In addition, the Company has
contracted with various health maintenance organizations to provide medical
benefits. The Company and, in many cases, its employees contribute to the cost
of these plans.
35
<PAGE>
MANAGEMENT
The following table sets forth the name, age, position and other
information with respect to the directors and executive officers of the Company.
Each person listed below is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD(1) AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Samuel J. Heyman .................................... 57 Mr. Heyman has been a director and Chairman of BMCA
Director, Chairman and Chief Executive Officer since its formation and Chief Executive Officer of
BMCA since June 1996. He has served as a director
and Chairman and Chief Executive Officer of ISP
since its formation in May 1991 and Chairman and
Chief Executive Officer of GAFBMC since May 1994.
Mr. Heyman has held the same offices with GAF, G-I
Holdings and certain of its subsidiaries since
April 1989, prior to which he held the same
position with GAF's predecessor from December 1983
to April 1989. Mr. Heyman has been a director of
USI since October 1995, and of ISP Holdings Inc.
since its formation. He is also the Chief Executive
Officer, Manager and General Partner of a number of
closely held real estate development companies and
partnerships whose investments include commercial
real estate and a portfolio of publicly traded
securities.
Sunil Kumar ......................................... 47 Mr. Kumar has been the President, Chief Operating
Director, President and Chief Operating Officer Officer and a director of BMCA since July 24, 1996,
March 18, 1996 and May 1995, respectively. He was
President, Commercial Roofing Products Division,
and Vice President of BMCA from February 1995 to
March 18, 1996. He has been Vice Chairman and a
director of USI since October 1995. From 1992 to
February 1995, he was Executive Vice President of
Bridgestone/Firestone Inc., a retail distributor
and manufacturer of tires and provider of
automobile services. From 1982 to 1990, Mr. Kumar
was President of Firestone Building Products
Company, and from 1990 to 1992 he was Vice
President of Bridgestone/Firestone.
James P. Rogers ..................................... 45 Mr. Rogers has been a director of BMCA since its
Director and Executive Vice President formation and Executive Vice President of BMCA
since December 1996. Mr. Rogers has been Executive
Vice President and Chief Financial Officer of GAF,
G-I Holdings and certain of its subsidiaries and
Executive Vice President-Finance of ISP since
December 1996. He was Senior Vice President of such
corporations from November 1993 to December 1996
and of BMCA from its formation to December 1996.
Mr. Rogers has been a director and Senior Vice
President of USI since October
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD(1) AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
1995 and ISP Holdings Inc. since its formation. Mr.
Rogers was Treasurer of BMCA from its formation
until December 1994. Mr. Rogers has served as
Treasurer of G-I Holdings, GAF and certain of its
subsidiaries since March 1992 and was Vice
President-Finance of such corporations from March
1992 to October 1993. From August 1987 to March
1992, Mr. Rogers was Treasurer of Amphenol
Corporation, a manufacturer of electronic
connectors.
Richard A. Weinberg ................................. 37 Mr. Weinberg has been Senior Vice President and
Senior Vice President and General Counsel General Counsel of BMCA since May 1996. He has been
Senior Vice President and General Counsel of GAF,
G-I Holdings, ISP and certain of their subsidiaries
since May 1996 and of ISP Holdings since its
formation. He was Vice President and General
Counsel of BMCA from September 1994 to May 1996,
Vice President Law of BMCA from May 1994 to
September 1994 and Vice President-Law of GAFBMC
from April 1993 to May 1994. Mr. Weinberg was
employed by Reliance Group Holdings Inc., a
diversified insurance holding company, as Staff
Counsel from October 1987 to January 1990 and as
Assistant Vice President and Corporate Counsel from
January 1990 to April 1993.
John M. Sergey ...................................... 54 Mr. Sergey has been a director of BMCA since its
Director formation. He was Chief Executive Officer and
President of BMCA from its formation until May 31,
1996, a director of GAFBMC from April 1989 until
May 31, 1996 and a director and Chairman of USI
from October 1995 until May 31, 1996. Mr. Sergey
was President of GAFBMC from April 1989 to May 1994
and was Executive Vice President of GAFBMC from May
1994 until May 31, 1996. Mr. Sergey was a Director
and Executive Vice President of GAF from April 1989
until May 31, 1996. From 1978 to 1989 he served in
various management positions with Avery
International Corporation, a company engaged in the
manufacture and conversion of pressure sensitive
adhesive products, including Group Vice President
of the Materials Group from 1987 to 1989 and Group
Vice President of the Soabar Group from 1984 to
1987.
Donald W. LaPalme ................................... 59 Dr. LaPalme has been Senior Vice President- Operations
Senior Vice President-Operations of BMCA and certain of its subsidiaries since April
1996. He was Vice President-Operations of BMCA and
certain of its subsidiaries from January 1994 to
April 1996 and
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD(1) AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
held the same position with GAFBMC from 1987 to May
1994. From 1985 to 1987 he was plant manager and
Director of Manufacturing Polymers of GFC's Calvert
City, Kentucky manufacturing facility. From 1981 to
1984 he was Vice President of Manufacturing of
GAF's Building Materials Division.
Danny J. Adair ...................................... 52 Mr. Adair has been President and Chief Executive
President and Chief Executive Officer, U.S. Intec, Officer of USI since 1982.
Inc.
Joseph J. Okaly ..................................... 39 Mr. Okaly has been Vice President of Marketing and
Vice President-Marketing and Sales, Residential Sales, Residential Roofing Products of BMCA since
Roofing Products June 1996. He was Vice President-Logistics of BMCA
from December 1992 to June 1996 and Director,
Distribution/Customer Service of BMCA from January
1992 to December 1992.
William W. Collins .................................. 46 Mr. Collins has been Vice President-Marketing &
Vice President-Marketing and Sales Commercial Sales, Commercial Roofing Products of BMCA since
Roofing Products March 1996. He was Vice President-Sales, Commercial
of BMCA from December 1995 to March 1996, Director
of Insulation, Accessories and Cobra Products of
BMCA from February 1995 to December 1995 and
Director of Special Projects of BMCA from July 1992
to February 1995. From February 1991 to July 1992,
he was Vice President-Sales & Marketing of Berger
Building Materials.
</TABLE>
- ------------------
(1) Under BMCA's By-laws, each director and executive officer continues in
office until BMCA's next annual meeting of stockholders and until his
successor is elected and qualified.
38
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the four other most highly compensated executive officers of BMCA as
of December 31, 1996, together with any person who served as BMCA's Chief
Executive Officer in 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -----------------
--------------------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL SARs ALL OTHER
NAME AND PRINCIPAL POSITION(8) YEAR SALARY BONUS(1) COMPENSATION (S)/OPTIONS(O) COMPENSATION
- ------------------------------------ ---- -------- -------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sunil Kumar ........................ 1996 $285,000(2) $ -- $ 0(2) 2,190(O)/8,886(S) $ 13,561(2)
President and Chief 1995 208,336(2) 60,000(2) 31,382(2) 9,201(S) 8,475(2)
Operating Officer 1994 (2) (2) (2) (2) (2)
Danny J. Adair ..................... 1996 $216,686(3) $ -- $ 0 1,550(O) $ 3,972(3)
President and Chief Executive 1995 216,686(3) 25,000 0 0 3,953(3)
Officer, U.S. Intec, Inc. 1994 (3) (3) (3) (3) (3)
Donald W. LaPalme .................. 1996 $160,000 $ -- $ 0 1,200(O) $ 14,519(4)
Senior Vice President-Operations 1995 148,500 34,000 0 0 14,381(4)
1994 141,000 40,000 0 0 17,338(4)
Joseph J. Okaly .................... 1996 $130,000 $ -- $ 0 900(O) $ 11,212(5)
Vice President-Marketing & Sales, 1995 118,000 22,000 0 0 10,033(5)
Residential Roofing Products 1994 107,500 22,500 0 0 9,744(5)
William W. Collins ................. 1996 $130,000 $ -- $ 0 900(O) $ 12,092(6)
Vice President-Marketing & Sales, 1995 122,000 22,000 0 0 14,149(6)
Commercial Roofing Products 1994 107,000 0 0 0 3,655(6)
John M. Sergey ..................... 1996 $148,512 $ 0 $ 0 0 $ 16,681(7)
Chief Executive Officer and 1995 326,550 80,000 0 0 16,786(7)
President 1994 310,417 100,000 0 0 21,870(7)
</TABLE>
- ------------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
Compensation Program. Bonus amounts for 1996 have not yet been determined.
(2) The stock appreciation rights relate to shares of GAF common stock. See
'Options/SARs'. Included in 'Other Annual Compensation' for Mr. Kumar are
$19,897 in payment of moving related expenses and a 'tax gross-up' of $8,711
in 1995. Included in 'All Other Compensation' for Mr. Kumar is $10,750 and
$5,664 representing BMCA's contribution to the GAF Capital Accumulation Plan
in 1996 and 1995, respectively; $1,636 for premiums paid by BMCA in each of
1995 and 1996 for a life insurance policy; and $1,175 for the premium paid
by BMCA for a long-term disability policy in each of 1995 and 1996.
(3) Included in 'All Other Compensation' for Mr. Adair are $1,260 in each of
1996 and 1995 for a life insurance policy; $2,212 and $2,193 for the premium
paid on a long-term disability policy in 1996 and 1995, respectively; and
$500 in each of 1996 and 1995 representing the Company's contribution to the
GAF Capital Accumulation Plan. USI become a subsidiary of the Company in
1995.
(4) Included in these amounts for Dr. LaPalme are: $11,000, $11,000 and $11,000,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1996, 1995 and 1994, respectively; $2,754, $2,646 and $5,643 for the premium
paid by BMCA for a life insurance policy in 1996, 1995 and 1994,
respectively; and $765, $735 and $695 for the premium paid by BMCA for a
long-term disability policy in 1996, 1995 and 1994, respectively.
(5) Included in these amounts for Mr. Okaly are: $10,390, $9,261 and $9,018,
representing BMCA's contributions under the GAF Capital Accumulation Plan in
1996, 1995 and 1994, respectively; $284, $267 and $251 for the premium paid
by BMCA for a life insurance policy in 1996, 1995 and 1994, respectively;
(Footnotes continued on next page)
39
<PAGE>
(Footnotes continued from previous page)
and $538, $505 and $475 for the premium paid by BMCA for a long-term
disability policy in 1996, 1995 and 1994, respectively.
(6) Included in these amounts for Mr. Collins are: $10,633, $14,149 and $3,655,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1996, 1995 and 1994, respectively; $849 for the premium paid by BMCA for a
life insurance policy in 1996; and $610 for the premium paid by BMCA for a
long-term disability policy in 1996.
(7) Included in these amounts for Mr. Sergey are: $10,708; $11,000 and $11,000,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1996, 1995 and 1994, respectively; $4,723, $4,536 and $9,620 for the premium
paid by BMCA for a life insurance policy in 1996, 1995 and 1994
respectively; and $1,250, $1,250 and $1,250 for the premium paid by BMCA for
a long-term disability policy in 1996, 1995 and 1994, respectively. Mr.
Sergey retired from BMCA on May 31, 1996. For a six-month period following
his retirement, Mr. Sergey served as a consultant for BMCA in exchange for a
fee of $28,932 per month.
(8) The salaries and other compensation of Messrs. Heyman, Weinberg and Rogers
are paid by ISP, an affiliate of BMCA. Mr. Heyman, Mr. Rogers and Mr.
Weinberg render services to BMCA pursuant to a management agreement. See
'Certain Relationships--Management.' No allocation of compensation for
services is made pursuant to such management agreement.
OPTIONS/SARs
The following table summarizes options ('BMCA Preferred Options') to
acquire BMCA's Redeemable Convertible Preferred Stock and grant Stock
Appreciation Rights relating to GAF Common Stock ('GAF SARs') granted during
1996 to the executive officers named in the Summary Compensation Table above and
the potential realizable value of BMCA Preferred Options and GAF SARs held by
such persons. No BMCA Preferred Options or GAF SARs were exercised by such
persons in 1996.
<TABLE>
<CAPTION>
BMCA PREFERRED STOCK OPTION (O)/
GAF SAR(S) GRANTS IN 1996(1)(2)
------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF BOOK
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS VALUE APPRECIATION
UNDERLYING OPTIONS/SARs GRANTED TO EMPLOYEES IN FISCAL -----------------------------
GRANTED 1996 5% 10%
----------------------- ------------------------------ ------------ --------------
<S> <C> <C> <C> <C>
Sunil Kumar.............. 2,190(O)/8,886(S) 8.9%(O)/15.4%(S) $ 50,607(S) $ 1,740,471(S)
68,000(0) 160,000(0)
Danny J. Adair........... 1,550(O) 6.3%(O) 48,000(0) 113,000(0)
Donald W. LaPalme........ 1,200(O) 4.9%(O) 37,000(0) 88,000(0)
Joseph J. Okaly.......... 900(O) 3.7%(O) 28,000(0) 66,000(0)
William W. Collins....... 900(O) 3.7%(O) 28,000(0) 66,000(0)
</TABLE>
- ------------------
(1) The BMCA Preferred Stock Options represent options to purchase shares of
Redeemable Convertible Preferred Stock of BMCA (the 'Preferred Stock'). Each
share of Preferred Stock is convertible, at the holder's option, into shares
of common stock of BMCA at a formula price based on Book Value (as defined)
as of the date of grant. The BMCA Preferred Stock Options vest over seven
years. Dividends will accrue on the Preferred Stock from the date of
issuance at the rate of 8% per annum. The Preferred Stock is redeemable, at
the Company's option, for a redemption price equal to the exercise price per
share plus accrued and unpaid dividends. The common stock of BMCA issuable
upon conversion of the Preferred Stock is subject to repurchase by the
Company under certain circumstances, at a price equal to current Book Value
(as defined). The exercise price of the options is equal to the fair value
per share of the Preferred Stock at the date of grant. The BMCA Preferred
Stock Options have no expiration date. The potential realizable values are
calculated on the basis of a seven-year period from the date of grant. In
connection with the Spin Off Transactions, options to purchase shares of
Redeemable Convertible Preferred Stock of USI held by Messrs. Kumar,
LaPalme, Okaly, Collins and Adair were canceled and exchanged for an equal
number of BMCA
(Footnotes continued on next page)
40
<PAGE>
(Footnotes continued from previous page)
Preferred Stock Options and the terms of BMCA Preferred Stock Options were
adjusted to reflect the impact of the Spin Off Transactions. The information
set forth above reflects such adjustment and exchange.
(2) The GAF SARs represent the right to receive a cash payment based upon the
appreciation in value of the specified number of shares of common stock of
GAF over the determined initial book value per share of common stock of GAF
(adjusted for the Spin Off Transactions) and interest on such book value at
a specified rate. The GAF SARs vest over a five-year period, subject to
earlier vesting under certain circumstances including in connection with a
change of control, and have no expiration date. The potential realizable
values are calculated on the basis of a ten-year period from the date of
grant. The GAF SARs were issued to Mr. Kumar on January 1, 1997 in
connection with the Spin Off Transactions, in exchange for options granted
to Mr. Kumar in 1996 to purchase shares of Redeemable Convertible Preferred
Stock of GAF.
BMCA PREFERRED STOCK OPTIONS/GAF STOCK APPRECIATION RIGHTS AS OF DECEMBER 31,
1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED IN-THE-
BMCA PREFERRED MONEY BMCA PREFERRED
OPTIONS(O)/GAF SARs(S) OPTIONS(O)/GAF SARs(S) AT
AT 12/31/96 12/31/96(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------- ---------------------------- ----------------------------
<S> <C> <C>
Sunil Kumar.............................................. 0/18,087(S) 0/2,190(O) $0/$500,271(S)(1)
Danny J. Adair........................................... 0/1,550(O) (1)
Donald W. LaPalme........................................ 0/1,200(O) (1)
Joseph J. Okaly.......................................... 0/900(O) (1)
William W. Collins....................................... 0/900(O) (1)
</TABLE>
- ------------------
(1) 9,201 GAF SARs held by Mr. Kumar were in-the-money as of December 31, 1996.
No BMCA Preferred Options were in the money as of December 31, 1996. Value
is based on estimated book value as of December 31, 1996.
COMPENSATION OF DIRECTORS
The directors of BMCA do not receive any compensation for their services as
such.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding common stock of BMCA (the 'Common Stock') is owned
of record by GAFBMC. All of the outstanding common stock of GAFBMC is owned of
record by G Industries which is 100% owned by G-I Holdings, which in turn is
100% owned by GAF.
The following table sets forth information with respect to the ownership of
Common Stock, as of December 31, 1996, by each other person known to BMCA to own
beneficially more than 5% of the Common Stock outstanding on that date, by each
director of BMCA and by all executive officers and directors of BMCA as a group,
based on 1,000,000 shares of Common Stock outstanding on that date:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF TOTAL VOTING
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS POWER
- -------------------------------------------- ---------------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock................................ Samuel J. Heyman 1,000,000 100%(1 ) 100%(1)
1361 Alps Road
Wayne, New Jersey 07470
All directors and executive
officers of BMCA as a
group (9 persons) 1,000,000 100%(1 ) 100%(1)
</TABLE>
- ------------------
41
<PAGE>
(1) By virtue of Mr. Heyman's ownership of capital stock of GAF having
approximately 96% of the combined voting power thereof, Mr. Heyman may be
deemed to be the beneficial owner of all shares of Common Stock.
CERTAIN RELATIONSHIPS
MANAGEMENT AGREEMENTS
Pursuant to a management agreement which expires at the end of 1997, ISP
(which is controlled by BMCA's Chief Executive Officer, Samuel J. Heyman)
provides certain general management, administrative and facilities services to
BMCA and USI (including the use of BMCA's headquarters in Wayne, New Jersey),
for which BMCA and USI paid ISP a management fee of $3.9 million in 1996. In
addition to the management fee, BMCA paid approximately $.8 million to ISP in
1996 primarily for telecommunications and information services and approximately
$.3 million to ISP in 1996 for certain legal services, which in each case were
not then contemplated by the management agreement. In connection with the Spin
Off Transactions, BMCA and ISP modified the management agreement to incorporate
such services into the management agreement, and, in that connection, increased
the management fee payable by the Company to ISP to $4.7 million and extended
the term through the end of 1997. Certain of BMCA's executive officers receive
their compensation from ISP, with ISP being indirectly reimbursed therefor by
virtue of the management fee.
As of January 1, 1997, BMCA and GFC entered into a management agreement
under which BMCA provides certain general management, administrative and
financial services to GFC. Under the management agreement which expires December
31, 1997, GFC is obligated to pay BMCA an annual management fee of $1,000,000.
Due to the unique nature of the services provided under the management
agreements, comparisons with third party arrangements are difficult. However,
BMCA believes that the terms of each of the management agreements taken as a
whole are no less favorable to BMCA than could be obtained from an unaffiliated
third party.
CERTAIN PURCHASES
BMCA purchases from ISP all of its colored mineral granules requirements,
except for the requirements of its California roofing plant, under a
requirements contract which was renewed for one year, effective as of January 1,
1997, and is subject to annual renewal unless terminated by BMCA or ISP. In
December 1995, USI commenced purchasing substantially all of its requirements
for colored roofing granules from ISP (except for the requirements of its
Stockton, California and Corvallis, Oregon plants which are supplied by a third
party) pursuant to a supply contract. In 1996, BMCA and USI purchased in the
aggregate approximately $50.5 million of mineral products from ISP.
As part of the Spin Off Transactions, the Company transferred to GFC its
Nashville, Tennessee facility, which manufactures a significant portion of the
Company's glass fiber requirements, and entered into a supply contract with GFC
under which GFC produces glass fiber for the Company on terms which the Company
believes are at least as favorable to the Company as could be obtained from an
unaffiliated third party.
TAX SHARING AGREEMENT
BMCA and its subsidiaries have entered into a Tax Sharing Agreement with
GAF and G-I Holdings with respect to the payment of federal income taxes and
certain related matters (the 'Tax Sharing Agreement'). During the term of the
Tax Sharing Agreement, which shall be effective for the period during which BMCA
or any of its domestic subsidiaries is included in a consolidated federal income
tax return filed by GAF, BMCA is obligated to pay G-I Holdings an amount equal
to those federal income taxes BMCA would have incurred if BMCA (on behalf of
itself and its domestic subsidiaries) filed its own federal income tax return.
Unused tax
42
<PAGE>
attributes will carry forward for use in reducing amounts payable by BMCA to G-I
Holdings in future years, but cannot be carried back. Were BMCA to leave the GAF
Group, it would be required to pay to G-I Holdings the value of any tax
attributes it would succeed to under the consolidated return regulations to the
extent such attributes reduced the amounts otherwise payable by BMCA under the
Tax Sharing Agreement. Under certain circumstances, the provisions of the Tax
Sharing Agreement could result in BMCA having a greater liability thereunder
than it would have had if it (and its domestic subsidiaries) had filed its own
separate federal income tax return. Under the Tax Sharing Agreement, BMCA and
each of its domestic subsidiaries are responsible for any taxes that would be
payable by reason of any adjustment to the tax returns of GAF or its
subsidiaries for years prior to the adoption of the Tax Sharing Agreement that
relate to the business or assets of BMCA or any domestic subsidiary of BMCA.
Although, as a member of the GAF Group, BMCA is severally liable for all federal
income tax liabilities of the GAF Group, including tax liabilities not related
to the business of BMCA, G-I Holdings and GAF have agreed to indemnify BMCA and
its subsidiaries for all tax liabilities of the GAF Group other than tax
liabilities (i) arising from the operations of BMCA and its domestic
subsidiaries and (ii) for tax years pre-dating the Tax Sharing Agreement that
relate to the business or assets of BMCA and its domestic subsidiaries. The Tax
Sharing Agreement provides for analogous principles to be applied to any
consolidated, combined or unitary state or local income taxes. Under the Tax
Sharing Agreement, GAF makes all decisions with respect to all matters relating
to taxes of the GAF Group. The provisions of the Tax Sharing Agreement take into
account both the federal income taxes BMCA would have incurred if it filed its
own separate federal income tax return and the fact that BMCA is a member of the
GAF Group for federal income tax purposes.
INTERCOMPANY BORROWINGS
BMCA makes loans to, and borrows from, G-I Holdings and its subsidiaries
from time to time at prevailing market rates (between 5.68% and 6.03% per annum
during 1996). The highest amount of loans made by BMCA to G-I Holdings during
1996 was $45.4 million and the highest amount of loans made to BMCA by G-I
Holdings and its subsidiaries during 1996 was $24.3 million. As of December 31,
1996, no loans were owed to BMCA by G-I Holdings or owed by BMCA to affiliates.
Prior to the consummation of the Spin Off Transactions, letters of credit
for the benefit of BMCA were provided under ISP's revolving credit agreement.
The highest amount of such letters of credit during 1996 was $.1 million.
43
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were issued by BMCA on December 9, 1996. In connection
therewith, BMCA entered into the Indenture and the Registration Agreement,
which agreements require that BMCA file a registration statement under the
Securities Act with respect to the New Notes and, upon the effectiveness of such
registration statement, offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, which will be
issued without a restrictive legend and, except as set forth below, may be
reoffered and resold by the holders without registration under the Securities
Act. Upon the completion of the Exchange Offer, BMCA's obligations with respect
to the registration of the Old Notes and the New Notes will terminate, except as
provided below. A copy of the Indenture and the Registration Agreement have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part. As a result of the filing and the effectiveness of the Registration
Statement, certain prospective increases in the interest rate on the Old Notes
provided for in the Registration Agreement will not occur. Following the
completion of the Exchange Offer, holders of Old Notes not tendered will not
have any further registration rights, except as provided below, and the Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Old Notes could be adversely
affected upon completion of the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than any
such holder that is an 'affiliate' of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such holder
represents to the Company that (i) such New Notes are acquired in the ordinary
course of business of such holder, (ii) such holder is not engaging in and does
not intend to engage in a distribution of such new Notes and (iii) such holder
has no arrangement or understanding with any person to participate in the
distribution of such New Notes. Any holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes cannot rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Each broker-dealer that receives
New 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
meeting the requirements of the Securities Act in connection with any resales of
such New Notes. See 'Plan of Distribution.'
In the event that any holder of Old Notes would not receive freely
tradeable New Notes in the Exchange Offer or is not eligible to participate in
the Exchange Offer, such holder can elect, by so indicating on the Letter of
Transmittal and providing certain additional necessary information, to have such
holder's Old Notes registered in a 'shelf' registration statement on an
appropriate form pursuant to Rule 415 under the Securities Act. In the event
that the Company is obligated to file a 'shelf' registration statement, it will
be required to keep such 'shelf' registration statement effective for a period
of three years or such shorter period that will terminate when all of the Old
Notes covered by such registration statement have been sold pursuant thereto.
Other than as set forth in this paragraph, no holder will have the right to
require the Company to register such holder's Notes under the Securities Act.
See 'Procedures for Tendering.'
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer holders of Old Notes not
tendered will not have any further registration rights, except as set forth
above, and the Old Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for a holder's Old Notes
could be adversely affected upon completion of the Exchange Offer if such holder
does not participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, The Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 12:00 midnight, New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in
44
<PAGE>
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000 in principal amount.
The form and terms of New Notes are the same as the form and terms of the
Old Notes, except that the New Notes have been registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture pursuant to which the Old
Notes were issued and will be deemed one issue of notes, together with the Old
Notes.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Old Notes were outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders and to others believed to
have beneficial interests in the Old Notes. Holders of Old Notes do not have any
appraisal or dissenters' rights in connection with the Exchange Offer under the
General Corporation Law of the State of Delaware or the Indenture. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange
Act'), and the rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, except as set forth below under 'Transfer
Taxes,' transfer taxes with respect to the exchange of Old Notes pursuant to the
Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes, in connection with the Exchange Offer. See '--Fees and
Expenses' below.
EXPIRATION DATE; AMENDMENTS
The term 'Expiration Date' shall mean 12:00 midnight New York City time, on
, 1997, unless the Company, in its sole discretion, extends the Exchange
Offer (in which case the term 'Expiration Date' shall mean the later date and
time to which the Exchange Offer is extended). The Company does not intend to
extend the Exchange Offer although it reserves the right to do so by giving oral
or written notice of such extension to the Exchange Agent and by giving each
registered holder notice by means of a press release or other public
announcement of any extension, in each case, prior to 9:00 A.M., New York City
time, on the next business day after the scheduled Expiration Date. The Company
also reserves the right, in its sole discretion, (i) to delay accepting any Old
Notes or, if any of the conditions set forth below under 'Conditions' shall not
have been satisfied or waived, to terminate the Exchange Offer or (ii) to amend
the terms of the Exchange Offer in any manner, by giving oral or written notice
of such delay or termination to the Exchange Agent, and by complying with Rule
14e-1(d) promulgated under the Exchange Act to the extent such Rule applies. The
Company acknowledges and undertakes to comply with the provisions of Rule
14e-1(c) promulgated under the Exchange Act, which requires the Company to pay
the consideration offered, or return the Old Notes surrendered for exchange,
promptly after the termination or withdrawal of the Exchange Offer. Any such
extension, termination or amendment will be followed as promptly as practicable
by a notice to holders of Old Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. To tender in the Exchange Offer, a registered holder must
complete, sign, and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise delivery such Letter of Transmittal or such facsimile to the
Exchange Agent prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a 'Book-Entry Confirmation') of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the 'Book-Entry Transfer Facility') pursuant to the procedure for book-entry
transfer described below, must be
45
<PAGE>
received by the Exchange Agent prior to the Expiration Date, or (iii) the
registered holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, the Letter of Transmittal and other required
documents must be received by the Exchange Agent at the address set forth below
under 'Exchange Agent' prior to the Expiration Date.
The tender by a registered holder which is not withdrawn prior to the
Expiration Date will constitute an agreement between such holder and the Company
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless (A) Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled 'Special Registration
Instructions' or 'Special Delivery Instructions' on the Letter of Transmittal or
(ii) for the account of an Eligible Institution and (B) the box entitled
'Special Registration Instructions' on the Letter of Transmittal has not been
completed. In the event that signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a financial institution (including most banks, savings and loan
associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program
or the Stock Exchanges Medallion Program (each an 'Eligible Institution').
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power and signed by such
registered holder as such registered holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities, or conditions of tender
as to particular Old Notes. The Company's 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, defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Although the Company intends to notify
holders of defects or irregularities with respect to tenders of Old Notes,
neither the Company, 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
46
<PAGE>
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 soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for, or to offer New Notes for, any Old Notes that
remain outstanding subsequent to the Expiration Date or, as set forth below
under 'Conditions,' to terminate the Exchange Offer and, to the extent permitted
by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of such holder, (ii) the holder is
not engaging in and does not intend to engage in a distribution of such New
Notes, (iii) the holder does not have an arrangement or understanding with any
person to participate in the distribution of such New Notes and (iv) the holder
is not an 'affiliate,' as defined under Rule 405 of the Securities Act, of the
Company.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, 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 set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes (or Old
Notes in substitution therefor) will be returned without expense to the
tendering holder thereof (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Old Notes will be credited to such tendering holder's account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after receipt of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under 'Exchange Agent' on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and such Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or prior to 12:00 midnight, New York
City time, on the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by facsimile transmission (if
available to such holder), mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ('NYSE') trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered
47
<PAGE>
Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 12:00 midnight,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth below under 'Exchange Agent' prior to 12:00
midnight, New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the 'Depositor'), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) 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 (iv)
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
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as soon as
practicable 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 under 'Procedures for Tendering' above at any time
on prior to 12:00 midnight, New York City time, on the Expiration Date.
CONDITIONS
Notwithstanding any other provisions of the Exchange Offer and, subject to
its obligations pursuant to the Registration Agreement, the Company shall not be
required to accept for exchange, or to issue New Notes in exchange for, any Old
Notes and may terminate or amend the Exchange Offer, if at any time before the
acceptance of such New Notes for exchange any of the following events shall
occur:
A. any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
B. the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and such right shall be deemed an ongoing right which may be asserted at
any time and time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened by the Commission or be in
effect with respect to the Registration Statement of which this Prospectus is a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of
Old Notes being tendered for exchange.
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ASSISTANCE
All executed Letters of Transmittal should be directed to the Exchange
Agent. Questions and requests for assistance may be directed to the Exchange
Agent as provided below under 'Exchange Agent.'
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions, requests for assistance and requests for additional copies of
the Prospectus, the Letter of Transmittal and other related documents should be
directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail, By Hand
or by Overnight Courier:
The Bank of New York
101 Barclay Street-7E
New York, New York 10286
Attn: Reorganization Section
By Facsimile: By Telephone:
(212) 571-3080 (212) 815-6333
The Exchange Agent also acts as trustee under the Indenture.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $250,000 which includes fees and expenses of the Exchange Agent,
accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
ACCOUNTING TREATMENT
The Company will not recognize any gain or loss for accounting purposes
upon the consummation of the Exchange Offer. The expense of the Exchange Offer
will be amortized by the Company over the terms of the New Notes under generally
accepted accounting principles.
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DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued under an Indenture dated as of December 9, 1996
(the 'Indenture') between the Company and The Bank of New York, as trustee (the
'Trustee'). A copy of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The New Notes also
will be issued under the Indenture, which will be qualified under the Trust
Indenture Act of 1939, as amended (the 'TIA'), upon the effectiveness of the
Registration Statement of which this Prospectus is a part. The form and terms of
the New Notes and the Old Notes are the same except that the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the TIA, and to all of the provisions of the Indenture, including
the definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture. The
definitions of certain capitalized terms used in the following summary are set
forth under 'Certain Definitions.' As used herein, 'Company' means BMCA and does
not include its Subsidiaries.
The New Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Notes. The Notes may
be presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes (the 'Holders'). The Company will pay principal (and premium, if any)
on the Notes at the Trustee's principal corporate trust office in New York, New
York. At the Company's option, interest may be paid at the Trustee's principal
corporate trust office or by check mailed to the registered address of Holders.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the New Notes issued in connection with the Exchange Offer,
will be treated as a single class of securities under the Indenture.
The Notes will be general unsecured obligations of the Company and will
rank senior to all subordinated indebtedness of the Company and pari passu in
right of payment to the Deferred Coupon Notes and to all other unsubordinated
indebtedness of the Company. The Notes will be effectively subordinated to all
secured indebtedness of the Company to the extent of the assets securing such
indebtedness and to all indebtedness and other obligations of the Company's
subsidiaries. See Note 9 to Consolidated Financial Statements.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on December 15, 2006 and will be limited to
$100,000,000 in aggregate principal amount.
Interest on the Notes will accrue at the rate of 8 5/8% per annum, payable
semi-annually on June 15 and December 15 of each year commencing June 15, 1997
to the holders of record at the close of business on the June 1 or December 1
immediately preceding the interest payment date.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest, plus, to the extent permitted by law, any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date. Such special record date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a business day. At least 15 days before the
special record date, the Company shall mail or cause to be mailed to each Holder
and the Trustee a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
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OPTIONAL REDEMPTION
The Company may redeem the Notes, in whole or in part, at any time on or
after December 15, 2001, on not less than 30 nor more than 60 days' prior notice
in principal amounts of $1,000 or any integral multiple of $1,000 at the
following redemption prices (expressed in percentages of principal amount) plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
commencing:
<TABLE>
<CAPTION>
OPTIONAL REDEMPTION PERIOD PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
December 15, 2001............................................. 104.3125%
December 15, 2002............................................. 102.8750%
December 15, 2003............................................. 101.4375%
</TABLE>
and thereafter, beginning December 15, 2004, at 100%.
In the event that, on or prior to the date which is three years after the
Issue Date, the Company consummates a public offering of the Common Stock of the
Company, the Company may, at its option, on not less than 30 nor more than 60
days' notice, redeem, but only to the extent of such net cash proceeds actually
received by it, up to 50% of the principal amount of the Notes then outstanding
at a redemption price equal to 108.625% of the principal amount thereof at the
date of redemption, provided that no such redemption may be made if and to the
extent that, after giving effect thereto, less than a majority of the principal
amount of Notes originally issued would be outstanding. Any such redemption
shall be made within 75 days of the consummation of any such sale.
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by a method
that complies with applicable legal and securities exchange requirements.
The Company shall also have the right to redeem all, but not less than all,
of the Notes upon a Change of Control. See 'Change of Control Put and Call.'
The Notes are not subject to redemption through the operation of a sinking
fund.
CHANGE OF CONTROL PUT AND CALL
In the event of any Change of Control, each Holder shall have the right, at
such Holder's option, to require the Company to purchase all or any portion (in
integral multiples of $1,000) of such Holder's Notes on the date (the 'Change of
Control Payment Date') which is 25 business days after the date the Change of
Control Notice (as defined below) is mailed or is required to be mailed (or such
later date as is required by applicable law) at 101% of the principal amount
thereof (or, if lower, the redemption price then in effect under the provisions
described in the first paragraph under '--Optional Redemption'), plus accrued
interest to the Change of Control Payment Date.
The Company or, at the request of the Company, the Trustee shall send, by
first-class mail, postage prepaid, to all Holders, within ten business days
after the occurrence of each Change of Control, a notice of the occurrence of
such Change of Control (the 'Change of Control Notice'), specifying a date by
which a Holder must notify the Company of such Holder's intention to exercise
the repurchase right and describing the procedure that such Holder must follow
to exercise such right. The Company is required to deliver a copy of such notice
to the Trustee.
Each Change of Control Notice shall state: (1) that the change of control
offer is being made pursuant to this covenant and that all Notes tendered will
be accepted for payment; (2) the purchase price and the Change of Control
Payment Date; (3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any Note
accepted for payment pursuant to the change of control offer shall cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have a Note purchased pursuant to a change of control offer will be
required to surrender the Note in accordance with the instructions set forth
therein; (6) that the Company has the right, pursuant to provisions described in
the next paragraph, to redeem any Notes not tendered at the Call Price; and (7)
the circumstances and relevant facts regarding such Change of Control.
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<PAGE>
In the event a Change of Control occurs, the Company may redeem all, but
not less than all, of the Notes then outstanding, at a redemption price equal to
100% of the principal amount thereof plus accrued interest to the redemption
date, plus the Applicable Premium (the 'Call Price'). Notice of any redemption
to be made pursuant to this paragraph as a result of the occurrence of a Change
of Control must be given no later than 10 days after the Change of Control
Payment Date applicable to the Change of Control giving rise to such redemption,
and redemption must be made within 30 days of the date of the notice.
The Company shall comply with all applicable Federal and state securities
laws in connection with each Change of Control Notice.
The Company's ability to pay cash to Noteholders upon a repurchase may be
limited by its then existing financial resources. See 'Risk Factors--Substantial
Leverage.'
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
'Acquired Debt', with respect to any Person, means (i) Debt (including any
then unutilized commitment under any revolving working capital facility) of an
entity, which entity is acquired by such Person or any of its Subsidiaries after
the Issue Date; provided that such Debt (including any such facility) is
outstanding at the time of the acquisition of such entity, is not created in
contemplation of such acquisition and is not, directly or indirectly, recourse
(including by way of set-off) to such Person or its Subsidiaries or any of their
respective assets other than to the entity and its Subsidiaries so acquired and
the assets of the entity and its Subsidiaries so acquired, (ii) Debt of such
Person that is not, directly or indirectly, recourse (including by way of
set-off) to such Person and its Subsidiaries or any of their respective assets
other than to specified assets acquired by such Person or its Subsidiaries after
the Issue Date, which Debt is outstanding at the time of the acquisition of such
assets and is not created in contemplation of such acquisition, or (iii)
Refinancings of Debt described in clause (i) or (ii), provided that the recourse
with respect to such Refinancing Debt is limited to the same extent as the Debt
so Refinanced.
'Affiliate' of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
'control' when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
'controlling' and 'controlled' having meanings correlative to the foregoing. For
the avoidance of doubt, ISP Holdings and its Affiliates (so long as they are
under common control with the Company) shall be deemed to be Affiliates of the
Company.
'Applicable Premium' means, with respect to any Note, the greater of (x)
1.0% of the principal amount of such Note and (y) the excess, if any, of (a) the
present value of the remaining interest payments, principal and future optional
redemption premium (if applicable) of such Note, discounted on a semi-annual
bond equivalent basis from either the maturity date of the Note or the optional
redemption date to the applicable redemption date at a per annum interest rate
equal to the Treasury Yield for such redemption date plus 100 basis points, over
(b) the sum of the principal amount of such Note plus accrued and unpaid
interest to the redemption date.
'Asset Sale' means, with respect to any Person, the sale, lease, assignment
or other disposition (including, without limitation, dispositions pursuant to
any consolidation, merger or sale and leaseback transaction) by such Person or
any of its Subsidiaries in any single transaction or series of related
transactions which consists of the disposition of (i) any Capital Stock of any
Subsidiary or (ii) all or substantially all of the properties and assets of any
division or line of business of such Person or any Subsidiary of such Person
(other than of a Non-Recourse Subsidiary) to any other Person which is not the
Company or a Subsidiary of the Company. For the purposes of this definition, the
term 'Asset Sale' shall not include (A) any sale, lease, assignment or other
disposition of properties or assets that is governed by the provisions under
'Merger, Etc.' or (B) any sale, lease, assignment or other disposition by a
Person that has outstanding senior debt securities all of which (I) are rated or
B- or higher by S&P and have not been placed on credit watch by S&P for a
possible downgrade or (II) are rated Baa3 or higher by Moody's and have not been
placed on credit watch by Moody's for a possible downgrade.
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<PAGE>
'Average Life' means, with respect to any Debt, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
the transaction or event giving rise to the need to calculate the Average Life
of such Debt to the date, or dates, of each successive scheduled principal
payment of such Debt multiplied by (b) the amount of each such principal payment
by (ii) the sum of all such principal payments.
'Board Resolution' means, with respect to the Board of Directors of any
Person, a copy of a resolution certified by the Secretary or Assistant Secretary
of such Person to have been duly adopted by such Board of Directors and to be in
full force and effect on the date of such certification and delivered to the
Trustee.
'Capitalized Lease Obligation' means any rental obligation that, in
accordance with GAAP, is required to be classified and accounted for as a
capitalized lease and the amount of Debt represented by such obligation shall be
the capitalized amount of such obligation determined in accordance with GAAP;
and the stated maturity thereof shall be the date of the last payment of rent or
any other amount due in respect of such obligation.
'Capital Stock' of any Person means any and all shares, interests
(including partnership interests), warrants, rights, options or other interests,
participations or other equivalents of or interests in (however designated)
equity of such Person, including common or preferred stock, whether now
outstanding or issued after the Issue Date, but excluding any debt securities
convertible into or exchangeable for such equity.
'Cash Equivalents' means (i) 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 acquisition thereof, (ii)
marketable direct obligations Issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P's or Moody's, (iii) 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's or at least P-1 from Moody's, (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof Issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital surplus of not less than $500,000,000, (v) Eurodollar
time deposits maturing within one year from the date of acquisition thereof and
issued or accepted by any commercial bank having at the date of acquisition
thereof combined capital and surplus of not less than $500,000,000, (vi)
repurchase obligations with a term of not more than thirty days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above and (vii) investments
in money market funds having assets in excess of $500,000,000 and which invest
substantially all their assets in securities of the types described in clauses
(i) through (vi) above.
'Change of Control' means the occurrence of any of the following events:
(i) prior to the time that at least 15% of the then outstanding Voting
Stock of Parent, the Company, or any Subsidiary of Parent of which the
Company is also a Subsidiary is publicly traded on a national securities
exchange or in the NASDAQ (national market system), 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, of majority voting power
of the Voting Stock of the Company, whether as a result of issuance of
securities of the Company or any of its Affiliates, any merger,
consolidation, liquidation or dissolution of the Company or any of its
Affiliates, any direct or indirect transfer of securities by any Permitted
Holder or by Parent or any of its Subsidiaries or otherwise (for purposes
of this clause (i) and clause (ii) below, the Permitted Holders shall be
deemed to beneficially own any Voting Stock of a corporation (the
'specified corporation') held by any other corporation (the 'parent
corporation') so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, a majority of the Voting Stock of the
parent corporation);
(ii) 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 clause (i) above, except that a Person
shall be deemed to have 'beneficial ownership' of all shares that any such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
53
<PAGE>
indirectly, of more than 35% of the Voting Stock of Parent or the Company;
provided that the Permitted Holders beneficially own (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser percentage of
the Voting Stock of Parent or the Company than such other Person and do not
have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of Parent or
the Company; or
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company including
predecessors, was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company, then in office.
'Commission' means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
'Common Stock' of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of such Person's
common stock whether now outstanding or issued after the Issue Date.
'Company' means Building Materials Corporation of America, a Delaware
corporation, and its successors.
'Consolidated EBITDA Coverage Ratio' with respect to any Person for any
period means the ratio of (i) the aggregate amount of EBITDA of such Person for
such period to (ii) Consolidated Interest Expense of such Person for such
period; provided that (A) if such Person or any Subsidiary of such Person has
Issued any Debt or Capital Stock since the beginning of such period that remains
outstanding on the date such calculation is made or if the transaction giving
rise to the need to calculate the Consolidated EBITDA Coverage Ratio is an
Issuance of Debt or Capital Stock, or both, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect, on a pro forma
basis, to the issuance of such Debt or Capital Stock as if such Debt or Capital
Stock had been Issued on the first day of such period and the discharge of any
other Debt or Capital Stock Refinanced or otherwise discharged with the proceeds
of such new Debt or Capital Stock as if such discharge had occurred on the first
day of such period, (B) if since the beginning of such period such Person or any
Subsidiary of such Person shall have made any asset sales out of the ordinary
course of business, EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets which are the
subject of such asset sale for such period, or increased by an amount equal to
the EBITDA (if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any Debt or
Capital Stock of such Person or any Subsidiary of such Person Refinanced or
otherwise discharged with respect to such Person and its continuing Subsidiaries
(including as a result of the assumption of such Debt or Capital Stock by the
purchaser of such assets, provided that such Person or any of its Subsidiaries
is no longer liable therefor) in connection with such asset sales for such
period (or if the Capital Stock of any Subsidiary of such Person is sold, the
Consolidated Interest Expense for such period directly attributable to the Debt
of such Subsidiary to the extent such Person and its continuing Subsidiaries are
no longer liable for such Debt after such sale) and (C) if since the beginning
of the period such Person or any Subsidiary of such Person (by merger or
otherwise) shall have made an Investment in any Subsidiary of such Person (or
any Person which becomes a Subsidiary of such Person) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto, as if
such Investment or acquisition occurred on the first day of such period. For
purposes of this definition, pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Person with
respect to which the calculation is being made. If any Debt or Capital Stock
bears a floating rate of interest and is being given pro forma effect, the
interest on such Debt and the dividends on such Capital Stock shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period.
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'Consolidated Interest Expense' means, with respect to any Person, for any
period, the sum of (a) the interest expense of such Person and its consolidated
Subsidiaries (other than (x) interest expense related to Non-Recourse Debt and
(y) interest expense resulting from any discount of the asbestos reserve
reflected on the Company's financial statements as of September 29, 1996) for
such period as determined in accordance with GAAP consistently applied, plus the
amount of all dividends paid or accrued on any series of Preferred Stock (other
than non-Redeemable Stock) of such Person and its Subsidiaries (other than
Non-Recourse Subsidiaries).
'Consolidated Net Income (Loss)' means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
consolidated Subsidiaries for such period as determined in accordance with GAAP,
adjusted to the extent included in calculating such net income (or loss), by
excluding (i) all extraordinary gains in such period net of all extraordinary
losses in such period; (ii) net income (or loss) of any other Person
attributable to any period prior to the date of combination of such other Person
with such Person or any of its Subsidiaries on a 'pooling of interests' basis;
(iii) net gains or losses in respect of dispositions of assets by such Person or
any of its Subsidiaries (including pursuant to a sale-and-leaseback arrangement)
other than in the ordinary course of business; (iv) the net income (loss) of any
Subsidiary of such Person to the extent that the declaration of dividends or
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its shareholders; (v) the net
income (or net loss) of any other Person that is not a Subsidiary of the first
Person with respect to which Consolidated Net Income is being calculated (the
'first Person') and in which any other Person (other than such first Person and
or any of its Subsidiaries) has an equity interest or of a Non-Recourse
Subsidiary of such first Person, except to the extent of the amount of dividends
or other distributions actually paid or made to such first Person or any of its
Subsidiaries by such other Person during such period (subject, in the case of a
dividend or distribution received by a Subsidiary of such first Person, to the
limitations contained in clause (iv) above); (vi) any interest income resulting
from loans or investments in Affiliates, other than cash interest income
actually received; (vii) any reserve established at the time the Company's
Affiliates first acquired USI; and (viii) the cumulative effect of a change in
accounting principles. In determining Consolidated Net Income (Loss), gains or
losses resulting from the early retirement, extinguishment or refinancing of
indebtedness for money borrowed, including any fees and expenses associated
therewith, shall be deducted or added back, respectively.
'Consolidated Net Worth' of any Person means, at any date, all amounts that
would, in conformity with GAAP, be included under shareholders' equity on a
consolidated balance sheet of such Person as at such date less (to the extent
otherwise included therein) any amounts attributable to Redeemable Stock.
'Credit Agreements' mean (i) the credit agreement, dated as of December 9,
1994, between the Company and The Chase Manhattan Bank, as amended by amendments
dated as of July 1, 1995, June 28, 1996 and November 21, 1996, (ii) the credit
agreement, dated as of September 24, 1993, between the Company and NationsBank
of North Carolina, N.A., as amended by amendments dated as of June 30, 1994,
December 31, 1994, June 22, 1995 and June 26, 1996 and (iii) the credit
agreement, dated as of June 29, 1995, as amended by amendments dated as of June
28, 1996 and November 15, 1996, between the Company and The Bank of New York,
each as amended and supplemented from time to time.
'Debt' of any Person means, without duplication, (i) the principal in
respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable (other than those
payable to government agencies to defer the payment of workers' compensation
liabilities, taxes, assessments or other obligations, and provided in the
ordinary course of business of such Person); (ii) all Capital Lease Obligations
of such Person; (iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention agreement
(but excluding trade accounts payable and other accrued current liabilities
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, bankers'
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) all obligations of the type referred to in
clauses
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(i) through (iv) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including guarantees of such
obligations and dividends; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured. For purposes of
the 'Limitation on Asset Sales', Debt of the Company or any of its Subsidiaries
shall include the provision for existing or future asbestos-related bodily
injury claims, as set forth in the then most recent consolidated financial
statement of the Company.
'Default' means any event which is, or after notice or passage of time or
both would be, an Event of Default.
'Deferred Coupon Notes' means the Company's 11 3/4% Senior Deferred Coupon
Notes due 2004.
'EBITDA' with respect to any Person for any period means the Consolidated
Net Income of such Person for such period, adjusted to the extent deducted in
calculating such Consolidated Net Income by adding back (without duplication):
(i) income tax expense of such Person and its Subsidiaries accrued in accordance
with GAAP for such period (other than income taxes attributable to extraordinary
items or other items excluded from the definition of Consolidated Net Income),
(ii) Consolidated Interest Expense of such Person for such period, (iii)
depreciation expense of such Person for such period, (iv) amortization expense
of such Person for such period, and (v) minority interest in any Non
Wholly-Owned Recourse Subsidiary that is otherwise consolidated in the financial
statements of such Person, but only so long as such Subsidiary is consolidated
with such Person for such period for U.S. federal income tax purposes.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'GAF' means GAF Corporation, a Delaware corporation, and its successors.
'GCC' means GAF Chemicals Corporation (which changed its name to GAF
Fiberglass Corporation on January 1, 1997), a Delaware corporation, and its
successors.
'Generally Accepted Accounting Principles' or 'GAAP' means generally
acceptable 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, as of the date of the Indenture.
'G-I Holdings' means G-I Holdings Inc., a Delaware corporation, and its
successors.
'Glass Fiber Contract' means the supply agreement effective as of the Spin
Off Date between GFC and the Company.
'Granules Contracts' means (i) the supply agreement, dated as of January 1,
1995 between ISP Technologies, Inc. and the Company, as amended by amendment
dated as of December 31, 1995 and (ii) the letter dated November 9, 1995 from
ISP Mineral Products Inc. to USI.
'Guarantee' by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation,
contingent or otherwise, of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt or other obligation of such other Person
(whether arising by virtue of participation arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into for
the purpose of assuring the obligee of such Debt or other obligation in any
other manner of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term 'guarantee' shall
not include endorsements for collection or deposit in the ordinary course of
business. The term 'Guarantee' used as a verb has a corresponding meaning.
'Interest Payment Date' means the Stated Maturity of an installment of
interest on the Notes.
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'Investment' means any direct or indirect advance, loan (other than
advances or loans to customers in the ordinary course of business, which are
recorded, in accordance with GAAP, at the time made as accounts receivable on
the balance sheet of the Person making such advance or loan) or other extension
of credit 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 of Capital Stock, bonds, notes,
debentures or other securities Issued by, any other Person.
'ISP' means International Specialty Products Inc., a Delaware corporation,
and its successors.
'ISP Holdings' means ISP Holdings Inc., a Delaware corporation, and its
successors.
'Issue' means issue, assume, Guarantee, incur or otherwise become liable
for; provided that any Debt or Capital Stock of a Person existing at the time
such Person becomes a Subsidiary of another Person (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary of such other Person.
'Issue Date' means December 9, 1996.
'Lien' means any lien, mortgage, charge, pledge, security interest, or
other encumbrance of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof).
'Management Agreement' means the amended and restated management agreement,
dated as of March 3, 1992, between the Company and ISP as amended through the
Issue Date.
'Margin Stock' shall have the meaning provided in Regulation U.
'Material Assets' means assets, singly or in the aggregate, the book or
fair market value of which equals 5% or more of the consolidated tangible assets
of the Company, as set forth on its most recently publicly available balance
sheet.
'Moody's' means Moody's Investors Service, Inc. or its successors.
'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 the Company or any of its Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable ((1) including, without
limitation, income taxes reasonably estimated to be actually payable as a result
of any disposition of property within two years of the date of disposition,
including under any tax sharing arrangements, and (2) after taking into account
any reduction in tax liability due to available tax credits or deductions
applicable to the transaction, (c) a reasonable reserve for the after-tax cost
of any indemnification obligations (fixed and/or contingent) attributable to
seller's indemnities to the purchaser undertaken by the Company or any of its
Subsidiaries in connection with such Asset Sale and (d) repayment of Debt that
is required to be repaid in connection with such Asset Sale, under the
agreements governing such Debt or Asset Sale.
'Non-Recourse Debt' of any Person means Debt or the portion of Debt (i) as
to which neither Parent nor any of its Subsidiaries (other than a Non-Recourse
Subsidiary) (A) provides credit support (including any undertaking, agreement or
instrument which would constitute Debt), (B) is directly or indirectly liable or
(C) constitutes the lender and (ii) no default with respect to which (including
any rights which the holders thereof may have to take enforcement action against
the assets of a Non-Recourse Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of such Person or its Subsidiaries
(other than Non-Recourse Subsidiaries) to declare a default on such other Debt
or cause the payment thereof to be accelerated or payable prior to its Stated
Maturity.
'Non-Recourse Subsidiary' of any Person means a Subsidiary (A) which has
been designated as such by such Person, (B) which has not acquired any assets
directly or indirectly from Parent or any of its Subsidiaries other than at fair
market value, including by the receipt of Capital Stock of such Non-Recourse
Subsidiary; provided that, if any such acquisition or series of related
acquisitions involves assets having a value in excess of $2,000,000, such
acquisition or series of related acquisitions shall be approved by a majority of
the members of
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the Board of Directors of the Company in a Board Resolution which shall set
forth that such acquisitions are being, or have been, made at fair market value,
and (C) which has no Debt other than Non-Recourse Debt.
'Notes' means the Old Notes and the New Notes, treated as a single class of
securities.
'Parent' means GAF so long as it owns, and any other Person which acquires
or owns, directly or indirectly, 80% or more of the Voting Stock of the Company.
'Permitted Holders' means (i) Samuel J. Heyman, his heirs, administrators,
executors and entities of which a majority of the Voting Stock is owned by
Samuel J. Heyman, his heirs, administrators or executors and (ii) any Person
controlled, directly or indirectly, by Samuel J. Heyman or his heirs,
administrators or executors.
'Permitted Lien' means:
(1) Liens for taxes, assessments and governmental charges to the
extent not required to be paid under the Indenture;
(2) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens arising in
the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by an appropriate process of
law, and for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made;
(3) pledges or deposits in the ordinary course of business to secure
lease obligations or non-delinquent obligations under workers'
compensation, unemployment insurance or similar legislation;
(4) Liens to secure the performance of public statutory obligations
that are not delinquent, appeal bonds, performance bonds or other
obligations of a like nature (other than for borrowed money);
(5) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company and
its Subsidiaries, taken as a whole;
(6) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in
connection with the importation of goods;
(7) judgment and attachment Liens not giving rise to a Default or
Event of Default;
(8) leases or subleases granted to others not interfering in any
material respect with the business of the Company and its Subsidiaries,
taken as a whole;
(9) Liens encumbering deposits made in the ordinary course of business
to secure nondelinquent obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any of its
Subsidiaries for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made;
(10) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of default by the
Company or any of its Subsidiaries of its obligations under any such lease
which is material;
(11) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases or conditional sales
of personal property that are otherwise permitted under the Indenture and
under which the Company or any of its Subsidiaries is lessee;
(12) broker's Liens securing the payment of commissions and management
fees in the ordinary course of business;
(13) Liens on cash and cash equivalents posted as margin pursuant to
the requirements of any bona fide hedge agreement relating to interest
rates, foreign exchange or commodities listed on public exchanges, but only
to the extent such Liens are required from customers generally (regardless
of creditworthiness) in accordance with customary market practice;
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(14) Liens on cash collateralizing reimbursement obligations in
respect of letters of credit issued for the account of the Company or any
of its Subsidiaries in the ordinary course of business (other than letters
of credit issued as credit support for any Debt);
(15) Liens arising in respect of accounts receivable arising as a
result of non-recourse sales thereof; and
(16) Liens on stock or assets of any Non-Recourse Subsidiary securing
Debt owing by such Non-Recourse Subsidiary.
'Person' means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
'Preferred Stock', as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation. Preferred Stock of any Person shall include Redeemable Stock of
such Person.
'Receivables' means accounts receivables, and related documentation,
contract rights, related proceeds and general intangibles.
'Receivables Financing Agreement' means the Pooling and Servicing
Agreement, dated as of November 1, 1996, among the Company, BMCA Receivables
Corporation and The Bank of New York, as Trustee, and related agreements, as
amended or supplemented.
'Recourse Subsidiaries' of any Person means all Subsidiaries of such Person
other than Non-Recourse Subsidiaries of such Person.
'Redeemable Stock' means, with respect to any Person, Capital Stock of such
Person that by its terms or otherwise (x) is required, directly or indirectly,
to be redeemed on or prior to the ninetieth day after the Stated Maturity of the
Notes, (y) is redeemable or puttable, directly or indirectly, at the option of
the holder thereof at any time on or prior to the ninetieth day after the Stated
Maturity of the Notes, or (z) is exchangeable or convertible into another
security (other than a security that is not itself Redeemable Stock).
'Refinance' means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue Debt in exchange
or replacement for, such Debt. 'Refinanced' and 'Refinancing' shall have
correlative meanings.
'Restricted Investment' means, with respect to the Company or any of its
Subsidiaries, an Investment by such Person in an Affiliate of the Company;
provided that the following shall not be Restricted Investments: (i) Investments
in the Company or any of its Recourse Subsidiaries; (ii) Investments in
Unrestricted Affiliates; and (iii) Investments in Affiliates that become, as a
result of such Investment, Recourse Subsidiaries.
'Restricted Payment' means (i) the declaration or making of any dividend or
of any other payment or distribution (other than dividends, payments or
distributions payable solely in shares of the Company's Capital Stock other than
Redeemable Stock) on or with respect to the Company's Capital Stock (other than
Redeemable Stock) and (ii) any payment on account of the purchase, redemption,
retirement or other acquisition for value of the Company's Capital Stock (other
than Redeemable Stock).
'Restricted Security' has the meaning set forth in Rule 144(a)(3) under the
Securities Act.
'S&P' means Standard & Poor's Rating Services or its successors.
'Significant Subsidiary' means (i) any Subsidiary (other than a
Non-Recourse Subsidiary) of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's most recent
quarterly consolidated balance sheet, constituted at least 5% of the Company's
total assets on a consolidated basis as of such date, in each case determined in
accordance with GAAP, or (B) had revenues for the 12-month period ending on the
date of the Company's most recent quarterly consolidated statement of income
which constituted at least 5% of the Company's total revenues on a consolidated
basis for such period, or (ii) any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) which, if merged with all Defaulting Subsidiaries (as
defined
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below) of the Company, would at the time of determination either (A) have had
assets which, as of the date of the Company's most recent quarterly consolidated
balance sheet, would have constituted at least 10% of the Company's total assets
on a consolidated basis as of such date or (B) have had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which would have constituted at least 10% of
the Company's total revenues on a consolidated basis for such period (each such
determination being made in accordance with GAAP). 'Defaulting Subsidiary' means
any Subsidiary of the Company (other than a Non-Recourse Subsidiary) with
respect to which an event described under clause (6), (7) or (8) of 'Events of
Default' below has occurred and is continuing.
'Spin Off' means the consummation of the Spin Off Transactions.
'Spin Off Date' means January 1, 1997.
'Stated Maturity,' when used with respect to any Note or any installment of
interest thereon, means the dates specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable, and when used with respect to any other Debt, means the date specified
in the instrument governing such Debt as the fixed date on which the principal
of such Debt or any installment of interest is due and payable.
'Subsidiary' means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries thereof or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof has at least majority ownership interest and the power to direct the
policies, management and affairs thereof. For purposes of this definition, any
director's qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
'Tax Sharing Agreement' means the tax sharing agreement, dated as of
January 31, 1994, among the Company, G-I Holdings and GAF.
'Treasury Yield' means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
applicable redemption date (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining Average Life of the Notes; provided that, if the Average Life
of the Notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Yield shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of the Notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
'Unrestricted Affiliate' means a Person (other than a Subsidiary of the
Company except a Non-Recourse Subsidiary) controlled by, or under common control
with, the Company in which no Affiliate of the Company (other than (i) the
Company or a Wholly-Owned Recourse Subsidiary, (ii) any director or officer of
the Company or any of its Subsidiaries, whose primary employment is by the
Company or any of its Subsidiaries other than a Non-Recourse Subsidiary, except
for Permitted Holders or members of their immediate family and (iii) another
Unrestricted Affiliate) has an Investment.
'U.S. Government Obligations' means money or direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
'USI' means U.S. Intec, Inc., a Texas corporation, and its successors.
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'Voting Stock' means, with respect to any Person, Capital Stock of any
class or kind normally entitled to vote in the election of the board of
directors or other governing body of such Person.
'Wholly-Owned Recourse Subsidiary' means a Subsidiary of a Person (other
than a Non-Recourse Subsidiary) all the Capital Stock of which (other than
directors' qualifying shares) is owned by such Person or another Wholly-Owned
Recourse Subsidiary of such Person.
'Wholly-Owned Subsidiary' means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the applicable corporation
or another Wholly-Owned Subsidiary of the applicable corporation.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Debt and Preferred Stock of the Company and its
Subsidiaries. (a) The Indenture provides that the Company shall not, and shall
not permit any of its Subsidiaries to, Issue, directly or indirectly, any Debt
unless, at the time of such Issuance and after giving effect thereto, (i) no
Default or Event of Default shall have occurred and be continuing and (ii) the
Consolidated EBITDA Coverage Ratio of the Company for the period of its most
recently completed four consecutive fiscal quarters ending at least 45 days
prior to the date such Debt is Issued is at least 2.00 to 1.00.
(b) Notwithstanding the foregoing, there may be issued the following Debt:
(1) The Old Notes and the New Notes;
(2) (i) Debt of the Company Issued to and held by a Wholly-Owned
Recourse Subsidiary of the Company and (ii) Debt of a Recourse Subsidiary
of the Company Issued to and held by the Company or a Wholly-Owned Recourse
Subsidiary of the Company; provided that any subsequent transfer of such
Debt (other than to the Company or to a Wholly-Owned Recourse Subsidiary of
the Company) shall be deemed, in each case, to constitute the Issuance of
such Debt by the Company or such Subsidiary;
(3) Debt the proceeds of which are used to acquire assets of the
Company and its Subsidiaries and such Debt is secured by purchase money
Liens on such assets or improvements or additions thereto, or replacements
thereof; provided that, after giving effect to the Issuance of any such
Debt that otherwise complies with this clause (3), the aggregate amount of
all Debt then outstanding at any time under this clause (3), including all
Refinancings thereof then outstanding, shall not at any time exceed
$50,000,000;
(4) Acquired Debt;
(5) (x) Debt outstanding on the Issue Date (including the Deferred
Coupon Notes) and (y) Debt Issued to Refinance any Debt permitted by clause
(a), this clause (5) or by clauses (1) or (3) above; provided that, in the
case of a Refinancing, (i) the amount of the Debt so Issued shall not
exceed the principal amount or the accreted value (in the case of Debt
Issued at a discount) of the Debt so Refinanced plus, in each case, the
reasonable costs incurred by the issuer in connection with such
Refinancing, (ii) the Average Life and Stated Maturity of the Debt so
Issued shall equal or exceed that of the Debt so Refinanced, (iii) the Debt
so Issued shall not rank senior in right of payment to the Debt being
Refinanced, (iv) if the Debt being Refinanced does not bear interest in
cash prior to a specified date, the Refinancing Debt shall not bear
interest in cash prior to such specified date, (v) if the Debt being
Refinanced is Debt permitted by clause (3), such Refinancing Debt is not
secured by any assets not securing the Debt so Refinanced or improvements
or additions thereto, or replacements thereof, and (vi) the obligors with
respect to the Refinancing Debt shall not include any Persons who were not
obligors (including predecessors thereof) with respect to the Debt being
Refinanced;
(6) Non-Recourse Debt of a Non-Recourse Subsidiary of the Company and
Guarantees of Non-Recourse Debt of Non-Recourse Subsidiaries which
Guarantees are recourse only to the stock of the Non-Recourse Subsidiaries;
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(7) Debt under the Credit Agreements or any Refinancing thereof;
provided that the aggregate outstanding amount thereunder does not at any
time exceed $75,000,000;
(8) Debt secured by Receivables, including to Refinance the
Receivables Financing Agreement, provided that such Debt does not exceed
85% of the face amount of the Receivables; and
(9) Debt (other than Debt identified in clauses (1) through (8) above)
in an aggregate principal amount outstanding at any one time not to exceed
$50,000,000.
(c) The Company shall not, and shall not permit any of its Subsidiaries to,
Issue any Preferred Stock; provided that there may be issued the following
Preferred Stock:
(1) Preferred Stock of the Company or any Subsidiary of the Company
issued to and held by the Company or a Wholly-Owned Recourse Subsidiary of
the Company; provided that any subsequent transfer of such Preferred Stock
(other than to the Company or to a Wholly-Owned Recourse Subsidiary of the
Company) or such Wholly-Owned Recourse Subsidiary of the Company ceasing to
be a Wholly-Owned Recourse Subsidiary of the Company shall be deemed, in
each case, to constitute the Issuance of such Preferred Stock by the
Company or such Subsidiary;
(2) Preferred Stock (other than Preferred Stock described in clause
(1) but including the Preferred Stock referred to in the proviso to clause
(1) above); provided that the liquidation value of any Preferred Stock
issued pursuant to this clause (2) shall constitute Debt for purposes of
this covenant and dividends on such Preferred Stock shall be included in
determining Consolidated Interest Expense of the Company for purposes of
calculating the Consolidated EBITDA Coverage Ratio of the Company under
paragraph (a) of this covenant; and
(3) Preferred Stock (other than Redeemable Stock) of the Company.
(d) To the extent the Company or any of its Subsidiaries Guarantees any
Debt of the Company or any other Subsidiary, such Guarantee and such Debt will
be deemed to be the same Debt and only the amount of the Debt will be deemed to
be outstanding. If the Company or any of its Subsidiaries Guarantees any Debt of
a Person that, subsequent to the Issuance of such Guarantee, becomes a
Subsidiary of the Company, such Guarantee and the Debt so Guaranteed shall be
deemed to be the same Debt, which shall be deemed to have been Issued when the
Guarantee was Issued and shall be deemed to be permitted to the extent the
Guarantee was permitted when Issued.
Limitation on Restricted Payments and Restricted Investments. (a) So long
as no Default or an Event of Default shall have occurred and be continuing, the
Company may make, and may permit any of its Subsidiaries to make, directly or
indirectly, any Restricted Payment or Restricted Investment so long as, at the
time of such Restricted Payment or Restricted Investment and immediately after
giving effect thereto, the aggregate amount of Restricted Payments made since
the Issue Date and the aggregate amount of Restricted Investments made since the
Issue Date and then outstanding (the amount expended for such purposes, if other
than in cash, shall be the fair market value of such property as determined by
the Board of Directors of the Company in good faith as of the date of payment or
investment) shall not exceed the sum of:
(i) 50% of the cumulative Consolidated Net Income (or minus 100% of
the cumulative Consolidated Net Loss) of the Company accrued during the
period beginning April 3, 1994 (the 'Commencement Date') and ending on the
last day of the fiscal quarter for which financial information has been
made publicly available by the Company but ending no more than 135 days
prior to the date of such Restricted Payment or Restricted Investment
(treating such period as a single accounting period);
(ii) 100% of the net cash proceeds, including the fair market value of
property other than cash as determined by the Board of Directors of the
Company in good faith, as evidenced by a Board Resolution, received by the
Company from any Person (other than a Subsidiary of the Company) from the
Issuance and sale subsequent to the Commencement Date of Capital Stock of
the Company (other than Redeemable Stock) or as a capital contribution;
provided that, if the value of the non-cash contribution is in excess of
$10,000,000, the Company shall have received the written opinion of a
nationally recognized investment
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banking firm that the terms thereof, from a financial point of view, are
fair to the shareholders of the Company or such Subsidiary, in their
capacity as such (the determination as to the value of any non-cash
consideration referred to in this clause (ii) to be made by such investment
banking firm), and such opinion shall have been delivered to the Trustee;
(iii) 100% of the net cash proceeds received by the Company from the
exercise of options or warrants on Capital Stock of the Company (other than
Redeemable Stock) since the Commencement Date;
(iv) 100% of the net cash proceeds received by the Company from the
conversion into Capital Stock (other than Redeemable Stock) of convertible
Debt or convertible Preferred Stock issued and sold (other than to a
Subsidiary of the Company) since the Commencement Date; and
(v) $30,000,000.
The designation by the Company or any of its Subsidiaries of a Subsidiary
as a Non-Recourse Subsidiary shall be deemed to be the making of a Restricted
Investment by the Company in an amount equal to the outstanding Investments made
by the Company and its Subsidiaries in such Person being designated a Non-
Recourse Subsidiary at the time of such designation.
(b) Paragraph (a) shall not prevent the following, as long as no Default or
Event of Default shall have occurred and be continuing (or would result
therefrom other than pursuant to paragraph (a) of this covenant):
(1) the making of any Restricted Payment or Restricted Investment
within 60 days after (x) the date of declaration thereof or (y) the making
of a binding commitment in respect thereof; provided that at such date of
declaration or commitment such Restricted Payment or Restricted Investment
complied with paragraph (a) of this covenant;
(2) any Restricted Payment or Restricted Investment made out of the
net cash proceeds received by the Company from the substantially concurrent
sale of its Common Stock (other than to a Subsidiary of the Company);
provided that such net cash proceeds so utilized shall not be included in
paragraph (a) in determining the amount of Restricted Payments or
Restricted Investments the Company could make under paragraph (a) of this
covenant;
(3) cumulative Investments in Non-Recourse Subsidiaries not in excess
of $50,000,000 in the aggregate determined as of the date of the Investment
(the amount so expended, if other than cash, to be determined by the
Company's Board of Directors, as evidenced by a Board Resolution); and
(4) repurchases of Capital Stock of the Company, in each case from
employees of the Company or any of its Subsidiaries (other than any
Permitted Holder); provided, however, that the aggregate amount of
Restricted Payments made under this clause shall not exceed $1,500,000 in
any fiscal year.
Restricted Payments or Restricted Investments made pursuant to clause (2), (3)
or (4) shall not be deducted in determining the amount of Restricted Payments or
Restricted Investments made or then outstanding under paragraph (a) of this
covenant.
Limitation on Liens. The Indenture provides that the Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, incur
or suffer to exist any Liens upon their respective property or assets whether
owned on the Issue Date or acquired after such date, or on any income or profits
therefrom, other than the following:
(1) Liens existing on the Issue Date;
(2) Permitted Liens;
(3) Purchase money Liens on assets of the Company and its Subsidiaries
or improvements or additions thereto existing or created within 180 days
after the time of acquisition of or improvement or addition to such assets,
or replacements thereof; provided that (i) such acquisition, improvement or
addition is otherwise permitted by the Indenture, (ii) the principal amount
of Debt (including Debt in respect of
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Capitalized Lease Obligations) secured by each such Lien in each asset
shall not exceed the cost (including all such Debt secured thereby, whether
or not assumed) of the item subject thereto, and such Liens shall attach
solely to the particular item of property so acquired, improved or added
and any additions or accessions thereto, or replacements thereof, and (iii)
the aggregate amount of Debt secured by Liens permitted by this clause (3)
shall not at any time exceed $30,000,000;
(4) Liens to secure Refinancing of any Debt secured by Liens described
in clauses (1)-(3) above and (5) below; provided that (i) Refinancing does
not increase the principal amount of Debt being so Refinanced and (ii) the
Lien of the Refinancing Debt does not extend to any asset not securing the
Debt being Refinanced or improvements or additions thereto, or replacements
thereof;
(5) Liens securing Acquired Debt; provided that (i) any such Lien
secured the Acquired Debt at the time of the incurrence of such Acquired
Debt by the Company or by one of its Subsidiaries and such Lien and
Acquired Debt were not incurred by the Company or any of its Subsidiaries
or by the Person being acquired or from whom the assets were acquired in
connection with, or in anticipation of, the incurrence of such Acquired
Debt by the Company or by one of its Subsidiaries and (ii) any such Lien
does not extend to or cover any property or assets of the Company or of any
of its Subsidiaries other than the property or assets that secured the
Acquired Debt prior to the time such Debt became Acquired Debt of the
Company or of one of its Subsidiaries;
(6) Liens on Receivables securing Debt permitted by clause (b)(8)
under 'Limitation on Debt and Preferred Stock of the Company and its
Subsidiaries';
(7) Liens securing intercompany Debt permitted by paragraph (b)(2)
under the 'Limitation on Debt and Preferred Stock of the Company and its
Subsidiaries' covenant; and
(8) Liens on assets of the Company and its Subsidiaries in addition to
those referred to in clauses
(1)-(7), provided that such Liens only secure Debt of the Company and its
Subsidiaries in an aggregate amount not to exceed at any one time
outstanding $50,000,000.
Limitation on Transactions with Affiliates. (a) The Indenture provides
that the Company shall not enter, and shall not permit any of its Subsidiaries
to enter, directly or indirectly, into any transaction or series of related
transactions with any Affiliate of the Company (other than (x) the making of a
Restricted Payment or Restricted Investment otherwise permitted by 'Limitation
on Restricted Payments and Restricted Investments' or those transactions
specifically permitted by paragraph (b) thereunder, (y) transactions between or
among Non-Recourse Subsidiaries of the Company or (z) transactions between or
among the Company and its Subsidiaries (other than Non-Recourse Subsidiaries))
including, without limitation, any loan, advance or investment or any purchase,
sale, lease or exchange of property or the rendering of any service, unless the
terms of such transaction or series of transactions are set forth in writing and
at least as favorable as those available in a comparable transaction in
arms-length dealings from an unrelated Person; provided that (i) if any such
transaction or series of related transactions (other than any purchase or sale
of inventory in the ordinary course of business, but including entering into any
long-term arrangement involving the purchase of granules or glass fiber from, or
the provision of management services of the type currently provided under the
Management Agreement by, an Affiliate of the Company, including ISP or a
Subsidiary thereof) involves aggregate payments or other consideration in excess
of $5,000,000, such transaction or series of related transactions shall be
approved (and the value of any non-cash consideration shall be determined) by a
majority of those members of the Board of Directors of the Company or such
Subsidiary, as the case may be, having no personal stake in such business,
transaction or transactions; and (ii) in the event that such transaction or
series of related transactions (other than any purchase or sale of inventory in
the ordinary course of business or other than purchases of granules or glass
fiber from an Affiliate of the Company, including ISP or a Subsidiary thereof)
involves aggregate payments or other consideration in excess of $20,000,000
(with the value of any noncash consideration being determined by a majority of
those members of the Board of Directors of the Company or such Subsidiary, as
the case may be, having no personal stake in such business, transaction or
transactions), the Company or such Subsidiary, as the case may be, shall have
also received a written opinion from a nationally recognized investment banking
firm that such transaction or series of related transactions is fair to the
shareholders, in their capacity as such, of the Company or such Subsidiary from
a financial point of view and such opinion has been delivered to the Trustee;
provided, further, in the event that
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the Board of Directors of the Company or the Subsidiary, as the case may be,
proposing to engage in a transaction or series of related transactions described
in the preceding proviso does not have any members having no personal stake in
such business, transaction or transactions, the Company or such Subsidiary may
enter into such transaction or series of transactions if the Company or such
Subsidiary, as the case may be, shall have received the written opinion of a
nationally recognized investment banking firm that the terms thereof, from a
financial point of view, are fair to the shareholders of the Company or such
Subsidiary, in their capacity as such (the determination as to the value of any
non-cash consideration referred to in the preceding proviso to be made by such
investment banking firm), and such opinion shall have been delivered to the
Trustee.
(b) Paragraph (a) shall not prevent the following:
(1) the purchase of granules from an Affiliate of the Company,
including ISP or a Subsidiary of ISP; provided that (a) subject to
paragraph (c) of this covenant, the price and other terms shall not be less
favorable to the Company than those set forth in the Granules Contracts or
(b) a nationally recognized investment banking firm or accounting firm has
delivered a written opinion to the Company to the effect that either the
terms thereof are fair to the Company from a financial point of view or are
on terms at least as favorable to the Company as those available in
comparable transactions in arms-length dealings from an unrelated third
party;
(2) the continuance of the Management Agreement (including with an
Affiliate of the Company other than ISP) (a) in accordance with its terms
or on terms no less favorable to the Company than those contained in the
Management Agreement or (b) on other terms provided that the Company shall
have received the written opinion of a nationally recognized investment
banking firm or accounting firm that either the terms thereof, from a
financial point of view, are fair to the Company or are on terms at least
as favorable to the Company as those available in comparable transactions
in arms-length dealings from an unrelated Person;
(3) any transaction between the Company or a Subsidiary thereof and
its own employee stock ownership or benefit plan;
(4) any transaction with an officer or director of the Company or any
Subsidiary of the Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any such
officer or director);
(5) any business or transaction with an Unrestricted Affiliate;
(6) borrowings by the Company or its Subsidiaries from Affiliates of
the Company; provided that such loans are unsecured, are prepayable at any
time without penalty, contain no restrictive covenants and the effective
cost of borrowings thereunder do not exceed the interest rate then in
effect from time to time under the Credit Agreements or any Refinancings
thereof (or, if none of such agreements is outstanding, under unsecured
bank Debt of the Company);
(7) payments made pursuant to the Tax Sharing Agreement; or
(8) purchases made pursuant to the Glass Fiber Contract; provided that
the terms of such contract are set forth in writing and are at least as
favorable to the Company as those available at the Spin Off Date in a
comparable transaction in arms-length dealings with an unrelated Person.
(c) The Company shall not, and shall not permit any of its Subsidiaries to,
amend, modify or waive any provision of the Tax Sharing Agreement, the Granules
Contracts or the Glass Fiber Contract in any manner which is significantly
adverse to the Company or the holders of the Notes (it being understood that an
extension or modification of any of the Granules Contracts (or any similar
granules purchase contract) or the Glass Fiber Contract on terms at least as
favorable to the Company as those available at the time of the extension or
modification (or any such new agreement) in a comparable transaction in
arms-length dealings with an unrelated Person shall not be deemed significantly
adverse to the Company or the Holders).
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Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that the Company shall not, and shall not
permit any of its Subsidiaries (other than Non-Recourse Subsidiaries) to,
directly or indirectly, create or otherwise cause to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (a) pay
dividends or make any other distributions on its Capital Stock or pay any Debt
owed to the Company or any of its Subsidiaries, (b) make loans or advances to
the Company or any of its Subsidiaries, (c) transfer any of its properties or
assets to the Company or (d) incur or suffer to exist Liens in favor of the
Holders, except for such encumbrances or restrictions existing under or by
reason of any of the following:
(1) applicable law;
(2) the Indenture and the indenture governing the Deferred Coupon
Notes;
(3) customary provisions restricting subletting or assignment of any
lease or license or other commercial agreement;
(4) any instrument governing Acquired Debt of any Person, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than such Person and its
Subsidiaries, or the property or assets of such Person and its
Subsidiaries, so acquired;
(5) the Liens specifically permitted by the provisions under
'--Limitation on Liens'; provided that such Liens and the terms governing
such Liens do not, directly or indirectly, restrict the Company or its
Subsidiaries from granting other Liens, except as to the assets subject to
such Liens;
(6) the Credit Agreements, the Receivables Financing Agreement or
other Debt existing on the Issue Date; and
(7) any Refinancing of the Credit Agreements, the Receivables
Financing Agreement or any such other Debt existing on the Issue Date;
provided that the terms and conditions of any such Refinancing agreements
relating to the terms described in paragraphs (a)-(d) above are no less
favorable to the Company than those contained in the agreements governing
the Debt being Refinanced.
Limitation on Asset Sales. The Indenture provides that the Company shall
not, and shall not permit any of its Subsidiaries, directly or indirectly, to
consummate an Asset Sale unless:
(1) the Company or such Subsidiary, as the case may be, receives
consideration (including non-cash consideration, whose fair market value
shall be determined in good faith by the Board of Directors of the Company
or such Subsidiary, as evidenced by a Board Resolution) at the time of such
Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by its Board of
Directors, as evidenced by a Board Resolution);
(2) at least 75% of the consideration received by the Company or such
Subsidiary, as the case may be, shall be cash or Cash Equivalents; provided
that this clause (2) shall not prohibit any Asset Sale for which the
Company or such Subsidiary, as the case may be, receives 100% of the
consideration, directly or through the acquisition of Capital Stock of a
Person, in operating assets; and
(3) in the case of an Asset Sale by the Company or any of its
Subsidiaries, the Company shall commit to apply the Net Cash Proceeds of
such Asset Sale within 300 days of the consummation of such Asset Sale, and
shall apply such Net Cash Proceeds within 360 days of receipt thereof, (i)
to invest in the businesses that the Company and its Recourse Subsidiaries
are engaged in at the time of such Asset Sale or any like or related
business, (ii) to pay or satisfy any Debt of the Company or any of its
Subsidiaries (other than Debt which is subordinated by its terms to the
Notes) or Preferred Stock of a Subsidiary, including the Debt referred to
in the last sentence of the definition thereof or make provision for the
payment thereof, through an escrow or other fund, and/or (iii) to offer to
purchase the Notes in a tender offer (a 'Net Proceeds Offer') at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest thereon to the date of purchase; provided, however, that the
Company shall, to the extent required under the indenture governing the
Deferred Coupon Notes, first offer to purchase any outstanding Deferred
Coupon Notes in a
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tender offer at a redemption price equal to 100% of the accreted value
thereof, to the date of redemption; provided, further, however that the
Company may defer making a Net Proceeds Offer until the aggregate Net Cash
Proceeds from Asset Sales to be applied pursuant to this clause (3)(iii)
equal or exceed $20,000,000;
provided that (i) the Company and its Subsidiaries may retain up to $5,000,000
of Net Cash Proceeds from Asset Sales in any twelve-month period (without
complying with clause (3)), and (ii) any Asset Sale that would result in a
Change of Control shall not be governed by this covenant but shall be governed
by the provisions described above under 'Change of Control Put and Call'.
The Company 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
repurchase of Notes pursuant to a Net Proceeds Offer.
Restriction on Transfer of Certain Assets to Subsidiaries. The Indenture
provides that if the Company transfers or causes to be transferred, in one or a
series of related transactions, Material Assets to any one or more Non-Recourse
Subsidiaries of the Company, the Company shall cause such transferee Subsidiary
to (i) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such transferee
Subsidiary shall unconditionally Guarantee, on a senior basis, all the Company's
obligations under the Notes and (ii) deliver to the Trustee an Opinion of
Counsel that such supplemental indenture has been duly executed and delivered by
such transferee Subsidiary.
Investment Company Act. The Indenture provides that the Company will not
take any action that would require it or any of its Subsidiaries to register as
an investment company under the Investment Company Act of 1940.
Reports to the Securities and Exchange Commission and Holders. The Company
shall file with the Trustee and provide Holders of record, within 15 days after
it files them with the Commission, copies of its annual report and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act, without exhibits in the case of Holders, unless the
Company is requested in writing by the Holders. Notwithstanding that the Company
may not be required to remain subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company will continue to file with the
Commission and provide the Trustee and Holders with such annual reports and
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
are specified in Sections 13 and 15(d) of the Exchange Act, without exhibits in
the case of Holders, unless the Company is requested in writing by the Holders.
The Company also will comply with the other provisions of TIA Section 314(a).
So long as any of the Notes remain outstanding, the Company shall cause
each annual, quarterly and other financial report mailed or otherwise furnished
by it generally to public stockholders to be filed with the Trustee and mailed
to the Holders of record at their addresses appearing in the register of Notes
maintained by the Registrar, in each case at the time of such mailing or
furnishing to such stockholders.
The Company shall provide to any Holder or any beneficial owner of Notes
any information reasonably requested by such holder or such beneficial owner
concerning the Company and its Subsidiaries (including financial statements)
necessary in order to permit such holder or such beneficial owner to sell or
transfer Notes in compliance with Rule 144A under the Securities Act or any
similar rule or regulation adopted by the Commission.
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MERGER, ETC.
The Indenture provides that the Company shall not consolidate with or merge
with or into or sell, assign, transfer or lease all or substantially all of its
properties and assets (either in one transaction or series of related
transactions) to any Person, unless:
(1) the Company shall be the continuing Person, or the resulting,
surviving or transferee Person (if other than the Company) shall be a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, all the obligations of the
Company under the Notes and the Indenture, and the Indenture shall remain
in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee Person or any of its Subsidiaries as a
result of such transaction as having been issued by such Person or such
Subsidiary at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing;
(3) immediately before and after giving effect to such transaction,
the resulting, surviving or transferee Person could incur at least $1.00 of
additional Debt under paragraph (a) of 'Limitation on Debt and Preferred
Stock of the Company and its Subsidiaries'; and
(4) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person shall have a Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction.
In connection with any consolidation, merger, sale, assignment, transfer or
lease contemplated by this covenant, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, transfer or lease and the
supplemental indenture in respect thereto comply with this covenant and the TIA
and that all conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger or any sale, assignment, transfer or lease
of all or substantially all of the assets of the Company in accordance with the
preceding two paragraphs, the successor corporation formed by such consolidation
or into which the Company is merged or to which such sale, assignment, transfer
or lease is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture, with the same effect
as if such successor corporation had been named as the Company herein, and,
except in the case of a lease, the Company will be discharged from all
obligations and covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(1) the Company defaults in the payment of interest on any Note when
the same becomes due and payable and the default continues for a period of
30 days;
(2) (i) the Company defaults in the payment of the principal of any
Note when the same becomes due and payable at maturity or otherwise or (ii)
the Company fails to redeem or repurchase Notes when required pursuant to
the Indenture or the Notes;
(3) the Company fails to comply with provisions of 'Merger, etc.';
(4) the Company fails to comply for 30 days after notice with any of
its obligations described under 'Change of Control Put and Call' and
'Certain Covenants';
(5) the Company fails to comply for 60 days after notice with its
other agreements contained in the Indenture or the Notes (other than those
referred to in clauses (1)-(4) above);
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(6) principal of or interest on Debt of the Company or any of its
Significant Subsidiaries is not paid within any applicable grace period or
is accelerated by the holders thereof because of a default and the total
amount that is unpaid or accelerated exceeds $15,000,000 or its foreign
currency equivalent and such default continues for 5 days after notice;
(7) certain events of bankruptcy, insolvency or reorganization of the
Company or any of its Significant Subsidiaries occurs pursuant to or within
the meaning of any Bankruptcy Law; or
(8) any judgment or order for the payment of money in excess of
$15,000,000 in the aggregate is rendered against the Company or any of its
Significant Subsidiaries and (i) there is a period of 60 days following the
entry of such judgment or order during which such judgment or order is not
discharged, waived or the execution thereof stayed and such default
continues for 10 days after the notice specified below or (ii) foreclosure
proceedings therefor have begun and have not been stayed within five days
of the commencement of such foreclosure proceeding.
A Default under clauses (4), (5), (6) or (8) is not an Event of Default
until the Trustee or the Holders of at least 25% in aggregate principal amount
of the outstanding Notes notify the Company in writing of the Default, and the
Company does not cure the Default within the time specified in such clause after
receipt of such notice. Such notice shall be given by the Trustee if so
requested in writing by the Holders of at least 25% in aggregate principal
amount of the outstanding Notes. When a Default under clause (4), (5), (6) or
(8) is cured or remedied within the specified period, it ceases to exist.
If an Event of Default (other than an Event of Default with respect to the
Company specified in clause (7) above) occurs and is continuing, the Trustee, by
written notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the outstanding Notes, by written notice to the Company and
the Trustee, may declare all unpaid principal of and accrued interest on the
Notes then outstanding to be due and payable (the 'Default Amount'). Upon a
declaration of acceleration, such amount shall be due and payable immediately.
If an Event of Default with respect to the Company specified in clause (7)
above occurs, the Default Amount shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Noteholder.
Under certain circumstances, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may rescind an acceleration with
respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest (if any) when due, no
Noteholder may pursue any remedy with respect to the Indenture or the Notes
unless (i) such Holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) Holders of at least 25% in principal amount at
maturity of the outstanding Notes have requested the Trustee to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt thereof and the
offer of security or indemnity and (v) the Holders of a majority in principal
amount at maturity of the outstanding Notes have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount at maturity
of the outstanding Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Noteholder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Noteholder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of 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 in the interests of the Noteholders. In addition, the
Issuer is required to deliver to the Trustee, within 120 days after the end of
each
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fiscal year, a certificate indicating whether the signers thereof know of any
Default that occurred during the previous year. The Company also is required to
deliver to the Trustee, within 10 days after the occurrence thereof, written
notice of any event which would constitute certain Defaults, their status, and
what action the Company is taking or proposes to take in respect thereof.
DISCHARGE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ('legal defeasance'), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under 'Certain Covenants' and 'Change of Control Put and Call,' above
and the operation of clauses (3), (4), (5), (6), (7) (with respect only to
Significant Subsidiaries) or (8) under 'Defaults' above and the limitations
contained in clause (3) or (4) described under 'Merger, Etc.' above ('covenant
defeasance').
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (3), (4), (5), (6), (7) (with respect only
to Significant Subsidiaries) or (8) under 'Defaults' above, or because of the
failure of the Company to comply with clause (3) or (4) described under 'Merger,
Etc.' above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the 'defeasance trust') with the Trustee money or U.S.
Government Obligations for the payment of principal and interest (if any) on the
Notes to redemption or maturity, as the case may be, and must comply with
certain other conditions, including (unless the Notes will mature or be redeemed
within 30 days) delivering to the Trustee an Opinion of Counsel to the effect
that holders of the Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been in the case if such deposit and defeasance had
not occurred, and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law.
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Notes; provided that no such modification or
amendment may, without the consent of the Holder of each outstanding Note
affected thereby: (i) change the stated maturity of the principal of, or any
installment of interest on, any Note or reduce the principal amount thereof, the
rate of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment after the stated maturity thereof (or, in the case of
redemption, on or after the redemption date); (ii) reduce the percentage in
principal amount of the outstanding Notes, the consent of the Holders of which
is required for any such supplemental indenture or the consent of such Holders
is required for any waiver of compliance with certain provisions of the
Indenture or certain Defaults thereunder and their consequences provided for in
the Indenture; (iii) modify any of the provisions relating to supplemental
indentures requiring the consent of Holders or relating to the waiver of past
defaults or relating to the waiver of certain covenants, except to increase any
such percentage of outstanding Notes required for such actions or to provide
that certain other provisions of the Indenture cannot be modified or waived
without the consent of each Noteholder affected thereby; or (iv) except as
otherwise permitted by the covenants described under '--Merger, Etc.,' consent
to the assignment or transfer by the Company of any of its rights and
obligations under the Indenture.
It shall not be necessary for the consent of the Holders to approve the
particular form of any proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof. Any
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<PAGE>
amendment, waiver or consent shall be deemed effective upon receipt by the
Trustee of the necessary consents and shall not require execution of any
supplemental indenture to be effective.
The Holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Noteholder for or as an inducement to any
consent, waiver or amendment of any terms or provisions of the Notes unless such
consideration is offered to be paid or agreed to be paid to all Noteholders
which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or amendment.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York.
71
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material federal income tax consequences
to tendering holders of Old Notes of (i) the exchange of Old Notes for New Notes
and (ii) the ownership and disposition of New Notes.
This summary is based upon provisions of the Internal Revenue Code of 1986,
as amended (the 'Code'), Treasury Regulations promulgated thereunder (including
temporary regulations), administrative rulings and judicial decisions now in
effect, all of which are subject to change, possibly with retroactive effect.
This summary does not discuss all aspects of federal income taxation that may be
relevant to a particular holder in light of such holder's individual investment
circumstances or to certain types of holders subject to special treatment under
the federal income tax laws (for example, dealers in securities, banks, life
insurance companies, tax-exempt organizations and foreign taxpayers and persons
who hold (or will hold) the Old Notes or New Notes as part of a 'straddle,'
'hedge' or 'conversion transaction'), nor does it discuss any aspect of state,
local or foreign taxation. The following discussion assumes that the Old Notes
and New Notes are (and will be) held by the holders thereof as 'capital assets'
within the meaning of Section 1221 of the Code.
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATIONAL PURPOSES
ONLY. ACCORDINGLY, EACH HOLDER OF OLD NOTES SHOULD CONSULT WITH SUCH HOLDER'S
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF
PARTICIPATION IN THE EXCHANGE OFFER, AND THE OWNERSHIP AND DISPOSITION OF NEW
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF TENDERING OLD NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute an exchange for federal income tax purposes. Accordingly,
the Exchange Offer should have no federal income tax consequences to holders of
Old Notes. Except for the immediately succeeding paragraph, the balance of this
discussion assumes that the exchange of Old Notes for New Notes will not
constitute an exchange for federal income tax purposes.
If, contrary to the above conclusion, the exchange of Old Notes for New
Notes constitutes an exchange for federal income purposes, both the Old Notes
and the New Notes should constitute 'securities' for federal income tax purposes
(which determination generally is made by reference to the initial terms of the
debt instrument, with debt instruments with initial terms of more than five
years generally being treated as securities) and, thus, a holder of Old Notes
should recognize no gain or loss on the consummation of the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES OF OWNING NEW NOTES
STATED INTEREST
Interest on a New Note should be taxable to a U.S. holder as ordinary
interest income at the time it accrues or is received in accordance with such
holder's method of accounting for U.S. federal income tax purposes.
SALE OR REDEMPTION
The sale, exchange, redemption (including pursuant to an offer by the
Company) or other disposition of New Notes generally will be a taxable event for
federal income tax purposes. A holder generally will recognize gain or loss
equal to the difference between (i) the amount of cash plus the fair market
value of any property received upon such sale, exchange, redemption or other
taxable disposition of a New Note (other than in respect of accrued interest
thereon) and (ii) the holder's adjusted tax basis in such debt instrument (other
than in respect of accrued interest thereon). Subject to the possible
application of the market discount rules discussed below, such gain or loss will
be capital gain or loss and would be long-term capital gain or loss if the New
Notes were held by the holder for the applicable period at the time of such sale
or other disposition.
72
<PAGE>
MARKET DISCOUNT
Except as discussed below, gain recognized on the disposition of New Notes
having accrued market discount will be treated as ordinary income, and not
capital gain, to the extent of the accrued market discount, provided the amount
of market discount thereon exceeds a de minimis amount. In general, upon the
disposition of a 'market discount' bond, any gain recognized by a holder is
treated as ordinary income to the extent of accrued market discount thereon.
Market discount is defined generally as the excess of (i) the 'stated redemption
price at maturity' of a debt obligation less any unamortized original issue
discount over (ii) the tax basis of the debt obligation in the hands of the
holder immediately after its acquisition.
If a holder of New Notes having accrued market discount disposes of such
New Notes in any transaction other than a sale, exchange or redemption (e.g., a
gift), such holder will be deemed to have realized an amount equal to the fair
market value of such new Notes and will be required to recognize as ordinary
income any accrued market discount thereon. See 'Sale or Redemption' above for
the general consequences of a sale, exchange or redemption. Partial principal
payments (if any) on such New Notes also would be includable as ordinary income
to the extent of any accrued market discount on such New Notes. A holder of New
Notes having accrued market discount also may be required to defer the deduction
of all or a portion of the interest on any indebtedness incurred or maintained
to purchase or carry such New Notes until they are disposed of in a taxable
transaction.
A holder of New Notes having accrued market discount may elect to include
the market discount in income as it accrues. This election would apply to all
market discount obligations acquired by the electing holder on or after the
first day of the first taxable year to which the election applies and may be
revoked only with the consent of the Service. If a holder of New Notes elects to
include market discount in income, the above-discussed rules with respect to
ordinary income recognition resulting from sale and certain other disposition
transactions and to deferral of interest deductions would not apply.
BOND PREMIUM
If the initial tax basis of a holder in any New Notes exceeds the 'amount
payable on maturity' (such excess being the 'bond premium'), the holder may
elect to amortize the bond premium over the period from the acquisition date of
such New Notes to their maturity date (or an earlier call date, if using such
earlier date would result in a smaller amortization deduction) and, except as
Treasury Regulations may otherwise provide, reduce the amount of interest
included in income in respect of such New Notes by such amount.
A holder who elects to amortize bond premium must reduce his adjusted basis
in such New Notes by the amount of such allowable amortization. An election to
amortize bond premium would apply to amortizable bond premium on all taxable
bonds held at or acquired after the beginning of the holder's taxable year as to
which the election is made, and may be revoked subsequently only with the
consent of the Service.
BACKUP WITHHOLDING
Under the Code, a holder of Old Notes or New Notes may be subject, under
certain circumstances, to 'backup withholding' at a 31% rate with respect to
payments of interest or the gross proceeds from the sale, exchange or redemption
of such notes. This withholding generally applies only if the holder (i) fails
to furnish his social security or other taxpayer identification number ('TIN')
within a reasonable time after the request therefor, (ii) furnishes an incorrect
TIN, (iii) fails to report properly interest or dividends, or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is his correct number and that he is not subject
to backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
Service. Holders of Old Notes and New Notes should consult their tax advisors as
to their qualification for exemption from withholding and the procedure for
obtaining such an exemption.
73
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
New Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by all persons subject to the prospectus delivery requirements
of the Securities Act, including broker-dealers in connection with resales of
New Notes received in exchange for Old Notes, where such Old Notes were acquired
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to 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 New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act, a broker-dealer will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the reasonable fees and expenses of
Cahill Gordon & Reindel, counsel to the initial purchasers of the Old Notes)
other than commissions or concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
New Notes will be passed upon for the Company by Weil, Gotshal & Manges LLP (a
limited liability partnership including professional corporations), New York,
New York. Weil, Gotshal & Manges LLP has from time to time represented, and
continues to represent, Bear, Stearns & Co. Inc., one of the initial purchasers
of the Old Notes, in connection with various legal matters. Weil, Gotshal &
Manges LLP has from time to time represented, and may continue to represent, GAF
and certain of its affiliates (including G-I Holdings, ISP, ISP Holdings and
BMCA) in connection with certain legal matters.
EXPERTS
The consolidated financial statements and schedules of Building Materials
Corporation of America as of December 31, 1994 and 1995 and the consolidated
statements of income, stockholder's equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1995 included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
74
<PAGE>
AVAILABLE INFORMATION
BMCA is subject to the informational requirements of the Exchange Act and
in accordance therewith files reports and other information with the Commission.
The reports and other information filed by BMCA with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601-2511. Copies of such material also can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 at
prescribed rates. Finally, the Commission maintains an Internet web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) on Form S-4 under the Securities
Act with respect to the New Notes offered hereby. This Prospectus does not
contain all information set forth in the Registration Statement and the exhibits
thereto, to which reference is hereby made. Statements made in this Prospectus
as to the contents of any contract, agreement, or other document are not
necessarily complete. With respect to each such contract, agreement, or other
document filed as an exhibit to the Registration Statement, reference is hereby
made to such exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
75
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Statements of Income for the three years ended December 31, 1995 and
the nine months ended October 1, 1995 and September 29, 1996 (Unaudited)................................. F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995 and as of September 29, 1996 (Unaudited)...... F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1995 and
the nine months ended October 1, 1995 and September 29, 1996 (Unaudited)................................. F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the three years ended December 31, 1995 and
the nine months ended September 29, 1996 (Unaudited)..................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)..................................................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited the accompanying consolidated balance sheets of Building
Materials Corporation of America (a Delaware corporation and a wholly-owned
subsidiary of GAF Building Materials Corporation) and subsidiaries as of
December 31, 1994 and 1995, and the related consolidated statements of income,
stockholder's equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, appearing on
Pages F-3 to F-22 of this Prospectus present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 6, 1996
(except with respect to the matter
regarding restatement of financial
statements discussed in Note 1 as to
which the date is January 1, 1997)
F-2
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, SEPTEMBER 29,
-------------------------------- 1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
-------- -------- -------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $559,152 $593,147 $687,184 $ 507,661 $ 648,426
-------- -------- -------- ----------- -------------
Costs and expenses:
Cost of products sold......................... 402,482 425,080 506,012 369,672 470,678
Selling, general and administrative........... 115,196 123,338 135,315 99,605 126,561
-------- -------- -------- ----------- -------------
Total costs and expenses...................... 517,678 548,418 641,327 469,277 597,239
-------- -------- -------- ----------- -------------
Operating income................................ 41,474 44,729 45,857 38,384 51,187
Interest expense................................ (2,045) (13,149) (24,822) (18,203) (23,741)
Other expense, net.............................. (6,447) (3,761) (4,486) (3,537) (490)
-------- -------- -------- ----------- -------------
Income before income taxes...................... 32,982 27,819 16,549 16,644 26,956
Income taxes:
Current year provision........................ (12,756) (11,159) (6,450) (6,646) (10,474)
Adjustment of deferred tax assets for change
in tax rate................................ 125 -- -- -- --
-------- -------- -------- ----------- -------------
Net income...................................... $ 20,351 $ 16,660 $ 10,099 $ 9,998 $ 16,482
-------- -------- -------- ----------- -------------
-------- -------- -------- ----------- -------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-3
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
-------------------- 1996
1994 1995 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................... $ 29,015 $ 45,989 $ 12,952
Investments in trading securities....................................... -- 6,095 436
Investments in available-for-sale securities............................ -- 34,020 28,961
Restricted cash......................................................... 24,484 -- --
Accounts receivable, trade, less reserve of $533, $1,794 and $1,319,
respectively......................................................... 796 12,735 15,803
Accounts receivable, other.............................................. 24,192 23,263 56,675
Loan receivable from related party...................................... 23,633 -- 21,953
Inventories............................................................. 49,454 69,073 80,928
Deferred income tax benefits............................................ 1,101 3,845 3,845
Other current assets.................................................... 2,088 5,402 3,174
-------- -------- -------------
Total Current Assets............................................... 154,763 200,422 224,727
Property, plant and equipment, net........................................ 171,498 223,784 216,274
Excess of cost over net assets of businesses acquired, net of accumulated
amortization of $4,055, $5,225 and $6,426,
respectively............................................................ 39,906 57,702 60,932
Deferred income tax benefits.............................................. 71,747 66,059 56,129
Other assets.............................................................. 14,431 11,304 13,123
-------- -------- -------------
Total Assets.............................................................. $452,345 $559,271 $ 571,185
-------- -------- -------------
-------- -------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Short-term debt......................................................... $ -- $ -- $ 256
Current maturities of long-term debt.................................... 2,845 8,990 3,124
Accounts payable........................................................ 38,606 51,975 57,656
Payable to related parties, net......................................... -- 2,749 6,732
Accrued liabilities..................................................... 27,575 33,970 46,643
Reserve for asbestos claims............................................. 49,506 48,176 20,581
-------- -------- -------------
Total Current Liabilities.......................................... 118,532 145,860 134,992
-------- -------- -------------
Long-term debt less current maturities.................................... 229,228 310,260 322,985
-------- -------- -------------
Reserve for asbestos claims............................................... 79,575 21,110 4,989
-------- -------- -------------
Reserve for product warranty claims....................................... 29,934 39,395 37,464
-------- -------- -------------
Other liabilities......................................................... 23,930 26,864 26,505
-------- -------- -------------
Commitments and Contingencies.............................................
Stockholder's Equity (Deficit):
Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par
value per share; 50,000 shares authorized; 0 shares issued........... -- -- --
Common stock, $.001 par value per share; 1,050,000 shares authorized;
1,000,010 shares issued and outstanding.............................. -- -- --
Additional paid-in-capital.............................................. 46,936 81,248 92,875
Excess of purchase price over the adjusted historical cost of the
predecessor company shares owned by GAF's stockholders............... (7,874) (7,874) (7,874)
Accumulated deficit..................................................... (67,328) (57,229) (40,747)
Other................................................................... (588) (363) (4)
-------- -------- -------------
Stockholder's Equity (Deficit).......................................... (28,854) 15,782 44,250
-------- -------- -------------
Total Liabilities and Stockholder's Equity (Deficit)...................... $452,345 $559,271 $ 571,185
-------- -------- -------------
-------- -------- -------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-4
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, SEPTEMBER 29,
----------------------------------- 1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
-------- -------- ----------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents, beginning
of period..................................... $ 4,612 $ 821 $ 29,015 $ 29,015 $ 45,989
-------- -------- ----------- ----------- -------------
Cash provided by operating activities:
Net income.................................... 20,351 16,660 10,099 9,998 16,482
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................... 14,465 16,796 20,252 14,545 18,072
Goodwill amortization...................... 641 1,064 1,170 800 1,201
Deferred income taxes...................... 3,118 10,959 6,250 6,494 10,260
Non-cash interest charges.................. 160 10,480 21,432 16,118 17,661
Increase in working capital items............. (4,246) (12,842) (8,050) (36,124) (46,182)
Purchases of trading securities............... -- -- -- -- (28,726)
Proceeds from sales of trading securities..... -- -- -- -- 25,868
(Increase) decrease in other assets........... 60 2,720 1,924 441 (940)
Decrease in other liabilities................. (12,558) (6,384) (4,502) (4,213) (1,390)
Increase (decrease) in payable to related
parties.................................... 1,350 (11,663) 1,939 6,059 4,831
Other, net.................................... 2,046 757 112 351 1,043
-------- -------- ----------- ----------- -------------
Net cash provided by operating activities....... 25,387 28,547 50,626 14,469 18,180
-------- -------- ----------- ----------- -------------
Cash used in investing activities:
Capital expenditures and acquisitions......... (18,963) (54,279) (54,111) (18,930) (15,726)
Purchases of available-for-sale securities.... -- -- (47,775) -- (106,452)
Proceeds from sales of available-for-sale
securities................................. -- -- 8,416 -- 120,305
-------- -------- ----------- ----------- -------------
Net cash used in investing activities......... (18,963) (54,279) (93,470) (18,930) (1,873)
-------- -------- ----------- ----------- -------------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable..... 38,485 12,217 7,919 23,511 16,378
(Increase) decrease in loans receivable
from/payable to related party.............. (9,993) (24,502) 23,633 (4,697) (21,953)
Increase in short-term debt................... -- -- -- -- 256
Proceeds from issuance of debt................ 7,285 195,528 40,002 -- --
Repayments of long-term debt.................. (1,825) (15,317) (10,440) (1,029) (11,880)
(Increase) decrease in restricted cash........ -- (24,484) 24,484 24,484 --
Capital contribution from parent company...... -- -- 34,312 -- 11,627
Distributions and dividend to parent
company.................................... (43,157) (7,900) -- -- --
Payments of asbestos claims................... -- (75,340) (59,795) (43,524) (43,716)
Financing fees and expenses................... (1,010) (6,276) (297) (295) (56)
-------- -------- ----------- ----------- -------------
Net cash provided by (used in) financing
activities................................. (10,215) 53,926 59,818 (1,550) (49,344)
-------- -------- ----------- ----------- -------------
Net change in cash and cash equivalents......... (3,791) 28,194 16,974 (6,011) (33,037)
-------- -------- ----------- ----------- -------------
Cash and cash equivalents, end of period........ $ 821 $ 29,015 $ 45,989 $ 23,004 $ 12,952
-------- -------- ----------- ----------- -------------
-------- -------- ----------- ----------- -------------
</TABLE>
F-5
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, SEPTEMBER 29,
------------------------------- 1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
------- -------- -------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Supplemental Cash Flow Information
Effect on cash from (increase) decrease in working
capital items:*
Accounts receivable.............................. $(3,202) $(14,340) $ 666 $ (32,662) $ (52,858)
Inventories...................................... 2,535 (6,534) (4,557) (12,261) (11,855)
Other current assets............................. (596) 151 1,760 (262) 1,329
Accounts payable................................. (2,324) 11,900 (6,093) 2,919 4,833
Accrued liabilities.............................. (659) (4,019) 174 6,142 12,369
------- -------- -------- ----------- -------------
Net effect on cash from increase in working
capital items............................... $(4,246) $(12,842) $ (8,050) $ (36,124) $ (46,182)
------- -------- -------- ----------- -------------
------- -------- -------- ----------- -------------
Cash paid during the period for:
Interest (net of amount capitalized)............. $ 2,117 $ 2,583 $ 2,796 $ 1,739 $ 4,632
Income taxes (including taxes paid pursuant to
the Tax Sharing Agreement).................... 484 9,609 213 189 143
Acquisition of U.S. Intec, Inc., net of $180 cash
acquired:
Fair market value of assets acquired............. $105,285
Purchase price of acquisition.................... 27,358
--------
Liabilities assumed.............................. $ 77,927
--------
--------
</TABLE>
- ------------------
* Working capital items exclude cash, restricted cash and short-term
investments, short-term debt and net payables or receivables to/from related
parties. Working capital acquired in connection with acquisitions is reflected
in 'Capital expenditures and acquisitions'. The effects of reclassifications
between noncurrent and current assets and liabilities are excluded from the
amounts shown above. In addition, the increase in receivables shown above does
not reflect the cash proceeds from the sale of the Company's receivables (see
Note 6); such proceeds are reflected in cash from financing activities.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-6
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CAPITAL
STOCK AND RETAINED
ADDITIONAL EARNINGS
PAID-IN (ACCUMULATED
CAPITAL OTHER DEFICIT)
---------- ------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Balance, December 31, 1992.................................................. $ 90,093 $ (460) $ 28,257
Net income................................................................ -- -- 20,351
Distributions to parent company........................................... (43,157) -- --
Adjustment of unfunded pension liability.................................. -- (1,342) --
---------- ------- -------------
Balance, December 31, 1993.................................................. $ 46,936 $(1,802) $ 48,608
Net income................................................................ -- -- 16,660
Assumption of a portion of parent company's asbestos liability, net of
related income tax benefits............................................ -- -- (124,696)
Dividend to parent company................................................ -- -- (7,900)
Adjustment of unfunded pension liability.................................. -- 1,214 --
---------- ------- -------------
Balance, December 31, 1994.................................................. $ 46,936 $ (588) $ (67,328)
Net income................................................................ -- -- 10,099
Capital contribution from parent company.................................. 34,312 -- --
Unrealized gain on available-for-sale securities, net of income tax effect
of $174................................................................ -- 272 --
Adjustment of unfunded pension liability.................................. -- (47) --
---------- ------- -------------
Balance, December 31, 1995.................................................. $ 81,248 $ (363) $ (57,229)
Net income (Unaudited).................................................... -- -- 16,482
Capital contribution from parent company (Unaudited)...................... 11,627 -- --
Unrealized gain on available-for-sale securities, net of income tax effect
of $229 (Unaudited).................................................... -- 359 --
---------- ------- -------------
Balance, September 29, 1996 (Unaudited)..................................... $ 92,875 $ (4) $ (40,747)
---------- ------- -------------
---------- ------- -------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-7
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Building Materials Corporation of America (the 'Company') was formed on
January 31, 1994 and is a wholly owned subsidiary of GAF Building Materials
Corporation ('GAFBMC'), which is a wholly owned subsidiary of G Industries Corp.
('G Industries'). G Industries is a wholly owned subsidiary of G-I Holdings Inc.
('G-I Holdings'), which is a wholly owned subsidiary of GAF Corporation ('GAF').
Financial information with regard to the nine months ended October 1, 1995 and
September 29, 1996 is unaudited and, in the opinion of management, contains all
adjustments necessary to present fairly the financial position and the results
of operations and cash flows of the Company for the periods presented. All
adjustments are of a normal recurring nature. The results of operations for
these periods are not necessarily indicative of the results to be expected for
the full year.
The Company manufactures a broad line of asphalt roofing products and
accessories for the residential and commercial roofing markets in the United
States.
NOTE 1. FORMATION OF THE COMPANY AND RESTATEMENT OF FINANCIAL STATEMENTS
Formation of the Company
Effective as of January 31, 1994, GAFBMC transferred to the Company all of
its business and assets (other than three closed manufacturing facilities,
certain deferred tax assets and receivables from affiliates). The Company
recorded the assets and liabilities related to such transfer at GAFBMC's
historical costs. The Company contractually assumed all of GAFBMC's liabilities,
except (i) all of GAFBMC's environmental liabilities, other than environmental
liabilities relating to the Company's plant sites and its business as then
conducted, (ii) any potential liability relating to certain litigation with
Georgia-Pacific Corporation (see 'Business--Legal Proceedings--Other
Litigation') and (iii) all of GAFBMC's asbestos-related liabilities, other than
the first $204.4 million of such liabilities (whether for indemnity or defense)
relating to then-pending asbestos-related bodily injury cases and previously
settled asbestos-related bodily injury cases which the Company contractually
assumed and agreed to pay. G-I Holdings and GAFBMC have agreed, jointly and
severally, to indemnify the Company from liabilities not assumed by the Company,
including asbestos-related and environmental liabilities not expressly assumed
by the Company. See Note 3.
The Company's consolidated financial statements have been prepared on a
basis which retroactively reflects the formation of the Company, as discussed
above, for all periods presented prior to 1995, except that the Company's
assumption of $204.4 million of asbestos-related liabilities described above and
related income tax benefits of $79.7 million have been reflected as a charge of
$124.7 million to stockholder's equity (deficit) upon the Company's formation as
of January 31, 1994. Excess cash generated has been reflected as a distribution
to GAFBMC in 1993.
Restatement of Financial Statements
In October 1995, G-I Holdings acquired all of the outstanding shares of
U.S. Intec, Inc. ('USI'), which manufactures commercial roofing products, for a
purchase price of $27.5 million and assumed $35 million of USI's indebtedness.
As of January 1, 1997, USI became a wholly owned subsidiary of the Company
through a capital contribution to the Company by G-I Holdings (see Note 13).
Accordingly, the Company's historical consolidated financial statements have
been restated for the year 1995 and the nine months ended September 29, 1996 to
include USI's results of operations from the date of its acquisition by G-I
Holdings, including sales of $21.8 million for the year 1995 and $76.3 million
for the nine months ended September 29, 1996 and net income (loss) of $(.5) and
$.8 million, respectively.
F-8
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
All subsidiaries are consolidated and intercompany transactions have been
eliminated.
Financial Statement Estimates
The preparation of financial statements requires management to make certain
estimates. Actual results could differ from those estimates. In the opinion of
management, the financial statements herein contain all adjustments necessary to
present fairly the financial position and the results of operations and cash
flows of the Company for the periods presented. All adjustments are of a normal
recurring nature. The Company has a policy to review the recoverability of
long-lived assets and identify and measure any potential impairments. The
Company does not anticipate any changes in management estimates that would have
a material impact on operations, liquidity or capital resources, subject to the
matters discussed in Note 12 (Commitments and Contingencies).
Short-term Investments
The Company carries its short-term investments at market value. For
securities classified as 'trading' (including short positions), unrealized gains
and losses are reflected in income. For securities classified as
'available-for-sale', unrealized gains and losses, net of income tax effect, are
included in a separate component of stockholder's equity (deficit), 'Other', and
amounted to $.3 and $.6 million as of December 31, 1995 and September 29, 1996,
respectively.
'Other expense, net' includes $.4, $0 and $5.4 million of net realized and
unrealized gains on securities in 1995 and the first nine months of 1995 and
1996, respectively. The determination of cost in computing realized gains and
losses is based on the specific identification method.
During the fourth quarter of 1995, the Company redesignated certain equity
securities held long (which are offsets against short positions in certain other
securities), with a fair market value of $6.3 million, as 'trading' and recorded
unrealized gains on such securities, through the date of redesignation, in the
amount of $.5 million as 'Other income'.
As of December 31, 1995, and September 29, 1996, the market value of the
Company's equity securities held long was $40.3 and $29.6 million, respectively,
and the Company had $5.9 and $1.7 million, respectively, of short positions in
common stocks, based on market value. The market values referred to above are
based on quotations as reported by various stock exchanges and major
broker-dealers. With respect to its investments in securities, the Company is
exposed to the risk of market loss.
Cash and cash equivalents for the purpose of reporting cash flows include
cash on deposit and debt securities purchased with original maturities of three
months or less.
In accordance with the terms of the indenture for the Company's 11 3/4%
Senior Deferred Coupon Notes due 2004 (the 'Deferred Coupon Notes') (see Note
9), the Company deposited $100 million of the proceeds from the issuance of the
Notes into a segregated account maintained by the trustee under the indenture
(the 'Account'). Funds in the Account could be invested only in certain
permitted investments and could be used, subject to certain exceptions, only to
fund the Company's assumed asbestos liabilities. As of December 31, 1994, $24.5
million remained in the Account and was invested in Eurodollar deposits
purchased with a maturity of less than three months. The account was reduced to
a zero balance in 1995.
Inventories
Inventories are stated at the lower of cost or market. The LIFO (last-in,
first-out) method is utilized to determine cost for a portion of the Company's
inventories. All other inventories are determined principally based on the FIFO
(first-in, first-out) method.
F-9
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Property, Plant and Equipment
Depreciation is computed principally on the straight-line method based on
the estimated economic lives of the assets. Certain interest charges are
capitalized during the period of construction as part of the cost of property,
plant and equipment.
New Accounting Standards
In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
relating to accounting for impairment of long-lived assets, which is required to
be adopted in 1996. The Company does not anticipate that the implementation of
SFAS No. 121 will have a material effect on the Company's results of operations
or financial position.
Excess of Purchase Price Over The Adjusted Historical Cost of Predecessor
Company Shares
Stockholder's equity (deficit) reflects a reduction of $7.9 million which
arose from a management-led buyout in March 1989 of the predecessor company to
GAF (the 'Acquisition'), because certain members of the management group owned
shares of the predecessor Company's common stock before the Acquisition and own
shares of GAF after the Acquisition. Accordingly, a step-up in asset values to
fair value as required by the purchase method of accounting (which was applied
to the Acquisition) does not apply to their shares.
Excess of Cost Over Net Assets of Businesses Acquired ('Goodwill')
Goodwill is amortized on the straight-line method over a period of
approximately 40 years. The Company believes that the goodwill is recoverable.
The primary financial indicator to assess recoverability of goodwill is
operating income before amortization of goodwill. The assessment is based on an
undiscounted analysis.
Debt Issuance Costs
Debt issuance costs are amortized to expense over the life of the related
debt.
Revenue Recognition
Revenue is recognized at the time products are shipped to the customer.
Interest Rate Swaps
Gains (losses) on interest rate swaps are deferred and amortized as a
reduction (increase) of interest expense over the remaining life of the debt
issue with respect to which the swaps were entered.
Research and Development
Research and development expenses are charged to operations as incurred and
amounted to $2.6, $2.5, $3.1, $2.2 and $3.0 million for 1993, 1994 and 1995 and
the first nine months of 1995 and 1996, respectively.
Warranty Claims
The Company provides certain limited warranties covering most of its
residential roofing products for periods ranging from 20 to 40 years. The
Company also offers limited warranties and guaranties of varying durations on
its commercial roofing products; income from warranty contracts related to
commercial roofing products is recognized over the life of the agreements.
Included in 'Accrued liabilities' as of December 31, 1994 and 1995 and as of
September 29, 1996 is $11.7, $11.0 and $9.4 million, respectively, for estimated
product
F-10
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
warranty claims. The Company believes that the reserves established for
estimated probable future warranty claims are adequate.
Environmental Liability
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters. The Company estimates
that its liability in respect of such environmental matters, and certain other
environmental compliance expenses, as of September 29, 1996 is $1.4 million,
before reduction for insurance recoveries reflected on its balance sheet of $.5
million. The Company's liability is reflected on an undiscounted basis. See
'Business--Environmental Litigation' for further discussion with respect to
environmental liabilities and estimated insurance recoveries.
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS
Upon its formation, the Company contractually assumed and agreed to pay the
first $204.4 million of GAFBMC's asbestos-related bodily injury liabilities
(whether for indemnity or defense), relating to pending cases and previously
settled, but not paid, cases as of January 31, 1994, and no other asbestos
liabilities of GAFBMC. Of that amount, $178.8 million had been paid through
September 29, 1996, and the Company's remaining asbestos liability amounted to
$25.6 million as of September 29, 1996. Substantially all of the Company's
asbestos liabilities are expected to be paid by the end of the second quarter of
1997. Also see Note 1. G-I Holdings and GAFBMC have agreed, jointly and
severally, to indemnify the Company against any claims related to
asbestos-related liabilities, other than those assumed by the Company, in the
event that claims in connection with liabilities not assumed by the Company are
asserted against it. GAFBMC is administering all asbestos-related bodily injury
claims, including those assumed by the Company, and will have the right to
settle or litigate asbestos-related claims and to settle and allocate recoveries
among GAF, the Company and GAFBMC under insurance policies relating thereto.
As of September 29, 1996, G-I Holdings' and GAFBMC's consolidated reserves
for asbestos bodily injury claims were approximately $357.8 million (before
estimated present value of recoveries from products liability insurance policies
of approximately $211 million and related deferred tax benefits of approximately
$51.4 million). G-I Holdings and GAFBMC have advised the Company that certain
components of the asbestos-related liability and the related insurance
recoveries have been reflected on a discounted basis in their financial
statements. The aggregate undiscounted consolidated liability, as of September
29, 1996, before estimated recoveries from products liability insurance
policies, was $398.1 million. The rate (6.25%) used to discount the affected
components of the asbestos-related liability was equivalent to the interest rate
in October 1993 for securities with a 10-year maturity backed by U.S. Government
agencies. As of September 29, 1996, G-I Holdings' consolidated expected net
payments (receipts) for the remainder of 1996 and the years 1997, 1998, 1999 and
2000 are $19, $34, $(9.8), $26.8, and $31.7 million, respectively, and the
aggregate expected payments to be made after 2000 are $72.1 million.
For a further discussion with respect to the foregoing, see
'Business--Legal Proceedings', which is incorporated herein by reference.
NOTE 4. ACQUISITION
In March 1994, a subsidiary of the Company acquired the assets and certain
liabilities of International Permalite Inc. ('IPI'), a manufacturer of perlite
roofing insulation products. The acquisition was accounted for under the
purchase method of accounting. Accordingly, the purchase price was allocated to
the estimated fair values of the identifiable net assets acquired, and the
excess was recorded as goodwill. The results of IPI, including sales of $19.3
million for the year 1994, are included from the date of acquisition; the
effects were not material to 1994 operations.
F-11
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES
Income tax provision, which has been computed on a separate return basis,
consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, SEPTEMBER 29,
------------------------------- 1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal:
Current......................................... $ (8,081) $ -- $ -- $ -- $ --
Deferred........................................ (2,739) (9,438) (5,424) (5,645) (9,094)
-------- -------- ------- ----------- -------------
Total Federal................................ (10,820) (9,438) (5,424) (5,645) (9,094)
-------- -------- ------- ----------- -------------
State and local:
Current......................................... (1,432) (200) (200) (152) (213)
Deferred........................................ (504) (1,521) (826) (849) (1,167)
-------- -------- ------- ----------- -------------
Total state and local........................ (1,936) (1,721) (1,026) (1,001) (1,380)
-------- -------- ------- ----------- -------------
Income tax provision.............................. $(12,756) $(11,159) $(6,450) $(6,646) $ (10,474)
-------- -------- ------- ----------- -------------
-------- -------- ------- ----------- -------------
</TABLE>
The differences between the income tax provision computed by applying the
statutory Federal income tax rate to pre-tax income, and the income tax
provision reflected in the Consolidated Statements of Income are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
YEAR ENDED DECEMBER 31, OCTOBER 1, SEPTEMBER 29,
------------------------------- 1995 1996
1993 1994 1995 (UNAUDITED) (UNAUDITED)
-------- -------- ------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory provision............................... $(11,544) $ (9,737) $(5,792) $(5,825) $ (9,435)
Impact of:
State and local taxes, net of Federal
benefits................................... (1,279) (1,119) (667) (651) (897)
Nondeductible goodwill amortization.......... (224) (372) (260) (168) (291)
Other, net................................... 291 69 269 (2) 149
-------- -------- ------- ----------- -------------
Income tax provision.............................. $(12,756) $(11,159) $(6,450) $(6,646) $ (10,474)
-------- -------- ------- ----------- -------------
-------- -------- ------- ----------- -------------
</TABLE>
F-12
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
-------------------- 1996
1994 1995 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities related to property, plant and
equipment..................................................... $(21,467) $(10,173) $ (9,753)
-------- -------- -------------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes:
Reserve for asbestos claims................................ 50,342 27,022 9,973
Other...................................................... 27,472 35,437 33,224
Net operating losses not yet utilized under the Tax Sharing
Agreement.................................................. 16,501 17,618 26,530
-------- -------- -------------
Total deferred tax assets..................................... 94,315 80,077 69,727
-------- -------- -------------
Net deferred tax assets....................................... 72,848 69,904 59,974
Less current portion.......................................... 1,101 3,845 3,845
-------- -------- -------------
Noncurrent deferred tax assets................................ $ 71,747 $ 66,059 $ 56,129
-------- -------- -------------
-------- -------- -------------
</TABLE>
Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that future taxable income will more likely
than not be sufficient to utilize fully the deferred tax assets recorded.
The Company and its subsidiaries have entered into a Tax Sharing Agreement
with GAF and G-I Holdings under which the Company is obligated to pay G-I
Holdings an amount equal to those Federal income taxes the Company would have
incurred if the Company (on behalf of itself and its subsidiaries) filed its own
Federal income tax return. Unused tax attributes will carry forward for use in
reducing amounts payable by the Company to G-I Holdings in future years, but
cannot be carried back. Were the Company to leave the GAF Group, it would be
required to pay to G-I Holdings the value of any tax attributes it would succeed
to under the consolidated return regulations to the extent such attributes
reduced the amounts otherwise payable by the Company under the Tax Sharing
Agreement. Under certain circumstances, the provisions of the Tax Sharing
Agreement could result in the Company having a greater liability thereunder than
it would have had if it (and its subsidiaries) had filed its own separate
Federal income tax return. Under the Tax Sharing Agreement, the Company and each
of its subsidiaries are responsible for any taxes that would be payable by
reason of any adjustment to the tax returns of GAF or its subsidiaries for years
prior to the adoption of the Tax Sharing Agreement that relate to the business
or assets of the Company or any subsidiary of the Company. Although, as a member
of the GAF Group, the Company is severally liable for all Federal income tax
liabilities of every member of the GAF Group, including tax liabilities not
related to the business of the Company, G-I Holdings and GAF have agreed to
indemnify the Company and its subsidiaries for all tax liabilities of the GAF
Group other than tax liabilities (i) arising from the operations of the Company
and its subsidiaries and (ii) for tax years pre-dating the Tax Sharing Agreement
that relate to the business or assets of the Company and its subsidiaries. The
Tax Sharing Agreement provides for analogous principles to be applied to any
consolidated, combined or unitary state or local income taxes. Under the Tax
Sharing Agreement, GAF makes all decisions with respect to all matters relating
to taxes of the GAF Group. The provisions of the Tax Sharing Agreement take into
account both the Federal income taxes the Company would have incurred if it
filed its own separate Federal income tax return and the fact that the Company
is a member of the GAF Group for Federal income tax purposes. In accordance with
the Tax Sharing Agreement, effective January 31, 1994, tax benefits generated by
net operating losses and credits will reduce future tax sharing payments to G-I
Holdings.
F-13
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
In connection with Rhone-Poulenc Surfactants and Specialties, L.P. (the
'Surfactants Partnership'), GAF Fiberglass Corporation ('GFC'), an indirect
subsidiary of GAF formerly known as GAF Chemicals Corporation, has recorded a
deferred tax liability in the amount of $131.4 million, which is reflected as a
liability on the consolidated balance sheet of G-I Holdings. Payment of this
liability (subject to reduction to reflect utilization of the tax attributes of
GAF and its subsidiaries) is not expected earlier than 1999 under present
circumstances. In certain circumstances, GFC could be required to satisfy this
liability earlier than 1999. GAF, G-I Holdings and certain subsidiaries of GAF
have agreed to jointly and severally indemnify the Company against such tax
liability. The Company is a member of the same consolidated group as GFC and,
subject to such indemnification, would be severally liable for any tax liability
imposed in connection with the Surfactants Partnership should GAF, G-I Holdings
and such subsidiaries be unable to satisfy such liability. GAF has advised the
Company that, in the event the tax liability becomes payable, GAF believes that
it will have access to sufficient funds to satisfy this liability if so
required.
NOTE 6. SALE OF ACCOUNTS RECEIVABLE
In March 1993, the Company sold its trade accounts receivable
('receivables') to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company entered into new agreements, pursuant to which it sold the
receivables to a special purpose subsidiary of the Company, BMCA Receivables
Corporation, without recourse, which in turn sold them to a new trust, without
recourse. The new agreements provide for a maximum of $115 million in cash to be
made available to the Company based on eligible receivables outstanding from
time to time and expires in December 2001. The excess of accounts receivable
sold over the net proceeds received is included in 'Accounts receivable, other'.
The effective cost to the Company varies with LIBOR and is included in 'Other
expense, net.'
NOTE 7. INVENTORIES
At December 31, 1994 and 1995 and September 29, 1996, $6.9, $6.2 and $7.5
million, respectively, of inventories were valued using the LIFO method.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
------------------ 1996
1994 1995 (UNAUDITED)
------- ------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Finished goods..................................................... $25,042 $36,363 $47,003
Work in process.................................................... 9,228 7,594 8,858
Raw materials and supplies......................................... 15,689 25,621 25,972
------- ------- -------------
Total............................................................ 49,959 69,578 81,833
Less LIFO reserve.................................................. (505) (505) (905)
------- ------- -------------
Inventories........................................................ $49,454 $69,073 $80,928
------- ------- -------------
------- ------- -------------
</TABLE>
F-14
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
-------------------- 1996
1994 1995 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Land and land improvements...................................... $ 19,927 $ 25,255 $ 25,750
Buildings and fixtures.......................................... 28,547 40,608 46,110
Machinery and equipment (including equipment under capitalized
leases of $14,421, $20,450 and $18,431--see Note 9)........... 138,339 172,993 182,003
Construction in progress........................................ 23,824 20,879 15,282
-------- -------- -------------
Total...................................................... 210,637 259,735 269,145
Less accumulated depreciation and amortization.................. (39,139) (35,951) (52,871)
-------- -------- -------------
Property, plant and equipment, net.............................. $171,498 $223,784 $ 216,274
-------- -------- -------------
-------- -------- -------------
</TABLE>
NOTE 9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
-------------------- 1996
1994 1995 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
11 3/4% Senior Deferred Coupon Notes due 2004............................. $185,445 $207,814 $ 226,553
Borrowings under revolving credit facilities.............................. -- 24,412 22,164
Industrial revenue bonds with various interest rates and maturity dates to
2012.................................................................... 19,625 19,625 19,625
Obligations on mortgaged properties....................................... 6,575 7,639 5,376
Obligations under capital leases (Note 12)................................ 20,428 59,760 52,391
-------- -------- -------------
Total................................................................... 232,073 319,250 326,109
Less current maturities................................................... (2,845) (8,990) (3,124)
-------- -------- -------------
Long-term debt less current maturities.................................... $229,228 $310,260 $ 322,985
-------- -------- -------------
-------- -------- -------------
</TABLE>
In June 1994, the Company issued $310 million in principal amount of the
Deferred Coupon Notes for net proceeds of $169.3 million. The Deferred Coupon
Notes will accrete to face value on July 1, 1999 and cash interest will accrue
from and after that date. Holders of the Deferred Coupon Notes have the right
under the indenture governing such notes to require the Company to purchase the
Deferred Coupon Notes at a price of 101% of Accreted Value (as defined therein),
and the Company has the right to redeem the Deferred Coupon Notes at Accreted
Value plus the Applicable Premium (as defined therein), together with any
accrued and unpaid interest, in the event of a Change of Control (as defined
therein). The indenture relating to the Deferred Coupon Notes contains covenants
that, among other things, limit the ability of the Company and its subsidiaries
to pay certain dividends or make certain other restricted payments and
restricted investments, incur liens, engage in transactions with affiliates, and
agree to certain additional limitations on dividends and other payment
restrictions affecting subsidiaries. As of September 29, 1996, the Company could
have paid dividends of up to $23.0 million. Under the indenture relating to the
Deferred Coupon Notes and the indenture relating to G-I Holdings' Senior
Discount Notes due 1998, the incurrence of additional debt by the Company and
the issuance by the Company of preferred stock would be restricted unless, at
the time of such issuance and after giving effect thereto, the ratio of the
Company's consolidated net income before income taxes, interest, depreciation
and amortization expense to
F-15
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
its consolidated interest expense for its most recently completed four fiscal
quarters is at least 2 to 1. For the four quarters ended September 29, 1996, the
Company was in compliance with such tests.
In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ('swaps') with banks in an aggregate ending
notional principal amount of $142 million, with a final maturity of July 1,
1999. As a result of the swaps, the effective interest cost to the Company of
the portion of the Deferred Coupon Notes covered by the swaps varies at a fixed
spread over LIBOR. Based on the fair value of the swaps at December 31, 1994 and
1995 and September 29, 1996, the Company would have incurred gains (losses) of
($3.6), $9.3 and $6.8 million, respectively, representing the estimated amount
that would be (payable)/receivable by the Company if the swaps were terminated
at such dates. No cash interest will be paid on the swaps until maturity. The
Company may be considered to be at risk, to the extent of the costs of replacing
such swaps at current market rates, in the event of nonperformance by
counterparties. However, since the counterparties are major financial
institutions, the credit ratings of which are continually monitored by the
Company, the risk of such nonperformance is considered by the Company to be
remote.
In June 1996, the Company's bank credit facilities were extended to June
1997 on the same terms and conditions. Such facilities provide for revolving
lines of credit of up to $30 million and letters of credit facilities of up to
$39 million, provided that total borrowings and outstanding letters of credit
may not exceed $40 million. As of September 29, 1996, $33.1 million of letters
of credit were outstanding and no amounts had been borrowed thereunder. Under
the agreements, the Company is subject to a minimum consolidated net worth test.
As of September 29, 1996, the Company was in compliance with such test.
USI has a revolving credit facility, providing for borrowings of up to
$29.6 million, which expires in January 1999 and is secured by, and subject to
limitations based upon values of, accounts receivable, inventories and certain
manufacturing equipment. As of September 29, 1996, loans of $22.2 million were
outstanding under the facility. The interest rate on that portion of the loans
which is collateralized by accounts receivable and inventories is at the prime
rate; that portion which is collateralized by manufacturing equipment is at a
fixed rate of 7%.
In December 1995, the Company consummated a $40 million sale-leaseback of
certain equipment located at its Chester, South Carolina roofing facility, in a
transaction accounted for as a capital lease, and the gain has been deferred.
The lessor was granted a security interest in certain equipment at the Chester
facility. The lease term extends to December 2005. In December 1994, the Company
consummated a $20.4 million sale-leaseback of certain equipment located at its
Baltimore, Maryland roofing facility, in a transaction accounted for as a
capital lease, and the gain has been deferred. The lessor was granted a security
interest in the land, buildings, and certain other equipment at the Baltimore
facility. The proceeds were used in part to repay $12 million outstanding under
a loan obtained in 1990 which was secured by the same equipment. The lease term
extends to December 2004. In December 1993, the Company obtained a loan of $7.3
million, which is secured by manufacturing equipment located at its Dallas
plant. The loan is being repaid over a seven-year period and has a fixed
interest rate. The Company has three industrial revenue bond issues outstanding,
which bear interest at short-term floating rates. Interest rates on the
foregoing obligations ranged between 3.65% and 8.87% as of September 29, 1996.
The Company believes that the fair value of its non-public indebtedness
approximates the book value of such indebtedness, because the interest rates on
such indebtedness are at floating short-term rates. With respect to the
Company's publicly traded debt securities, the Company has obtained an estimate
of the fair value of the Deferred Coupon Notes from an independent source
believed to be reliable. The estimated fair value of the Deferred Coupon Notes
as of December 31, 1994 and 1995 and September 29, 1996 was $156.6, $210.8 and
$249.6 million, respectively.
International Specialty Products Inc. ('ISP'), a Delaware corporation that
was an 83.5% indirect subsidiary of GAF prior to consummation of the Spin Off
Transactions (see Note 13), is permitted under the terms of its revolving credit
facilities to make loans or make available letters of credit to affiliates
(including the Company)
F-16
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
up to an aggregate of $75 million outstanding at any one time. As of September
29, 1996, no loans to the Company and $2.3 million in letters of credit for the
benefit of affiliates were outstanding.
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates (between 6.14% and 6.55% during 1995 and
between 5.68% and 6.0% during the first nine months of 1996). The highest amount
of loans made by the Company to G-I Holdings during 1995 and the first nine
months of 1996 was $34.4 million. No loans were made to the Company by G-I
Holdings and its subsidiaries during 1995, and the highest amount of loans made
to the Company by G-I Holdings and its subsidiaries during the first nine months
of 1996 was $24.3 million. As of December 31, 1994 and 1995 and September 29,
1996, $23.6 million, $0 and $22.0 million, respectively, was owed to the Company
by G-I Holdings, and no loans were owed by the Company to affiliates.
The aggregate maturities of long-term debt as of September 29, 1996 for the
next five years are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED SEPTEMBER 30, (THOUSANDS)
- ----------------------------------------------------------------------- -----------
<S> <C>
1997................................................................... $ 3,124
1998................................................................... 3,627
1999................................................................... 26,095
2000................................................................... 4,536
2001................................................................... 5,879
</TABLE>
In the above table, maturities for the twelve months ended September 30,
1999 include the $22.2 million of borrowings outstanding under the USI revolving
credit facility, which expires in January 1999.
NOTE 10. BENEFIT PLANS
Eligible, full-time employees of the Company are covered by various benefit
plans, as described below.
Defined Contribution Plan
The Company provides a defined contribution plan for eligible employees.
The Company contributes up to 7% of participants' compensation and also
contributes fixed amounts, ranging from $50 to $750 per year depending on age,
to the accounts of participants who are not covered by a Company-provided
postretirement medical benefit plan. The aggregate contributions by the Company
were $2.3, $2.6, $2.7, $2.0 and $2.3 million for 1993, 1994 and 1995 and the
first nine months of 1995 and 1996, respectively.
USI provides a defined contribution plan for eligible employees. USI may
contribute a discretionary matching contribution equal to 100% of each
participant's eligible contributions each plan year up to a maximum of $500 for
each participant. Such contributions by USI were immaterial for the period in
1995 after the acquisition of USI and were $148,000 for the first nine months of
1996.
Defined Benefit Plans
The Company provides a noncontributory defined benefit retirement plan for
hourly employees (the 'Hourly Retirement Plan'). Benefits under this plan are
based on stated amounts for each year of service. The Company's funding policy
is consistent with the minimum funding requirements of ERISA.
F-17
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
The Company's net periodic pension cost for the Hourly Retirement Plan
included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
----- ----- -----
(THOUSANDS)
<S> <C> <C> <C>
Service cost............................................................................ $ 408 $ 501 $ 463
Interest cost........................................................................... 484 551 598
Actual income on plan assets............................................................ (380) (380) (432)
Net deferral and amortization of unrecognized prior service cost and actuarial losses... 305 175 97
----- ----- -----
Net periodic pension cost............................................................... $ 817 $ 847 $ 726
----- ----- -----
----- ----- -----
</TABLE>
Net periodic pension cost for the Hourly Retirement Plan was $.5 and $.3
million, respectively, for the first nine months of 1995 and 1996.
The following table sets forth the funded status of the Hourly Retirement
Plan:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
(THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation:
Vested........................................................................... $ 6,080 $ 7,623
Nonvested........................................................................ 840 1,266
------- -------
Total accumulated benefit obligation............................................... $ 6,920 $ 8,889
------- -------
------- -------
Projected benefit obligation....................................................... $ 6,920 $ 8,889
Fair value of plan assets, primarily publicly traded stocks and U.S. Government
securities....................................................................... (4,563) (7,092)
------- -------
Projected benefit obligation in excess of plan assets.............................. 2,357 1,797
Unrecognized prior service cost.................................................... (465) (368)
Unrecognized net loss.............................................................. (588) (635)
------- -------
Unfunded accrued pension cost...................................................... $ 1,304 $ 794
------- -------
------- -------
</TABLE>
At December 31, 1995, the difference between the 'Projected benefit
obligation in excess of plan assets' and the 'Unfunded accrued pension cost', in
the amount of $1,003,000, was recorded by the Company as a liability, offset by
an intangible asset in the amount of $368,000 and a reduction of stockholder's
equity (deficit) in the amount of $635,000. The foregoing amounts will be
amortized to expense over a period of approximately 15 years, as the Company
continues to fund the benefits under the Hourly Retirement Plan.
In determining the projected benefit obligation, the weighted average
assumed discount rate was 9% and 7.5% for 1994 and 1995, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 9% for 1994 and 1995.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1993, 1994 and 1995 and the first nine months of 1995 and 1996.
Preferred Stock Option Plan
On January 1, 1996, the Company issued options to certain employees to
purchase 24,509 shares of Redeemable Convertible Preferred Stock ('Preferred
Stock') of the Company, exercisable at a price of $100 per share. Each share of
Preferred Stock is convertible, at the holder's option, into 0.76 shares of
common stock. The
F-18
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
options vest over seven years. Dividends will accrue on the Preferred Stock from
the date of issuance at the rate of 8% per annum. The Preferred Stock is
redeemable, at the Company's option, for a redemption price equal to $100 per
share plus accrued and unpaid dividends. The Preferred Stock, and common stock
issuable upon conversion of Preferred Stock into common stock, is subject to
repurchase by the Company under certain circumstances, at a price equal to
current Book Value (as defined). The exercise price of the options to purchase
Preferred Stock was equal to the fair value per share of the Preferred Stock at
the date of grant. No expense is accrued in connection with the preferred stock
option plan.
Income Appreciation Unit Plan
The Company provides an Income Appreciation Unit Plan, an employee
incentive program based on the operating performance of the Company. Expense
accrued for the plan was $1.1 million for each of 1993 and 1994, $.2 million for
1995, and was $.9 and $.8 million for the first nine months of 1995 and 1996,
respectively.
The Income Appreciation Unit Plan will be terminated as of December 31,
1996, and the values will be frozen as of that date. Participants who hold
vested units will be entitled to receive cash payment equal to the value of
their vested units as of December 31, 1996, and as the remaining units become
vested, holders will be entitled to receive additional cash payment for such
value.
A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vest over seven years.
Upon exercise, employees are entitled to receive a cash payment based on the
increase in Book Value (as defined). Expense accrued under this plan for the
first nine months of 1996 was $.1 million.
Postretirement Medical and Life Insurance
The Company provides certain medical and life insurance benefits for all
retirees who were formerly hourly employees and for certain retirees who were
formerly salaried employees. Current hourly employees may become eligible for
benefits if they reach retirement age while working for the Company. The Company
accrues the estimated cost of such retiree benefits during covered employees'
active service periods.
During 1992, the postretirement medical and life insurance plans for
salaried employees were terminated, with certain exceptions for salaried
employees then over age 55 with 10 years of service. Retirees as of December 31,
1992 who were formerly salaried employees maintain life insurance coverage and
receive a Company subsidy of up to $800 per year towards medical coverage, with
certain exceptions.
The following table shows the components of the accrued postretirement
health care cost obligation as of December 31, 1994 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
(THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees, dependents and beneficiaries eligible for benefits.................... $ 5,430 $ 5,866
Active employees fully eligible for benefits.................................... 1,112 1,193
Active employees not fully eligible for benefits................................ 926 1,154
------- -------
Total accumulated postretirement benefit obligation............................... 7,468 8,213
Fair value of plan assets......................................................... -- --
Unrecognized net gain............................................................. 4,280 3,284
------- -------
Accrued postretirement benefit obligation......................................... $11,748 $11,497
------- -------
------- -------
</TABLE>
F-19
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1993 1994 1995
---- ----- -----
(THOUSANDS)
<S> <C> <C> <C>
Service cost........................................................................... $ 81 $ 86 $ 79
Interest cost.......................................................................... 736 599 645
Amortization of net gain from earlier periods.......................................... (1) (200) (415)
---- ----- -----
Net periodic postretirement benefit cost............................................... $816 $ 485 $ 309
---- ----- -----
---- ----- -----
</TABLE>
Net periodic postretirement benefit cost was $.2 and $.4 million,
respectively, for the first nine months of 1995 and 1996.
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1992 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $800 per year. With respect to retirees who were
formerly hourly employees, most such retirees are subject to a $5,000 per person
lifetime maximum benefit. Subject to such lifetime maximum, a 14% and 8% annual
rate of increase in the Company's per capita cost of providing postretirement
medical benefits was assumed for 1996 for such retirees under and over age 65,
respectively. To the extent that the lifetime maximum benefits have not been
reached, the foregoing rates were assumed to decrease gradually to 7% and 6%,
respectively, by the year 2003 and remain at that level thereafter. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 9% and 7.5% in 1994 and 1995, respectively.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1995 by $327,000 and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the year 1995 by $74,000.
NOTE 11. RELATED PARTY TRANSACTIONS
Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating transactions
between the Company and its affiliates:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
---------------- 1996
1994 1995 (UNAUDITED)
----- ------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Receivable from (payable to):
GAF/G-I Holdings/G Industries................................................. $ 276 $ 208 $ (143)
GAFBMC........................................................................ (927) (55) 35
ISP........................................................................... 689 (2,902) (6,624)
----- ------- -------------
Receivable from (payable to) related parties, net............................. $ 38 $(2,749) $(6,732)
----- ------- -------------
----- ------- -------------
</TABLE>
The Company also borrows from or makes loans to related parties. Interest
on the loans is charged at prevailing rates available to ISP under its bank
credit agreement. The weighted average interest rate on the
F-20
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS--(CONTINUED)
Company's short-term loan to G-I Holdings as of December 31, 1994 and September
29, 1996 was 6.1% and 5.7%, respectively. The balances of such outstanding loans
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
----------------- 1996
1994 1995 (UNAUDITED)
------- ------ -------------
(THOUSANDS)
<S> <C> <C> <C>
Loan receivable from G-I Holdings............................................. $23,633 $ -- $21,953
------- ------ -------------
------- ------ -------------
</TABLE>
Mineral Products: The Company purchases all of its colored roofing
granules requirements from ISP (except for the requirements of the California
roofing plant) under a requirements contract which was renewed in 1996 and is
subject to annual renewal unless terminated by the Company or ISP. Such
purchases totaled $43.5, $42.5, $45.7, $35.9 and $35.7 million for 1993, 1994
and 1995 and the first nine months of 1995 and 1996, respectively. The amount
payable to ISP at December 31, 1994 and 1995 and September 29, 1996 for such
purchases was $2.6, $2.7 and $7.5 million, respectively. In addition, in
December 1995, USI commenced purchasing substantially all of its requirements
for colored roofing granules from ISP (except for the requirements of its
Stockton, California and Corvallis, Oregon plants) pursuant to a requirements
contract which expires December 31, 1997. Such purchases totaled $.1 million for
1995 and $3.3 million for the first nine months of 1996. The amount payable by
USI to ISP for such purchases was $.1 and $.6 million at December 31, 1995 and
September 29, 1996, respectively.
Management Agreement: The Company is a party to a Management Agreement
with ISP (the 'Management Agreement'), which expires at the end of 1996,
pursuant to which ISP provides certain general management, administrative and
facilities services to the Company (including the use of the Company's
headquarters in Wayne, New Jersey), for which the Company paid ISP a management
fee of $4.6, $3.5, $3.6, $2.7 and $2.9 million for 1993, 1994 and 1995 and the
first nine months of 1995 and 1996, respectively. Such fee was increased to an
annual rate of $3.9 million effective January 1, 1996. In addition to the
management fee, the Company paid to ISP approximately $.7 million in each of
1993, 1994 and 1995, and $.5 million in each of the first nine months of 1995
and 1996, primarily for telecommunications and information services, and the
Company paid approximately $.2 and $.1 million to ISP in 1994 and 1995,
respectively, for certain legal services, which in each case were not
encompassed within the management agreement.
Tax Sharing Agreement: See Note 5.
NOTE 12. COMMITMENTS AND CONTINGENCIES
The discussion as to legal matters involving the Company contained in
'Business--Legal Proceedings, Environmental Litigation and Other Litigation' is
incorporated herein by reference.
GAF, G-I Holdings, G Industries and GAFBMC are presently dependent upon the
earnings and cash flow of their subsidiaries, including the Company, in order to
satisfy their obligations, including as of September 29, 1996, $332.2 million
estimated present value of asbestos liability (before estimated present value of
recoveries from products liability insurance policies of approximately $211
million and net of the asbestos liability assumed by the Company), and
approximately $163.7 million of various tax and other liabilities, including tax
liabilities relating to the Surfactants Partnership (discussed in Note 5). Of
such obligations, $50.4 million (net of estimated insurance recoveries of $35.1
million) is estimated to be payable during the twelve months ended September 30,
1997. GAF has advised the Company that it expects to obtain funds to satisfy
such obligations from, among other things, refinancings of debt, dividends and
loans from subsidiaries, as to which there are restrictions under the indentures
relating to the Deferred Coupon Notes and from payments pursuant to Tax Sharing
Agreements between GAF and its subsidiaries. In the event that such parent
corporations should become unable to meet their cash requirements from sources
other than the Company, they might take various actions, including, among other
things, seeking to cause the Company to make distributions to stockholders by
means of dividends or otherwise,
F-21
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
to make loans to its parent corporations, or cause GAFBMC to sell shares of the
Company's common stock. As of September 29, 1996, G-I Holdings' stockholder's
equity was $61.7 million. The Company does not believe that the dependence of
its parent corporations on the cash flows of their subsidiaries should have a
material adverse effect on the operations, liquidity or capital resources of the
Company. See Notes 3 and 5.
The leases for certain property, plant and equipment at the Company's
Baltimore, Maryland and Chester, South Carolina roofing facilities are accounted
for as capital leases. See Note 9. The Company is also a lessee under operating
leases principally for production, transportation and computer equipment. Rental
expense on operating leases was $6.3, $7.1 and $7.0 million for 1993, 1994 and
1995, respectively. Future minimum lease payments for properties which were held
under long-term noncancelable leases as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
(THOUSANDS)
<S> <C> <C>
1996....................................................................................... $ 11,846 $ 3,582
1997....................................................................................... 6,862 3,088
1998....................................................................................... 6,862 1,744
1999....................................................................................... 6,862 439
2000....................................................................................... 7,302 99
Later years................................................................................ 47,072 77
-------- ---------
Total minimum payments..................................................................... 86,806 $ 9,029
---------
---------
Less interest included above............................................................... (27,046)
--------
Present value of net minimum lease payment................................................. $ 59,760
--------
--------
</TABLE>
NOTE 13. SUBSEQUENT EVENTS (UNAUDITED)
On December 9, 1996, the Company issued $100 million in aggregate principal
amount of 8 5/8% Senior Notes due 2006.
On January 1, 1997, GAF effected a series of transactions involving its
subsidiaries (the 'Spin Off Transactions') that resulted in, among other things,
(1) the approximately 83% of the issued and outstanding common stock of ISP
owned by a subsidiary of GAF being distributed to the stockholders of GAF, (2)
the Company's glass fiber manufacturing facility in Nashville, Tennessee (and
certain related assets and liabilities) being transferred to GFC, (3) USI
becoming a subsidiary of the Company and (4) G-I Holdings making a contribution
of approximately $57 million in cash and securities to the Company. As a result
of the Spin Off Transactions, ISP Holdings and ISP are no longer direct or
indirect subsidiaries of GAF, while the Company and GFC remain subsidiaries of
GAF. In connection with these transactions, GFC entered into a long-term supply
agreement with the Company under which GFC produces glass fiber for the Company.
As a result of USI becoming a subsidiary of the Company as of January 1, 1997,
the financial and statistical data regarding the Company presented herein
reflect the results of USI from and after October 20, 1995, the date on which
USI was acquired by a subsidiary of GAF, except as expressly set forth herein.
See Note 1.
The parent corporations of the Company are GAF, G-I Holdings, G Industries
and GAFBMC, and, except for the Company, the only other significant asset of
such parent corporations is GFC. As a result of the Spin Off Transactions,
dividends from ISP are not available to GAF and G-I Holdings, and loans from ISP
to GAF, G-I Holdings and the Company are prohibited by ISP Holdings' debt
instruments.
F-22
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1994 BY QUARTER 1995 BY QUARTER
------------------------------------ ------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $119.1 $169.0 $169.2 $135.8 $138.6 $177.1 $191.9 $179.6
Cost of products sold.............. 86.3 117.7 119.6 101.4 102.9 127.0 139.7 136.4
------ ------ ------ ------ ------ ------ ------ ------
Gross profit....................... $ 32.8 $ 51.3 $ 49.6 $ 34.4 $ 35.7 $ 50.1 $ 52.2 $ 43.2
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Operating income................... $ 6.5 $ 17.2 $ 15.5 $ 5.5 $ 7.0 $ 15.8 $ 15.6 $ 7.5
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Interest expense................... $ 1.0 $ 1.3 $ 5.2 $ 5.6 $ 6.0 $ 6.0 $ 6.2 $ 6.6
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income
taxes............................ $ 4.8 $ 15.0 $ 9.0 $ (1.0) $ .6 $ 8.0 $ 8.0 $ (.1)
Income tax (provision) benefit..... (1.9) (5.8) (3.6) .2 (.2) (3.2) (3.2) .2
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss).................. $ 2.9 $ 9.2 $ 5.4 $ (.8) $ .4 $ 4.8 $ 4.8 $ .1
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
F-23
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY BMCA. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary........................................ 1
Risk Factors................................... 12
Capitalization................................. 16
Selected Financial Data........................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 20
Business....................................... 24
Management..................................... 36
Executive Compensation......................... 39
Security Ownership of Certain Beneficial Owners
and Management............................... 41
Certain Relationships.......................... 42
The Exchange Offer............................. 44
Description of the New Notes................... 50
Certain Federal Income Tax
Considerations............................... 72
Plan of Distribution........................... 74
Legal Matters.................................. 74
Experts........................................ 74
Available Information.......................... 75
Index to Consolidated Financial Statements..... F-1
</TABLE>
$100,000,000
SERIES B 8 5/8%
SENIOR NOTES DUE 2006
BUILDING
MATERIALS
CORPORATION
OF AMERICA
------------------------
PROSPECTUS
------------------------
, 1997
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Building Materials Corporation of America ('BMCA') is a Delaware
corporation. Subsection (b)(7) of Section 102 of the Delaware General
Corporation Law (the 'DGCL') enables a corporation in its original certificate
of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary
damages for violations of the director's fiduciary duty, except (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
DGCL (providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
a director derived an improper personal benefit. Article Seventh of BMCA's
Certificate of Incorporation has eliminated the personal liability of directors
to the fullest extent permitted by Subsection (b)(7) of Section 102 of the DGCL.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding provided that such
director or officer acted in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action or proceeding, provided further that such director or
officer has no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director or officer acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification and advancement of expenses provided for, by, or granted
pursuant to, Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Article VIII of the Company's By-Laws states that the corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by reason of the fact
that he is or was a director, officer or employee of the corporation, or is or
was serving at the request of the
II-1
<PAGE>
corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise against judgments, fines
and amounts paid in settlement actually incurred by him in connection with such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
3.1 -- Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 3.1 to BMCA's
Registration Statement on Form S-4 (Registration No. 33-81808) (the 'Deferred Coupon Note
Registration Statement')).
3.2 -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to the Deferred Coupon Note Registration
Statement).
*4.1 -- Indenture, dated as of December 9, 1996, between BMCA and The Bank of New York, as trustee.
*4.2 -- Form of Notes (included in Exhibit 4.1).
*4.3 -- Registration Rights Agreement, dated December 9, 1996, between BMCA, Bear, Stearns & Co. Inc.,
Chase Securities Inc. and Salomon Brothers Inc.
**5 -- Opinion of Weil, Gotshal & Manges LLP re: legality.
**8 -- Opinion of Weil, Gotshal & Manges LLP re: tax matters.
10.1 -- Indenture dated as of June 30, 1994 between BMCA and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.1 to the Deferred Coupon Note Registration Statement).
10.2 -- Management Agreement, dated as of March 3, 1992 ('Management Agreement'), among GAF, G-I Holdings,
G Industries, ISP, GAF Building Materials Corporation and GAF Broadcasting (incorporated by
reference to Exhibit 10.9 to the Registration Statement on Form S-4 of G-I Holdings (Registration
No. 33-72220)).
10.3 -- Amendment No. 1, dated as of January 1, 1994, to the Management Agreement (incorporated by
reference to Exhibit 10.10 to G-I Holdings' Form 10-K for the year ended December 31, 1993).
10.4 -- Amendment No. 2, dated as of May 31, 1994, to the Management Agreement (incorporated by reference
to Exhibit 10.1 to G-I Holdings' Form 10-Q for the quarter ended July 3, 1994).
10.5 -- Amendment No. 3, dated as of December 31, 1994, to the Management Agreement (incorporated by
reference to Exhibit 10.4 to ISP's Form 10-K for the year ended December 31, 1994).
10.6 -- Amendment No. 4, dated as of December 31, 1995, to the Management Agreement (incorporated by
reference to Exhibit 10.6 to the Registration Statement on Form S-4 of G-I Holdings (Registration
No. 333-2436)).
10.7 -- Amendment No. 5, dated as of October 18, 1996 to the Management Agreement (incorporated by
reference to Exhibit 10.6 to ISP Holdings' Registration Statement on Form S-4 (Registration No.
333-17827)).
*10.8 -- Amendment No. 6, dated as of January 1, 1997, to the Management Agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.9 -- Tax Sharing Agreement, dated as of January 31, 1994, among GAF, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.6 to the Deferred Coupon Note Registration Statement).
10.10 -- Income Appreciation Unit Plan (incorporated by reference to Exhibit 10.7 to the Deferred Coupon
Note Registration Statement).
10.11 -- Reorganization Agreement, dated as of January 31, 1994, among GAFBMC, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note Registration Statement).
10.12 -- Stock Appreciation Right dated March 7, 1995 between GAF Corporation and Sunil Kumar (incorporated
by reference to Exhibit 10.2 to BMCA's Form 10-Q for the quarter ended July 2, 1995 (the 'July
1995 10-Q')).
10.13 -- Agreement dated January 24, 1995 between BMCA and Sunil Kumar (incorporated by reference to
Exhibit 10.1 to the July 1995 10-Q).
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*21 -- Subsidiaries of BMCA.
*23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
*24 -- Power of Attorney (included on signature pages to Registration Statement).
*25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank
of New York, as Trustee under the Indenture.
*27 -- Restated Financial Data Schedule for the first nine months of fiscal year 1996, which is submitted
electronically to the Securities and Exchange Commission for information only.
**99.1 -- Form of Letter of Transmittal.
**99.2 -- Form of Notice of Guaranteed Delivery.
**99.3 -- Form of Exchange Agreement between The Bank of New York and BMCA.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by Amendment.
(B) SCHEDULES
<TABLE>
<S> <C>
Consolidated Financial Statement Schedules:
Report of Independent Public Accountants......................................................... S-1
Schedule II--Valuation and Qualifying Accounts................................................... S-2
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the 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
II-3
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) 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 this form, 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.
(c) 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Wayne, State of New
Jersey, on the 31st day of January 1997.
BUILDING MATERIALS CORPORATION OF
AMERICA
By: /s/ JAMES P. ROGERS
----------------------------------
Name: James P. Rogers
Title: Executive Vice President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of Messrs. Heyman, Kumar, Sergey and
Rebele hereby constitutes James P. Rogers such person's true and lawful
attorney, with full power of substitution to sign for such person and in such
person's name and capacity indicated below, any and all amendments to this
Registration Statement, and to file the same with the Securities and Exchange
Commission, hereby ratifying and confirming such person's signature as it may be
signed by said attorney to any and all amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- ------------------
<S> <C> <C>
/s/ SAMUEL J. HEYMAN Chairman, Chief Executive Officer and January 31, 1997
---------------------------------- Director (Principal Executive Officer)
Samuel J. Heyman
/s/ JAMES P. ROGERS Executive Vice President and Director January 31, 1997
---------------------------------- (Principal Financial Officer)
James P. Rogers
/s/ SUNIL KUMAR President, Chief Operating Officer and January 31, 1997
---------------------------------- Director
/s/ JOHN M. SERGEY Director January 31, 1997
---------------------------------
John M. Sergey
/s/ JOHN F. REBELE Vice President and Controller (Principal January 31, 1997
--------------------------------- Accounting Officer)
John F. Rebele
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Building Materials Corporation of America
and subsidiaries included in this registration statement and have issued our
report thereon dated March 6, 1996. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in item 21(b) is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 1, 1997
S-1
<PAGE>
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1993
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1993 EXPENSES DEDUCTIONS 1993
- -------------------------------------------------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets to Which
They Apply:
Allowance for doubtful accounts.......................... $ 1,599 $ 780 $ 1,128(a) $ 1,251(b)
Allowance for discounts.................................. 16,488 59,140 58,587 17,041
Reserve for inventory market valuation................... 841 175 442 574
</TABLE>
YEAR ENDED DECEMBER 31, 1994
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1994 EXPENSES DEDUCTIONS 1994
- -------------------------------------------------------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets to Which
They Apply:
Allowance for doubtful accounts.......................... $ 1,251 $ 666 $ 9(a) $ 1,908(b)
Allowance for discounts.................................. 17,041 56,988 58,594 15,435
Reserve for inventory market valuation................... 574 222 192 604
</TABLE>
YEAR ENDED DECEMBER 31, 1995
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1995 EXPENSES DEDUCTIONS OTHER 1995
- ---------------------------------------------------- ---------- ---------- ---------- ------ ------------
<S> <C> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets to Which
They Apply:
Allowance for doubtful accounts................ $ 1,908 $ 478 $ 920(a) $1,751(c) $ 3,217(b)
Allowance for discounts........................ 15,435 65,057 61,695 -- 18,797
Reserve for inventory market valuation......... 604 -- 30 -- 574
</TABLE>
- ------------------
Notes:
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balances at December 31, 1993 and 1994 principally represent a reserve
for receivables sold to a trust (see Note 6 to Consolidated Financial
Statements) and are reflected in the Consolidated Balance Sheets as a
reduction of 'Accounts receivable, other'. The balance at December 31, 1995,
in addition to representing such reserve for receivables sold to a trust,
includes a reserve of $1,261,000 related to USI trade receivables.
(c) Represents balance acquired in acquisitions.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 3.1 to
BMCA's Registration Statement on Form S-4 (Registration No. 33-81808) (the 'Deferred
Coupon Note Registration Statement')).
3.2 -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to the Deferred Coupon Note
Registration Statement).
*4.1 -- Indenture, dated as of December 9, 1996, between BMCA and The Bank of New York, as
trustee.
*4.2 -- Form of Notes (included in Exhibit 4.1).
*4.3 -- Registration Rights Agreement, dated December 9, 1996, between BMCA, Bear, Stearns &
Co. Inc., Chase Securities Inc. and Salomon Brothers Inc.
**5 -- Opinion of Weil, Gotshal & Manges LLP re: legality.
**8 -- Opinion of Weil, Gotshal & Manges LLP re: tax matters.
10.1 -- Indenture dated as of June 30, 1994 between BMCA and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.1 to the Deferred Coupon Note Registration
Statement).
10.2 -- Management Agreement, dated as of March 3, 1992 ('Management Agreement'), among GAF,
G-I Holdings, G Industries, ISP, GAF Building Materials Corporation and GAF
Broadcasting (incorporated by reference to Exhibit 10.9 to the Registration Statement
on Form S-4 of G-I Holdings (Registration No. 33-72220)).
10.3 -- Amendment No. 1, dated as of January 1, 1994, to the Management Agreement (incorporated
by reference to Exhibit 10.10 to G-I Holdings' Form 10-K for the year ended December
31, 1993).
10.4 -- Amendment No. 2, dated as of May 31, 1994, to the Management Agreement (incorporated by
reference to Exhibit 10.1 to G-I Holdings' Form 10-Q for the quarter ended July 3,
1994).
10.5 -- Amendment No. 3, dated as of December 31, 1994, to the Management Agreement
(incorporated by reference to Exhibit 10.4 to ISP's Form 10-K for the year ended
December 31, 1994).
10.6 -- Amendment No. 4, dated as of December 31, 1995, to the Management Agreement
(incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-4 of
G-I Holdings (Registration No. 333-2436)).
10.7 -- Amendment No. 5, dated as of October 18, 1996 to the Management Agreement (incorporated
by reference to Exhibit 10.6 to ISP Holdings' Registration Statement on Form S-4
(Registration No. 333-17827)).
*10.8 -- Amendment No. 6, dated as of January 1, 1997, to the Management Agreement.
10.9 -- Tax Sharing Agreement, dated as of January 31, 1994, among GAF, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.6 to the Deferred Coupon Note Registration
Statement).
10.10 -- Income Appreciation Unit Plan (incorporated by reference to Exhibit 10.7 to the
Deferred Coupon Note Registration Statement).
10.11 -- Reorganization Agreement, dated as of January 31, 1994, among GAFBMC, G-I Holdings and
BMCA (incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note
Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
10.12 -- Stock Appreciation Right dated March 7, 1995 between GAF Corporation and Sunil Kumar
(incorporated by reference to Exhibit 10.2 to BMCA's Form 10-Q for the quarter ended
July 2, 1995 (the 'July 1995 10-Q')).
10.13 -- Agreement dated January 24, 1995 between BMCA and Sunil Kumar (incorporated by
reference to Exhibit 10.1 to the July 1995 10-Q).
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*21 -- Subsidiaries of BMCA.
*23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
*24 -- Power of Attorney (included on signature pages to Registration Statement).
*25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
The Bank of New York, as Trustee under the Indenture.
*27 -- Restated Financial Data Schedule for the first nine months of fiscal year 1996, which
is submitted electronically to the Securities and Exchange Commission for information
only.
**99.1 -- Form of Letter of Transmittal.
**99.2 -- Form of Notice of Guaranteed Delivery.
**99.3 -- Form of Exchange Agreement between The Bank of New York and BMCA.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by Amendment.
<PAGE>
================================================================================
BUILDING MATERIALS CORPORATION OF AMERICA
8 5/8% Senior Notes due 2006
and
Series B 8 5/8% Senior Notes due 2006
---------------------
INDENTURE
Dated as of December 9, 1996
---------------------
THE BANK OF NEW YORK
---------------------
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
----------- -----------------
310(a)(1)-------------------------------------------- 7.10
(a)(2)-------------------------------------------- 7.10
(a)(3)-------------------------------------------- N.A.
(a)(4)-------------------------------------------- N.A.
(a)(5)-------------------------------------------- 7.08
(b)----------------------------------------------- 7.08; 7.10; 10.02
(c)----------------------------------------------- N.A.
311(a)----------------------------------------------- 7.11
(b)----------------------------------------------- 7.11
(c)----------------------------------------------- N.A.
312(a)-------------------------------------------- 2.05
(b)----------------------------------------------- 10.03
(c)----------------------------------------------- 10.03
313(a)----------------------------------------------- 7.06
(b)(1)-------------------------------------------- N.A.
(b)(2)-------------------------------------------- 7.06
(c)----------------------------------------------- 7.06; 10.02
(d)----------------------------------------------- 7.06
314(a)----------------------------------------------- 4.05; 4.06; 10.02
(b)----------------------------------------------- N.A.
(c)(1)-------------------------------------------- 10.04
(c)(2)-------------------------------------------- 10.04
(c)(3)-------------------------------------------- N.A.
(d)----------------------------------------------- N.A.
(e)----------------------------------------------- 10.05
(f)----------------------------------------------- N.A.
315(a)----------------------------------------------- 7.12(b)
(b)----------------------------------------------- 7.05; 10.02
(c)----------------------------------------------- 7.12(a)
(d)----------------------------------------------- 7.12(c)
(e)----------------------------------------------- 6.11
316(a)(last sentence)-------------------------------- 2.09
(a)(1)(A)----------------------------------------- 6.05
(a)(1)(B)----------------------------------------- 6.04
(a)(2)-------------------------------------------- N.A.
(b)----------------------------------------------- 6.07
(c)----------------------------------------------- 9.04
317(a)(1)-------------------------------------------- 6.08
(a)(2)-------------------------------------------- 6.09
(b)----------------------------------------------- 2.04
318(a)----------------------------------------------- 10.01
N.A. means "not applicable."
*This Cross-Reference Table shall not, for any purpose, be deemed to be a part
of this Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions .............................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act ........ 22
SECTION 1.03. Rules of Construction .................................... 23
ARTICLE II THE SECURITIES
SECTION 2.01. Form and Dating .......................................... 23
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount . 24
SECTION 2.03. Registrar and Paying Agent ...............................
SECTION 2.04. Paying Agent To Hold Money in Trust ...................... 26
SECTION 2.05. Securityholder Lists ..................................... 26
SECTION 2.06. Transfer and Exchange .................................... 26
SECTION 2.07. Replacement Securities ................................... 28
SECTION 2.08. Outstanding Securities ................................... 29
SECTION 2.09. Treasury Securities ...................................... 29
SECTION 2.10. Temporary Securities ..................................... 29
SECTION 2.11. Cancellation ............................................. 30
SECTION 2.12. Defaulted Interest ....................................... 30
SECTION 2.13. CUSIP Number ............................................. 30
SECTION 2.14. Deposit of Moneys ........................................ 30
ARTICLE III REDEMPTION
SECTION 3.01. Notices to Trustee ....................................... 31
SECTION 3.02. Selection of Securities To Be Redeemed ................... 31
SECTION 3.03. Notice of Redemption ..................................... 32
SECTION 3.04. Effect of Notice of Redemption ........................... 32
SECTION 3.05. Deposit of Redemption Price .............................. 33
SECTION 3.06. Securities Redeemed in Part .............................. 33
ARTICLE IV COVENANTS
SECTION 4.01. Payment of Securities .................................... 33
SECTION 4.02. Maintenance of Office or Agency .......................... 33
SECTION 4.03. Corporate Existence ...................................... 34
SECTION 4.04. Payment of Taxes and Other Claims ........................ 34
SECTION 4.05. Compliance Certificates .................................. 35
SECTION 4.06. Securities and Exchange Commission Reports ............... 36
SECTION 4.07. Waiver of Stay, Extension or Usury Laws .................. 37
SECTION 4.08. Maintenance of Properties ................................ 37
SECTION 4.09. Limitation on Debt and Preferred Stock of the Company
and its Subsidiaries ................................... 37
-ii-
<PAGE>
SECTION 4.10. Limitation on Restricted Payments and Restricted
Investments ............................................ 40
SECTION 4.11. Limitation on Liens ...................................... 42
SECTION 4.12. Limitation on Transactions with Affiliates ............... 43
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries ................................. 46
SECTION 4.14. Change of Control ........................................ 47
SECTION 4.15. Limitation on Asset Sales ................................ 49
SECTION 4.16. Restriction on Transfer of Certain Assets to
Subsidiaries ........................................... 52
SECTION 4.17. Investment Company Act .................................... 52
SECTION 4.18. Consents, etc ............................................. 52
ARTICLE V SUCCESSOR CORPORATION
SECTION 5.01. When the Company May Merge, etc .......................... 53
SECTION 5.02. Successor Corporation Substituted ........................ 54
ARTICLE VI DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default ........................................ 54
SECTION 6.02. Acceleration ............................................. 56
SECTION 6.03. Other Remedies 56
SECTION 6.04. Waiver of Past Defaults .................................. 57
SECTION 6.05. Control by Majority ...................................... 57
SECTION 6.06. Limitation on Remedies ................................... 57
SECTION 6.07. Rights of Holders To Receive Payment ..................... 58
SECTION 6.08. Collection Suit by Trustee ............................... 58
SECTION 6.09. Trustee May File Proofs of Claim ......................... 58
SECTION 6.10. Priorities ............................................... 59
SECTION 6.11. Undertaking for Costs .................................... 60
SECTION 6.12. Restoration of Rights and Remedies ....................... 60
ARTICLE VII TRUSTEE ........................................................ 60
SECTION 7.01. Rights of Trustee ........................................ 60
SECTION 7.02. Individual Rights of Trustee ............................. 61
SECTION 7.03. Money Held in Trust ...................................... 61
SECTION 7.04. Trustee's Disclaimer ..................................... 61
SECTION 7.05. Notice of Defaults ....................................... 62
SECTION 7.06. Reports by Trustee to Holders ............................ 62
SECTION 7.07. Compensation and Indemnity ............................... 62
SECTION 7.08. Replacement of Trustee ................................... 63
SECTION 7.09. Successor Trustee by Merger, etc ......................... 65
SECTION 7.10. Eligibility; Disqualification ............................ 65
SECTION 7.11. Preferential Collection of Claims Against the Company .... 65
SECTION 7.12. Duties of Trustee ........................................ 65
-iii-
<PAGE>
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities; Defeasance ......... 67
SECTION 8.02. Conditions to Defeasance ................................. 68
SECTION 8.03. Application of Trust Money ............................... 69
SECTION 8.04. Repayment to Company ..................................... 69
SECTION 8.05. Indemnity for Government Obligations ..................... 70
SECTION 8.06. Reinstatement ............................................ 70
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders ............................... 70
SECTION 9.02. With Consent of Holders .................................. 71
SECTION 9.03. Revocation and Effect of Consents ........................ 71
SECTION 9.04. Record Date .............................................. 71
SECTION 9.05. Notation on or Exchange of Securities .................... 71
SECTION 9.06. Trustee May Sign Amendments, etc ......................... 72
SECTION 9.07. Compliance with TIA ...................................... 72
ARTICLE X MISCELLANEOUS .................................................... 72
SECTION 10.01. Trust Indenture Act of 1939 .............................. 72
SECTION 10.02. Notices .................................................. 72
SECTION 10.03. Communication by Holders with Other Holders .............. 73
SECTION 10.04. Certificate and Opinion as to Conditions Precedent ....... 73
SECTION 10.05. Statements Required in Certificate or Opinion ............ 74
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar ................ 74
SECTION 10.07. Governing Law ............................................ 74
SECTION 10.08. No Interpretation of Other Agreements .................... 75
SECTION 10.09. No Recourse Against Others ............................... 75
SECTION 10.10. Legal Holidays ........................................... 75
SECTION 10.11. Successors ............................................... 75
SECTION 10.12. Duplicate Originals ...................................... 75
SECTION 10.13. Separability ............................................. 75
SECTION 10.14. Table of Contents, Headings, etc ......................... 75
SECTION 10.15. Benefits of Indenture .................................... 75
SIGNATURES ................................................................. 76
EXHIBIT A -- Form of Initial Note .......................................... A-1
EXHIBIT B -- Form of Exchange Note ......................................... B-1
EXHIBIT C -- Form of Legend for Book-Entry Securities ...................... C-1
EXHIBIT D -- Form of Accredited Investor Letter ............................ D-1
-iv-
<PAGE>
INDENTURE, dated as of December 9, 1996, between BUILDING MATERIALS
CORPORATION OF AMERICA, a Delaware corporation, and THE BANK OF NEW YORK, a New
York banking corporation (the "Trustee"), having its Corporate Trust Office at
101 Barclay Street, New York, New York 10286.
The parties agree as follows for the benefit of each other and for
the equal and ratable benefit of the Holders of the Company's 8 5/8% Senior
Notes due 2006 (the "Initial Securities") and the Company's Series B 8 5/8%
Senior Notes due 2006 (the "Exchange Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accredited Investor" has the meaning set forth in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act.
"Acquired Debt", with respect to any Person, means (i) Debt
(including any then unutilized commitment under any revolving working capital
facility) of an entity, which entity is acquired by such Person or any of its
Subsidiaries after the Issue Date; provided that such Debt (including any such
facility) is outstanding at the time of the acquisition of such entity, is not
created in contemplation of such acquisition and is not, directly or indirectly,
recourse (including by way of set-off) to such Person or its Subsidiaries or any
of their respective assets other than to the entity and its Subsidiaries so
acquired and the assets of the entity and its Subsidiaries so acquired, (ii)
Debt of such Person that is not, directly or indirectly, recourse (including by
way of set-off) to such Person and its Subsidiaries or any of their respective
assets other than to specified assets acquired by such Person or its
Subsidiaries after the Issue Date, which Debt is outstanding at the time of the
acquisition of such assets and is not created in contemplation of such
acquisition, or (iii) Refinancings of Debt described in clause (i) or (ii),
provided that the recourse with respect to such Refinancing Debt is limited to
the same extent as the Debt so Refinanced.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when
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used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" having meanings correlative to the foregoing. For the avoidance of
doubt, ISP Holdings Inc. and its Affiliates (so long as they are under common
control with the Company) shall, both before and after the Spin Off, be deemed
Affiliates of the Company.
"Agent" means any Registrar, Paying Agent or co-Registrar of the
Securities.
"Applicable Premium" means, with respect to any Security, the greater
of (x) 1.0% of the principal amount of such Security and (y) the excess, if any,
of (a) the present value of the remaining interest payments, principal and
future optional redemption premium (if applicable) of such security, discounted
on a semi-annual bond equivalent basis from either December 15, 2006 or the
optional redemption date to the applicable redemption date at a per annum
interest rate equal to the Treasury Yield for such redemption date plus 100
basis points, over (b) the sum of the principal amount of such Security plus
accrued and unpaid interest to the redemption date.
"Asset Sale" means, with respect to any Person, the sale, lease,
assignment or other disposition (including, without limitation, dispositions
pursuant to any consolidation, merger or sale and leaseback transaction) by such
Person or any of its Subsidiaries in any single transaction or series of related
transactions which consists of the disposition of (i) any Capital Stock of any
Subsidiary or (ii) all or substantially all of the properties and assets of any
division or line of business of such Person or any Subsidiary of such Person
(other than of a Non-Recourse Subsidiary) to any other Person which is not the
Company or a Subsidiary of the Company. For the purposes of this definition, the
term "Asset Sale" shall not include (A) any sale, lease, assignment or other
disposition of properties or assets that is governed by the provisions of
Article V or (B) any sale, lease, assignment or other disposition by a Person
that has outstanding senior debt securities all of which (I) are rated BBB- or
higher by S&P and have not been placed on credit watch by S&P for a possible
downgrade or (II) are rated Baa3 or higher by Moody's and have not been placed
on credit watch by Moody's for a possible downgrade.
"Average Life" means, with respect to any Debt, the quotient obtained
by dividing (i) the sum of the products of (a) the number of years from the date
of the transaction or event
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giving rise to the need to calculate the Average Life of such Debt to the date,
or dates, of each successive scheduled principal payment of such Debt multiplied
by (b) the amount of each such principal payment by (ii) the sum of all such
principal payments.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" of any Person means the Board of Directors or
similar governing body of such Person, or any duly authorized committee of such
Board of Directors or similar governing body.
"Board Resolution" means, with respect to the Board of Directors of
any Person, a copy of a resolution certified by the Secretary or Assistant
Secretary of such Person to have been duly adopted by such Board of Directors
and to be in full force and effect on the date of such certification and
delivered to the Trustee.
"Book-Entry Security" means a Security represented by a Global
Security and registered in the name of the nominee of the Depository.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means any rental obligation that, in
accordance with GAAP, is required to be classified and accounted for as a
capitalized lease and the amount of Debt represented by such obligation shall be
the capitalized amount of such obligation determined in accordance with GAAP;
and the stated maturity thereof shall be the date of the last payment of rent or
any other amount due in respect of such obligation.
"Capital Stock" of any Person means any and all shares, interests
(including partnership interests), warrants, rights, options or other interests,
participations or other equivalents of or interests in (however designated)
equity of such Person, including common or preferred stock, whether now
outstanding or issued after the Issue Date, but excluding any debt securities
convertible into or exchangeable for such equity.
"Cash Equivalents" means (i) marketable direct obligations Issued by,
or unconditionally Guaranteed by, the United States Government or Issued by any
agency thereof and
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backed by the full faith and credit of the United States, in each case maturing
within one year from the date of acquisition thereof, (ii) marketable direct
obligations Issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either S&P or
Moody's, (iii) 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, (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof Issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital surplus of not less than $500,000,000, (v) Eurodollar time deposits
maturing within one year from the date of acquisition thereof and issued or
accepted by any commercial bank having at the date of acquisition thereof
combined capital and surplus of not less than $500,000,000, (vi) repurchase
obligations with a term of not more than thirty days for underlying securities
of the types described in clause (i) above entered into with any bank meeting
the qualifications specified in clause (iv) above and (vii) investments in money
market funds having assets in excess of $500,000,000 and which invest
substantially all their assets in securities of the types described in clauses
(i) through (vi) above.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the time that at least 15% of the then outstanding
Voting Stock of Parent, the Company, or any Subsidiary of Parent of which
the Company is also a Subsidiary is publicly traded on a national
securities exchange or in the NASDAQ (national market system), 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, of
majority voting power of the Voting Stock of the Company, whether as a
result of issuance of securities of the Company or any of its Affiliates,
any merger, consolidation, liquidation or dissolution of the Company or
any of its Affiliates, any direct or indirect transfer of securities by
any Permitted Holder or by Parent or any of its Subsidiaries or otherwise
(for purposes of this clause (i) and clause (ii) below, the Permitted
Holders shall be deemed to beneficially
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own any Voting Stock of a corporation (the "specified corporation") held
by any other corporation (the "parent corporation") so long as the
Permitted Holders beneficially own (as so defined), directly or
indirectly, a majority of the Voting Stock of the parent corporation);
(ii) 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 clause (i) above, except that
a Person shall be deemed to have "beneficial ownership" of all shares that
any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the Voting Stock of Parent or the Company;
provided that the Permitted Holders beneficially own (as defined in clause
(i) above), directly or indirectly, in the aggregate a lesser percentage
of the Voting Stock of Parent or the Company than such other Person and do
not have the right or ability by voting power, contract or otherwise to
elect or designate for election of a majority of the Board of Directors of
Parent or the Company; or
(iii) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Change of Control Payment Date" has the meaning set forth in Section
4.14.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commencement Date" means April 3, 1994.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Common Stock" of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of such Person's
common stock whether now outstanding or issued after the Issue Date.
"Company" means Building Materials Corporation of America, a Delaware
corporation, and its successors.
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"Consolidated EBITDA Coverage Ratio" with respect to any Person for
any period means the ratio of (i) the aggregate amount of EBITDA of such Person
for such period to (ii) Consolidated Interest Expense of such Person for such
period; provided that (A) if such Person or any Subsidiary of such Person has
Issued any Debt or Capital Stock since the beginning of such period that remains
outstanding on the date such calculation is made or if the transaction giving
rise to the need to calculate the Consolidated EBITDA Coverage Ratio is an
Issuance of Debt or Capital Stock, or both, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect, on a pro forma
basis, to the issuance of such Debt or Capital Stock as if such Debt or Capital
Stock had been Issued on the first day of such period and the discharge of any
other Debt or Capital Stock Refinanced or otherwise discharged with the proceeds
of such new Debt or Capital Stock as if such discharge had occurred on the first
day of such period, (B) if since the beginning of such period such Person or any
Subsidiary of such Person shall have made any asset sales out of the ordinary
course of business, EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets which are the
subject of such asset sale for such period, or increased by an amount equal to
the EBITDA (if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any Debt or
Capital Stock of such Person or any Subsidiary of such Person Refinanced or
otherwise discharged with respect to such Person and its continuing Subsidiaries
(including as a result of the assumption of such Debt or Capital Stock by the
purchaser of such assets, provided that such Person or any of its Subsidiaries
is no longer liable therefor) in connection with such asset sales for such
period (or if the Capital Stock of any Subsidiary of such Person is sold, the
Consolidated Interest Expense for such period directly attributable to the Debt
of such Subsidiary to the extent such Person and its continuing Subsidiaries are
no longer liable for such Debt after such sale) and (C) if since the beginning
of the period such Person or any Subsidiary of such Person (by merger or
otherwise) shall have made an Investment in any Subsidiary of such Person (or
any Person which becomes a Subsidiary of such Person) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto, as if
such Investment or acquisition occurred on the first day of such period. For
purposes of this definition, pro forma calculations shall be
<PAGE>
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determined in good faith by a responsible financial or accounting officer of the
Person with respect to which the calculation is being made. If any Debt or
Capital Stock bears a floating rate of interest and is being given pro forma
effect, the interest on such Debt and the dividends on such Capital Stock shall
be calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period.
"Consolidated Interest Expense" means, with respect to any Person,
for any period, the sum of (a) the interest expense of such Person and its
consolidated Subsidiaries (other than (x) interest expense related to
Non-Recourse Debt and (y) interest expense resulting from any discount of the
asbestos reserve reflected on the Company's financial statements as of September
29, 1996) for such period as determined in accordance with GAAP consistently
applied, plus the amount of all dividends paid or accrued on any series of
Preferred Stock (other than non-Redeemable Stock) of such Person and its
Subsidiaries (other than Non-Recourse Subsidiaries).
"Consolidated Net Income (Loss)" means, with respect to any Person,
for any period, the consolidated net income (or loss) of such Person and its
consolidated Subsidiaries for such period as determined in accordance with GAAP,
adjusted to the extent included in calculating such net income (or loss), by
excluding (i) all extraordinary gains in such period net of all extraordinary
losses in such period; (ii) net income (or loss) of any other Person
attributable to any period prior to the date of combination of such other Person
with such Person or any of its Subsidiaries on a "pooling of interests" basis;
(iii) net gains or losses in respect of dispositions of assets by such Person or
any of its Subsidiaries (including pursuant to a sale-and-leaseback arrangement)
other than in the ordinary course of business; (iv) the net income (loss) of any
Subsidiary of such Person to the extent that the declaration of dividends or
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its shareholders; (v) the net
income (or net loss) of any other Person that is not a Subsidiary of the first
Person with respect to which Consolidated Net Income is being calculated (the
"first Person") and in which any other Person (other than such first Person
and/or any of its Subsidiaries) has an equity interest or of a Non-Recourse
Subsidiary of such first Person, except to the extent of the amount of dividends
or other distributions actually paid or made to such first Person or any of its
Subsidiaries by such other Person during such period
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(subject, in the case of a dividend or distribution received by a Subsidiary of
such first Person, to the limitations contained in clause (iv) above); (vi) any
interest income resulting from loans or investments in Affiliates, other than
cash interest income actually received; (vii) any reserve established at the
time the Company's Affiliates first acquired USI; and (viii) the cumulative
effect of a change in accounting principles. In determining Consolidated Net
Income (Loss), gains or losses resulting from the early retirement,
extinguishment or refinancing of indebtedness for money borrowed, including any
fees and expenses associated therewith, shall be deducted or added back,
respectively.
"Consolidated Net Worth" of any Person means, at any date, all
amounts that would, in conformity with GAAP, be included under shareholders'
equity on a consolidated balance sheet of such Person as at such date less (to
the extent otherwise included therein) any amounts attributable to Redeemable
Stock.
"Corporate Trust Office" means the corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which on the date hereof is located at 101 Barclay
Street, Floor 21 West, New York, New York 10286, except that, with respect to
presentation of Securities for payment or registration of transfer and exchange
and the location of the Securities register, such term means the office or
agency of the Trustee at which at any particular time its corporate agency
business shall be conducted, which is, on the date hereof, located at 101
Barclay Street, Corporate Trust Services Window, New York, New York 10286.
"Credit Agreements" mean (i) the credit agreement, dated as of
December 9, 1994, between the Company and The Chase Manhattan Bank, as amended
by amendments dated as of July 1, 1995, June 28, 1996 and November 21, 1996,
(ii) the credit agreement, dated as of September 24, 1993, between the Company
and NationsBank of North Carolina, N.A., as amended by amendments dated as of
June 30, 1994, December 31, 1994, June 22, 1995, June 26, 1996 and December 3,
1996 and (iii) the credit agreement dated as of June 29, 1995, as amended by
amendments dated June 28, 1996 and November 15, 1996 between the Company and The
Bank of New York, each amended as and supplemented from time to time.
<PAGE>
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"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debt" of any Person means, without duplication, (i) the principal in
respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable (other than those
payable to government agencies to defer the payment of workers' compensation
liabilities, taxes, assessments or other obligations, and provided in the
ordinary course of business of such Person); (ii) all Capital Lease Obligations
of such Person; (iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention agreement
(but excluding trade accounts payable and other accrued current liabilities
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, bankers'
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Preferred Stock (but excluding any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including guarantees of such obligations and dividends; and (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured. For purposes of Section 4.15, Debt of the Company or
any of its Subsidiaries shall include the provision for existing or future
asbestos-related bodily injury claims, as set forth in the then most recent
consolidated financial statement of the Company.
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"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Deferred Coupon Notes" means the Company's 11 3/4% Senior Deferred
Coupon Notes due 2004.
"Depository" means, with respect to the Securities issued in the form
of one or more Book-Entry Securities, The Depository Trust Company or another
person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"EBITDA" with respect to any Person for any period means the
Consolidated Net Income of such Person for such period, adjusted to the extent
deducted in calculating such Consolidated Net Income by adding back (without
duplication): (i) income tax expense of such Person and its Subsidiaries accrued
in accordance with GAAP for such period (other than income taxes attributable to
extraordinary items or other items excluded from the definition of Consolidated
Net Income), (ii) Consolidated Interest Expense of such Person for such period,
(iii) depreciation expense of such Person for such period, (iv) amortization
expense of such Person for such period, and (v) minority interest in any Non
Wholly-Owned Recourse Subsidiary that is otherwise consolidated in the financial
statements of such Person, but only so long as such Subsidiary is consolidated
with such Person for such period for U.S. federal income tax purposes.
"Events of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the registration by the Company under the
Securities Act pursuant to a registration statement of the offer by the Company
to each Holder of the Initial Securities to exchange all the Initial Securities
held by such Holder for the Exchange Securities in an aggregate principal amount
equal to the aggregate principal amount of the Initial Securities held by such
Holder, all in accordance with the terms and conditions of the Registration
Rights Agreement.
"Exchange Securities" has the meaning assigned to that term in the
preambles to this Indenture.
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"GAF" means GAF Corporation, a Delaware corporation, and its
successors.
"GCC" means GAF Chemicals Corporation, a Delaware corporation, and
its successors.
"Generally Accepted Accounting Principles" or "GAAP" means generally
acceptable 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 as of the date of the Indenture.
"G-I Holdings" means G-I Holdings Inc., a Delaware corporation, and
its successors.
"Glass Fiber Contract" means the supply agreement effective as of the
Spin Off Date between GCC and the Company.
"Global Security" means a Security evidencing all or a part of the
Securities to be issued as Book-Entry Securities, issued to the Depository in
accordance with Section 2.02 and bearing the legend prescribed in Exhibit C.
"Granules Contracts" means (i) the supply agreement, dated as of
January 1, 1995, between ISP Technologies, Inc. and the Company, as amended by
amendment dated as of December 31, 1995 and (ii) after the Spin Off Date, the
letter dated November 9, 1995 from ISP Mineral Products Inc. to USI.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation, contingent or otherwise, of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or other obligation of such other
Person (whether arising by virtue of participation arrangements, by agreement to
keep well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring the obligee of such Debt or other obligation in any
other manner of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
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"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means incur, create, assume, Guarantee or otherwise become
liable; and the terms "incurred" and "incurrence" having meanings correlative to
the foregoing.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Initial Purchasers" means Bear, Stearns & Co. Inc., Chase Securities
Inc. and Salomon Brothers Inc
"Initial Securities" has the meaning assigned to that term in the
preambles to this Indenture.
"Interest Payment Dates" means December 15 and June 15, commencing
June 15, 1997.
"Investment" means any direct or indirect advance, loan (other than
advances or loans to customers in the ordinary course of business, which are
recorded, in accordance with GAAP, at the time made as accounts receivable on
the balance sheet of the Person making such advance or loan) or other extension
of credit 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 of Capital Stock, bonds, notes,
debentures or other securities Issued by, any other Person.
"ISP" means International Specialty Products Inc., a Delaware
corporation, and its successors.
"Issue" means issue, assume, Guarantee, incur or otherwise become
liable for; provided that any Debt or Capital Stock of a Person existing at the
time such Person becomes a Subsidiary of another Person (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Issued by such
Subsidiary at the time it becomes a Subsidiary of such other Person.
"Issue Date" means the date of original issuance of the Securities.
"Legal Holiday" has the meaning set forth in Section 10.10.
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"Lien" means any lien, mortgage, charge, pledge, security interest,
or other encumbrance of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof).
"Management Agreement" means the amended and restated management
agreement, dated as of March 3, 1992, between the Company and ISP, as amended
through the Issue Date.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Assets" means assets, singly or in the aggregate, the book
or fair market value of which equals 5% or more of the consolidated tangible
assets of the Company, as set forth on its most recently publicly available
balance sheet.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"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 the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable ((1) including,
without limitation, income taxes reasonably estimated to be actually payable as
a result of any disposition of property within two years of the date of
disposition, including under any tax sharing arrangements, and (2) after taking
into account any reduction in tax liability due to available tax credits or
deductions applicable to the transaction), (c) a reasonable reserve for the
after-tax cost of any indemnification obligations (fixed and/or contingent)
attributable to seller's indemnities to the purchaser undertaken by the Company
or any of its Subsidiaries in connection with such Asset Sale and (d) repayment
of Debt that is required to be repaid in connection with such Asset Sale, under
the agreements governing such Debt or Asset Sale.
"Net Proceeds Offer" shall have the meaning provided in Section 4.15.
"Non-Recourse Debt" of any Person means Debt or the portion of Debt
(i) as to which neither Parent nor any of its Subsidiaries (other than a
Non-Recourse Subsidiary) (A) provides
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credit support (including any undertaking, agreement or instrument which would
constitute Debt), (B) is directly or indirectly liable or (C) constitutes the
lender and (ii) no default with respect to which (including any rights which the
holders thereof may have to take enforcement action against the assets of a
Non-Recourse Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Debt of such Person or its Subsidiaries (other than
Non-Recourse Subsidiaries) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" of any Person means a Subsidiary (A) which
has been designated as such by such Person, (B) which has not acquired any
assets directly or indirectly from Parent or any of its Subsidiaries other than
at fair market value, including by the receipt of Capital Stock of such
Non-Recourse Subsidiary, provided that, if any such acquisition or series of
related acquisitions involves assets having a value in excess of $2,000,000,
such acquisition or series of related acquisitions shall be approved by a
majority of the members of the Board of Directors of the Company in a Board
Resolution which shall set forth that such acquisitions are being, or have been,
made at fair market value, and (C) which has no Debt other than Non-Recourse
Debt.
"Obligations" means (a) the full and punctual payment of the
principal and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under this Indenture and the Securities and (b) the full and
punctual performance of all other obligations of the Company under this
Indenture and the Securities.
"Offering" means the Company's offering of the Initial Securities.
"Offering Memorandum" means the Offering Memorandum dated December ,
1996, pursuant to which the Initial Securities were offered.
"Officer" of any corporation means the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer, the Treasurer, the
Secretary, the Controller or the Assistant Secretary of such corporation.
"Officers' Certificate" of any corporation means a certificate signed
by two Officers or by an Officer and an
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Assistant Treasurer or Assistant Secretary of such corporation and delivered to
the Trustee and which complies with Section 10.05.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee and which complies with Section 10.05.
Such legal counsel may be an employee of or counsel to the Company or its
Affiliates.
"Parent" means GAF so long as it owns, and any other Person which
acquires or owns, directly or indirectly, 80% or more of the Voting Stock of the
Company.
"Paying Agent" has the meaning set forth in Section 2.03, except
that, for the purposes of Article VIII and Sections 4.14 and 4.15, the Paying
Agent shall not be the Company or a Subsidiary of the Company or an Affiliate of
any thereof.
"Permitted Holders" means (i) Samuel J. Heyman, his heirs,
administrators, executors and entities of which a majority of the Voting Stock
is owned by Samuel J. Heyman, his heirs, administrators or executors and (ii)
any Person controlled, directly or indirectly, by Samuel J. Heyman or his heirs,
administrators or executors.
"Permitted Lien" means:
(1) Liens for taxes, assessments and governmental charges to the
extent not required to be paid under this Indenture;
(2) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens arising
in the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by an appropriate process of
law, and for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made;
(3) pledges or deposits in the ordinary course of business to secure
lease obligations or non-delinquent obligations under workers'
compensation, unemployment insurance or similar legislation;
(4) Liens to secure the performance of public statutory obligations
that are not delinquent, appeal bonds,
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performance bonds or other obligations of a like nature (other than for
borrowed money);
(5) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company and
its Subsidiaries, taken as a whole;
(6) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in
connection with the importation of goods;
(7) judgment and attachment Liens not giving rise to a Default or
Event of Default;
(8) leases or subleases granted to others not interfering in any
material respect with the business of the Company and its Subsidiaries,
taken as a whole;
(9) Liens encumbering deposits made in the ordinary course of
business to secure nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or any of
its Subsidiaries for which a reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made;
(10) any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating other than any
such interest or title resulting from or arising out of default by the
Company or any of its Subsidiaries of its obligations under any such lease
which is material;
(11) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases or conditional sales
of personal property that are otherwise permitted under this Indenture and
under which the Company or any of its Subsidiaries is lessee;
(12) broker's Liens securing the payment of commissions and
management fees in the ordinary course of business;
(13) Liens on cash and Cash Equivalents posted as margin pursuant to
the requirements of any bona fide hedge agreement relating to interest
rates, foreign exchange or
<PAGE>
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commodities listed on public exchanges, but only to the extent such Liens
are required from customers generally regardless of creditworthiness) in
accordance with customary market practice;
(14) Liens on cash collateralizing reimbursement obligations in
respect of letters of credit issued for the account of the Company or any
of its Subsidiaries in the ordinary course of business (other than letters
of credit issued as credit support for any Debt);
(15) Liens arising in respect of accounts receivable arising as a
result of non-recourse sales thereof; and
(16) Liens on stock or assets of any Non-Recourse Subsidiary securing
Debt owing by such Non-Recourse Subsidiary.
"Person" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation. Preferred Stock of any Person shall include Redeemable Stock of
such Person.
"Principal" of a debt security, including the Securities, means the
principal of such security plus, when appropriate, the premium, if any, on such
security.
"Private Exchange Notes" has the meaning assigned to such term in the
Registration Rights Agreement.
"Proceeds Purchase Date" shall have the meaning provided in Section
4.15.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
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"Receivables" means accounts receivables, and related documentation,
contract rights, related proceeds and general intangibles.
"Receivables Financing Agreement" means the Pooling and Servicing
Agreement, dated as of November 1, 1996, among the Company, BMCA Receivables
Corporation and The Bank of New York, as Trustee, and related agreements, as
amended or supplemented.
"Recourse Subsidiaries" of any Person means all Subsidiaries of such
Person other than Non-Recourse Subsidiaries of such Person.
"Redeemable Stock" means, with respect to any Person, Capital Stock
of such Person that by its terms or otherwise (x) is required, directly or
indirectly, to be redeemed on or prior to the ninetieth day after the Stated
Maturity of the Securities, (y) is redeemable or puttable, directly or
indirectly, at the option of the holder thereof at any time on or prior to the
ninetieth day after the Stated Maturity of the Securities, or (z) is
exchangeable or convertible into another security (other than a security that is
not itself Redeemable Stock).
"Refinance" means, in respect of any Debt, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue Debt in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Registrar" has the meaning set forth in Section 2.03.
"Registration Rights Agreement" means the registration rights
agreement dated December 9, 1996, between the Company and the Initial
Purchasers.
"Restricted Investment" means, with respect to the Company or any of
its Subsidiaries, an Investment by such Person in an Affiliate of the Company;
provided that the following shall not be Restricted Investments: (i) Investments
in the Company or any of its Recourse Subsidiaries; (ii) Investments in
Unrestricted Affiliates; and (iii) Investments in Affiliates that become, as a
result of such Investment, Recourse Subsidiaries.
"Restricted Payment" means (i) the declaration or making of any
dividend or of any other payment or distribution (other than dividends, payments
or distributions payable solely in shares of the Company's Capital Stock other
than Redeemable
<PAGE>
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Stock) on or with respect to the Company's Capital Stock (other than Redeemable
Stock) and (ii) any payment on account of the purchase, redemption, retirement
or other acquisition for value of the Company's Capital Stock (other than
Redeemable Stock).
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act.
"S&P" means Standard & Poor's Rating Services or its successors.
"Securities" means the Initial Securities, the Exchange Securities
and the Private Exchange Notes treated as a single class of securities.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the Commission thereunder.
"Shelf Registration Statement" means the shelf registration
statement, which the Company will use its best efforts to cause to become
effective with respect to the resale of the Initial Securities in the event that
the Exchange Offer is not completed, pursuant to the terms of the Registration
Rights Agreement.
"Significant Subsidiary" means (i) any Subsidiary (other than a
Non-Recourse Subsidiary) of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's most recent
quarterly consolidated balance sheet, constituted at least 5% of the Company's
total assets on a consolidated basis as of such date, in each case determined in
accordance with GAAP, or (B) had revenues for the 12-month period ending on the
date of the Company's most recent quarterly consolidated statement of income
which constituted at least 5% of the Company's total revenues on a consolidated
basis for such period, or (ii) any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) which, if merged with all Defaulting Subsidiaries (as
defined below) of the Company, would at the time of determination either (A)
have had assets which, as of the date of the Company's most recent quarterly
consolidated balance sheet, would have constituted at least 10% of the Company's
total assets on a consolidated basis as of such date or (B) have had revenues
for the 12-month period ending on the date of the Company's most recent
quarterly consolidated statement of income which would have constituted at least
10% of the Company's total revenues on a consolidated basis for such period
(each such determination being made in accordance with GAAP). "Defaulting
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Subsidiary" means any Subsidiary of the Company (other than a Non-Recourse
Subsidiary) with respect to which an event described under clause (6), (7) or
(8) of Section 6.01 has occurred and is continuing.
"Spin Off" means the consummation of the Spin Off Transactions (as
defined in the Offering Memorandum).
"Spin Off Date" means the date on which the Spin Off is consummated.
"Stated Maturity," when used with respect to any Security or any
installment of interest thereon, means the dates specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other Debt, means
the date specified in the instrument governing such Debt as the fixed date on
which the principal of such Debt or any installment of interest is due and
payable.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries thereof or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof has at least majority ownership interest and the power to direct the
policies, management and affairs thereof. For purposes of this definition, any
director's qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
"Tax Sharing Agreement" means the tax sharing agreement, dated as of
January 31, 1994, among the Company, G-I Holdings and GAF.
"TIA" means, except as otherwise provided in Section 9.07, the Trust
Indenture Act of 1939, as amended, as in effect on the date hereof.
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the
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applicable redemption date (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining Average Life of the Securities; provided that, if the Average
Life of the Securities is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Yield
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that, if the average life of the
Securities is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces such party in accordance with the provisions of this
Indenture, and thereafter means such successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Affiliate" means a Person (other than a Subsidiary of
the Company except a Non-Recourse Subsidiary) controlled by, or under common
control with, the Company in which no Affiliate of the Company (other than (i)
the Company or a Wholly-Owned Recourse Subsidiary, (ii) any director or officer
of the Company or any of its Subsidiaries whose primary employment is by the
Company or any of its Subsidiaries other than a Non-Recourse Subsidiary, except
for Permitted Holders or members of their immediate family, and (iii) another
Unrestricted Affiliate) has an Investment.
"U.S. Government Obligations" means money or direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"USI" means U.S. Intec, Inc., a Texas corporation, and its
successors.
"Voting Stock" means, with respect to any Person, Capital Stock of
any class or kind normally entitled to vote in the election of the board of
directors or other governing body of such Person.
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"Wholly-Owned Recourse Subsidiary" means a Subsidiary of a Person
(other than a Non-Recourse Subsidiary) all the Capital Stock of which (other
than directors' qualifying shares) is owned by such Person or another
Wholly-Owned Recourse Subsidiary of such Person.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the applicable
corporation or another Wholly-Owned Subsidiary of the applicable corporation.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words in the plural
include the singular;
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(4) provisions apply to successive events and transactions;
(5) herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision; and
(6) all calculations made for the purpose of determining compliance
with the terms of the covenants set forth in Article IV and other
provisions of this Indenture shall utilize GAAP in effect at the time of
preparation of, and in conformity with those used to prepare, the
historical consolidated financial statements of the Company at and for the
fiscal year ended December 31, 1995.
ARTICLE II
THE SECURITIES
SECTION 2.01. Form and Dating. The Initial Securities and the
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit A hereto. The Exchange Securities and the Private Exchange Notes
and the Trustee's certificate of authentication thereon shall be substantially
in the form of Exhibit B. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or agreements to which the
Company is subject, if any, or usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them, and such approval
shall be evidenced by the execution of such Securities by two Officers of the
Company. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of the Securities,
annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly
made, a part of this Indenture.
SECTION 2.02. Execution and Authentication; Aggregate Principal
Amount. Two Officers shall sign the Securities for the Company by facsimile or
manual signature. The Company's seal may be reproduced or imprinted on the
Securities, by facsimile or otherwise.
If a Person whose signature is on a Security as an Officer no longer
holds that office or position at the time the
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Trustee authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery (i)
Initial Securities for original issue in an aggregate principal amount of
$100,000,000, and (ii) Exchange Securities or Private Exchange Notes from time
to time for issue only in exchange for a like principal amount of Initial
Securities in accordance with the Registration Rights Agreement, in each case
upon a written order Registrar of the Company signed by an Officer of the
Company to a Trust Officer. The order shall specify the amount of Securities to
be authenticated, the date on which the Securities are to be authenticated and
whether the Securities are to be Initial Securities, Exchange Securities or
Private Exchange Notes. The aggregate principal amount of Securities outstanding
at any time may not exceed $100,000,000, except as provided in Section 2.07.
The Securities shall be issuable only in registered form and only in
denominations of $1,000 and any integral multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Securities, which authenticating agent shall be
compensated by the Company. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so,
except with regard to the original issuance of the Securities and pursuant to
Section 2.06. Except as provided in the preceding sentence, each reference in
this Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as any Agent.
If the Securities are to be issued in the form of one or more Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Global Securities that (i) shall represent and shall be
in minimum denominations of $1,000 or in the approximate equivalent amount, (ii)
shall be registered in the name of the Depository for such Global Security or
Securities or the nominee of such Depository, (iii) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions and
(iv) shall bear the legend set forth in Exhibit C.
<PAGE>
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SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange ("Registrar") and an office or agency where Securities
may be presented for payment ("Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-Registrars and one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture. Each such agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall give prompt written notice to the Trustee of the name and address
of any such Agent and any change in the address of such Agent. The Company may
change an Agent without prior notice to the Holders. In the event that there is
a change in the address of an Agent or if the Company changes an Agent, the
Company shall promptly notify the Holders in writing. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that such
Paying Agent shall hold in trust for the benefit of Securityholders all money
held by the Paying Agent for the payment of principal of or interest on the
Securities, and such Paying Agent shall notify the Trustee of any default by the
Company in making any such payment. If the Company or any of its Subsidiaries
acts as Paying Agent, it shall segregate the money and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and account for any funds disbursed, and the Trustee
may at any time during the continuance of any payment default, upon written
request to a Paying Agent, require such Paying Agent to pay all money held by it
to the Trustee and to account for any funds disbursed. Upon doing so, the Paying
Agent shall have no further liability for the money so paid over to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders and shall otherwise comply with
TIA ss. 312(a). If the Trustee is not the Registrar, the Company
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shall furnish to the Trustee at least ten Business Days before each Interest
Payment Date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Securityholders, and the Company shall otherwise
comply with TIA ss. 312(a).
The Trustee shall be entitled to rely upon a certificate of the
Registrar, the Company or such other Paying Agent, as the case may be, as to the
names and addresses of the Securityholders and the principal amounts and serial
numbers of the Securities.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
in registered form and shall be transferable only upon the surrender of such
Securities for registration or transfer. When Securities are presented to the
Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; provided that every
Security presented or surrendered for registration of transfer or exchange shall
be duly endorsed, or be accompanied by a written instrument or transfer in a
form satisfactory to the Company and the Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute the Securities, and the
Trustee shall authenticate the Securities at the Registrar's request. No service
charge to the Securityholder shall be made for any registration of transfer or
exchange, but the Company or the Trustee may require from the transferring or
exchanging Securityholder payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges
pursuant to Sections 2.10, 4.14, 4.15 or 9.05). The Registrar or co-Registrar
shall not be required to register the transfer of or exchange of any Security
(i) during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of Securities and ending at the close of
business on the day of such mailing and (ii) selected for redemption in whole or
in part pursuant to Article III, except the unredeemed portion of any Security
being redeemed in part.
If a Security is a Restricted Security in certificated form, then as
provided in this Indenture and subject to the limitations herein set forth, the
Holder, provided it is a Qualified
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Institutional Buyer or an Accredited Investor, may exchange such Security for a
Book-Entry Security by instructing the Trustee to arrange for such Security to
be represented by a beneficial interest in a Global Security in accordance with
the customary procedures of the Depository.
In accordance with the provisions of this Indenture and subject to
certain limitations herein set forth, an owner of a beneficial interest in a
Global Security which has not been exchanged for an Exchange Security may
request a Security in certificated form, in exchange in whole or in part, as the
case may be, for such beneficial owner's interest in the Global Security.
Upon any exchange provided for in the preceding paragraph, the
Company shall execute and the Trustee shall authenticate and deliver to the
person specified by the Depository a new Security or Securities registered in
such names and in such authorized denominations as the Depository, pursuant to
the instructions of the beneficial owner of the Securities requesting the
exchange, shall instruct the Trustee. Thereupon, the beneficial ownership of
such Global Security shown on the records maintained by the Depository or its
nominee shall be reduced by the amounts so exchanged and an appropriate
endorsement shall be made by or on behalf of the Trustee on the Global Security.
Any such exchange shall be effected through the Depository in accordance with
the procedures of the Depository therefor.
Notwithstanding the foregoing, no Global Security shall be registered
for transfer or exchange, or authenticated and delivered, whether pursuant to
this Section, Section 2.07, 2.10 or 3.06 or otherwise, in the name of a person
other than the Depository for such Global Security or its nominee until (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for such Global Security or if at any time the Depository ceases to
be a clearing agency registered under the Exchange Act, and a successor
depository is not appointed by the Company within 30 days, (ii) the Company
executes and delivers to the Trustee a Company order that all such Global
Securities shall be exchangeable or (iii) there shall have occurred and be
continuing an Event of Default. Upon the occurrence in respect of any Global
Security representing the Securities of any one or more of the conditions
specified in clause (i), (ii) or (iii) of the preceding sentence, such Global
Security may be registered for transfer or exchange for Securities registered in
the names of, authenticated and delivered to, such persons as the Trustee or the
Depository, as the case may be, shall direct.
<PAGE>
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Except as provided above, any Security authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, any Global
Security, whether pursuant to this Section, Section 2.07, 2.10 or 3.06 or
otherwise, shall also be a Global Security and bear the legend specified in
Exhibit C.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder of a Security claims that such
Security has been lost, destroyed or wrongfully taken, the Company shall issue a
replacement Security, and the Trustee shall authenticate such replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, an indemnity bond must be provided by the Securityholder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced. The Company or the Trustee may charge such Holder for
its expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
time are all Securities that have been authenticated by the Trustee, except for
those cancelled by it, those delivered to it for cancellation and those
described in this Section 2.08 as not outstanding. A Security does not cease to
be outstanding because the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds (or, if the Company or a Subsidiary is the
Paying Agent, segregates and holds in trust), in accordance with this Indenture,
on the maturity or redemption date, money sufficient to pay Securities payable
on that date, then on and after that date such Securities shall be deemed to be
no longer outstanding and interest on them shall cease to accrue.
SECTION 2.09. Treasury Securities. In determining whether the Holders
of the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company or any of its Affiliates
shall be disregarded, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direc-
<PAGE>
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tion, waiver or consent, only Securities which the Trustee actually knows are so
owned shall be so disregarded.
SECTION 2.10. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare, and the Trustee shall authenticate
upon written order of the Company signed by an Officer thereof, temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare, and the Trustee shall authenticate, definitive Securities in
exchange for temporary Securities.
Until such exchange, such temporary Securities shall be entitled to
the same rights, benefits and privileges as the definitive Securities.
SECTION 2.11. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancellation. The Company may not issue new Securities to replace Securities it
has paid or delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, it shall pay the defaulted interest,
plus, to the extent permitted by law, any interest payable on the defaulted
interest, to the Persons who are Securityholders on a subsequent special record
date. Such special record date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest, whether or not
such day is a Business Day. At least 15 days before the special record date, the
Company shall mail or cause to be mailed to each Securityholder and the Trustee
a notice that states the special record date, the payment date and the amount of
defaulted interest to be paid.
SECTION 2.13. CUSIP Number. The Company in issuing the Securities may
use a "CUSIP" number. If so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Securityholders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be
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placed only on the other identification numbers printed on the Securities, and
any such redemption shall not be affected by any defect in or omission of such
numbers. The Company will promptly notify the Trustee of any change in the CUSIP
number.
SECTION 2.14. Deposit of Moneys. On or before 11:00 A.M., New York
City time, on each payment date, the Company shall deposit with the Trustee or
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such payment date. The principal amount and interest
due on Book-Entry Securities shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Book-Entry Securities represented thereby. The principal amount and interest on
Securities in certificated form shall be payable at the office of the Paying
Agent; provided however that the Company, at its option, may pay interest by
check by mailing such check to the Holder's registered address.
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5(a) of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
The Company shall give the notice to the Trustee provided for in this
Section at least 45 days before the redemption date, unless the Trustee consents
in writing to a shorter notice period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel to the effect that such
redemption will comply with the conditions contained in this Indenture and will
set forth the redemption price. If fewer than all the Securities are to be
redeemed, the record date relating to such redemption shall be selected by the
Company and given to the Trustee together with the 45-day notice, which record
date shall not be prior to the date of such notice nor more than 15 days after
the date of notice to the Trustee.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal
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and securities exchange requirements, if any. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal amount at maturity
of Securities that have denominations larger than $1,000, subject to the
restriction that Securities and portions of Securities which the Trustee selects
shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities (or, if applicable, at
such other time as is provided by paragraph 5(a) of the Securities), the Company
shall mail a notice of redemption by first-class mail to each Holder of
Securities to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(A) the redemption date;
(B) the redemption price;
(C) the name and address of the Paying Agent;
(D) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(E) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amount of the particular Securities to be
redeemed;
(F) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on
and after such redemption date; and
(G) the CUSIP number, if any, and that no representation is made as
to the correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Securities.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by clauses
(A), (B), (C) and (E) at least 45 days before the redemption date.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, subject to the Company's compliance with Section
3.05 herein, such Securities shall be paid at the redemption price stated in the
notice, plus accrued and unpaid interest, if any, to the redemption date.
SECTION 3.05. Deposit of Redemption Price. On or prior to the
redemption date, the Company shall deposit with the Paying Agent in immediately
available funds (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued and unpaid interest, if any, on all Securities to be redeemed on that
date other than Securities or portions of Securities called for redemption which
have been delivered by the Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay, or cause
to be paid, the principal of and interest on the Securities on the dates and in
the manner provided herein and in the Securities. Principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent holds on that
date money designated for and sufficient to pay all principal and interest
payable in cash in each case as then due. The Company shall pay interest on
overdue principal, as the case may be, at the rate specified therefor in the
Securities.
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SECTION 4.02. Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Securities may be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
fails to maintain any such required office or agency or shall fail to furnish
the Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the address of the Trustee as set forth in
Section 10.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any matter relieve the
Company of its obligation to maintain an office or agency pursuant to this
Section 4.02. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby initially designates the office of the Trustee or
its agent located in the Borough of Manhattan, The City of New York, as such
office of the Company in accordance with Section 2.03.
SECTION 4.03. Corporate Existence. The Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect its
(i) corporate existence and the corporate existence of each of its Subsidiaries
(other than Non-Recourse Subsidiaries) in accordance with their respective
organizational documents and (ii) the material rights (charter and statutory),
licenses and franchises of the Company and each of its Subsidiaries; provided
that (i) neither the Company nor any of its Subsidiaries shall be required to
preserve any such right or franchise, or corporate existence, if the Board of
Directors of the Company or such Subsidiary shall determine that the loss
thereof is not, and will not be, adverse in any material respect to the Company
or the Holders and (ii) nothing in this Section 4.03 shall prevent the Company
from taking any action that complies with the provisions of Section 5.01.
SECTION 4.04. Payment of Taxes and Other Claims. The Company shall,
and shall cause each of its Subsidiaries
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(other than Non-Recourse Subsidiaries) to, pay or discharge or cause to be paid
or discharged, before any penalty accrues from the failure to so pay or
discharge, (1) all material taxes, assessments and governmental charges levied
or imposed upon it or any of such Subsidiaries or upon the income, profits or
property of it or any of such Subsidiaries, and (2) all material, lawful claims
for labor, materials and supplies which, if unpaid, might by law become a Lien
upon its property or the property of any Subsidiary; provided that there shall
not be required to be paid or discharged any such tax, assessment, charge or
claim if the amount, applicability or validity thereof is being contested in
good faith by appropriate proceedings and adequate provision therefor has been
made.
SECTION 4.05. Compliance Certificates. (a) The Company shall deliver
to the Trustee within 60 days after the end of each of the Company's fiscal
quarters (120 days after the end of the Company's last fiscal quarter of its
fiscal year) an Officers' Certificate, stating whether or not the signers, after
due inquiry, know of any Default or Event of Default which occurred during such
fiscal quarter. An Officers' Certificate delivered within 120 days after the end
of the Company's fiscal year shall also contain a certification from the
principal executive officer, principal financial officer or principal accounting
officer of the Company as to such officer's knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this Section 4.05(a), such compliance shall be determined without regard to
any period of grace or requirement of notice provided under this Indenture. If
the officer does know of such a Default or Event of Default, the certificate
shall describe any such Default or Event of Default, and its status. The first
certificate to be delivered pursuant to this Section 4.05(a) shall be for the
first fiscal quarter beginning after the execution of this Indenture.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 10 days after the Company becomes aware of the occurrence of
each Default or Event of Default which is continuing, an Officers' Certificate
setting forth the details of such Default or Event of Default, and the action
which the Company has taken and proposes to take with respect thereto. Following
receipt of such Officers' Certificate, the Trustee shall send the notice called
for by Section 7.05, except as provided therein.
SECTION 4.06. Securities and Exchange Commission Reports. (a) The
Company shall file with the Trustee and provide
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Holders of record, within 15 days after it files them with the Commission,
copies of its annual report and the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may by rules
and regulations prescribe) which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, without exhibits
in the case of each Holder, unless the Company is requested in writing by such
Holder. Notwithstanding that the Company may not be required to remain subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will continue to file with the Commission and provide the Trustee and
Holders with such annual reports and information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) which are specified in Sections 13 and 15(d) of
the Exchange Act, without exhibits in the case of Holders, unless the Company is
requested in writing by the Holders. The Company also will comply with the other
provisions of TIA ss. 314(a).
(b) So long as any of the Securities remain outstanding, the Company
shall cause each annual, quarterly and other financial report mailed or
otherwise furnished by it generally to public securityholders to be filed with
the Trustee and mailed to the Holders of record at their addresses appearing in
the register of Securities maintained by the Registrar, in each case at the time
of such mailing or furnishing to stockholders. The Company shall provide to any
Holder or any beneficial owner of Notes any information reasonably requested by
such holder or such beneficial owner concerning the Company and its Subsidiaries
(including financial statements) necessary in order to permit such holder or
such beneficial owner to sell or transfer Notes in compliance with Rule 144A
under the Securities Act or any similar rule or regulation adopted by he
Commission.
(c) Delivery of such reports to the Trustee is for informational
purposes only and the Trustee's receipt of such reports shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
SECTION 4.07. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the full extent permitted by applicable law) that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or
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advantage of, and will actively resist any attempts to claim the benefit of any
stay or extension law or any usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal or Accreted
Value of or interest on the Securities as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the full extent permitted by applicable
law) the Company hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 4.08. Maintenance of Properties. Subject to this Article IV,
the Company shall cause all material properties owned by or leased to it or any
of its Subsidiaries (other than Non-Recourse Subsidiaries) and used or useful in
the conduct of its business or the business of such Subsidiaries to be
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company or such Subsidiary may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided that nothing in this Section 4.08 shall prevent the
Company or any of its Subsidiaries from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal is not, in the judgment of the Board of Directors of
the Company or such Subsidiary, adverse in any material respect, to the Company
or the Holders.
SECTION 4.09. Limitation on Debt and Preferred Stock of the Company
and its Subsidiaries. (a) The Company shall not, and shall not permit any of its
Subsidiaries to, Issue, directly or indirectly, any Debt unless, at the time of
such Issuance and after giving effect thereto, (i) no Default or Event of
Default shall have occurred and be continuing and (ii) the Consolidated EBITDA
Coverage Ratio of the Company for the period of its most recently completed four
consecutive fiscal quarters ending at least 45 days prior to the date such Debt
is Issued is at least 2.00 to 1.00.
(b) Notwithstanding the foregoing, there may be issued the following
Debt:
(1) The Securities;
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(2) Debt the proceeds of which are used to acquire assets of the
Company and its Subsidiaries and such Debt is secured by purchase money
Liens on such assets or improvements or additions thereto, or replacements
thereof; provided that, after giving effect to the Issuance of any such
Debt that otherwise complies with this clause (3), the aggregate amount of
all Debt then outstanding at any time under this clause (3), including all
Refinancings thereof then outstanding, shall not at any time exceed
$50,000,000;
(3) Acquired Debt;
(4) (x) Debt outstanding on the Issue Date (including the Deferred
Coupon Notes) and (y) Debt Issued to Refinance any Debt permitted by
clause (a), this clause (5) or by clauses (1) and (3) of this Section
4.09(b); provided that, in the case of a Refinancing, (i) the amount of
the Debt so Issued shall not exceed the principal amount or the accreted
value (in the case of Debt Issued at a discount) of the Debt so Refinanced
plus, in each case, the reasonable costs incurred by the issuer in
connection with such Refinancing, (ii) the Average Life and Stated
Maturity of the Debt so Issued shall equal or exceed that of the Debt so
Refinanced, (iii) the Debt so Issued shall not rank senior in right of
payment to the Debt being Refinanced, (iv) if the Debt being Refinanced
does not bear interest in cash prior to a specified date, the Refinancing
Debt shall not bear interest in cash prior to such specified date, (v) if
the Debt being Refinanced is Debt permitted by clause (3), such
Refinancing Debt is not secured by any assets not securing the Debt so
Refinanced or improvements or additions thereto, or replacements thereof,
and (vi) the obligors with respect to the Refinancing Debt shall not
include any Persons who were not obligors (including predecessors thereof)
with respect to the Debt being Refinanced;
(5) Non-Recourse Debt of a Non-Recourse Subsidiary of the Company and
Guarantees of Non-Recourse Debt of Non-Recourse Subsidiaries which
Guarantees are recourse only to the stock of the Non-Recourse
Subsidiaries;
(6) Debt under the Credit Agreements or any Refinancing thereof;
provided that the aggregate outstanding amount thereunder does not at any
time exceed $75,000,000;
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(7) Debt secured by Receivables, including to Refinance the
Receivables Financing Agreement, provided that the amount of such Debt
does not exceed 85% of the face amount of the Receivables; and
(8) Debt (other than Debt identified in clauses (1) through (8)
above) in an aggregate principal amount outstanding at any one time not to
exceed $50,000,000.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, Issue any Preferred Stock; provided that there may be issued
the following Preferred Stock:
(1) Preferred Stock of the Company or any Subsidiary of the Company
issued to and held by the Company or a Wholly-Owned Recourse Subsidiary of
the Company; provided that any subsequent transfer of such Preferred Stock
(other than to the Company or to a Wholly-Owned Recourse Subsidiary of the
Company) or such Wholly-Owned Recourse Subsidiary of the Company ceasing
to be a Wholly-Owned Recourse Subsidiary of the Company shall be deemed,
in each case, to constitute the Issuance of such Preferred Stock by the
Company or such Subsidiary;
(2) Preferred Stock (other than Preferred Stock described in clause
(1) but including the Preferred Stock referred to in the proviso to clause
(1) above); provided that the liquidation value of any Preferred Stock
issued pursuant to this clause (2) shall constitute Debt for purposes of
this Section 4.09 and dividends on such Preferred Stock shall be included
in determining Consolidated Interest Expense of the Company for purposes
of calculating the Consolidated EBITDA Coverage Ratio of the Company under
paragraph (a) of this Section 4.09; and
(3) Preferred Stock (other than Redeemable Stock) of the Company.
(d) To the extent the Company or any of its Subsidiaries Guarantees
any Debt of the Company or any other Subsidiary, such Guarantee and such Debt
will be deemed to be the same Debt and only the amount of the Debt will be
deemed to be outstanding. If the Company or any of its Subsidiaries Guarantees
any Debt of a Person that, subsequent to the Issuance of such Guarantee, becomes
a Subsidiary of the Company, such Guarantee and the Debt so Guaranteed shall be
deemed to be the same Debt, which shall be deemed to have been Issued when the
Guarantee
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was Issued and shall be deemed to be permitted to the extent the Guarantee was
permitted when Issued.
SECTION 4.10. Limitation on Restricted Payments and Restricted
Investments. (a) So long as no Default or an Event of Default shall have
occurred and be continuing, the Company may make, and may permit any of its
Subsidiaries to make, directly or indirectly, a Restricted Payment or Restricted
Investment so long as, at the time of such Restricted Payment or Restricted
Investment and immediately after giving effect thereto, the aggregate amount of
Restricted Payments made since the Issue Date and the aggregate amount of
Restricted Investments made since the Issue Date and then outstanding (the
amount expended for such purposes, if other than in cash, shall be the fair
market value of such property as determined by the Board of Directors of the
Company in good faith as of the date of payment or investment) shall not exceed
the sum of:
(i) 50% of the cumulative Consolidated Net Income (or minus 100% of
the cumulative Consolidated Net Loss) of the Company accrued during the
period beginning on the Commencement Date and ending on the last day of
the fiscal quarter for which financial information has been made publicly
available by the Company but ending no more than 135 days prior to the
date of such Restricted Payment or Restricted Investment (treating such
period as a single accounting period);
(ii) 100% of the net cash proceeds, including the fair market value
of property other than cash as determined by the Board of Directors of the
Company in good faith, as evidenced by a Board Resolution, received by the
Company from any Person (other than a Subsidiary of the Company) from the
Issuance and sale subsequent to the Commencement Date of Capital Stock of
the Company (other than Redeemable Stock) or as a capital contribution;
provided that, if the value of the non-cash contribution is in excess of
$10,000,000 the Company shall have received the written opinion of a
nationally recognized investment banking firm that the terms thereof, from
a financial point of view, are fair to the shareholders of the Company or
such Subsidiary, in their capacity as such (the determination as to the
value of any non-cash consideration referred to in this clause (ii) to be
made by such investment banking firm), and such opinion shall have been
delivered to the Trustee;
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(iii) 100% of the net cash proceeds received by the Company from the
exercise of options or warrants on Capital Stock of the Company (other
than Redeemable Stock) since the Commencement Date;
(iv) 100% of the net cash proceeds received by the Company from the
conversion into Capital Stock (other than Redeemable Stock) of convertible
Debt or convertible Preferred Stock issued and sold (other than to a
Subsidiary of the Company) since the Commencement Date; and
(v) $30,000,000.
The designation by the Company or any of its Subsidiaries of a
Subsidiary as a Non-Recourse Subsidiary shall be deemed to be the making of a
Restricted Investment by the Company in an amount equal to the outstanding
Investments made by the Company and its Subsidiaries in such Person being
designated a Non-Recourse Subsidiary at the time of such designation.
(b) Section 4.10(a) shall not prevent the following, as long as no
Default or Event of Default shall have occurred and be continuing (or would
result therefrom other than pursuant to Section 4.10(a)):
(1) the making of any Restricted Payment or Restricted Investment
within 60 days after (x) the date of declaration thereof or (y) the making
of a binding commitment in respect thereof; provided that at such date of
declaration or commitment such Restricted Payment or Restricted Investment
complied with Section 4.10(a);
(2) any Restricted Payment or Restricted Investment made out of the
net cash proceeds received by the Company from the substantially
concurrent sale of its Common Stock (other than to a Subsidiary of the
Company); provided that such net cash proceeds so utilized shall not be
included in paragraph (a) in determining the amount of Restricted Payments
or Restricted Investments the Company could make under Section 4.10(a);
(3) cumulative Investments in Non-Recourse Subsidiaries not in
excess of $50,000,000 in the aggregate determined as of the date of
Investment (the amount so expended, if other than cash, to be determined
by the Company's Board of Directors, as evidenced by a Board Resolution);
and
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(4) repurchases of Capital Stock of the Company, in each case from
employees of the Company or any of its Subsidiaries (other than any
Permitted Holder); provided, however, that the aggregate amount of
Restricted payments made under this clause shall not exceed $1,500,000 in
any fiscal year.
Restricted Payments or Restricted Investments made pursuant to clauses (2), (3)
or (4) shall not be deducted in determining the amount of Restricted Payments or
Restricted Investments made or then outstanding under Section 4.10(a).
SECTION 4.11. Limitation on Liens. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, incur or suffer
to exist any Liens upon their respective property or assets whether owned on the
Issue Date or acquired after such date, or on any income or profits therefrom,
other than the following:
(1) Liens existing on the Issue Date;
(2) Permitted Liens;
(3) Purchase money Liens on assets of the Company and its
Subsidiaries or improvements or additions thereto existing or created
within 180 days after the time of acquisition of or improvement or
addition to such assets, or replacements thereof; provided that (i) such
acquisition, improvement or addition is otherwise permitted by this
Indenture, (ii) the principal amount of Debt (including Debt in respect of
Capitalized Lease Obligations) secured by each such Lien in each asset
shall not exceed the cost (including all such Debt secured thereby,
whether or not assumed) of the item subject thereto, and such Liens shall
attach solely to the particular item of property so acquired, improved or
added and any additions or accessions thereto, or replacements thereof,
and (iii) the aggregate amount of Debt secured by Liens permitted by this
clause (3) shall not at any time exceed $30,000,000;
(4) Liens to secure Refinancing of any Debt secured by Liens
described in clauses (1)-(3) above and (5) below; provided that (i)
Refinancing does not increase the principal amount of Debt being so
Refinanced and (ii) the Lien of the Refinancing Debt does not extend to
any asset not securing the Debt being Refinanced or improvements or
additions thereto, or replacements thereof;
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(5) Liens securing Acquired Debt; provided that (i) any such Lien
secured the Acquired Debt at the time of the incurrence of such Acquired
Debt by the Company or by one of its Subsidiaries and such Lien and
Acquired Debt were not incurred by the Company or any of its Subsidiaries
or by the Person being acquired or from whom the assets were acquired in
connection with, or in anticipation of, the incurrence of such Acquired
Debt by the Company or by one of its Subsidiaries and (ii) any such Lien
does not extend to or cover any property or assets of the Company or of
any of its Subsidiaries other than the property or assets that secured the
Acquired Debt prior to the time such Debt became Acquired Debt of the
Company or of one of its Subsidiaries;
(6) Liens on Receivables securing Debt permitted by Section
4.09(b)(8);
(7) Liens securing intercompany Debt permitted by Section
4.09(b)(2); and
(8) Liens on assets of the Company and its Subsidiaries in addition
to those referred to in clauses (1)-(7), provided that such Liens only
secure Debt of the Company and its Subsidiaries in an aggregate amount not
to exceed at any one time outstanding $50,000,000.
SECTION 4.12. Limitation on Transactions with Affiliates. (a) The
Company shall not enter, and shall not permit any of its Subsidiaries to enter,
directly or indirectly, into any transaction or series of related transactions
with any Affiliate of the Company (other than (x) the making of a Restricted
Payment or Restricted Investment otherwise permitted by Section 4.10 or those
transactions specifically permitted by Section 4.10(b), (y) transactions between
or among Non-Recourse Subsidiaries of the Company or (z) transactions between or
among the Company and its Subsidiaries (other than Non-Recourse Subsidiaries))
including, without limitation, any loan, advance or investment or any purchase,
sale, lease or exchange of property or the rendering of any service, unless the
terms of such transaction or series of transactions are set forth in writing and
at least as favorable as those available in a comparable transaction in
arms-length dealings from an unrelated Person; provided that (i) if any such
transaction or series of related transactions (other than any purchase or sale
of inventory in the ordinary course of business, but including entering into any
long-term arrangement involving the purchase of granules or glass fiber from, or
the provision of management services of
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the type currently provided under the Management Agreement by, an Affiliate of
the Company, including ISP or a Subsidiary thereof) involves aggregate payments
or other consideration in excess of $5,000,000, such transaction or series of
related transactions shall be approved (and the value of any non-cash
consideration shall be determined) by a majority of those members of the Board
of Directors of the Company or such Subsidiary, as the case may be, having no
personal stake in such business, transaction or transactions; and (ii) in the
event that such transaction or series of related transactions (other than any
purchase or sale of inventory in the ordinary course of business or other than
purchases of granules or glass fiber from an Affiliate of the Company, including
ISP or a Subsidiary thereof) involves aggregate payments or other consideration
in excess of $20,000,000 (with the value of any noncash consideration being
determined by a majority of those members of the Board of Directors of the
Company or such Subsidiary, as the case may be, having no personal stake in such
business, transaction or transactions), the Company or such Subsidiary, as the
case may be, shall have also received a written opinion from a nationally
recognized investment banking firm that such transaction or series of related
transactions is fair to the shareholders, in their capacity as such, of the
Company or such Subsidiary from a financial point of view and such opinion has
been delivered to the Trustee; provided further, in the event that the Board of
Directors of the Company or the Subsidiary, as the case may be, proposing to
engage in a transaction or series of related transactions described in the
preceding proviso does not have any members having no personal stake in such
business, transaction or transactions, the Company or such Subsidiary may enter
into such transaction or series of transactions if the Company or such
Subsidiary, as the case may be, shall have received the written opinion of a
nationally recognized investment banking firm that the terms thereof, from a
financial point of view, are fair to the shareholders of the Company or such
Subsidiary, in their capacity as such (the determination as to the value of any
non-cash consideration referred to in the preceding proviso to be made by such
investment banking firm), and such opinion shall have been delivered to the
Trustee.
(b) Section 4.12(a) shall not prevent the following:
(1) the purchase of granules from an Affiliate of the Company,
including ISP or a Subsidiary of ISP, provided that (a) subject to Section
4.12(c), the price and other terms shall not be less favorable to the
Company than those set forth in the Granules Contracts or (b) a
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nationally recognized investment banking firm or accounting firm has
delivered a written opinion to the Company to the effect that either the
terms thereof are fair to the Company from a financial point of view or
are on terms at least as favorable to the Company as those available in
comparable transactions in arms-length dealings from an unrelated third
party;
(2) the continuance of the Management Agreement (including with an
Affiliate of the Company other than ISP) (a) in accordance with its terms
or on terms no less favorable to the Company than those contained in the
Management Agreement or (b) on other terms provided that the Company shall
have received the written opinion of a nationally recognized investment
banking firm or accounting firm that either the terms thereof, from a
financial point of view, are fair to the Company or are on terms at least
as favorable to the Company as those available in comparable transactions
in arms-length dealings from an unrelated Person;
(3) any transaction between the Company or a Subsidiary thereof and
its own employee stock ownership or benefit plan;
(4) any transaction with an officer or director of the Company or
any Subsidiary of the Company entered into in the ordinary course of
business (including compensation or employee benefit arrangements with any
such officer or director);
(5) any business or transaction with an Unrestricted Affiliate;
(6) borrowings by the Company or its Subsidiaries from Affiliates of
the Company; provided that such loans are unsecured, are prepayable at any
time without penalty, contain no restrictive covenants and the effective
cost of borrowings thereunder do not exceed the interest rate then in
effect from time to time under the Credit Agreements or any Refinancings
thereof (or, if none of such agreements is outstanding, under unsecured
bank Debt of the Company);
(7) payments made pursuant to the Tax Sharing Agreement; or
(8) purchases made pursuant to the Glass Fiber Contract; provided
that the terms of such contract are set
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forth in writing and are at least as favorable to the Company as those
available at the Spin Off Date in a comparable transaction in arms-length
dealings with an unrelated Person.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, amend, modify or waive any provision of the Tax Sharing
Agreement, the Granules Contracts or the Glass Fiber Contract in any manner
which is significantly adverse to the Company or the holders of the Notes (it
being understood that an extension or modification of any of the Granules
Contracts (or any similar granules purchase contract) or the Glass Fiber
Contract on terms at least as favorable to the Company as those available at the
time of the extension or modification (or any such new agreement) in a
comparable transaction in arms-length dealings with an unrelated Person shall
not be deemed significantly adverse to the Company or the Holders).
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Company shall not, and shall not permit any of its
Subsidiaries (other than Non-Recourse Subsidiaries) to, directly or indirectly,
create or otherwise cause to exist or become effective any encumbrance or
restriction on the ability of any Subsidiary to (a) pay dividends or make any
other distributions on its Capital Stock or pay any Debt owed to the Company or
any of its Subsidiaries, (b) make loans or advances to the Company or any of its
Subsidiaries, (c) transfer any of its properties or assets to the Company or (d)
incur or suffer to exist Liens in favor of the Holders, except for such
encumbrances or restrictions existing under or by reason of any of the
following:
(1) applicable law;
(2) this Indenture and the indenture governing the Deferred Coupon
Notes;
(3) customary provisions restricting subletting or assignment of any
lease or license or other commercial agreement;
(4) any instrument governing Acquired Debt of any Person, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than such Person and its
Subsidiaries, or the property or assets of such Person and its
Subsidiaries, so acquired;
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(5) the Liens specifically permitted by Section 4.11; provided that
such Liens and the terms governing such Liens do not, directly or
indirectly, restrict the Company or its Subsidiaries from granting other
Liens, except as to the assets subject to such Liens;
(6) the Credit Agreements, the Receivables Financing Agreement or
other Debt existing on the Issue Date; and
(7) any Refinancing of the Credit Agreements, the Receivables
Financing Agreement or any such other Debt existing on the Issue Date;
provided that the terms and conditions of any such Refinancing agreements
relating to the terms described under clauses (a)-(d) above are no less
favorable to the Company than those contained in the agreements governing
the Debt being Refinanced.
SECTION 4.14. Change of Control. (a) In the event of any Change of
Control, each Holder shall have the right, at such Holder's option, to require
the Company to purchase all or any portion (in integral multiples of $1,000) of
such Holder's Securities on the date (the "Change of Control Payment Date")
which is 25 Business Days after the date the Change of Control Notice (as
defined below) is mailed or is required to be mailed (or such later date as is
required by applicable law) at 101% of the principal amount thereof (or, if
lower, the redemption price then in effect under paragraph 5(a) of the
Securities), plus accrued interest to the Change of Control Payment Date (the
"Put Amount").
(b) The Company or, at the request of the Company, the Trustee shall
send, by first-class mail, postage prepaid, to all Holders, within ten Business
Days after the occurrence of each Change of Control, a notice of the occurrence
of such Change of Control (the "Change of Control Notice"), specifying a date by
which a Holder must notify the Company of such Holder's intention to exercise
the repurchase right and describing the procedure that such Holder must follow
to exercise such right. The Company is required to deliver a copy of such notice
to the Trustee and to cause a copy of such notice to be published in a daily
newspaper of national circulation.
Each Change of Control Notice shall state:
(1) that a Change of Control has occurred, that each Holder has the
right to require the Company to repurchase all or any part of such
Holder's Security at a purchase price in cash equal to their Put Amount,
that the change
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of control offer is being made pursuant to this Section 4.15 and that all
Securities tendered will be accepted for payment;
(2) the purchase price and the Change of Control Payment Date;
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the change of control offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
change of control offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Change of Control Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Securities the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered;
(8) the circumstances and relevant facts regarding such Change of
Control, including but not limited to the identity of the purchaser and
pro forma financial information; and
(9) that the Company has the right, pursuant to the provision
described in paragraph 5(a) of the Securities, to redeem any securities
not tendered as provided therein.
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No failure of the Company to give the foregoing notice shall limit
any Holder's right to exercise a repurchase right. The Company shall comply with
all applicable Federal and state securities laws in connection with each Change
of Control Notice.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
change of control offer, (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Securities so tendered and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail to such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any Securities not so
purchased shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.14, the Trustee shall act as the Paying Agent.
SECTION 4.15. Limitation on Asset Sales. (a) The Company shall not,
and shall not permit any of its Subsidiaries, directly or indirectly, to,
consummate an Asset Sale unless:
(1) the Company or such Subsidiary, as the case may be, receives
consideration (including non-cash consideration, whose fair market value
shall be determined in good faith by the Board of Directors of the Company
or such Subsidiary, as evidenced by a Board Resolution) at the time of
such Asset Sale at least equal to the fair market value of the assets sold
or otherwise disposed of (as determined in good faith by its Board of
Directors, as evidenced by a Board Resolution);
(2) at least 75% of the consideration received by the Company or
such Subsidiary, as the case may be, shall be cash or Cash Equivalents;
provided that this clause (2) shall not prohibit any Asset Sale for which
the Company or such Subsidiary, as the case may be, receives 100% of the
consideration, directly or through the acquisition of Capital Stock of a
Person, in operating assets; and
(3) in the case of an Asset Sale by the Company or any of its
Subsidiaries, the Company shall commit to apply the Net Cash Proceeds of
such Asset Sale within 300 days of the consummation of such Asset Sale,
and shall apply
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such Net Cash Proceeds within 360 days of receipt thereof (i) to invest in
the businesses that the Company and its Recourse Subsidiaries are engaged
in at the time of such Asset Sale or any like or related business, (ii) to
pay or satisfy any Debt of the Company or any of its Subsidiaries (other
than Debt which is subordinated by its terms to the Securities) or
Preferred Stock of a Subsidiary, including the Debt referred to in the
last sentence of the definition thereof or make provision for the payment
thereof, through an escrow or other fund, and/or (iii) to offer to
purchase the Securities in a tender offer (a "Net Proceeds Offer") at a
redemption price equal to 100% of the principal amount thereof plus
accrued interest thereon to the date of purchase; provided, however, that
the Company shall, to the extent required under the indenture governing
the Deferred Coupon Notes, first offer to purchase any outstanding
Deferred Coupon Notes in a tender offer at a redemption price equal to
100% of the accreted value thereof to the date of redemption, provided,
further, however, that the Company may defer making a Net Proceeds Offer
until the aggregate Net Cash Proceeds from Asset Sales to be applied
pursuant to this clause (3)(iii) equal or exceed $20,000,000;
provided that (i) the Company and its Subsidiaries may retain up to $5,000,000
of Net Cash Proceeds from Asset Sales in any twelve-month period (without
complying with clause (3)), and (ii) any Asset Sale that would result in a
Change of Control shall not be governed by this Section 4.15 but shall be
governed by the provisions described under Section 4.14 and paragraph 5(a) of
the Securities.
(b) Notice of a Net Proceeds Offer shall be mailed or caused to be
mailed, by first class mail, by the Company, within 300 days after the relevant
Asset Sale to all Holders at their last registered addresses as of a date within
15 days prior to the mailing of such notice, with a copy to the Trustee. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Net Proceeds Offer and shall state
the following terms:
(1) that the Net Proceeds Offer is being made pursuant to this
Section 4.15 and that all Securities tendered will be accepted for
payment; provided that, if the aggregate principal amount of Securities
tendered in a Net Proceeds Offer exceeds the aggregate amount available
for the Net Proceeds Offer, the Company shall select the Securities to be
purchased on a pro rata basis (with such ad-
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justments as may be deemed appropriate by the Company, so that only
Securities in denominations of $1,000 or multiples thereof shall be
purchased);
(2) the purchase price and the purchase date (which shall be
determined in accordance with Section 4.15(a)) (the "Proceeds Purchase
Date");
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless there is a default in making payment therefor, any
Security accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Security purchased pursuant to a
Net Proceeds Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day prior to the
Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than two Business Days prior to the
Proceeds Purchase Date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities the Holder
delivered for purchase and a statement that such Holder is withdrawing his
or her election to have such Securities purchased; and
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered.
The Company 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
repurchase of Securities pursuant to a Net Proceeds Offer.
On or before the Proceeds Purchase Date, the Company or such
Subsidiary of the Company, as the case may be, shall (i) accept for payment
Securities or portions thereof tendered pursuant to the Net Proceeds Offer which
are to be purchased in
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accordance with item (b)(1) above, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities to be purchased and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
SECTION 4.16. Restriction on Transfer of Certain Assets to
Subsidiaries. If the Company transfers or causes to be transferred, in one or a
series of related transactions, Material Assets to any one or more Subsidiaries
of the Company, the Company shall cause such transferee Subsidiary to (i)
execute and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such transferee Subsidiary shall
unconditionally Guarantee, on a senior basis, all of the Company's obligations
under the Securities and (ii) deliver to the Trustee an Opinion of Counsel that
such supplemental indenture has been duly executed and delivered by such
transferee Subsidiary.
SECTION 4.17. Investment Company Act. The Company shall not take any
action that would require it or any of its Subsidiaries to register as an
investment company under the Investment Company Act of 1940.
SECTION 4.18. Consents, etc. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, pay or cause to be
paid any fee, interest or other amount to any Holders in connection with any
consent, waiver or amendment to this Indenture or the Securities, unless such
fee, interest or other amount is offered or agreed to be paid to all Holders who
are given the same opportunity to so consent, waive or agree to amend and who,
in fact, so consent, waive or agree to amend.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.01. When the Company May Merge, etc. The Company shall not
consolidate with or merge with or into or sell, assign, transfer or lease all or
substantially all of its
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properties and assets (either in one transaction or series of related
transactions) to any Person, unless:
(1) the Company shall be the continuing Person, or the resulting,
surviving or transferee Person (if other than the Company) shall be a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture, and
this Indenture shall remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee Person or any of its Subsidiaries as a
result of such transaction as having been issued by such Person or such
Subsidiary at the time of such transaction), no Default or Event of
Default shall have occurred and be continuing;
(3) immediately before and after giving effect to such transaction,
the resulting, surviving or transferee Person could incur at least $1.00
of additional Debt under Section 4.09(a); and
(4) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person shall have a Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of
the Company immediately prior to such transaction.
In connection with any consolidation, merger, sale, assignment,
transfer or lease contemplated by this Section 5.01, the Company shall deliver,
or cause to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, assignment, transfer or
lease and the supplemental indenture in respect thereto comply with this Article
V and that all conditions precedent herein provided for relating to such
transaction have been complied with.
SECTION 5.02. Successor Corporation Substituted. Upon any
consolidation or merger or any sale, assignment, transfer or lease of all or
substantially all of the assets of
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the Company in accordance with Section 5.01, the successor corporation formed by
such consolidation or into which the Company is merged or to which such sale,
assignment, transfer or lease is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture,
with the same effect as if such successor corporation had been named as the
Company herein, and, except in the case of a lease, the Company will be
discharged from all obligations and covenants under this Indenture and the
Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the default continues for a
period of 30 days;
(2) (i) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity or otherwise or
(ii) the Company fails to redeem or repurchase Securities when required
pursuant to this Indenture or the Securities;
(3) the Company fails to comply with the provisions of Article V;
(4) the Company fails to comply for 30 days after notice with any of
its obligations under Sections 4.03, 4.06 and 4.09 through 4.14,
inclusive;
(5) the Company fails to comply for 60 days after notice with its
other agreements contained in this Indenture or the Securities (other than
those referred to in clauses (1)-(4) above);
(6) principal of or interest on Debt of the Company or any of its
Significant Subsidiaries is not paid within any applicable grace period or
is accelerated by the holders thereof because of a default and the total
amount that is unpaid or accelerated exceeds $15,000,000 or its foreign
currency equivalent and such default continues for five days after notice;
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(7) the Company or any of its Significant Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become due, (B)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (C) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (D) consents to the appointment of a Custodian of it or
for substantially all of its property, (E) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(F) makes a general assignment for the benefit of its creditors, or (G)
takes any corporate action to authorize or effect any of the foregoing;
and
(8) any judgment or order for the payment of money in excess of
$15,000,000 in the aggregate is rendered against the Company or any of its
Significant Subsidiaries and (i) there is a period of 60 days following
the entry of such judgment or order during which such judgment or order is
not discharged, waived or the execution thereof stayed and such default
continues for 10 days after the notice specified below or (ii) foreclosure
proceedings therefor have begun and have not been stayed within five days
of the commencement of such foreclosure proceeding.
A Default under clauses (4), (5), (6) or (8) is not an Event of
Default until the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities notify the Company in writing of the
Default, and the Company does not cure the Default within the time specified in
such clause after receipt of such notice. Such notice shall be given by the
Trustee if so requested in writing by the Holders of at least 25% in aggregate
principal amount of the outstanding Securities. When a Default under clause (4),
(5), (6) or (8) is cured or remedied within the specified period, it ceases to
exist.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default with respect to the Company specified in Section 6.01(7))
occurs and is continuing, the Trustee, by written notice to the Company, or the
Holders of at least 25% in aggregate principal amount of the outstanding
Securities, by written notice to the Company and the Trustee, may declare all
unpaid principal of and accrued interest on the Securities then outstanding to
be due and payable (the "Default Amount"). Upon a declaration of acceleration,
such amount shall be due and payable immediately.
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If an Event of Default with respect to the Company specified in
Section 6.01(7) occurs, the Default Amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholder.
The Holders of a majority in aggregate principal amount of the
Securities then outstanding, by written notice to the Trustee and the Company,
may rescind an acceleration with respect to the Securities and its consequences
if (i) all existing Defaults and Events of Default, other than the non-payment
of the principal of the Securities which has become due solely by such
declaration of acceleration, have been cured or waived, (ii) to the extent the
payment of such interest is lawful, interest on overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid and
(iii) the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction.
SECTION 6.03. Other Remedies. Notwithstanding any other provision of
this Indenture, if an Event of Default occurs and is continuing and the Holders
are entitled to payment as a result of acceleration, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of and/or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. Subject only to the
provisions of Sections 6.07 and 9.02, the Holders of a majority in aggregate
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default in payment of principal or interest on any Security
as specified in clauses (1) and (2) of Section 6.01. When a Default or Event of
Default is waived, it is cured and ceases to exist.
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SECTION 6.05. Control by Majority. The Holders of a majority in
aggregate principal amount of the outstanding Securities may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines may be unduly prejudicial to the rights
of another Securityholder as such, or that may subject the Trustee to personal
liability. The Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 6.06. Limitation on Remedies. Except as provided in Section
6.07, a Securityholder may not pursue any remedy with respect to this Indenture
or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and provide to the Trustee
reasonable indemnity or security satisfactory to the Trustee against any
loss, liability or expense;
(4) the Trustee does not comply with such request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Security to
receive payment of the principal amount of and interest on the Security, on or
after the respective due dates expressed in the Security, or to bring suit for
the enforcement of any such payment on or after such
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respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of the principal amount, together with, to the extent that payment of such
interest is lawful, interest on overdue principal, at the rate per annum
specified in the Securities, and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Securityholders allowed in any judicial
proceedings relative to the Company (or any other obligor upon the Securities),
its creditors or its property. The Trustee shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Securityholders, to pay to the Trustee any amount
due to the Trustee for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant
to this Article VI, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
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Second: to Securityholders for amounts due and unpaid on the
Securities ratably, without preference or priority of any kind, according
to the amounts due and payable on the Securities for the principal amount
and interest, respectively; and
Third: to the Company or any other obligors on the Securities, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by any Holder or
a group of Holders of more than 10% in principal amount of the outstanding
Securities.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then,
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
ARTICLE VII
TRUSTEE
SECTION 7.01. Rights of Trustee. Subject to TIA ss. 315(a) through
(d):
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(A) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(B) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 10.05. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(C) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(D) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers; provided that the Trustee's conduct does not constitute
negligence.
(E) The Trustee may consult with counsel of its own choosing and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(F) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction.
SECTION 7.02. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or any of its Affiliates with the same
rights it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA ss.ss. 310(b) and 311.
SECTION 7.03. Money Held in Trust. The Trustee shall not be liable
for interest on any money received by it except as the Trustee may agree in
writing with the Company.
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Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no
representation as to the legality or validity or adequacy of this Indenture or
the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee and
it shall not be responsible for any statement in the Securities other than its
certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in the payment of the principal of or interest on any
Security, the Trustee may withhold notice if and so long as a committee of its
Trust Officers in good faith determines that the withholding of such notice is
in the interests of the Securityholders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after
each May 15 beginning with the May 15 following the Issue Date, the Trustee
shall mail to each Securityholder a report dated as of May 15 as to the matters
set forth in TIA ss. 313(a) if required by TIA ss. 313(a). The Trustee also
shall comply with TIA ss.ss. 313(b) and 313(c).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the Commission and each stock exchange, if
any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any national securities exchange or of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company agrees that it
shall pay to the Trustee from time to time such compensation as the Company and
the Trustee shall agree in writing for its services. The Trustee's compensation
shall not be limited by any law on compensation relating to the trustee of an
express trust. The Company agrees that it shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or made
by it. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel. Such ex-
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penses shall also include any taxes or other reasonable costs incurred by the
trust created under Section 8.01.
The Company shall indemnify each of the Trustee and any predecessor
Trustee for, and hold it harmless against, any and all loss, damage, claim or
liability or expense, including taxes (other than taxes based on the income of
the Trustee) incurred by it in connection with the administration of this trust
and its duties hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the acceptance, exercise or
performance of any of its powers or duties hereunder. The Trustee shall notify
the Company promptly of any claim asserted against the Trustee for which it may
seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder unless the Company is actually
prejudiced thereby. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
reimburse the Trustee for any expense or indemnify the Trustee against any loss
or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee except money or property held in trust to pay
principal or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 6.01(7), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any Lien
arising hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article VIII and/or the
termination of this Indenture.
SECTION 7.08. Replacement of Trustee. A resignation or removal of
the Trustee and the appointment of a successor Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in this
Section 7.08. The Trustee may resign by so notifying the Company in writing at
least 30 days prior to the date of the proposed resignation. The Holders of a
majority in aggregate principal
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amount of the outstanding Securities may remove the Trustee by so notifying the
Trustee in writing and may appoint a successor Trustee with the Company's
consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. The Trustee shall be entitled to payment of its fees and reimbursement
of its expenses while acting as Trustee, and to the extent such amounts remain
unpaid, the Trustee that has resigned or has been removed shall retain the Lien
afforded by Section 7.07. Within one year after the successor Trustee takes
office, the Holders of a majority in aggregate principal amount at maturity of
the outstanding Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately thereafter,
subject to the Lien provided in Section 7.07, the retiring Trustee shall
transfer all property held by it as Trustee to the successor Trustee, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in aggregate principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If any Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor
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Trustee. Any successor Trustee shall comply with TIA ss. 310(a)(5).
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee, if
such corporation or association complies with Section 7.10.
SECTION 7.10. Eligibility; Disqualification. This Indenture shall
always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1). The
Trustee shall have (or, in the case of a corporation included in a bank holding
company system, the related bank holding company subsidiary shall have) a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee also shall comply with
TIA ss. 310(b).
SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee is subject to TIA ss. 311(a), excluding from the operation of TIA
ss. 311(a) any creditor relationship listed in TIA ss. 311(b). A Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated therein.
SECTION 7.12. Duties of Trustee. (A) If a Default or an Event of
Default has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
(B) Except during the continuance of a Default or an Event of
Default:
(1) the Trustee need perform only those duties as are specifically
set forth in this Indenture and no others and no implied covenants or
obligation shall be read into this Indenture against the Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and which conform to the requirements of this Indenture;
however, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(C) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (B) of
this Section 7.12;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(D) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(E) Every provision of this Indenture that in any way relates to the
Trustee is subject to Sections 7.12(A), (B), (C) and (D).
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee
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all outstanding Securities (other than Securities replaced pursuant to Section
2.07) for cancellation or (ii) all outstanding Securities have become due and
payable, and the Company irrevocably deposits with the Trustee money sufficient
to pay at maturity all outstanding Securities, including interest thereon, if
any, (other than Securities replaced pursuant to Section 2.07) and if in either
case the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Sections 8.01(c) and 8.06, cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel as to the satisfaction of all conditions to such
satisfaction and discharge of this Indenture and at the cost and expense of the
Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company may at
any time terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance"), or (ii) its obligations under Sections 4.03,
4.04, 4.06, 4.08 through 4.17, inclusive, and the operation of Section 6.01(3),
6.01(4), 6.01(5), 6.01(6), 6.01(7) (with respect only to Significant
Subsidiaries) and 6.01(8) and the limitations contained in Section 5.01(3) and
(4) ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Securities may not be accelerated
because of an Event of Default with respect thereto.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and
8.06 shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the
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payment of principal on the Securities and interest, if any, to maturity
or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest, if any,
when due on all the Securities to maturity or redemption, as the case may
be;
(3) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) the Company delivers to the Trustee an Opinion of Counsel
stating that the Securityholders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and defeasance
and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred, and, in the case of legal
defeasance only, such Opinion of Counsel shall be based on a ruling
received from or published by the Internal Revenue Service or a change,
since the date of this Indenture, in the applicable federal income tax
law, and
(7) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
VIII have been complied with.
Notwithstanding the foregoing provisions of this Section, the
conditions set forth in the foregoing paragraphs (2), (3), (4), (5), (6) and (7)
need not be satisfied so long as, at the time the Company makes the deposit
described in paragraph
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(1), (i) no Default under Section 6.01(1), 6.01(2), 6.01(7) or 6.01(8) has
occurred and is continuing on the date of such deposit and after giving effect
thereto and (ii) either (x) a notice of redemption has been mailed pursuant to
Section 3.03 providing for redemption of all the Securities 30 days after such
mailing and the provisions of Section 3.01 with respect to such redemption shall
have been complied with or (y) the Stated Maturity of all of the Securities will
occur within 30 days. If the conditions of the preceding sentence are satisfied
the Company shall be deemed to have exercised its covenant defeasance option.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III (including by utilizing amounts under deposit).
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest, if any, on the
Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal and interest, if any, that remains unclaimed
for two years, and, thereafter, Securityholders entitled to the money must look
to the Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charges
imposed on or assessed against U.S. Government Obligations deposited with the
Trustee hereunder or the principal and interest received on such U.S. Government
Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
oth-
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erwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided that, if the Company
has made any payment of interest, if any, on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or consent of
any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to
certificated Securities;
(4) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional benefit or
rights to the Securityholders or that does not adversely affect the rights
of any Securityholder; or
(6) to provide for issuance of the Exchange Securities or Private
Exchange Notes, if applicable, which will have terms substantially
identical in all material respects to the Initial Securities (except that,
with respect to the Exchange Securities, the transfer restrictions
contained in the Initial Securities will be modified or eliminated, as
appropriate), and which will be treated
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together with any outstanding Initial Securities, as a single
issue of securities.
Notwithstanding the above, the Trustee and the Company may not make
any change that adversely affects the rights of any Securityholders hereunder.
SECTION 9.02. With Consent of Holders. Subject to Section 6.07, the
Company, when authorized by resolution of its Board of Directors, and the
Trustee may amend this Indenture or the Securities with the written consent of
the Holders of a majority in aggregate principal amount of the Securities then
outstanding, and the Holders of a majority in aggregate principal amount of the
Securities then outstanding by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the
Securities.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Securityholder affected, an amendment or waiver, including a
waiver pursuant to Section 6.04, may not:
(A) change the stated maturity of the principal of, or any
installment of interest on, any Security or reduce the principal amount
thereof, the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any Security
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the stated
maturity thereof (or, in the case of redemption, on or after the
redemption date);
(B) reduce the percentage in principal amount of the outstanding
Securities, the consent of the Holders of which is required for any
supplemental indenture or the consent of the Holders of which is required
for any waiver of compliance with provisions of this Indenture or Defaults
hereunder and their consequences provided for in this Indenture;
(C) modify any of the provisions relating to supplemental indentures
requiring the consent of Holders or relating to the waiver of past
defaults or relating to the waiver of covenants, except to increase any
such percentage of outstanding Securities required for such actions or to
provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of each Securityholder affected thereby;
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(D) waive a default in the payment of the principal of or interest
on any Security or modify or waive the Company's obligation to repurchase
Securities under Section 4.14 or 4.15;
(E) except as otherwise permitted by the covenants contained in
Article V, consent to the assignment or transfer by the Company of any of
its rights and obligations under this Indenture;
(F) make any change in this Section 9.02 or Section 6.04 or 6.07; or
(G) change the time at which any Security must be redeemed or repaid
in accordance with the terms of this Indenture and the Securities.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof. Any amendment, waiver or consent shall be deemed effective
upon receipt by the Trustee of the necessary consents and shall not require
execution of any supplemental indenture to be effective.
After an amendment or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such amendment, waiver or consent. Except as otherwise provided in this Section
9.02, the Holders of a majority in aggregate principal amount of the Securities
then outstanding may waive compliance in a particular instance by the Company
with any provisions of this Indenture or the Securities.
SECTION 9.03. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by such Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his Security
or portion of a Security. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective.
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After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder; provided that if such amendment, supplement or waiver
makes a change described in any of clauses (A) through (G) of Section 9.02, such
amendment, supplement or waiver shall bind each Holder of a Security who has
consented to it; and provided, further, that if notice of such amendment,
supplement or waiver is reflected on a Security that evidences the same debt as
the consenting Holder's Security, such amendment, supplement or waiver shall
bind every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
SECTION 9.04. Record Date. The Company shall be permitted to set a
record date for purposes of determining the identity of Securityholders entitled
to vote or consent on any matter arising under this Indenture. In the Company's
sole discretion, the record date shall be either (i) the record date as
determined pursuant to ss. 316(c) of the TIA or (ii) such other record date as
the Company shall select.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee may
(and, at the request of the Company, shall) require the Holder of the Security
to deliver it to the Trustee. The Trustee may (and, at the request of the
Company, shall) place an appropriate notation on the Security about the changed
terms and return it to the Holder and the Trustee may (and, at the request of
the Company, shall) place an appropriate notation on any Security thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms.
SECTION 9.06. Trustee May Sign Amendments, etc. The Trustee shall
sign any amendment, supplement or waiver authorized pursuant to this Article IX
if the amendment, supplement or waiver does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. If it does, the Trustee may,
but need not, sign it. In signing or refusing to sign such amendment, supplement
or waiver, the Trustee shall be entitled to receive and, subject to TIA ss.
315(a) through (d), shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such
amendment, supplement or waiver is authorized or permitted by this Indenture,
that it is not inconsistent herewith, and that it will be valid and binding upon
the Company in accordance with its terms.
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SECTION 9.07. Compliance with TIA. Every amendment or supplement to
this Indenture or Securities shall comply with the TIA as then in effect.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939. This Indenture is
subject to the provisions of the TIA that are required to be a part of this
Indenture, and shall, to the extent applicable, be governed by such provisions.
SECTION 10.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, postage prepaid, addressed as follows:
If to the Company, to:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Attention: General Counsel
If to the Trustee, to:
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Trustee
Administration
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, postage prepaid, to a
Securityholder shall be mailed by first class mail to him at his address as it
appears on the Securities register maintained by the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed. Copies of any
such communication or notice to a Holder shall also be mailed to the Trustee.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency
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with respect to other Securityholders. Except for a notice to the Trustee or the
Company, which is deemed given only when received, if a notice or communication
is mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
SECTION 10.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA ss. 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than pursuant to Section 4.05(b)) shall
include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinions contained in such
certificate or opinion are based;
(3) a brief statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been com-
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plied with; provided that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar. The
Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 10.07. Governing Law. The laws of the State of New York
shall govern this Indenture and the Securities without regard to principles of
conflicts of law. The Trustee, the Company and the Securityholders agree to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Indenture or the Securities.
SECTION 10.08. No Interpretation of Other Agreements. This Indenture
may not be used to interpret another indenture, loan or debt agreement of the
Company or any of its Subsidiaries. No such indenture, loan or debt agreement
may be used to interpret this Indenture.
SECTION 10.09. No Recourse Against Others. No director, officer,
employee, stockholder or Affiliate, as such, of the Company shall have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability.
SECTION 10.10. Legal Holidays. A "Legal Holiday" is a Saturday,
Sunday or a day on which banking institutions in New York, New York are not
required to be open. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday and interest shall not accrue for the intervening period.
SECTION 10.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 10.12. Duplicate Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all such
executed copies together represent the same agreement.
<PAGE>
-75-
SECTION 10.13. Separability. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 10.14. Table of Contents, Headings, etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
SECTION 10.15. Benefits of Indenture. Nothing in this Indenture or
in the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
<PAGE>
-76-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
BUILDING MATERIALS CORPORATION
OF AMERICA
By: /s/ Mark A. Presto
-----------------------
Name: Mark A. Presto
Title: Vice President
THE BANK OF NEW YORK,
as Trustee
By: /s/ Timothy J. Shea
-----------------------
Name: Timothy J. Shea
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL
ACCREDITED INVESTOR"); (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE THAT IS
THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY AND THE LAST DATE ON WHICH THE COMPANY OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE (THE
"RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED
HEREBY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE NOTE EVIDENCED HEREBY BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK, AS
TRUSTEE, IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE
RESTRICTION TERMINATION DATE.
A-1
<PAGE>
No. $________
CUSIP No.
BUILDING MATERIALS CORPORATION OF AMERICA
8 5/8% SENIOR NOTES DUE 2006
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation
(the "Company"), promises to pay to _____________________________, or registered
assigns, the principal sum of __________ Dollars on December 15, 2006.
Interest Payment Dates: June 15 and December 15, commencing June 15,
1997.
Record Dates: June 1 and December 1.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
BUILDING MATERIALS CORPORATION
OF AMERICA
By: ____________________________
Name:
Title:
Attest:
By: __________________________
Name:
Title:
Dated: December 9, 1996
Trustee's Certificate of Authentication
This is one of the 8 5/8% Senior
Notes due 2006 described in
the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: ___________________________
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE SIDE INITIAL SECURITY]
BUILDING MATERIALS CORPORATION OF AMERICA
8 5/8% Senior Notes due 2006
1. Interest. BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), promises to pay cash interest on the principal
amount of this Security at a rate of 8 5/8% per annum, payable on June 15 and
December 15 of each year (the "Interest Payment Date"), commencing June 15,
1997. The Company shall pay interest on overdue principal at the rate of 8 5/8%
per annum. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. The Holder must
surrender this Security to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts. The
Company, however, may pay principal and interest by a check payable in such
money. The Company may mail an interest check to the Holder's registered
address. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar. Initially, The Bank of New York (the
"Trustee") or its agent will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without prior notice to any
Holder. The Company or any of its Subsidiaries or Affiliates may act in any such
capacity, except in certain circumstances.
4. Indenture. The Company issued the Securities under an Indenture
dated as of December 9, 1996 (the "Indenture") between the Company and the
Trustee. Capitalized terms used in this Security and not defined in this
Security shall have the meaning set forth in the Indenture. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 as in effect on the
date of the Indenture. The Securities are subject to all such terms, and Holders
of Securities are referred to the Indenture and said Act for a statement of such
terms.
A-4
<PAGE>
The Securities are senior unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount. This Security is one of the
Initial Securities referred to in the Indenture. The Securities include the
Initial Securities, any Exchange Securities, as defined below, issued in
exchange for the Initial Securities pursuant to the Indenture, and the Private
Exchange Notes. The Initial Securities, the Exchange Securities, and the Private
Exchange Notes are treated as a single class of securities under the Indenture.
5. Redemption.
(a) Optional Redemption. The Company may redeem the Securities, in
whole or in part, at any time on or after December 15, 2001, on not less than 30
nor more than 60 days' prior notice in principal amounts of $1,000 or any
integral multiple of $1,000 at the following redemption prices (expressed in
percentages of principal amount) plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing:
Optional
Redemption
Period Percentage
------ ----------
December 15, 2001.................................................. 104.3125%
December 15, 2002.................................................. 102.8750%
December 15, 2003.................................................. 101.4375%
and thereafter, beginning December 15, 2004, at 100%.
In the event that, on or prior to the date which is three years
after the Issue Date, the Company consummates a public offering of the Common
Stock of the Company, the Company may, at its option, on not less than 30 nor
more than 60-days' notice, redeem, but only to the extent of such net cash
proceeds actually received by it, up to 50% of the principal amount of the
Securities then outstanding at a redemption price equal to 108.625% of the
principal amount thereof at the date of redemption, provided that no such
redemption may be made if and to the extent that, after giving effect thereto,
less than a majority of the principal amount of the Securities originally issued
would be outstanding. Any such redemption shall be made within 75 days of the
consummation of any such sale.
In the event a Change of Control occurs, the Company shall have the
option to redeem all, but not less than all, of the Securities, at a redemption
price equal to the sum of (x) 100% of the principal amount thereof plus accrued
and unpaid
A-5
<PAGE>
interest thereon to the redemption date and (y) the Applicable Premium with
respect to each $1,000 principal amount of Securities so redeemed. Notice of any
redemption to be made pursuant to this paragraph must be given no later than 10
days after the Change of Control Payment Date, and redemption must be made
within 30 days of the date of such notice.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities or portions thereof to be redeemed pro rata, by lot
or by a method that complies with applicable legal and securities exchange
requirements.
(b) Mandatory Redemption. The Securities will not have the benefit
of any sinking fund.
6. Put Provisions. Upon a Change of Control, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities (in integral multiples of $1,000) of such Holder at a
repurchase price equal to 101% of the principal amount thereof (or, if lower,
the redemption price then in effect under the provisions described in paragraph
5(a)), plus accrued interest to the date of repurchase as provided in, and
subject to the terms of, the Indenture.
7. Notice of Redemption. Notice of redemptions pursuant to paragraph
5 will be mailed at least 30 days but not more than 60 days before the
applicable redemption date (or, if applicable at such other time as is provided
by paragraph 5(a)) to each Holder of Securities to be redeemed at the Holder's
registered address. If money sufficient to pay the redemption price and accrued
interest on all Securities to be redeemed on the redemption date is deposited
with the Paying Agent on the redemption date, on and after such date interest
will cease to accrue on such Securities or portions of them. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000.
8. Proceeds on Disposition of Assets. As described in Section 4.15
of the Indenture, the Company is required under certain circumstances to apply
the Net Cash Proceeds (or a portion thereof) from Asset Sales to offer to
purchase Securities at a price equal to 100% of the principal amount thereof
plus accrued interest thereon to the date of purchase.
9. Denominations, Transfer, Exchange. The Securities are in
registered form in denominations of $1,000 and integral multiples of $1,000. A
Holder may register the transfer or exchange of Securities as provided in the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture.
A-6
<PAGE>
10. Persons Deemed Owners. The Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name the Security is
registered with the Registrar as the owner for all purposes.
11. Unclaimed Money. If money for the payment of interest or
principal remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its written request. After such time,
Holders entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Maturity. Subject to certain conditions
described in Article VIII of the Indenture, if the Company deposits with the
Trustee money or U.S. Government Obligations sufficient to pay the principal of
and interest on the Securities to maturity, the Company will be discharged (to
the extent provided in the Indenture) from the Indenture and the Securities.
13. Amendments, Supplements and Waivers. Subject to certain
exceptions requiring the consent of each Holder affected as described in Article
IX of the Indenture, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Securities, and any existing Default may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Securities. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency, provide for the
assumption of the obligations of the Company to Holders or make any change that
does not adversely affect the rights of any Holder.
14. Restrictive Covenants. The Indenture imposes certain limitations
on, among other things, the ability of the Company to merge or consolidate with
any other Person or sell, lease or otherwise transfer all or substantially all
of its properties or assets, the ability of the Company or certain of its
Subsidiaries to make Restricted Payments and Restricted Investments and the
ability of the Company and certain of its Subsidiaries to incur Debt, create
Liens or engage in transactions with Affiliates or issue Preferred Stock, all
subject to certain limitations and qualifications described in the Indenture.
15. Successor Corporation. When a successor Person or other entity
assumes all the obligations of its predecessor under the Securities and the
Indenture, the predecessor Person will be released from those obligations.
A-7
<PAGE>
16. Defaults and Remedies. The Securities have the Events of Default
as set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding
Securities may declare all the Securities to be due and payable immediately,
except that in the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization relating to the Company, all
outstanding Securities shall become due and payable immediately without further
action or notice. Holders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power. The
Company must furnish quarterly compliance certificates to the Trustee.
17. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any of its Affiliates,
and may otherwise deal with the Company or any of its Affiliates, as if it were
not the Trustee.
18. No Recourse Against Others. A director, officer, employee,
stockholder or Affiliate, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
19. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or any authenticating
agent.
20. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of re-
A-8
<PAGE>
demption and reliance may be placed only on the other identification numbers
placed thereon.
22. Registration Rights. Pursuant to the Registration Rights
Agreement among the Company and the Initial Purchasers of the Initial
Securities, the Company has certain obligations regarding an Exchange Offer
pursuant to which the Holder of this Security shall have the right to exchange
this Security for the Company's Series B 8 5/8% Senior Notes Due 2006 (the
"Exchange Securities"), which have been registered under the Securities Act, in
like principal amount and having identical terms as the Initial Securities. The
Holders of the Initial Securities shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement. Within five days after the
occurrence of an event so resulting in such additional interest payments, the
Company shall provide the Trustee with an Officers' Certificate describing such
event and providing the Trustee with all necessary details relating to the
payment of such interest, including, without limitation, the interest rate, the
effective date of such interest rate and the method of calculating interest.
A-9
<PAGE>
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Attention: Secretary
A-10
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
________________________________________________________________________________
(insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date:__________________ Your Signature:_______________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:_______________________________
In connection with any transfer of any of the Securities evidenced
by this certificate occurring prior to the date that is three years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being transferred:
A-11
<PAGE>
CHECK ONE BOX BELOW
(1) |_| to the Company or a subsidiary thereof; or
(2) |_| inside the United States to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act of 1933, as
amended; or
(3) |_| to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that, prior to such transfer, furnishes to the Trustee
a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the note evidenced
thereby (the form of which letter can be obtained from the
Trustee); or
(4) |_| outside the United States in compliance with Rule 903 or Rule
904 of Regulation S under the Securities Act of 1933, as amended; or
(5) |_| pursuant to the exemption from registration under the
Securities Act of 1933, as amended, provided by Rule 144 thereunder
(if available); or
(6) |_| pursuant to a registration statement which has been declared
effective under the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided that if box (3), (4) or (5) is
checked, the holder must, prior to such transfer, furnish to the Trustee such
certifications, legal opinions, or other information as the Company may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
_____________________________
Signature Guarantee: Signature
____________________ _____________________________
Signature
______________________________________________________________________________
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all of this Security purchased by the
Company pursuant to Section 4.14 or 4.15 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.14 or 4.15 of the Indenture, state the
Principal Amount: $
Date:____________________ Your Signature:___________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:________________________________________________________
(Signature must be guaranteed)
A-13
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE(a)]
No.
$________
CUSIP No.
BUILDING MATERIALS CORPORATION OF AMERICA
SERIES B 8 5/8% SENIOR NOTES DUE 2006
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation
(the "Company"), promises to pay to
, or registered assigns, the principal sum of Dollars on
December 15, 2006.
Interest Payment Dates: June 15 and December 15, commencing June 15,
1997.
Record Dates: June 1 and December 1.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
- ----------
(a) If the certificate is a Private Exchange Note issued pursuant to the
Registration Rights Agreement in a Private Exchange (as defined therein),
add the restricted securities legend from Exhibit A to this Indenture and
replace the Assignment Form included in this Exhibit B with the Assignment
Form included in Exhibit A.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
BUILDING MATERIALS CORPORATION
OF AMERICA
By: ____________________________
Name:
Title:
Attest:
By: __________________________
Name:
Title:
Dated:
Trustee's Certificate of Authentication
This is one of the Series B 8 5/8%
Senior Notes due 2006 [Private Exchange
8 5/8% Senior Notes due 2006] described
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: ___________________________
Authorized Signatory
B-2
<PAGE>
[FORM OF REVERSE SIDE EXCHANGE SECURITY AND PRIVATE EXCHANGE NOTE]
BUILDING MATERIALS CORPORATION OF AMERICA
Series B 8 5/8% Senior Notes due 2006
Private Exchange 8 5/8% Senior Notes due 2006
1. Interest. BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), promises to pay cash interest on the principal
amount of this Security at a rate of 8 5/8% per annum, payable on June 15 and
December 15 of each year (the "Interest Payment Date"), commencing June 15,
1997. The Company shall pay interest on overdue principal at the rate of 8 5/8%
per annum. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. The Holder must
surrender this Security to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts. The
Company, however, may pay principal and interest by a check payable in such
money. The Company may mail an interest check to the Holder's registered
address. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar. Initially, The Bank of New York (the
"Trustee") or its agent will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without prior notice to any
Holder. The Company or any of its Subsidiaries or Affiliates may act in any such
capacity, except in certain circumstances.
4. Indenture. The Company issued the Securities under an Indenture
dated as of December 9, 1996 (the "Indenture") between the Company and the
Trustee. Capitalized terms used in this Security and not defined in this
Security shall have the meaning set forth in the Indenture. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 as in effect on the
date of the Indenture. The Securities are subject
B-3
<PAGE>
to all such terms, and Holders of Securities are referred to the Indenture and
said Act for a statement of such terms.
The Securities are senior unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount. This Security is one of the
[Exchange Securities] [Private Exchange Notes] referred to in the Indenture. The
Securities include the Initial Securities, any Exchange Securities, issued in
exchange for the Initial Securities pursuant to the Indenture, and the Private
Exchange Notes. The Initial Securities, the Exchange Securities, and the Private
Exchange Notes are treated as a single class of securities under the Indenture.
5. Redemption.
(a) Optional Redemption. The Company may redeem the Securities, in
whole or in part, at any time on or after December 15, 2001, on not less than 30
nor more than 60 days' prior notice in principal amounts of $1,000 or any
integral multiple of $1,000 at the following redemption prices (expressed in
percentages of principal amount) plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing:
Optional
Redemption
Period Percentage
---------- ----------
December 15, 2001........................................ 104.3125%
December 15, 2002........................................ 102.8750%
December 15, 2003........................................ 101.4375%
and thereafter, beginning December 15, 2004, at 100%.
In the event that, on or prior to the date which is three years
after the Issue Date, the Company consummates a public offering of the Common
Stock of the Company, the Company may, at its option, on not less than 30 nor
more than 60-days' notice, redeem, but only to the extent of such net cash
proceeds actually received by it, up to 50% of the principal amount of the
Securities then outstanding at a redemption price equal to 108.625% of the
principal amount thereof at the date of redemption, provided that no such
redemption may be made if and to the extent that, after giving effect thereto,
less than a majority of the principal amount of the Securities originally issued
would be outstanding. Any such redemption shall be made within 75 days of the
consummation of any such sale.
B-4
<PAGE>
In the event a Change of Control occurs, the Company shall have the
option to redeem all, but not less than all, of the Securities, at a redemption
price equal to the sum of (x) 100% of the principal amount thereof plus accrued
and unpaid interest thereon to the redemption date and (y) the Applicable
Premium with respect to each $1,000 principal amount of Securities so redeemed.
Notice of any redemption to be made pursuant to this paragraph must be given no
later than 10 days after the Change of Control Payment Date, and redemption must
be made within 30 days of the date of such notice.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities or portions thereof to be redeemed pro rata, by lot
or by a method that complies with applicable legal and securities exchange
requirements.
(b) Mandatory Redemption. The Securities will not have the benefit
of any sinking fund.
6. Put Provisions. Upon a Change of Control, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities (in integral multiples of $1,000) of such Holder at a
repurchase price equal to 101% of the principal amount thereof (or, if lower,
the redemption price then in effect under the provisions described in paragraph
5(a)), plus accrued interest to the date of repurchase as provided in, and
subject to the terms of, the Indenture.
7. Notice of Redemption. Notice of redemptions pursuant to paragraph
5 will be mailed at least 30 days but not more than 60 days before the
applicable redemption date (or, if applicable at such other time as is provided
by paragraph 5(a)) to each Holder of Securities to be redeemed at the Holder's
registered address. If money sufficient to pay the redemption price and accrued
interest on all Securities to be redeemed on the redemption date is deposited
with the Paying Agent on the redemption date, on and after such date interest
will cease to accrue on such Securities or portions of them. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000.
8. Proceeds on Disposition of Assets. As described in Section 4.15
of the Indenture, the Company is required under certain circumstances to apply
the Net Cash Proceeds (or a portion thereof) from Asset Sales to offer to
purchase Securities at a price equal to 100% of the principal amount thereof
plus accrued interest thereon to the date of purchase.
9. Denominations, Transfer, Exchange. The Securities are in
registered form in denominations of $1,000 and integral multiples of $1,000. A
Holder may register the transfer or
B-5
<PAGE>
exchange of Securities as provided in the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture.
10. Persons Deemed Owners. The Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name the Security is
registered with the Registrar as the owner for all purposes.
11. Unclaimed Money. If money for the payment of interest or
principal remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its written request. After such time,
Holders entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Maturity. Subject to certain conditions
described in Article VIII of the Indenture, if the Company deposits with the
Trustee money or U.S. Government Obligations sufficient to pay the principal of
and interest on the Securities to maturity, the Company will be discharged (to
the extent provided in the Indenture) from the Indenture and the Securities.
13. Amendments, Supplements and Waivers. Subject to certain
exceptions requiring the consent of each Holder affected as described in Article
IX of the Indenture, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Securities, and any existing Default may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Securities. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency, provide for the
assumption of the obligations of the Company to Holders or make any change that
does not adversely affect the rights of any Holder.
14. Restrictive Covenants. The Indenture imposes certain limitations
on, among other things, the ability of the Company to merge or consolidate with
any other Person or sell, lease or otherwise transfer all or substantially all
of its properties or assets, the ability of the Company or certain of its
Subsidiaries to make Restricted Payments and Restricted Investments and the
ability of the Company and certain of its Subsidiaries to incur Debt, create
Liens or engage in transactions with Affiliates or issue Preferred Stock, all
subject to certain limitations and qualifications described in the Indenture.
B-6
<PAGE>
15. Successor Corporation. When a successor Person or other entity
assumes all the obligations of its predecessor under the Securities and the
Indenture, the predecessor Person will be released from those obligations.
16. Defaults and Remedies. The Securities have the Events of Default
as set forth in Section 6.01 of the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding
Securities may declare all the Securities to be due and payable immediately,
except that in the case of an Event of Default arising from certain events of
bankruptcy, insolvency or reorganization relating to the Company, all
outstanding Securities shall become due and payable immediately without further
action or notice. Holders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power. The
Company must furnish quarterly compliance certificates to the Trustee.
17. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any of its Affiliates,
and may otherwise deal with the Company or any of its Affiliates, as if it were
not the Trustee.
18. No Recourse Against Others. A director, officer, employee,
stockholder or Affiliate, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
19. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or any authenticating
agent.
20. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification
B-7
<PAGE>
Procedures, the Company has caused CUSIP numbers to be printed on the Securities
and has directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Securityholders. No representation is made as to the accuracy of
such numbers either as printed on the Securities or as contained in any notice
of Redemption and reliance may be placed only on the other identification
numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Attention: Secretary
B-8
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
________________________________________________________________________________
(insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
Date:__________________________ Your Signature:_______________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:_________________________
B-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all of this Security purchased by the
Company pursuant to Section 4.14 or 4.15 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.14 or 4.15 of the Indenture, state the
Principal Amount: $____________________
Date:________________ Your Signature:_________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:____________________________________________________
(Signature must be guaranteed)
B-10
<PAGE>
EXHIBIT C
[FORM OF LEGEND FOR BOOK-ENTRY SECURITIES]
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
C-1
<PAGE>
EXHIBIT D
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS
The undersigned is delivering this letter in connection with an
offering of 8 5/8% Senior Notes Due 2006 (the "Notes") of Building Materials
Corporation of America (the "Company"), all as described in the Offering
Memorandum (the "Offering Memorandum") relating to the offering.
The undersigned hereby confirms that:
(i) the undersigned is an "accredited investor" within the meaning
of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended
(the "Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2) or (3)
under the Securities Act (an "Institutional Accredited Investor");
(ii) any purchase of Notes by the undersigned will be for the
undersigned's own account or for the account of one or more other
Institutional Accredited Investors or as fiduciary for the account of one
or more trusts, each of which is an "accredited investor" within the
meaning of Rule 501(a)(7) under the Securities Act and for each of which
we exercise sole investment discretion or (B) we are a "bank," within the
meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan
association" or other institution described in Section 3(a)(5)(A) of the
Securities Act that is acquiring Notes as fiduciary for the account of one
or more institutions for which we exercise sole investment discretion;
(iii) in the event that the undersigned purchases any notes, it will
acquire Notes having a minimum principal amount of not less than $250,000
for the undersigned's own account or for any separate account for which
the undersigned is acting;
(iv) the undersigned has such knowledge and experience in financial
and business matters that the undersigned is capable of evaluating the
merits and risks of purchasing Notes;
(v) the undersigned is not acquiring Notes with a view to
distribution thereof or with any present intention of offering or selling
Notes, except as permitted below; provided that the disposition of the
undersigned's property and property of any accounts for which the
undersigned is
D-1
<PAGE>
acting as fiduciary shall remain at all times within the undersigned's
control; and
(vi) the undersigned has received a copy of the Offering Memorandum
and acknowledges that the undersigned has had access to such financial and
other information, and has been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto,
as the undersigned deems necessary in connection with the undersigned's
decision to purchase Notes.
The undersigned understands that the Notes are being offered in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Notes have not been registered
under the Securities Act or any applicable state securities laws, and the
undersigned agrees, on the undersigned's own behalf and on behalf of each
account for which the undersigned acquires any Notes, that if in the future the
undersigned decides to resell or otherwise transfer only (a) to the Company or
any subsidiary thereof, (b) to a person who is a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, (c) to an Institutional Accredited Investor that,
prior to such transfer, furnishes to the trustee (or transfer agent, as the case
may be) for such Notes a signed letter containing certain representations and
agreements relating to the restrictions on transfer of such Notes (the form of
which letter can be obtained from such trustee, or transfer agent, as the case
may be), (d) outside the United States in a transaction meeting the requirements
of Regulation S under the Securities Act, (e) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if applicable) or
(f) pursuant to a registration statement which has been declared effective under
the Securities Act. The undersigned agrees that any such transfer of Notes
referred to in this paragraph shall be in accordance with applicable securities
laws of any State of the United States or any other applicable jurisdiction and
in accordance with the legends set forth on the Notes. The undersigned
understands that the register and transfer agent for the Notes will not be
required to accept for registration or transfer any Notes, except upon
presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. The undersigned further
understands that any Notes will be in the form of definitive physical
certificates and that such certificates will bear a legend (unless the sale of
the Notes has been registered under the Securities Act) reflecting the substance
of this paragraph.
The undersigned acknowledges that the Company, others and you will
rely upon the undersigned's confirmations, acknowledgements and agreements set
forth herein, and the undersigned
D-2
<PAGE>
agrees to notify you promptly in writing if any of the undersigned's
representations or warranties herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK.
______________________________________
(Name of Purchaser)
By:___________________________________
Name:
Title:
Address:
D-3
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this indenture to
be duly executed, all as of the date first written above.
[ISSUER]
as Issuer
By:_________________________________
Name:
Title:
[TRUSTEE]
as Trustee
By:_________________________________
Name:
Title:
D-4
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
$100,000,000
8 5/8% Senior Notes Due 2006
REGISTRATION RIGHTS AGREEMENT
December 9, 1996
Bear, Stearns & Co. Inc.
Chase Securities Inc.
Salomon Brothers Inc
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Building Materials Corporation of America, a Delaware corporation
(the "Company"), proposes to issue and sell to you (the "Initial Purchasers"),
upon the terms set forth in a purchase agreement dated December 9, 1996 (the
"Purchase Agreement"), $100,000,000 aggregate principal amount of its 8 5/8%
Senior Notes due 2006 (the "Notes"). The Notes will be issued pursuant to an
indenture (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Trustee") dated December 9, 1996, substantially in the form
previously furnished to the Initial Purchasers. As an inducement to the Initial
Purchasers, the Company agrees with the Initial Purchasers, for the benefit of
the holders of the Notes (including, without limitation, the Initial Purchasers,
herein referred to as the "Holders"), as follows:
<PAGE>
-2-
1. Registered Exchange Offer. The Company shall prepare and, by the
earlier of 60 days after the date of original issuance of the Notes (the "Issue
Date") or the date of filing of a registration statement in respect of an
initial public offering of common stock of the Company, file with the Securities
and Exchange Commission (the "Commission") a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to a
proposed offer (the "Registered Exchange Offer") to the Holders of the Notes to
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of debt securities of the Company identical in all material respects to
the Notes (the "Exchange Notes"), except for the transfer restrictions relating
to the Notes. The Company shall use its best efforts to cause such Exchange
Offer Registration Statement to become effective under the Securities Act within
120 days of the Issue Date. Following the declaration of the effectiveness of
the Exchange Offer Registration Statement, the Company shall promptly commence
the Registered Exchange Offer, it being the objective of such Registered
Exchange Offer to enable each Holder of the Notes electing to exchange the Notes
for Exchange Notes and (assuming that such Holder is not an affiliate of the
Company within the meaning of the Securities Act, acquires the Exchange Notes in
the ordinary course of such Holder's business and has no arrangements with any
person to participate in the distribution of the Exchange Notes) to trade such
Exchange Notes from and after their receipt without any limitations or
restrictions under the Securities Act and the securities laws of the several
states of the United States. In connection with such Registered Exchange Offer,
the Company shall take such further action, including, without limitation,
appropriate filings under state securities laws, as may be necessary to realize
the foregoing objective subject to the proviso of Section 3(h).
The Company shall include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the Commission
with respect to the potential "underwriter" status of any broker-dealer that is
the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such
broker-dealer in the Registered Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the Com-
<PAGE>
-3-
mission or such positions or policies, in the reasonable judgment of the
Initial Purchasers, represent the prevailing views of the staff of the
Commission. Such "Plan of Distribution" section shall also allow the use
of the prospectus by all persons subject to the prospectus delivery
requirements of the Securities Act, including Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; provided that such period shall not
exceed 180 days (or such longer period if extended pursuant to Section 3(j)
below).
If, upon consummation of the Exchange Offer, an Initial Purchaser
holds Notes acquired by it as part of its initial distribution, the Company upon
the request of such Initial Purchaser shall simultaneously with the delivery of
the Exchange Notes pursuant to the Registered Exchange Offer issue and deliver
to such Initial Purchaser, in exchange (the "Private Exchange") for the Notes
held by such Initial Purchaser, a like principal amount of debt securities of
the Company identical in all material respects to the Notes (the "Private
Exchange Notes"). The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
business days after the date notice thereof is mailed to the Holders (or longer
if required by applicable law);
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
<PAGE>
-4-
(d) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(ii) deliver to the Trustee for cancellation all the Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of the Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Notes of such Holder so accepted
for exchange.
The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture substantially similar to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes will vote and consent
together on all matters as one class and that none of the Exchange Notes, the
Private Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter.
2. Shelf Registration. If, (i) because of any change in law or in
currently prevailing interpretations of the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) for any reason the Registered Exchange Offer is not
completed within 180 days of the Issue Date (the "Completion Deadline"), (iii)
the Initial Purchasers so request with respect to the Notes or the Private
Exchange Notes held by them following consummation of the Registered Exchange
Offer or (iv) any Holder is not eligible to participate in the Registered
Exchange Offer or, in the case of any Holder that participates in the Registered
Exchange Offer or the Private Ex-
<PAGE>
-5-
change, such Holder does not receive freely tradeable Exchange Notes on the date
of the exchange, the Company shall, at its cost, take the following actions:
(a) as promptly as practicable file with the Commission and
thereafter shall use its best efforts to cause to be declared effective a
registration statement (the "Shelf Registration Statement" and, together with
the Exchange Offer Registration Statement, a "Registration Statement") on an
appropriate form under the Securities Act relating to the offer and sale of the
Notes or, if applicable, the Private Exchange Notes by the Holders thereof from
time to time in accordance with the methods of distribution set forth in the
Shelf Registration Statement and Rule 415 under the Securities Act (hereafter,
the "Shelf Registration").
(b) use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the prospectus included therein to be
lawfully delivered by the Holders of the Notes or, if applicable, the Private
Exchange Notes for a period of three years (or for such longer period if
extended pursuant to Section 3(j) below) from the Issue Date or such shorter
period that will terminate when all the Notes or, if applicable, the Private
Exchange Notes covered by the Shelf Registration Statement have been sold
pursuant thereto; provided, that the Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in Holders
of the Notes or, if applicable, the Private Exchange Notes covered thereby not
being able to offer and sell the Notes or, if applicable, the Private Exchange
Notes during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
<PAGE>
-6-
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall furnish to the Initial Purchasers, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall obtain the consent of the Initial Purchasers to any such
filing, which shall not be unreasonably withheld.
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Notes and any Participating Broker-Dealer from whom the
Company has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer:
(i) when the Registration Statement or any amendment thereto
has been filed with the Commission and when the Registration Statement or
any posteffective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information, provided that the request and the
contents of the request need only be disclosed to the Initial Purchasers
and one counsel appointed by and on behalf of the Holders of the Notes as
described in Section 4;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Notes or, if applicable, the Private Exchange Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order to
make the statements therein not misleading (which notice shall be
accompanied by an
<PAGE>
-7-
instruction to suspend the use of the prospectus until the requisite
changes have been made).
(c) The Company shall use its best efforts to prevent the issuance
or obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible time.
(d) The Company shall furnish to each Holder of the Notes or, if
applicable, the Private Exchange Notes included within the coverage of the Shelf
Registration, without charge, at least one copy of the Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits (including
those, if any, incorporated by reference).
(e) The Company shall deliver to the Initial Purchasers and to any
other Holder who so requests, without charge, at least one copy of the Exchange
Offer Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Initial Purchasers or any such
Holder requests, all exhibits (including those incorporated by reference).
(f) The Company shall deliver to each Holder of the Notes or, if
applicable, the Private Exchange Notes included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Notes or, if applicable, the Private Exchange Notes in connection with
the offering and sale of the Notes or, if applicable, the Private Exchange Notes
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(g) The Company shall deliver to the Initial Purchasers, any
Participating Broker-Dealer and such other persons required to deliver a
prospectus following the Registered Exchange Offer, without charge, as many
copies of the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as such persons may reasonably
request. The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any
<PAGE>
-8-
amendment or supplement thereto by the Initial Purchasers, if necessary, any
Participating Broker-Dealer and such other persons required to deliver a
prospectus following the Registered Exchange Offer in connection with the
offering and sale of the Exchange Notes covered by the prospectus, or any
amendment or supplement thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Notes or, if applicable, the
Private Exchange Notes, pursuant to the Shelf Registration, the Company shall
register or qualify or cooperate with the Holders of the Notes or, if
applicable, the Private Exchange Notes, included therein and their respective
counsel in connection with the registration or qualification of the Notes or, if
applicable, the Private Exchange Notes, for offer and sale under the securities
or blue sky laws of such jurisdictions as any Holder of the Notes or the Private
Exchange Notes reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Notes covered by the Shelf Registration; provided that the Company shall
not be required to (i) qualify generally to do business in any jurisdiction
where it is not then so qualified or (ii) take any action which would subject it
to general service of process or to taxation in any jurisdiction where it is not
then so subject.
(i) The Company shall cooperate with the Holders of the Notes or, if
applicable, the Private Exchange Notes to facilitate the timely preparation and
delivery of certificates representing the Notes or, if applicable, the Private
Exchange Notes to be sold in the Shelf Registration free of any restrictive
legends and in such denominations and registered in such names as the Holders
may request a reasonable period of time prior to sales of the Notes or, if
applicable, the Private Exchange Notes pursuant to the Shelf Registration.
(j) Upon the occurrence of any event contemplated by Section 3(b)(v)
above, the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to Holders of the
Notes, the Exchange Notes or, if applicable, the Private Exchange Notes, as the
case may be, the prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Company notifies the Initial Purchasers, the Holders of the
Notes and any known Participating Broker-Dealer
<PAGE>
-9-
in accordance with Section 3(b)(v) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the Initial
Purchasers, the Holders of the Notes and any such Participating Broker-Dealers
shall suspend use of such prospectus, and the period of effectiveness of the
Shelf Registration Statement provided for in Section 2(b) above and the Exchange
Offer Registration Statement provided for in Section 1 above shall each be
extended by the number of days from and including the date of the giving of such
notice to and including the date when the Initial Purchasers, the Holders of the
Notes and any known Participating Broker-Dealer shall have received such amended
or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Notes or Exchange
Notes, as the case may be, and provide the applicable trustee with printed
certificates for the Notes or Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration and will make generally available to
its securities holders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of the Shelf Registration, which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture (or an indenture
substantially identical to the Indenture in the case of a Registered Exchange
Offer) to be qualified under the Trust Indenture Act of 1939, as amended.
(n) The Company may require each Holder of the Notes to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Notes as the
Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement.
(o) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in
<PAGE>
-10-
customary form) and take all such other action, if any, as any Holder of the
Notes shall reasonably request in order to facilitate the disposition of the
Notes pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i)
make reasonably available for inspection by the Holders of the Notes, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement and any attorney, accountant or other agent retained by the Holders of
the Notes or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii) cause the
Company's officers, directors and employees to supply all relevant information
reasonably requested by the Holders of the Notes or any such underwriter,
attorney, accountant or agent in connection with the Shelf Registration
Statement; provided that the foregoing inspection and information gathering
shall be coordinated on behalf of the Initial Purchasers by the Initial
Purchasers and on behalf of the other parties, by one counsel designated by and
on behalf of such other parties as described in Section 4.
(q) In the case of the Registered Exchange Offer, the Company shall
(i) make reasonably available for inspection by the Initial Purchasers, any
known Participating Broker-Dealer and any attorney, accountant or other agent
retained by the Initial Purchasers or such Participating Broker-Dealer all
relevant financial and other records, pertinent corporate documents and
properties of the Company and (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by the Initial
Purchasers, such Participating Broker-Dealer or any such attorney, accountant or
agent in connection with the Exchange Offer Registration Statement; provided
that the foregoing inspection and information gathering shall be coordinated on
behalf of the Initial Purchasers by the Initial Purchasers and on behalf of the
other parties, by one counsel designated by and on behalf of such other parties
as described in Section 4.
(r) In the case of any Shelf Registration, the Company, if requested
by any Holder of the Notes or, if applicable, the Private Exchange Notes, shall
cause its counsel to deliver an opinion relating to the Notes or, if applicable,
the Private Exchange Notes in customary form, cause its officers to execute and
deliver all customary documents and certificates requested by any underwriters
of the Notes or, if applicable, the Private Exchange Notes and cause its
independent public accountants to provide to the selling Holders of the Notes
or, if
<PAGE>
-11-
applicable, the Private Exchange Notes and any underwriter therefor a comfort
letter in customary form.
(s) In the case of the Registered Exchange Offer, if requested by
the Initial Purchasers or any known Participating Broker-Dealer, the Company
shall cause its outside counsel to deliver to the Initial Purchasers or such
Participating Broker-Dealer a signed opinion in the form set forth in Section
5(c)(A) of the Purchase Agreement with such changes as are customary in
connection with the preparation of a Registration Statement and shall cause its
independent public accountants to deliver to the Initial Purchasers or such
Participating Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Section 5(f) of the
Purchase Agreement, with appropriate date changes.
4. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses of Cahill Gordon &
Reindel, counsel to the Initial Purchasers, incurred in connection with the
Registered Exchange Offer) and, in the event of a Shelf Registration, shall bear
or reimburse the Holders of the Notes or, if applicable, the Private Exchange
Notes for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Notes and, if
applicable, the Private Exchange Notes to act as counsel for the Holders of the
Notes, and, if applicable, the Private Exchange Notes in connection therewith,
which counsel shall be reasonably satisfactory to the Company.
5. Indemnification. The Company agrees to indemnify and hold
harmless each Holder of the Notes or, if applicable, the Private Exchange Notes
and each person, if any, who controls such Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act and each director,
officer, employee or agent of such Holder and each director, officer, employee
or agent of each such controlling person (each Holder, such controlling persons
and each such director, officer, employee and agent are referred to collectively
as the "Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including, but
not limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Notes or, if applicable, the Private Exchange Notes),
to which each Indemnified Party may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise
<PAGE>
-12-
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse, as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending or preparing to defend against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action in respect
thereof; provided, however, that the Company shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein; provided, further, that (A) the Company shall not be
obligated to indemnify or hold harmless any Indemnified Party in respect of any
loss, claim, damage, liability or action to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in a
preliminary Registration Statement or preliminary prospectus if the applicable
Holder or Initial Purchaser failed to deliver a copy of a final prospectus or an
amended or supplemented Registration Statement or prospectus that was made
available by the Company to such Indemnified Party prior to the applicable sale
to the person or persons asserting the claim which is the basis of
indemnification and such final prospectus or amended or supplemented
Registration Statement or prospectus cured such defect and (B) this indemnity
agreement will be in addition to any liability which the Company may otherwise
have to such Indemnified Party. The Company will not settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Indemnified Party or any person who controls such
Indemnified Party within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding) without the prior written consent of such Indemnified Party, which
consent shall not be unreasonably withheld, unless such settlement, compromise
or consent includes an unconditional release of such Indemnified Party and each
such controlling person from all liability arising out of
<PAGE>
-13-
such claim, action, suit or proceeding. No Indemnified Party will settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought without the prior written consent of the Company (which consent will not
be unreasonably withheld). The Company shall also indemnify underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution (as described in such Registration Statement),
their officers and directors and each person who controls such persons (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Holders of the Notes if requested by such Holders.
(b) less the Initial Purchasers, any Participating Broker-Dealer and
each person, if any, who controls the Initial Purchasers or such Participating
Broker-Dealer within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act and each director, officer, employee or agent of the
Initial Purchasers or such Participating Broker-Dealer and each director,
officer, employee or agent of each such controlling person (the Initial
Purchasers, any Participating Broker-Dealer, such controlling persons and each
such director, officer, employee and agent of the Initial Purchasers, such
Participating Broker-Dealer or such controlling person are referred to
collectively as the "Exchange Offer Indemnified Parties") from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of Exchange Notes), to
which each Exchange Offer Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Exchange Offer Registration Statement or prospectus contained therein or in any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse, as incurred, the Exchange Offer Indemnified Parties for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending or preparing to defend against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action in respect
thereof; provided, however, that the Company shall not be liable in any such
case to
<PAGE>
-14-
the extent that such loss, claim, damage or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Exchange Offer Registration Statement or prospectus
contained therein or in any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such Initial Purchaser or Participating Broker-Dealer specifically for
inclusion therein; provided, further, that (A) the Company shall not be
obligated to indemnify or hold harmless any Exchange Offer Indemnified Party in
respect of any loss, claim, damage, liability or action to the extent that any
such loss, claim, damages, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in a preliminary Registration Statement or preliminary prospectus if the
applicable Initial Purchaser or Participating Broker-Dealer failed to deliver a
copy of a final prospectus or an amended or supplemented Registration Statement
or prospectus that was made available by the Company to such Exchange Offer
Indemnified Party prior to the applicable sale to the person or persons
asserting the claim which is the basis of indemnification and such final
prospectus or amended or supplemented Registration Statement or prospectus cured
such defect and (B) this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Exchange Offer
Indemnified Party. The Company will not settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Exchange Offer Indemnified Party or any person who controls such
Exchange Offer Indemnified Party within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) without the prior written consent of such Exchange
Offer Indemnified Party, which consent shall not be unreasonably withheld,
unless such settlement, compromise or consent includes an unconditional release
of such Exchange Offer Indemnified Party and each such controlling person from
all liability arising out of such claim, action, suit or proceeding. No Exchange
Offer Indemnified Party will settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought without the prior written consent
of the Company (which consent will not be unreasonably withheld).
(c) Each Holder of the Notes or, if applicable, the Private Exchange
Notes, severally and not jointly, will indemnify and hold harmless the Company,
each director, officer, em-
<PAGE>
-15-
ployee or agent of the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and each director, officer, employee or agent of such controlling
person from and against any losses, claims, damages or liabilities or any
actions in respect thereof, to which the Company or any such director, officer,
employee, agent or controlling person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, such indemnified persons
for any legal or other expenses reasonably incurred by the Company or any such
director, officer, employee, agent or controlling person in connection with the
investigating or defending or preparing to defend against or appearing as a
third-party witness in connection with any loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Holder may otherwise have to the Company or any such
directors, officers, employees, agents or controlling persons.
(d) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party (i) will not relieve it from any liability
under paragraph (a), (b) or (c) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights or defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a), (b)
or (c) above. In case any such action is brought against any indemnified
<PAGE>
-16-
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, which approval shall not be unreasonably withheld, the indemnifying
party will not be liable to such indemnified party under this Section 5 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances) or (ii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
(e) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 5 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) (other than by reason of exceptions
provided in such Section 5), each indemnifying party, in order to provide for
just and equitable contribution, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof), in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the in-
<PAGE>
-17-
demnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or such Holder or such other indemnified person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and each
indemnified party agrees that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (e).
Notwithstanding any other provision of this Section 5(e), the Holders of the
Notes or, if applicable, the Private Exchange Notes shall not be required to
contribute any amount in excess of the amount by which the net proceeds received
by such Holders from the sale of the Notes or, if applicable, the Private
Exchange Notes pursuant to a Registration Statement exceeds the amount of
damages which such Holders have otherwise been required to pay in respect of the
same or a similar claim, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (e), each director, officer,
employee and agent of any indemnified party and each person, if any, who
controls such indemnified party within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such indemnified party and each director and officer of the
Company, and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Company.
(f) The agreements contained in this Section 5 shall survive the
sale of the Notes, the Exchange Notes or, if applicable, the Private Exchange
Notes pursuant to a Registration Statement and shall remain in full force and
effect, regardless
<PAGE>
-18-
of any termination or cancellation of this Agreement or any investigation made
by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances.
(a) Additional interest at a rate of 0.5% per annum of the principal
amount of the Notes (the "Additional Interest") shall be assessed as follows:
(i) if the Exchange Offer Registration Statement is not filed
with the Commission by the earlier of 60 days after the Issue Date or the
date of filing of a registration statement in respect of an initial public
offering of common stock of the Company, then, commencing from and
including the earlier of such dates, Additional Interest shall be assessed
on the Notes;
(ii) if the Registered Exchange Offer is not completed and a
Shelf Registration is not declared effective by the Commission by the
Completion Deadline, then, commencing on the Completion Deadline,
Additional Interest shall be assessed on the Notes; and
(iii) if (A) the Company has not exchanged Exchange Notes for
all the Notes validly tendered in accordance with the terms of the
Registered Exchange Offer on or prior to 30 business days after the date
on which the Exchange Offer Registration Statement was declared effective,
or (B) if applicable, the Shelf Registration Statement has been declared
effective and it ceases to be effective prior to three years (or such
later date if such three-year period is extended pursuant to Section 3(j)
above or such shorter period as is provided in Section 2(b)) from the
Issue Date, then, Additional Interest shall be assessed on the Notes,
commencing on (x) the 31st business day after such effective date in the
case of (A) above, or (y) the day such Shelf Registration Statement ceases
to be effective in the case of (B) above;
provided, however, that (1) upon the filing of the Exchange Offer Registration
Statement or the Completion Deadline in the case of (i) above, (2) upon
completion of the Registered Exchange Offer or the effectiveness of the Shelf
Registration Statement in the case of (ii) above, or (3) upon the exchange of
Exchange Notes for all the Notes validly tendered in accordance with the terms
of the Registered Exchange Offer, or upon the effectiveness of the Shelf
Registration Statement which has ceased to remain effective prior to three years
(or such later
<PAGE>
-19-
date if extended pursuant to Section 3(j) above or such shorter period as is
provided in Section 2(b)) from the date of original issuance of the Notes in the
case of (iii) above, Additional Interest on the Notes as a result of such clause
(i), (ii) or (iii) shall immediately cease to accrue.
(b) Any amount of Additional Interest due pursuant to clauses (i),
(ii) or (iii) of Section 6(a) above will be payable in cash semiannually in
arrears on each Interest Payment Date (as defined in the Notes), commencing with
the first such Interest Payment Date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the Additional Interest by a fraction, the numerator
of which is the number of days such Additional Interest rate was applicable
during such period, determined on the basis of a 360-day year comprised of
twelve 30-day months, and the denominator of which is 360.
(c) If the Company effects the Registered Exchange Offer, the
Company will be entitled to close the Registered Exchange Offer provided that
the Company has accepted all the Notes theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer.
7. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of Holders of a majority in aggregate principal amount of the Notes,
determined in accordance with the terms of the Indenture.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
telex, telecopy, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Notes, in accordance with Section 10.02 of
the Indenture, with a copy to the Initial Purchasers as follows:
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
<PAGE>
-20-
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Michael A. Becker, Esq.
(2) if to the Initial Purchasers, at the addresses specified in
Section 7(b)(1);
(3) if to the Company, at its address as follows:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07970
Attention: General Counsel
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged by recipient's
telecopy operator, if telecopied; and on the day delivered, if sent by overnight
air courier guaranteeing next day delivery. All such notices and communications
to the Holders shall be deemed to have been duly given if given as provided in
Section 10.02 of the Indenture.
(c) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any provisions relating to conflicts of laws.
<PAGE>
-21-
(g) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms:
Very truly yours,
BUILDING MATERIALS CORPORATION
OF AMERICA
By: /s/ James P. Rogers
----------------------------------
Name: James P. Rogers
Title: Senior Vice President
and Treasurer
Confirmed and accepted as of the date first above written:
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
SALOMON BROTHERS INC
By: /s/ Michael L. Offen
--------------------------------
Name: Michael L. Offen
Title: Senior Managing Director
<PAGE>
AMENDMENT No. 6, dated as of January 1, 1997, to AMENDED AND
RESTATED MANAGEMENT AGREEMENT dated as of March 3, 1992 (the
"Agreement"), as previously amended by Amendments dated as of January 1,
1994, May 31, 1994, December 31, 1994, December 31, 1995 and October 18,
1996, among GAF Corporation ("GAF"), ISP Holdings Inc. ("ISP Holdings"),
G-I Holdings Inc. ("G-I Holdings"), G Industries Corp. ("Industries"),
Merick Inc. ("Merick"), GAF Fiberglass Corporation, formerly known as
GAF Chemicals Corporation ("GFC"), GAF Building Materials Corporation
("Building Materials"), GAF Broadcasting Company, Inc. ("Broadcasting"),
Building Materials Corporation of America ("BMCA"), U.S. Intec, Inc.
("USI"), and International Specialty Products Inc. (the "Company")
WHEREAS, in accordance with Section 2 of the Agreement, the parties
desire to further delineate the services to be provided by ISP under the
Agreement;
WHEREAS, the parties desire to further describe the manner in which
certain combined expenses and costs are to be allocated among the
parties;
WHEREAS, the parties desire to reallocate the management fees
payable to the Company in order to more appropriately reflect usage of
services and, in accordance with Section 8 of the Agreement, to increase
the management fee payable to the Company;
WHEREAS, the parties desire to extend the term of the Agreement;
NOW, THEREFORE, the parties hereby amend the Agreement as follows:
1. Section 1 of the Agreement is hereby amended to extend the
Term until December 31, 1997.
2. Section 2(ii) of the Agreement shall be amended to read as follows:
"Financial Services, including insurance management, accounting,
payroll and control, tax and investment management services"
3. Section 3 of the Agreement is amended to read in its
entirety as follows:
"In consideration of the Company providing Services hereunder, each
of the corporations listed below shall pay to the Company a
management fee (the "Management Fee") at the following respective
annual rates: BMCA - $4,653,291; G-I Holdings - $500,000; ISP
Holdings - $100,000; and GFC - $281,216. The Management Fee shall be
payable quarterly in arrears."
4. Section 4 of the Agreement is hereby amended by adding the
following at the end thereof:
1
<PAGE>
"(c) If joint insurance policies or separate policies with a
shared policy limit or deductible are issued to the parties
hereto, (i) the premiums charged for each such policy shall be
allocated among them in the manner determined by an
unaffiliated actuary, insurance broker or insurer designated by
the Company's risk manager, except to the extent premiums or
rates are specifically identifiable to a pary or parties, and
(ii) deductibles, policy limits and policy recoveries shall be
allocated among the parties, on a policy by policy basis, in
proportion to the premiums paid by each of them; provided that
clause (ii) shall only apply (x) to a policy limit or
deductible to the extent it is exceeded, (y) to recoveries to
the extent a related deductible or policy limit is exceeded and
(z) to deductibles, policy limits or recoveries to the extent a
party had a loss relating thereto. To the extent a party
receives insurance recoveries in excess of its allocable share
as provided in the preceding sentence and another party shall
have the right to receive all or portion of such excess
recoveries under the related insurance policy and in accordance
with the allocations referred to in the preceding sentence,
such first party shall, within five business days after notice
thereof from the other party, pay to the other party the amount
of such excess recoveries such other party was entitled to
receive. No person or entity, other than the parties hereto,
their subsidiaries and the successors of the parties and their
subsidiaries, shall have any rights under this Section 4(c) or
be a third party beneficiary hereof. This Section 4(c) shall
survive termination of this Agreement.
(d) Any shared third party charges, other than those referred
to in Section 4(c), shall be allocated among the parties hereto
on such basis as the Company, in consultation with the other
parties, shall reasonably determine.
(e) If, at the request of another party hereto, the Company
performs for such party services outside of the normal scope of
the Services provided hereunder, the requesting party shall pay
to the Company such fee therefor as is reasonably designated by
the Company in advance of performing such services."
5. Section 6 of the Agreement is hereby deleted.
6. The first sentence of Section 8(a) of the Agreement is hereby amended
to read in its entirety as follows:
"The parties acknowledge that the Management Fee has been
established to reflect the cost to the Company of providing
Services hereunder on the date hereof. In the event of a change
of circumstances that materially affects the cost to the
Company of providing Services hereunder, including, without
limitation, a substantial increase in the Services
2
<PAGE>
provided by the Company hereunder, the parties shall negotiate
in good faith such amendments to this Agreement as may be
appropriate to take into acccount the effect of any such change
of circumstances."
7. In all other respects, the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first above written.
GAF CORPORATION
ISP HOLDINGS INC. INTERNATIONAL SPECIALTY
G-I HOLDINGS INC. PRODUCTS INC.
G INDUSTRIES CORP.
MERICK INC.
GAF FIBERGLASS CORPORATION
GAF BUILDING MATERIALS CORPORATION
GAF BROADCASTING COMPANY, INC.
BUILDING MATERIALS CORPORATION By: /s/James P. Rogers
OF AMERICA -------------------------------
U.S. INTEC, INC. Name: James P. Rogers
Title: Executive Vice President
By: /s/James P. Rogers
----------------------------------
Name: James P. Rogers
Title: Executive Vice President
3
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
BUILDING MATERIALS CORPORATION OF AMERICA
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
(Thousands, except ratio data)
Nine Months Ended Pro Forma
----------------- ------------------------
Oct. Sept. Nine Nine
Year Ended December 31, 1, 29, Year Months Months
-------------------------------------------
1991 1992 1993 1994 1995 1995 1996 1995 1995 1996
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME (LOSS)
BEFORE INCOME
TAXES 11,709 23,144 32,982 27,819 16,549 16,644 26,956 (9,143) (757) 20,229
ADD:
INTEREST EXPENSE 4,613 3,623 2,045 13,149 24,822 18,203 23,741 32,805 24,633 28,346
INTEREST
COMPONENT OF
RENTAL EXPENSE 1,813 1,984 2,091 2,366 2,329 1,676 2,210 2,806 2,105 2,210
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
EARNINGS
AVAILABLE FOR
FIXED CHARGES 18,135 28,751 37,118 43,334 43,700 36,523 52,907 26,468 25,981 50,785
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
FIXED CHARGES:
- -------------
INTEREST EXPENSE 4,613 3,623 2,045 13,149 24,822 18,203 23,741 32,805 24,633 28,346
ADD:
CAPITALIZED
INTEREST 0 0 178 413 499 367 366 499 367 366
INTEREST
COMPONENT OF
RENTAL EXPENSE 1,813 1,984 2,091 2,366 2,329 1,676 2,210 2,806 2,105 2,210
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL FIXED CHARGES 6,426 5,607 4,314 15,928 27,650 20,246 26,317 36,110 27,105 30,922
======= ======= ====== ====== ====== ======= ====== ======= ====== =======
RATIO OF EARNINGS
TO FIXED CHARGES 2.82 5.13 8.60 2.72 1.58 1.80 2.01 - - 1.64
======= ====== ======= ====== ======= ====== ===== ====== ====== ======
EARNINGS INADEQUATE TO
COVER FIXED CHARGES 9,642 1,124
====== ======
</TABLE>
<PAGE>
Exhibit 21
BUILDING MATERIALS CORPORATION OF AMERICA
LIST OF SUBSIDIARIES
COMPANY STATE OF D/B/A
- ------- -------- -----
INCORPORATION
-------------
U.S. Intec Holdings Delaware
Inc.
U.S. Intec, Inc. Texas Tri-Ply Corporation
Exterior Texas
Technologies
Corporation
Intec Marine Inc. Texas
USI Materials Inc. Delaware
BMCA Insulation Delaware
Products Inc.
BMC Warehousing Delaware
Inc.
GAFTECH Delaware
Corporation
South Ponca Realty Delaware
Corp.
GAF Real Properties Delaware
Inc.
BMCA Receivables Delaware
Corp.
Pequannock Valley Delaware
Claim Service
Company, Inc.
GAF Premium Delaware
Products Inc.
Wind Gap Real Delaware
Property
Acquisition
Corp.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Building Materials Corporation of America:
As independent public accountants, we hereby consent to the use of our reports
and all references to our firm in or made a part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 31, 1997
<PAGE>
CONFORMED COPY
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-----------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of obligor as specified in its charter)
Delaware 22-3276290
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1361 Alps Road
Wayne, New Jersey 07470
(Address of principal executive offices) (Zip code)
-----------------------------
Series B 8 5/8% Senior Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule
24 of the Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of January, 1997.
THE BANK OF NEW YORK
By: /S/STEPHEN J. GIURLANDO
--------------------------------
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1996, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,404,522
Interest-bearing balances .......... 732,833
Securities:
Held-to-maturity securities ........ 789,964
Available-for-sale securities ...... 2,005,509
Federal funds sold in domestic offices
of the bank:
Federal funds sold ................... 3,364,838
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................28,728,602
LESS: Allowance for loan and
lease losses ..............584,525
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve.... 28,143,648
Assets held in trading accounts ...... 1,004,242
Premises and fixed assets (including
capitalized leases) ................ 605,668
Other real estate owned .............. 41,238
Investments in unconsolidated
subsidiaries and associated
companies .......................... 205,031
Customers' liability to this bank on
acceptances outstanding ............ 949,154
Intangible assets .................... 490,524
Other assets ......................... 1,305,839
-----------
Total assets ......................... $44,043,010
===========
LIABILITIES
Deposits:
In domestic offices ................ $20,441,318
Noninterest-bearing .......8,158,472
Interest-bearing .........12,282,846
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 11,710,903
Noninterest-bearing ..........46,182
Interest-bearing .........11,664,721
Federal funds purchased in
domestic offices of the
bank:
Federal funds purchased ............ 1,565,288
Demand notes issued to the U.S.
Treasury ........................... 293,186
Trading liabilities .................. 826,856
Other borrowed money:
With original maturity of one year
or less .......................... 2,103,443
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 951,116
Subordinated notes and debentures .... 1,020,400
Other liabilities .................... 1,522,884
-----------
Total liabilities .................... 40,456,160
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 2,129,376
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 2,073)
Cumulative foreign currency transla-
tion adjustments .................. ( 8,403)
-----------
Total equity capital ................ 3,586,850
-----------
Total liabilities and equity
capital ........................... $44,043,010
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot |
Thomas A. Renyi | Directors
Alan R. Griffith |
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM S-4
REGISTRATION STATEMENT OF BUILDING MATERIALS CORPORATION OF AMERICA AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-29-1996
<CASH> 12,952
<SECURITIES> 29,397
<RECEIVABLES> 15,803
<ALLOWANCES> 1,319
<INVENTORY> 80,928
<CURRENT-ASSETS> 224,727
<PP&E> 216,274
<DEPRECIATION> 52,871
<TOTAL-ASSETS> 571,185
<CURRENT-LIABILITIES> 134,992
<BONDS> 322,985
0
0
<COMMON> 0
<OTHER-SE> 44,250
<TOTAL-LIABILITY-AND-EQUITY> 571,185
<SALES> 648,426
<TOTAL-REVENUES> 648,426
<CGS> 470,678
<TOTAL-COSTS> 470,678
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,741
<INCOME-PRETAX> 26,956
<INCOME-TAX> 10,474
<INCOME-CONTINUING> 16,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,482
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
