REGISTRATION NO. 333-
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 1997
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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
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BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
DELAWARE 2952 22-3276290
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification
incorporation or Number)
organization)
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BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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RICHARD A. WEINBERG, ESQ.
BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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With a copy to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
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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: [ ]
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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 UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Series B 8% Senior Notes due 2007 $100,000,000 99.254% $99,254,000 $29,280
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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. The 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 DECEMBER 5, 1997
PROSPECTUS
OFFER FOR
ALL OUTSTANDING 8% SENIOR NOTES DUE 2007
IN EXCHANGE FOR SERIES B 8% SENIOR NOTES DUE 2007
OF
BUILDING MATERIALS CORPORATION OF AMERICA
THIS EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON , 1998.
Building Materials Corporation of America, a Delaware corporation (the
"Company" or "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% Senior Notes due 2007 (the "New Notes") for each $1,000 principal
amount of its 8% Senior Notes due 2007 (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.
Holders whose Old Notes are accepted for exchange will not receive any payment
in respect of interest thereon accrued after the issuance of the 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 , 1998 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 New 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 Company's 11 3/4% Senior Deferred Coupon Notes due 2004
(the "Deferred Coupon Notes"), the Company's 85/8% Senior Notes due 2006 (the
"2006 Notes") and the Company's $75 million credit facility entered into on
August 29, 1997 (the "Credit Agreement"). At September 28, 1997, the outstanding
indebtedness from borrowings of the Company and its subsidiaries was $419.6
million and the 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 $158.5 million. The
Indenture limits the incurrence of Debt (as defined) and the issuance of
Preferred Stock (as defined) by the Company and its subsidiaries. See "Risk
Factors" and "Description of New Notes-Certain Covenants."
Prior to the Exchange Offer, there has been no public market for the New
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 NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 199_
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus. As
used herein, "Company" includes the Company's consolidated subsidiaries.
Information regarding the Company retroactively reflects the formation of the
Company.
THE COMPANY
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 26 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(R) product is the leading brand in the residential
roofing market, and the Company's Ruberoid(R) 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 "Separation
Transactions") involving its subsidiaries that resulted in, among other things,
U.S. Intec, Inc. ("USI"), a leading national manufacturer of commercial roofing
products and an indirect subsidiary of GAF, becoming a subsidiary of the
Company. 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 Separation Transactions also included transferring the Company's
glass fiber manufacturing facility in Nashville, Tennessee (and certain related
assets and liabilities) to GAF Fiberglass Corporation ("GFC"), a subsidiary of
GAF. In connection therewith, 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 Company has registered, through 1996, nine consecutive years of increases
in operating income. During the five-year period ended December 31, 1996, the
Company's net sales and operating income have increased at average annual
compound rates of approximately 14.9% and 18.3%, respectively, and its operating
income margin has increased from 6.2% to 7.2%. The Company believes that its
growth is primarily attributable to (i) improvement in its product mix, driven
by a business 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; (iv) the strength of its
national distribution system; and (v) broadening its products lines through
niche-type acquisitions.
INDUSTRY OVERVIEW
The United States residential roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 90% of industry residential roofing unit sales in
1996. Residential asphalt roofing materials comprise higher margin, premium
laminated shingles and strip shingles, which represented approximately 27% and
73%, respectively, of industry asphalt roofing unit sales in 1996. Total asphalt
residential roofing unit sales grew during the past five years (from January 1,
1992 through December 31, 1996) at an average annual compound rate of
approximately 6%, during which period unit sales of laminated and strip shingles
grew at average annual compound rates of approximately 18% and 4%, 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 product line.
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 an increase of 7%, while unit sales of modified
bitumen products grew at a rate of approximately 12%, 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 which produce, for example, gypsum, wood and cement. Management
expects that 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.
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RESIDENTIAL ROOFING PRODUCTS
Residential roofing represented approximately 66% of the Company's net sales
in 1996. 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(R),
which created an entirely new product line within the asphalt roofing industry.
The Company produces two lines of shingles, the Timberline(R) series and the
Sovereign(R) series, as well as certain specialty shingles principally for
regional markets.
The Company's sales of laminated shingles represented approximately 37% of
its residential sales in 1996, with sales of laminated shingles having grown
during the five years ended December 31, 1996 at an average annual compound rate
of approximately 13%. The Timberline(R) 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(R) 25 shingle, a
mid-weight laminated shingle which serves as an economic trade-up for consumers;
the Timberline(R) shingle, offering a wood shake appearance and enhanced visual
depth and contrast simulating shadows and superior fire resistance and
durability; and the Timberline Ultra(R) shingle, a super heavyweight laminated
shingle with the same design features as the Timberline(R) shingle, together
with added durability.
The Company's sales of strip shingles have grown at an average annual
compound rate of approximately 9% during the past five years, representing
approximately 50% of the Company's residential sales in 1996. The Sovereign(R)
series includes the standard 3-tab Sentinel(R) shingle, the Company's
residential volume leader; the Royal Sovereign(R) shingle, a heavier weight
3-tab shingle; and the Marquis(R) 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(R) and RidgetexTM Hip & Ridge
shingles, Shingle-Mater(R) underlayment, Weather Watch(R) ice and water barrier,
a waterproof underlayment, and Cobra(R) 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 34% of the Company's net sales
in 1996. 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.
BUSINESS STRATEGY
The principal elements of the Company's business strategy are the following:
INCREASE 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. From January
1, 1992 and through December 31, 1996, the Company's unit sales of such premium
shingles have increased at an average annual compound rate of approximately 16%.
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.
ENHANCE 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,
1996, the Company has invested in excess of $240 million in new property, plant
and equipment (of which more than $135 million has been invested since the
beginning of 1990), principally in order to increase capacity and implement
process improvements to reduce manufacturing costs.
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CAPITALIZE ON ITS NATIONAL DISTRIBUTION SYSTEM
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, consultants, contractors and building owners. The Company markets
its roofing products through its own sales force of approximately 210 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.
BROADEN PRODUCT LINES THROUGH NICHE-TYPE 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 the assets of the Leatherback Industries
division of Hollinee Corporation, which is engaged in the manufacture and sale
of asphalt-saturated roofing felts and other felt and construction paper
products; the acquisition of the assets of Major Group, Incorporated, the
manufacturer of the TOPCOAT(R) Roofing System, a liquid-applied polymer membrane
system designed to protect and waterproof existing metal roofing; and the
acquisition of USI, a leading national manufacturer of commercial roofing
products.
***
The Company's executive offices are located at 1361 Alps Road, Wayne, New
Jersey 07470 and its telephone number is (973) 628-3000. Industry information is
based upon Company estimates and data from the Asphalt Roofing Manufacturers
Association, F.W. Dodge, Drucker Research Co. Inc. or Single Ply Roofing
Institute.
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THE EXCHANGE OFFER
The Exchange Offer is being made with respect to all of BMCA's outstanding
8% Senior Notes due 2007 (the "Old Notes"). On October 20, 1997, 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 issued pursuant to, and 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."
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."
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Expiration Date................ The Exchange Offer will expire at 12:00
midnight, New York City time, on _______ ,
1998, 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,
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 in cash at the
rate of 8% per annum, payable on April 15
and October 15 each year, commencing on
April 15, 1998 to the persons who are
registered holders on the immediately
preceding April 1 and October 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
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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, in order to properly tender Old
Notes in the Exchange Offer, 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 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."
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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
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 of
Series B 8% Senior Notes due 2007 (the "New
Notes").
Maturity....................... October 15, 2007.
Interest Payment Dates......... The New Notes will pay interest in cash at a
rate of 8% per annum, payable on April 15
and October 15, commencing April 15, 1998.
Change of Control Put and Call. Upon the occurrence of a Change of Control,
holders of the Notes may require the Company
to repurchase such holder's Notes at a
purchase price equal to 101% of the
principal amount of the Notes, plus accrued
and unpaid interest, if any, to the
repurchase date, and the Company will have
the option to purchase the Notes in whole at
a price equal to 100% of the principal
amount of the Notes, plus the Applicable
Premium (as defined), together with accrued
and unpaid interest, if any, to the
repurchase date. The Notes are not otherwise
redeemable by the Company.
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, the
2006 Notes and the Credit Agreement.
Immediately following the issuance of the
Notes, the Company will not have any
subordinated obligations. At September 28,
1997, the Company and its subsidiaries had
outstanding indebtedness from borrowings of
$419.6 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 $158.5
million. On a pro forma basis, assuming
consummation of the Offering and application
of the net proceeds therefrom, the Company
would have had as of September 28, 1997
total outstanding consolidated long-term
debt of $518.9 million. The Indenture
governing the Notes (the "Indenture") limits
the incurrence of 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."
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
8
<PAGE>
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.
Under the terms of the Indenture, as of
September 28, 1997, the Company would have
been able to make Restricted Payments and
Restricted Investments in the aggregate
amount of approximately $138.9 million. 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, 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
February 17, 1998, a registration statement
with respect to the Exchange Offer. In the
event that the Exchange Offer is not
completed by April 18, 1998, 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 two years after
the date of original issuance of the Old
Notes.
If by April 18, 1998 (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 April 18, 1998 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 April 15, and
October 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.
9
<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. As of January 1, 1997, USI became a subsidiary of the Company
through a capital contribution to the Company by its parent, G-I Holdings Inc.
Accordingly, the Company's historical consolidated financial statements include
USI's results of operations from the date of its acquisition by G-I Holdings
(October 20, 1995), including sales of $21.8, $99.0 and $76.3 million for the
years ended December 31, 1995 and 1996 and the nine months ended September 29,
1996, respectively, and net income (loss) of $(0.5), $1.3 and $0.8 million,
respectively. See Note 1 to Consolidated Financial Statements. The results for
the nine months ended September 28, 1997 include the results of the Leatherback
business from its date of acquisition (March 14, 1997). The results of any
interim period are not necessarily indicative of the results to be expected for
the full year. The pro forma balance sheet data give effect to the issuance of
the Notes as if the Offering had been completed as of September 28, 1997. The
pro forma operating data give effect to the issuance of the Notes, the
acquisitions of the assets of the Leatherback Industries division of Hollinee
Corporation and Major Group, Incorporated (the "Acquisitions") and the issuance
of the 2006 Notes as if such transactions had been completed as of January 1,
1996. 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 issuance of the Notes, the Acquisitions or the issuance of the 2006 Notes
had been completed at the dates indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
SEPT. 29, SEPT. 28,
YEAR ENDED DECEMBER 31, 1996 1997
----------------------- ---- ----
1994 1995 1996 (UNAUDITED) (UNAUDITED)
---- ---- ---- ----------- -----------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales..................................... $593.1 $687.2 $852.0 $648.4 $723.6
Operating income.............................. 44.7 45.9 61.4 51.2 59.8
Interest expense.............................. 13.1 24.8 32.0 23.7 30.5
Income before income taxes.................... 27.8 16.5 27.9 27.0 38.2
Net income.................................... 16.7 10.1 17.1 16.5 23.3
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1997
------------------
DECEMBER 31, ACTUAL AS ADJUSTED(5)
1996 (UNAUDITED) (UNAUDITED)
---- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments................. $230.8 $136.8 $234.3
Total working capital........................... 247.3 195.6 293.0
Total assets.................................... 701.6 694.7 794.0
Long-term debt less current maturities(2)....... 405.7 415.9 515.2
Total stockholder's equity...................... 143.2 116.5 116.5
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
SEPT. 29, SEPT. 28,
YEAR ENDED DECEMBER 31, 1996 1997
----------------------- ---- ----
1994 1995 1996 (UNAUDITED) (UNAUDITED)
---- ---- ---- ----------- -----------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation................................. $16.8 $20.3 $23.9 $18.1 $16.8
Goodwill amortization........................ 1.1 1.2 1.7 1.2 1.4
Capital expenditures and acquisitions........ 54.3 54.1 25.6 15.7 56.7
EBITDA (3)................................... 58.8 62.8 85.4 70.0 86.9
Ratio of earnings to fixed charges (1)....... 2.72x 1.58x 1.78x 2.02x 2.14x
Ratio of EBITDA to interest expense (3)...... 4.47x 2.53x 2.67x 2.95x 2.85x
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPT. 29, SEPT. 28,
1996 1996 1997
------------- -------- ------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA (5):
Interest expense.................................. $46.5 $34.8 $36.7
Net income........................................ 11.4 12.3 19.6
Adjusted EBITDA (4)............................... 92.9 75.8 87.6
Ratio of earnings to fixed charges(1)............. 1.37x 1.53x 1.81x
Ratio of Adjusted EBITDA to interest expense(4)... 2.00x 2.18x 2.39x
</TABLE>
10
<PAGE>
(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).
(2) See "Capitalization" and Note 9 to Consolidated Financial Statements.
(3) EBITDA is calculated as income before income taxes, increased by interest
expense, depreciation and goodwill amortization. As an indicator of the
Company's operating performance, EBITDA should not be considered as an
alternative to net income or any other measure of performance under generally
accepted accounting principles.
(4) The Adjusted 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 September 29, 1996 and September 28, 1997 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 Notes."
The details of the calculations of Adjusted EBITDA are set forth below:
<TABLE>
<CAPTION>
PRO FORMA
---------
NINE NINE
YEAR MONTHS MONTHS
NINE MONTHS ENDED ENDED ENDED ENDED
----------------- ----- ----- -----
SEPT. 29, SEPT. 28, DEC. 31, SEPT. 29, SEPT. 28,
YEAR ENDED DECEMBER 31, 1996 1997 1996 1996 1997
-------------------------
1994 1995 1996 (Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
---- ---- ------ -------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes
(before giving effect to the
Acquisitions).................. $27,819 $16,549 $27,864 $26,956 $38,172 $13,390 $15,939 $31,979
Add:
Interest expense............... 13,149 24,822 32,044 23,741 30,494 46,518 34,758 36,687
Goodwill amortization.......... 1,064 1,170 1,664 1,201 1,421 1,664 1,201 1,421
Depreciation................... 16,796 20,252 23,857 18,072 16,796 23,857 18,072 16,796
EBITDA adjustment for
Acquisitions (a)............. -- -- -- -- -- 7,431 5,805 698
------- ------- ------- ------- ------- ------- ------- -------
Adjusted EBITDA................. $58,828 $62,793 $85,429 $69,970 $86,883 $92,860 $75,775 $87,581
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(a)EBITDA adjustment for Acquisitions is to reflect incremental
EBITDA as if the Acquisitions had occurred as of January 1, 1996.
(5) The principal assumption used in preparing the Pro Forma Operating Data is
that each of the following events occurred as of January 1, 1996: the
issuance of $100 million principal amount of Notes at an interest rate of 8%
per annum; the issuance of $100 million principal amount of the 2006 Notes
at an interest rate of 8 5/8% per annum; the repayment of approximately $22
million of indebtedness of USI outstanding in 1996; and the Acquisitions.
The net effect of such assumptions is to decrease the Company's pro forma
income before income taxes by $9.2, $6.8 and $6.0 million for the year 1996
and the first nine months of 1996 and 1997, respectively. As a result, the
Company's pro forma provision for income taxes decreased by $3.5, $2.6 and
$2.3 million for the year ended 1996 and the first nine months of 1996 and
1997, respectively, based on an effective marginal income tax rate of 39%.
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
28, 1997, the Company had total outstanding consolidated long-term debt of
$419.6 million and common stockholder's equity of $116.5 million. On a pro forma
basis, assuming consummation of the Offering and application of the net proceeds
therefrom, the Company would have had as of September 28, 1997 total outstanding
consolidated long-term debt of $518.9 million and common stockholder's equity of
$116.5 million. In addition, subject to certain restrictions contained in the
Credit Agreement, the indentures relating to the Deferred Coupon Notes and the
2006 Notes and the Indenture, the Company may incur additional indebtedness. 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, restrictions contained in
the indentures relating to the Deferred Coupon Notes and the 2006 Notes, the
Indenture and the Credit Agreement 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.
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 claims and certain tax liabilities. The parent corporations of
the Company are GAF, G-I Holdings, Inc., a direct wholly owned subsidiary of GAF
("G-I Holdings"), G Industries Corp. and GAFBMC, and, except for the stock of
the Company, the only significant asset of such parent corporations is the stock
of 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 its
stockholder 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. In addition, creditors of the parent corporations
could seek to cause GAFBMC to sell common stock of the Company or take similar
action in order to satisfy liabilities owed to such creditors. See "--Asbestos
Claims Filed Against GAF," "--GAF Group Federal Income Tax Liability" and Notes
3, 5 and 12 to Consolidated Financial Statements.
ASBESTOS CLAIMS FILED AGAINST GAF
Bodily Injury Claims. In connection with its formation, BMCA contractually
assumed and agreed to pay the first $204.4 million of liabilities for
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber ("Asbestos Claims") of its parent, GAFBMC. As of March 30, 1997, BMCA had
paid all of its
12
<PAGE>
assumed asbestos-related liabilities. 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.
GAF has advised the Company that, as of September 28, 1997, it had been
named as a defendant in approximately 65,500 pending lawsuits involving alleged
Asbestos Claims, having resolved approximately 232,500 Asbestos Claims. Since
December 31, 1996 and through September 28, 1997, GAF has settled approximately
9,000 Asbestos Claims and received notice of approximately 15,100 new Asbestos
Claims.
The reserves of GAF and G-I Holdings for asbestos bodily injury claims, as
of September 28, 1997, were $277.1 million (before estimated present value of
recoveries from products liability insurance policies of $184.3 million and
related deferred tax benefits of $33.4 million). GAF and G-I Holdings have
advised the Company that certain components of the asbestos-related liabilities
and the related insurance recoveries have been reflected on a discounted basis
in their financial statements. See Note 3 to Consolidated Financial Statements
and "Business--Legal Proceedings--Insurance Matters."
The amount of such reserves was based on the effectiveness of a proposed
class action settlement of future Asbestos Claims (the "Settlement") and on
assumptions which relate, among other things, to the number of new cases filed,
the cost of resolving (either by settlement or litigation) 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. See "Business--Legal
Proceedings--Insurance Matters." On June 25, 1997, the United States Supreme
Court affirmed the ruling of the United States Court of Appeals for the Third
Circuit that the class proposed in the Settlement was not certifiable, thus
rendering the Settlement inoperable. GAF and G-I Holdings have advised the
Company that they are presently evaluating the effect of this Supreme Court
decision on the amount of their reserves for asbestos-related liabilities
(including the impact on discounted reserves), that such analysis could result
in GAF and G-I Holdings increasing their estimates of asbestos-related
liabilities, and that it is not currently possible to estimate the range or
amount, if any, of such possible additional reserves. GAF and G-I Holdings have
stated that they remain committed to effectuating a comprehensive resolution of
Asbestos Claims, that they are presently exploring a number of options, both
judicial and legislative, to accomplish such resolution, but that there can be
no assurance that these efforts will be successful.
The Company believes that it will not sustain any additional liability in
connection with asbestos- related claims. While the Company cannot predict
whether any asbestos-related claims will be asserted against it or its assets,
or the outcome of any litigation relating 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.
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 regarding asbestos-related matters, see
"Business--Legal Proceedings" and Note 3 to Consolidated Financial Statements.
GAF GROUP 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 federal income tax liabilities
of the GAF consolidated group (including with respect to the Separation
Transactions and tax liability relating to Rhone-Poulenc Surfactants and
Specialties, L.P. (the
13
<PAGE>
"surfactants partnership")), but is indemnified under certain circumstances for
such tax liabilities principally by GAF and G-I Holdings. On September 15, 1997,
GAF received a tax assessment for the 1990 fiscal year relating to the
surfactants partnership which could result in GAF incurring liabilities
significantly in excess of GAF's deferred tax liability. GAF has advised the
Company that it believes GFC will prevail in this matter although there can be
no assurance in this regard. The Company believes that the ultimate disposition
of this matter will not have a material adverse effect on its financial position
or results of operations. See "Certain Relationships--Tax Sharing Agreement" and
Note 5 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."
CHANGE OF CONTROL; ACCELERATION OF DEBT
The Credit Agreement currently prohibits the Company from repurchasing any
Notes. Upon the occurrence of a Change of Control, each holder of the Notes will
have the right to require the Company to repurchase such holder's Notes at 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the repurchase date. There can be no assurance that the Company will have
sufficient funds available or will be permitted by its debt agreements to
repurchase the Notes upon the occurrence of a Change of Control. The Company's
failure to repurchase tendered Notes would constitute an Event of Default (as
defined) under the Indenture, which would in turn constitute a default under the
Credit Agreement and the indentures governing the Deferred Coupon Notes and the
2006 Notes. See "Description of the Notes--Change of Control Put and Call."
The Credit Agreement provides the Company with a $75 million unsecured
revolving credit facility, the full amount of which is available for letters of
credit, provided that total borrowings and outstanding letters of credit may not
exceed $75 million in the aggregate. If a change of control as defined in the
Credit Agreement occurs, the credit facilities thereunder could be terminated
and the loans thereunder accelerated by the lenders party thereto, an event
which could also cause the Deferred Coupon Notes, the 2006 Notes and the Notes
to be accelerated. See "Capitalization." Such an event could have a material
adverse impact on the Company.
CERTAIN AGREEMENTS
The Company purchases from International Specialty Products Inc. ("ISP"),
a Delaware corporation that prior to the Separation Transactions was a
subsidiary of GAF, 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 supply contract which was renewed for one year, effective as of
January 1, 1997, and is subject to annual renewal unless terminated by the
Company 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 and the first
nine months of 1997, the Company and USI purchased in the aggregate
approximately $50.5 million and $40.8 million, respectively, of mineral products
from ISP. Although the
14
<PAGE>
Company believes that, if necessary, it would be able to secure alternative
sources for colored granules, there can be no assurance that the Company will be
able to obtain sufficient quantities of such products in a timely manner and
upon acceptable terms. See "Certain Relationships--Certain Purchases."
As part of the Separation 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 December 31, 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 and $3.5
million in 1996 and the first nine months of 1997, respectively. 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 Notes--Certain Covenants--Limitations on
Transactions with Affiliates" for limitations that will be imposed by the
Indenture on transactions with affiliates of the Company.
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., BNY Capital Markets, Inc. and Chase
Securities 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 PROCEDURE
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
15
<PAGE>
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."
16
<PAGE>
CAPITALIZATION
The following table sets forth the Company's short-term debt and current
maturities of long-term debt and consolidated capitalization as of September 28,
1997 and as adjusted on a pro forma basis to give effect to the issuance of the
Notes. This table should be read in conjunction with the Company's Consolidated
Financial Statements and related notes included elsewhere in this Prospectus.
AS OF SEPTEMBER 28, 1997
(UNAUDITED)
-----------
ACTUAL AS ADJUSTED(1)
------ --------------
(THOUSANDS)
Short-term Debt and current maturities of Long-term Debt:
Short-term debt..................................... $ -- $ --
Current maturities of long-term debt................ 3,728 3,728
--------- ---------
Total............................................ $ 3,728 $ 3,728
========= =========
Long-term Debt (excluding current maturities)(2):
11 3/4% Senior Deferred Coupon Notes due 2004....... $253,955 $253,955
8 5/8% Senior Notes due 2006........................ 99,542 99,542
8% Senior Notes due 2007............................ -- 99,254
Bank credit facilities(3)........................... -- --
Industrial revenue bonds............................ 11,125 11,125
Obligations on mortgaged properties................. 3,744 3,744
Obligations under capital leases.................... 47,536 47,536
--------- ---------
Total Long-term Debt (excluding current maturities). $415,902 $515,156
Stockholder's Equity:
Series A Cumulative Redeemable Convertible Preferred
Stock, $.01 par value per share; 100,000 shares
authorized, no shares issued..................... $ -- $ --
Common stock and additional paid-in capital......... 131,911 131,911
Accumulated deficit.............................. (16,889) (16,889)
Other.............................................. 1,522 1,522
Total Stockholder's Equity....................... $116,544 $116,544
======== ========
Total Capitalization............................. $532,446 $631,700
======== ========
(1) For an explanation of the assumptions used to arrive at such adjusted
information, see "Notes to Selected Financial Data."
(2) For a description of long-term debt, see Note 9 to Consolidated Financial
Statements.
(3) On August 29, 1997, the Company's bank credit facilities were replaced with
the Credit Agreement, a new three-year $75 million bank facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Financial Condition" and Note 9 to Consolidated
Financial Statements.
17
<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, 1992
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, 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 include USI's results of operations from the date of its acquisition
by G-I Holdings (October 20, 1995), including sales of $21.8, $99.0 and $76.3
million for the years ended December 31, 1995 and 1996, and for the nine months
ended September 29, 1996, respectively, and net income (loss) of $(0.5), $1.3
and $0.8 million, respectively. See Note 1 to Consolidated Financial Statements.
The results for the nine months ended September 28, 1997 include the results of
the Leatherback business from its date of acquisition (March 14, 1997).
The pro forma balance sheet data give effect to the issuance of the Notes
as if the Offering had been completed as of September 28, 1997. The pro forma
operating data give effect to the issuance of the Notes, the Acquisitions and
the issuance of the 2006 Notes as if such transactions had been completed as of
January 1, 1996. 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 issuance of the Notes, the Acquisitions or the issuance of the 2006 Notes
had been completed at the dates indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
SEPT. 29, SEPT. 28,
YEAR ENDED DECEMBER 31 ----------- -----------
---------------------- 1996 1997
1992 1993 1994 1995 1996 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ------------ -----------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales..................................... $508.5 $559.2 $593.1 $687.2 $852.0 $648.4 $723.6
Operating income.............................. 34.6 41.5 44.7 45.9 61.4 51.2 59.8
Interest expense.............................. 3.6 2.0 13.1 24.8 32.0 23.7 30.5
Income before income taxes(1)................. 23.1 33.0 27.8 16.5 27.9 27.0 38.2
Income before cumulative effect...............
of accounting change(1)..................... 14.1 20.4 16.7 10.1 17.1 16.5 23.3
Net income(1)................................. 6.5 20.4 16.7 10.1 17.1 16.5 23.3
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 28, 1997
------------------
DECEMBER 31, ACTUAL AS ADJUSTED(6)
1992 1993 1994 1995 1996 (UNAUDITED)
------ ------ ------ ------ ------ -----------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total working capital......................... $ 33.8$ 4.8 $ 36.2$ 54.6 $247.3 $195.6 $293.0
Total assets.................................. 297.3 259.4 452.3 559.3 701.6 694.7 794.0
Long-term debt less current maturities(3)..... 34.1 38.7 229.2 310.3 405.7 415.9 515.2
Total Stockholder's equity (deficit).......... 110.0 85.9 (28.9) 15.8 143.2 116.5 116.5
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
SEPT. 29, SEPT. 28,
YEAR ENDED DECEMBER 31, 1996 1997
1992 1993 1994 1995 1996 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ----------- -----------
(IN MILLIONS EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation.................................. $ 12.8$ 14.5 $ 16.8$ 20.3 $ 23.9 $ 18.1 $ 16.8
Goodwill amortization......................... 0.6 0.6 1.1 1.2 1.7 1.2 1.4
Capital expenditures and acquisitions......... 15.6 19.0 54.3 54.1 25.6 15.7 56.7
EBITDA (4).................................... 40.2 50.1 58.8 62.8 85.4 70.0 86.9
Ratio of earnings to fixed charges (2)........ 5.13x 8.60x 2.72x 1.58x 1.78x 2.02x 2.14x
Ratio of EBITDA to interest expense (4)....... 11.11x 24.51x 4.47x 2.53x 2.67x 2.95x 2.85x
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPT. 29, SEPT. 28,
1996 1996 1997
--------------- -------------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(6):
Interest expense.......................................... $ 46.5 $ 34.8 $ 36.7
Net income............................................... 11.4 12.3 19.6
Adjusted EBITDA (5)....................................... 92.9 75.8 87.6
Ratio of earnings to fixed charges (2).................... 1.37x 1.53x 1.81x
Ratio of Adjusted EBITDA to interest expense (5).......... 2.00x 2.18x 2.39x
</TABLE>
- --------------------
(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
cumulative effect of an accounting change in 1992 includes the after-tax
effects of the foregoing item.
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), plus that portion of lease rental
expense representative of interest (estimated to be one-third of lease
rental expense).
(3) See "Capitalization" and Note 9 to Consolidated Financial Statements.
(4) EBITDA is calculated as income before income taxes, increased by interest
expense, depreciation and goodwill amortization. As an indicator of the
Company's operating performance, EBITDA should not be considered as an
alternative to net income or any other measure of performance under
generally accepted accounting principles.
(5) The Adjusted 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 September 29, 1996 and September
28, 1997 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 Notes." Also see "Summary
Financial Data" for the details of the calculations of Adjusted EBITDA.
(6) The principal assumption used in preparing the Pro Forma Operating Data is
that each of the following events occurred as of January 1, 1996: the
issuance of $100 million principal amount of Notes at an interest rate of
8% per annum; the issuance of $100 million principal amount of the 2006
Notes at an interest rate of 8 5/8% per annum; the repayment of
approximately $22 million of indebtedness of USI outstanding in 1996; and
the Acquisitions. The net effect of such assumptions is to decrease the
Company's pro forma income before income taxes by $9.2, $6.8 and $6.0
million for the year 1996 and the first nine months of 1996 and 1997,
respectively. As a result, the Company's pro forma provision for income
taxes decreased by $3.5, $2.6 and $2.3 million for the year ended 1996 and
the first nine months of 1996 and 1997, 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
Separation Transactions consummated on 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 include
USI's results of operations from the date of its acquisition by G-I Holdings,
including sales of $21.8, $99.0 and $76.3 million for the years ended December
31, 1995 and 1996, and the nine months ended September 29, 1996, respectively,
and net income (loss) of $(0.5), $1.3 and $0.8 million, respectively. The
Separation Transactions also included transferring the Company's glass fiber
manufacturing facility in Nashville, Tennessee (and certain related assets and
liabilities) to GFC and a contribution by G-I Holdings of approximately $82.5
million in cash and short-term investments 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."
RESULTS OF OPERATIONS
First Nine Months of 1997 Compared With First Nine Months of 1996
Net sales for the first nine months of 1997 were $723.6 million, an 11.6%
increase over last year's sales of $648.4 million. The increase in sales
reflected increased unit volumes of both residential and commercial roofing
products, as well as the sales of the Leatherback Industries business. Average
selling prices in the 1997 period declined slightly for residential roofing
products and were higher for commercial roofing products compared to the 1996
period.
Gross profit margin increased to 28.0% for the first nine months of 1997
compared with 27.4% for the same period in 1996, resulting primarily from lower
raw material costs and improved product mix. Selling, general and administrative
expenses increased slightly as a percentage of net sales from 19.3% to 19.5% in
1997, mainly reflecting increased costs of distribution incurred early in the
year.
Operating income for the first nine months of 1997 was $59.8 million, a
16.8% increase over the $51.2 million recorded last year. The increase in
operating income was attributable to the increased sales and improved margins.
Interest expense increased to $30.5 million in the first nine months of
1997 from $23.7 million last year, due primarily to higher debt levels. Other
income, net, was $8.9 million compared with other expense, net, of $0.5 million
last year. The improvement was primarily due to higher investment income.
For the first nine months of 1997, the Company recorded net income of
$23.3 million compared with net income of $16.5 million for the first nine
months of 1996. The 41.3% increase in net income was attributable to higher
operating and other income, partially offset by increased interest expense.
1996 Compared With 1995
Net sales for 1996 increased $164.8 million (24.0%) to $852.0 million
compared with $687.2 million in 1995. The sales growth reflected a 13.2%
increase in sales for BMCA (excluding the effect of USI sales) due to increased
unit volumes of both residential and commercial roofing products and higher
average residential selling
20
<PAGE>
prices, and also reflected USI sales of $99.0 million for the full year 1996
compared with $21.8 million for the period in 1995 after the date of
acquisition.
Gross profit margin improved to 27.0% in 1996 from 26.4% in 1995,
resulting primarily from higher average residential selling prices, partially
offset by higher raw material costs. Selling, general and administrative
expenses increased 24.3% to $166.7 million in 1996 from $134.1 million in 1995,
primarily reflecting higher distribution and selling costs to support the
increased level of sales, and also reflecting $13.0 million higher expenses as a
result of the inclusion of USI for the full year 1996. Selling, general and
administrative expenses as a percentage of net sales increased slightly from
19.5% in 1995 to 19.6% in 1996.
Operating income in 1996 was $61.4 million, an increase of $15.5 million
(33.8%) compared with $45.9 million in 1995. The higher operating income was
attributable to the increased sales and improved gross profit margins and
included $4.3 million operating income from USI.
Interest expense was $32.0 million in 1996 compared with $24.8 million in
1995, principally reflecting higher debt levels. Other expense, net, decreased
to $1.5 million in 1996 from $4.5 million in 1995. The improvement was primarily
attributable to higher investment income (up $4.8 million) partially offset by
increased expenses related to the sale of the Company's receivables (up $.6
million) and certain litigation costs.
The Company recorded net income in 1996 of $17.1 million compared with net
income of $10.1 million in 1995. The 68.9% increase in net income was primarily
attributable to higher operating income and lower other expense, net, partially
offset by higher interest expense.
1995 Compared With 1994
Net sales for 1995 increased $94.1 million (15.9%) 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 of 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 $134.1 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 20.6% in
1994 to 19.5% in 1995.
The Company recorded operating income of $45.9 million in 1995, up 2.5%
compared with $44.7 million in 1994, due principally to the higher sales
volumes, partially offset by the lower gross profit 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).
21
<PAGE>
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.
LIQUIDITY AND FINANCIAL CONDITION
The Company used $15.9 million of cash for operations during the first
nine months of 1997, reinvested $56.7 million in capital programs and
acquisitions, and generated $28 million from net sales of available-for-sale and
held-to-maturity securities, for a net cash outflow of $44.6 million before
financing activities.
Cash invested in additional working capital totaled $52.3 million during
the first nine months of 1997. This amount primarily reflected an increase in
inventories of $9.1 million and a $57.6 million increase in receivables,
including a $27 million increase in the receivable from the trust which
purchases the Company's trade accounts receivable, partially offset by a $15.3
million increase in accounts payable and accrued liabilities. Cash used in
operations also reflected a $22.3 million outflow for related party
transactions, and a $14.3 million cash outlay for net purchases of trading
securities.
Cash used in financing activities for the first nine months of 1997
totaled $35.9 million, principally reflecting $46 million of distributions to
the Company's parent, $3.1 million of asbestos payments and $2.6 million in
repayments of long-term debt, partially offset by $15.6 million of proceeds from
the sale of the Company's trade receivables.
As a result of the foregoing factors, cash and cash equivalents decreased
by $80.4 million during the first nine months of 1997 to $44.1 million
(excluding $92.7 million of trading, available-for-sale and held-to-maturity
securities and other short-term investments).
The Company generated $53.1 million of cash from operations during 1996,
invested $25.6 million for capital programs, and invested $38.9 million for net
purchases of available-for-sale securities and other short-term investments, for
a net cash outflow of $11.4 million before financing activities. Cash from
operations included a cash outflow of $3.4 million for net purchases of trading
securities.
Cash invested in additional working capital totaled $14.9 million during
1996. This amount primarily reflected an increase in inventories of $8.1 million
and a $5.1 million increase in receivables, reflecting higher sales levels.
The Company generated $90.0 million from financing activities in 1996. On
December 9, 1996, the Company issued $100 million principal amount of the 2006
Notes. In addition, principally as part of the Separation Transactions, G-I
Holdings made cash contributions to the Company in 1996 of $86.1 million (not
including contributions of $23.1 million of available-for-sale and
held-to-maturity securities, also as part of the Separation Transactions). The
Company utilized the net proceeds from the issuance of the 2006 Notes to repay
indebtedness owed by USI to G-I Holdings of approximately $30 million and to pay
the purchase price for the March 1997 acquisition of the assets of the
Leatherback Industries division of Hollinee Corporation. The remainder of
proceeds from the issuance of the 2006 Notes of approximately $42.1 million was
utilized for general corporate purposes.
Financing activities in 1996 also included $8.0 million of proceeds from
the sale of the Company's receivables, offset by $34.9 million of repayments of
long-term debt, $66.2 million of asbestos payments and $2.5 million of financing
fees and expenses related to the issuance of the 2006 Notes.
22
<PAGE>
As a result of the foregoing factors, cash and cash equivalents increased
by $78.6 million during 1996 to $124.6 million (excluding $106.2 million of
trading, available-for-sale and held-to-maturity securities and other short-term
investments).
The Company's investment strategy is to seek 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 a
strategy. The Company invests primarily in international and domestic 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.
In June 1996, the Company's bank credit facilities were extended to June
1997 on the same terms and conditions. Such facilities provided for revolving
lines of credit of up to $32 million and letters of credit of up to $41 million,
provided that total borrowings and outstanding letters of credit could not
exceed $42 million. On August 29, 1997, such facilities were replaced with the
Credit Agreement, which provides the Company with a $75 million unsecured
revolving credit facility, the full amount of which is available for letters of
credit, provided that total borrowings and outstanding letters of credit may not
exceed $75 million in the aggregate. As of September 28, 1997, $38.6 million of
letters of credit were outstanding and no amounts had been borrowed under the
Credit Agreement. Under the terms of the Credit Agreement, the Company is
subject to certain financial covenants, including interest coverage and leverage
ratios, and dividends and other restricted payments are limited. The Company was
in compliance with such covenants as of September 28, 1997.
Additional borrowings by the Company are subject to certain covenants
contained in the indentures relating to the Deferred Coupon Notes, the 2006
Notes and the Credit Agreement.
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 28, 1997, the total notional amount of interest
rate swaps outstanding was $65.5 million, and the amount of underlying debt
relating to such swaps was $254.0 million. By utilizing interest rate swap
agreements, the Company reduced its interest expense by $0.2, $1.5, $2.2, $1.6
and $1.5 million in 1994, 1995 and 1996 and the first nine months of 1996 and
1997, respectively. 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, all of which had been
paid as of March 30, 1997. Accordingly, as of January 31, 1994, the Company's
stockholder's equity reflected 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 28, 1997, the Company had total
outstanding consolidated indebtedness of $419.6 million, of which $3.7 million
matures prior to September 30, 1998, and stockholder's equity of $116.5 million.
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
23
<PAGE>
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. This 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 28, 1997, no loans were
owed to the Company by G-I Holdings and no loans were owed by the Company to
affiliates. In addition, the Company makes non-interest bearing advances to
affiliates, of which $27.2 million were outstanding at September 28, 1997.
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, principally the Company, in
order to satisfy their obligations, including asbestos-related claims 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,
dividends and loans from subsidiaries (principally the Company) and from
payments pursuant to the Tax Sharing Agreement between GAF and the Company. The
indentures relating to the Notes, the 2006 Notes and the Deferred Coupon Notes
and the Credit Agreement contain restrictions on the amount of dividends, loans
and other restricted payments (as defined therein) which may be paid by the
Company. As of September 28, 1997, after giving effect to the most restrictive
of the aforementioned restrictions, the Company could have paid dividends and
other Restricted Payments of up to $82.0 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. For further information, see Notes 3, 5, 9
and 12 to Consolidated Financial Statements.
The Company believes that it will have access to working capital or other
assets sufficient to meet its capital and operating needs for the foreseeable
future. The Company intends to use a substantial amount of the net proceeds from
the Offering to fund the cost of its capital expenditure programs.
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.
For a discussion of seasonality, see "Business--Seasonal Variations and
Working Capital."
FORWARD-LOOKING STATEMENTS
The discussions in this Prospectus contain both historical information and
forward-looking statements. Although the Company believes that any such
forward-looking statements are based on reasonable assumptions, these statements
involve uncertainties that affect, among other things, the Company's operations,
markets, products, services and prices. These uncertainties include economic,
competitive, governmental and technological factors. Forward-looking statements
contained herein are not historical facts, but only predictions. No assurances
can be given that projected results or events will be achieved.
24
<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 26 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 shingles and
modified bitumen commercial roofing markets. Based on brand awareness studies,
the Company's Timberline(R) product is the leading brand in residential roofing,
and the Company's Ruberoid(R) 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, five roofing
accessory plants, one glass mat manufacturing plant, two perlite roofing
manufacturing plants, one liquid roofing membrane and adhesive plant and one
fiber-cement shingle and siding plant. The Company has registered, through 1996,
nine consecutive years of increases in operating income. During the five year
period ended December 31, 1996, the Company's net sales and operating income
have increased at average annual compound rates of approximately 14.9% and
18.3%, respectively, and its operating income margin has increased from 6.2% to
7.2%. The Company believes that its growth is primarily attributable to (i)
improvement in its product mix, driven by a business 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; (iv)
the strength of its national distribution system; and (v) broadening its product
lines through niche-type acquisitions.
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) all of GAFBMC's
tax liabilities, other than tax liabilities arising from the operations or
business of the Company, 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. All of the Company's assumed
asbestos-related liabilities had been satisfied as of March 30, 1997. 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 and for all tax
liabilities of the GAF consolidated tax group other than tax liabilities arising
from the operations or business of the Company. See Note 3 to Consolidated
Financial Statements, "Risk Factors--Parents' Dependence upon Company's Cash
Flow" and "Certain Relationships--Tax Sharing Agreement."
25
<PAGE>
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 Separation 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 90% of industry residential roofing unit sales in
1996. Residential asphalt roofing materials comprise higher margin, premium
laminated shingles and strip shingles, which represented approximately 27% and
73%, respectively, of industry asphalt roofing unit sales in 1996. Total asphalt
residential unit sales grew during the past five years (from January 1, 1992
through December 31, 1996) at an average annual compound rate of approximately
6%, during which period unit sales of laminated and strip shingles grew at
average annual compound rates of approximately 18% and 4%, 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 product line.
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 an increase of 7%, while unit
sales of modified bitumen products grew at a rate of approximately 12%, 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 which
produce, for example, gypsum, wood and cement. Management expects that 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 66% of the Company's net
sales in 1996. 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(R)
series and the Sovereign(R) series, as well as certain specialty shingles
principally for regional markets.
The Company's sales of laminated shingles represented approximately 37% of
its residential sales in 1996, with sales of such shingles having grown during
the five years ended December 31, 1996 at an average annual compound rate of
approximately 13%. The Timberline(R) 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 9% during the past five years and represented
approximately 50% of the Company's residential sales in 1996. The Sovereign(R)
series includes a line of standard strip shingles and heavier weight 3-tab
shingles designed to capitalize on the demand for quality shingles.
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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(R) and Ridgetex(TM) Hip &
Ridge shingles, Shingle-Mate(R) underlayment, Weather Watch(R) ice and water
barrier, a waterproof underlayment, and Cobra(R) 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 34% of the Company's net
sales in 1996. The Company manufactures a broad line of modified bitumen
products, asphalt built-up roofing and roofing accessories. The Company markets
commercial roofing through BMCA and USI and 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 and accessories, which consist
of low thermal insulation products for commercial roofing installation 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.
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. From January
1, 1992 and through December 31, 1996, the Company's unit sales of premium
shingles have increased at an average annual compound rate of approximately 16%.
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, 1996,
the Company has invested in excess of $240 million in new property, plant and
equipment (of which more than $135 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 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(R), 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(R) 25 and Timberline Ultra(R) shingles, which offer wood shake
appearance, enhanced visual depth and contrast simulating shadows; the
Marquis(R) shingle, a heavyweight three-tab shingle designed for Northern
markets which offers greater flexibility and added durability in cold
temperatures; the Grand Sequoia(R) shingle, a premier architectural shingle; and
Ruberoid(R) 20/30, a polymer modified bitumen roofing system which utilizes
fiberglass reinforcements coated with modified asphalt
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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(TM), a new
commercial roofing product that combines the tensile strength of built-up
roofing with the flexibility and superior elongation of modified bitumen
membranes. In 1997, the Company introduced Flexply(TM) 6, an enhanced performing
premium built-up roofing felt, and Stratavent(R), a premium venting base sheet
used in built-up roofing systems. 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 the assets of the Leatherback Industries
division of Hollinee Corporation, which is engaged in the manufacture and sale
of asphalt-saturated roofing felts and other felt and construction paper
products; the acquisition of the assets of Major Group, Incorporated, the
manufacturer of the TOPCOAT(R) Roofing System, a liquid-applied polymer membrane
system designed to protect and waterproof existing metal roofing; and the
acquisition of USI, a leading national manufacturer of commercial roofing
products.
RESIDENTIAL ROOFING
The Company is a leading manufacturer of a complete line of premium
residential roofing products, with residential roofing product sales
representing approximately 66% of the Company's net sales in 1996. 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(R) series and the Sovereign(R) series, as well as certain specialty
shingles for regional markets.
The Timberline(R) Series. The Timberline(R) 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(R) 25
shingle, a mid-weight laminated shingle which serves as an economic trade-up for
consumers, with a 25-year limited warranty; the Timberline(R) 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(R) shingle, with a 40-year limited warranty, a super
heavyweight laminated shingle with the same design features as the Timberline(R)
shingle, together with added durability.
The Sovereign(R) Series. The Sovereign Series includes the standard
3-tab Sentinel(R) shingle with a 20-year limited warranty; the Royal
Sovereign(R) 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(R) Weathermax(TM) shingle, a super heavyweight 3-tab shingle with a
30-year limited warranty.
Specialty Shingles. The Company's specialty asphalt shingles
include: Slateline(R) and Slateline(R) Color Contrast(TM) shingles offering the
appearance of slate, labor savings in installation because of their larger size
and a 30-year limited warranty; Dubl-Coverage(R) Tite-On(R) shingles offering a
design feature that enables the shingles to lock together to form a double layer
roof, and a 25-year limited warranty; and the Grand Sequoia(R) shingle, a
premier architectural shingle with a 40-year warranty.
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WeatherStopper(TM) Roofing System. In addition to shingles, the
Company supplies all the components necessary to install a complete roofing
system. The Company's WeatherStopper(TM) Roofing System begins with Weather
Watch(R) and stormguard waterproof underlayments for eaves, valleys and
flashings to prevent water seepage between the roof deck and the shingles caused
by ice build-ups and wind-driven rains. The Company's WeatherStopper(TM) Roofing
System also includes Shingle-Mate(R) glass reinforced underlayment,
Timbertex(R), Timberidge(TM), Ridgetex(TM) and 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(R)
Ridge Vent which provides attic ventilation.
COMMERCIAL ROOFING
The Company manufactures a full line of modified bitumen products, asphalt
built-up roofing, liquid applied membrane and roofing accessories for use in the
application of commercial roofing. Commercial roofing represented approximately
34% of the Company's net sales in 1996. 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 provides comprehensive solutions to solve most commercial
roofing needs. The Company manufactures glass membranes under the trademarks
GAFGLAS(R) and Permaglas(R), 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(R) and Permaglas(R) products are assembled on the roof by
applying successive layers of roofing membrane with asphalt and topped, in some
applications, with gravel. Thermal insulation is often 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 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(R) trademark by the
Company and under the Brai(R) trademark by USI and are used primarily in
re-roofing applications or in combination with glass membranes in GAF
CompositeRoof(TM) systems. 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, consultants, contractors and building owners. The Company markets
its roofing products through its own sales force of approximately 160 full-time
employees and independent sales representatives operating from five regional
sales offices located across the United States. System solutions are promoted at
the contractor level by the sales force. USI markets its roofing products
through approximately 50 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
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recognized and requested brands in the industry. In addition, the Company's
sales to large national retailers are growing rapidly and expanding the
availability of the Company's products on a nationwide basis.
No single customer accounted for as much as 10% of the Company's 1996
sales, except for American Builders and Contractors Supply Co., Inc., which
accounted for approximately 11% of such 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 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, 1997 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 Separation 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).
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, Tamko, Elcor and Celotex, and in the commercial roofing market
are Johns Manville, 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
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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 $2.5 million, $3.1 million and $4.5 million in 1994, 1995 and
1996, 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 Company occupies its headquarters pursuant to its management
agreement with ISP. See "Certain Relationships--Management Agreements."
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.
LOCATION FACILITY
- -------- --------
Alabama
Mobile........................ Plant, Warehouse*
Arizona
Chandler...................... Warehouse*
California
Fontana....................... Plant, Sales Office
Hollister..................... Plant, Plant*
Ontario....................... Plant, Sales Office
Stockton...................... Plant, Plant, Warehouse*
Florida
Tampa......................... Plant, Sales Office*
Georgia
Monroe........................ Plant, Warehouse*
Savannah...................... Plant, Sales Office
Indiana
Mount Vernon.................. Plant, Sales Office
Illinois
Naperville.................... Sales Office*
Kentucky
Florence...................... Plant
Maryland
Baltimore..................... Plant, Warehouse*
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Massachusetts
Millis........................ Plant, Sales Office
Walpole....................... Plant*
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*
New Mexico
Albuquerque................... Plant
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
Dallas........................ Plant, Sales Office, Warehouse*
Fannett....................... Warehouse
Houston....................... Plant, Warehouse, Warehouse*
Nederland..................... Plant
Port Arthur................... Plant, Warehouse, Office
- ----------------------
* 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 1996, the Company made capital expenditures in the amount of $25.6
million relating to plant, property and equipment.
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PATENTS AND TRADEMARKS
The Company owns approximately 47 domestic and 83 foreign patents or
patent applications and owns or licenses approximately 143 domestic and 55
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 Company's business.
The Company believes that the duration of the existing patents and patent
licenses is satisfactory.
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 1998 and 1999 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.
LEGAL PROCEEDINGS
Bodily Injury Claims. In connection with its formation, BMCA
contractually assumed and agreed to pay the first $204.4 million of liabilities
for asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber ("Asbestos Claims") of its parent, GAFBMC. As of March 30, 1997, BMCA had
paid all of its assumed asbestos-related liabilities. 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.
GAF has advised the Company that, as of September 28, 1997, it had been
named as a defendant in approximately 65,500 pending lawsuits involving alleged
Asbestos Claims, having resolved approximately 232,500 Asbestos Claims. Since
December 31, 1996 through September 28, 1997, GAF has settled approximately
9,000 Asbestos Claims and received notice of approximately 15,100 new Asbestos
Claims.
The reserves of GAF and G-I Holdings for asbestos bodily injury claims, as
of September 28, 1997, were $277.1 million (before estimated present value of
recoveries from products liability insurance policies of $184.3 million and
related deferred tax benefits of $33.4 million). GAF and G-I Holdings have
advised the Company that certain components of the asbestos-related liabilities
and the related insurance recoveries have been reflected on a discounted basis
in their financial statements. See Note 3 to Consolidated Financial Statements
and "--Insurance Matters."
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The amount of such reserves was based on the effectiveness of a proposed
class action settlement of future Asbestos Claims (the "Settlement") and on
assumptions which relate, among other things, to the number of new cases filed,
the cost of resolving (either by settlement or litigation) 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. See "--Insurance Matters." On June
25, 1997, the United States Supreme Court affirmed the ruling of the United
States Court of Appeals for the Third Circuit that the class proposed in the
Settlement was not certifiable, thus rendering the Settlement inoperable. GAF
and G-I Holdings have advised the Company that they are presently evaluating the
effect of this Supreme Court decision on the amount of their reserves for
asbestos-related liabilities (including the impact on discounted reserves), that
such analysis could result in GAF and G-I Holdings increasing their estimates of
asbestos-related liabilities, and that it is not currently possible to estimate
the range or amount, if any, of such possible additional reserves. GAF and G-I
Holdings have stated that they remain committed to effectuating a comprehensive
resolution of Asbestos Claims, that they are presently exploring a number of
options, both judicial and legislative, to accomplish such resolution, but that
there can be no assurance that these efforts will be successful.
The Company believes that it will not sustain any additional liability in
connection with asbestos-related claims. While the Company cannot predict
whether any asbestos-related claims will be asserted against it or its assets,
or the outcome of any litigation relating 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.
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.
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 14 years ago, GAF has not only
successfully disposed of approximately 144 such cases at an average disposition
cost (including cases disposed of at no cost to GAF) of approximately $18,000
per case (all of which have been paid by insurance under reservation of rights),
but is a co-defendant in only 4 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 against
any such liabilities in the event any such claims are asserted against it.
Insurance Matters. GAF and G-I Holdings had available, as of
September 28, 1997, to pay asbestos- related bodily injury claims aggregate
insurance coverage of $193.7 million (which amount was used in the reserve
calculation referred to in "Bodily Injury Claims" and is reduced as
asbestos-related liabilities are satisfied), $13.2 million of which is the
subject of negotiations with various insurers and/or the Coverage Action
described below, and which $13.2 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 $193.7 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 Center for Claims Resolution (the "CCR"), a
non-profit organization of asbestos defendant companies including GAF, 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 (the "Coverage Action"). The
third-party complaint sought 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
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<PAGE>
obligated to provide coverage for Asbestos Claims. On June 27, 1997, GAF and
other members of the CCR filed a motion for leave to file amended third party
complaints for coverage for Asbestos Claims without reference to the Settlement
and for leave to consolidate their amended third party complaints. The insurers
who are defendants in GAF's amended third-party complaint are Atlanta
International, Employers Mutual and Northbrook. The insurance carrier third<0-
45>party defendants have raised various defenses to the Coverage Action
including that the action creates a procedural morass, fails to name
indispensable parties, and that the separate amended complaints of the various
CCR members should not be consolidated.
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 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
those environmental liabilities assumed by BMCA and other environmental
liabilities of the Company. 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 28, 1997, its liability in respect of the
environmental liabilities of GAFBMC not assumed by BMCA was approximately $14.5
million, before insurance recoveries reflected on its balance sheet of $6.4
million, as compared to BMCA's estimate of its liability as of September 28,
1997 in respect of assumed and other environmental liabilities of $1.0 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.
35
<PAGE>
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 or that relate to the operations of its business. 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
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 the Company's laminated shingles, which Elk
claims infringe design and utility patents issued to it. Elk also asserts that
the Company has appropriated the trade dress of Elk's product. Elk seeks
injunctive relief, damages and attorneys' fees. The Company denies infringement
of Elk's patents or appropriation of Elk's trade dress, and 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. On October 10, 1997, the Court issued an
opinion holding that Elk's design patent is unenforceable because it was
obtained through fraud and inequitable conduct. The Company believes that it
will prevail on the balance of Elk's claims as well.
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. 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. In August 1997, the
Company filed a motion to deny class certification of the action, which motion
remains pending. On or about September 19, 1997, an action was commenced in the
Superior Court of New Jersey, Passaic County, against GAFBMC and GAF on behalf
of a nationwide class of owners of structures with roof shingles manufactured
and distributed by GAFBMC and which were installed from 1988 to 1993. 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 any of these actions.
36
<PAGE>
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(R)
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 has appealed the state court's conditional class certification. The
action alleges that the 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 September 30, 1997, the Company employed approximately 3,000 people
worldwide, approximately 1,045 of which were subject to 16 union contracts. The
contracts are effective for three to four-year periods. During the first
nine months of 1997, three labor contracts expired and were renegotiated. The
Company expects to renegotiate two labor contracts during the remainder of 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.
37
<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.
Present Principal Occupation
Name and Position Held(1) Age and Five-year Employment History
- ------------------------- --- --------------------------------
Samuel J. Heyman......... 58 Mr. Heyman has been a director and
Chairman of Director, Chairman and Chief
BMCA since its formation and Chief
Executive Officer 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. ("ISP
Holdings") 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............... 48 Mr. Kumar has been the President, Chief
Operating Director, President and
Officer and a director of BMCA since
July 1996, Chief Operating Officer March
1996 and May 1995, respectively. He was
President, Commercial Roofing Products
Division, and Vice President of BMCA
from February 1995 to March 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.
38
<PAGE>
James P. Rogers........... 46 Mr. Rogers has been a director of BMCA
since its Director and Executive Vice
formation and Executive Vice President
of BMCA President 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 1995 and
ISP Holdings 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....... 38 Mr. Weinberg has been Senior Vice
President and Senior Vice President and
General Counsel of BMCA since May 1996.
He has General Counsel 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.
Donald W. LaPalme......... 60 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 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.
39
<PAGE>
William R. Lang........... 53 Mr. Lang has been Senior Vice President
and Chief Senior Vice President and
Chief Financial Officer of BMCA since
April 1997. He was Financial Officer
Senior Vice President and Chief
Financial Officer of Duane Reade, a
regional drug store chain, from 1993 to
1996. From 1990 to 1992, Mr. Lang was
President and Chief Financial Officer of
Furr's, Inc., a large supermarket chain.
Danny J. Adair............ 53 Mr. Adair has been President and Chief
Executive President and Chief
ExecutiveOfficer of USI since 1982.
Officer, U.S. Intec, Inc.
Joseph J. Okaly........... 39 Mr. Okaly has been Senior Vice
President-Materials Senior Vice
President - Management of BMCA since
November 1997. He was Materials
Management Vice President - Marketing
and Sales, Residential Roofing Products
of BMCA from June 1996 to November 1997,
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........ 47 Mr. Collins has been Senior Vice
President - Marketing Senior Vice
President-Marketing and Sales -
Residential Roofing Products of BMCA and
Sales, Residential Roofing since
November 1997. He was Vice President -
Products Marketing and Sales, Commercial
Roofing Products of BMCA from March 1996
to November 1997, 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 Products, Incorporated.
Robert Tafaro............. 47 Mr. Tafaro has been Vice
President-Marketing and Vice
President-Sales and Sales, Commercial
Roofing Products of BMCA since
Marketing, Commercial Roofing November
1997. He was Vice President-Residential
Products Marketing of BMCA from May 1997
to November 1997, Director of
Residential Marketing of BMCA from
February 1997 to May 1997, Eastern
Regional Sales Manager of BMCA from July
1993 to February 1997 and Field Sales
Manager of BMCA from August 1989 to July
1993.
- ---------------------
(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.
40
<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
ANNUAL COMPENSATION COMPENSATION
SECURITIES
OTHER UNDERLYING
ANNUAL SARS (S)/ ALL OTHER
NAME AND PRINCIPAL POSITION(8)YEAR SALARY BONUS(1) COMPENSATION OPTIONS(O)(1) COMPENSATION
- ---------------------------------- ------ -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman. 1996 (8) (8) (8) (8) (8)
Chairman and Chief 1995 (8) (8) (8) (8) (8)
Executive Officer 1994 (8) (8) (8) (8) (8)
Sunil Kumar 1996 $285,000(2) $165,000 $ 0(2) 2,190(O)/8,609(S)(9) $13,561(2)
President and Chief 1995 208,336(2) 60,000(2) 28,608(2) 9,201(S) 8,475(2)
Operating Officer 1994 (2) (2) (2) (2) (2)
Danny J. Adair 1996 $216,686(3) $ 53,093 $ 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 $ 59,774 $ 0 1,200(O) $14,519(4)
Senior Vice President- 1995 148,500 34,000 0 0 14,381(4)
Operations 1994 141,000 40,000 0 0 17,338(4)
William W. Collins 1996 $130,000 $ 42,588 $ 0 900(O) $12,092(5)
Vice President-Marketing & 1995 122,000 20,000 0 0 9,858(5)
Sales, Commercial Roofing 1994 107,000 0 0 0 8,194(5)
Products
Joseph J. Okaly 1996 $130,000 $ 35,763 $ 0 900(O) $11,212(6)
Vice President-Marketing & 1995 118,000 22,000 0 0 10,033(6)
Sales, Residential Roofing 1994 107,500 22,500 0 0 9,744(6)
Products
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. The stock appreciation rights (S) relate to shares of GAF common
stock. The options (O) relate to shares of redeemable convertible preferred
stock of BMCA. See "--Options/SARs".
(2)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 are $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. Mr.
Kumar commenced employment with the Company in February 1995.
41
<PAGE>
(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 premiums 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 became 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, $2,446 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. Collins are: $10,633, $9,858 and $8,194,
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.
(6)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; and
$538, $505 and $475 for premiums paid by BMCA for a long-term disability
policy in 1996, 1995 and 1994, respectively.
(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 premiums 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 the six-month period following
his retirement, Mr. Sergey served as a consultant for BMCA in exchange for a
fee of $28,392 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.
(9)Excluded are options to purchase redeemable preferred stock of ISP Holdings
Inc. See Note (3) to the first table under "--Options/SARs" below.
OPTIONS/SARS
The following table summarizes options ("BMCA Preferred Options") to
acquire BMCA's Redeemable Convertible Preferred Stock and 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.
42
<PAGE>
<TABLE>
<CAPTION>
BMCA PREFERRED STOCK OPTION (O)/
GAF SAR(S) GRANTS IN 1996(1)(2)
--------------------------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS/SARS ASSUMED ANNUAL RATES OF BOOK
UNDERLYING GRANTED TO ALL VALUE APPRECIATION
OPTIONS/SARS EMPLOYEES IN FISCAL
GRANTED 1996 5% 10%
-------- --------- ------- ------
<S> <C> <C> <C> <C>
Sunil Kumar(3) 8,609(S) 16.4%(S) $194,363(S) $242,904(S)
2,190(O) 8.9%(O) 41,610(O) 158,775(O)
Danny J. Adair 1,550(O) 6.3%(O) 29,450(O) 112,375(O)
Donald W. LaPalme 1,200(O) 4.9%(O) 22,800(O) 87,000(O)
William W. Collins 900(O) 3.7%(O) 17,100(O) 65,250(O)
Joseph J. Okaly 900(O) 3.7%(O) 17,100(O) 65,250(O)
</TABLE>
- -----------------------
(1) The BMCA Preferred 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 in the option agreement) as of the date of grant. The BMCA
Preferred Options vest over seven years from the date of grant. 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. 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 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 Separation
Transactions, options to purchase shares of redeemable convertible
preferred stock of USI held by Messrs. Kumar, LaPalme, Collins, Okaly, and
Adair were canceled and exchanged for an equal number of BMCA Preferred
Options and the terms of BMCA Preferred Options were adjusted to reflect
the impact of the Separation 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 Separation 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 Separation Transactions, in exchange
for options granted to Mr. Kumar in 1996 to purchase shares of Redeemable
Convertible Preferred Stock of GAF. The grant date of the SARs is deemed to
be the start date of such GAF options for vesting and other purposes.
(3) Excluded are options to purchase 24,095 shares of redeemable convertible
preferred stock of ISP Holdings Inc. ("ISP Holdings Options") issued to Mr.
Kumar on January 1, 1997 in connection with the Separation Transactions,
which have potential realizable values of $48,491 and $1,667,715 at assumed
annual rates of Book Value appreciation of 5% and 10%, respectively. Each
share of ISP Holdings preferred stock is convertible, at the holder's
option, into shares of common stock of ISP Holdings at a formula price
based on
43
<PAGE>
the sum of the determined initial Book Value (as defined in the option
agreement) plus interest on such Book Value at a specified rate. The ISP
Holdings Options are exercisable at a price of $111.44 per share and vest
over seven years from the date of grant, subject to earlier vesting under
certain circumstances, including in connection with a change of control.
Dividends will accrue on the ISP Holdings preferred stock from the date of
issuance at the rate of 6% per annum. The ISP Holdings preferred stock is
redeemable at ISP Holdings' option, for a redemption price equal to the
exercise price per share plus accrued and unpaid dividends. The ISP
Holdings common stock issuable upon conversion of the ISP Holdings
preferred stock is subject to repurchase by ISP Holdings under certain
circumstances at a price equal to current Book Value. The ISP Holdings
Options have no expiration date. The potential realizable values are
calculated on the basis of a ten-year period from the date of grant.
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(2) 0/17,810(S) 0/2,190(O) $0/$ 9,648(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.
(2) Excluded are options to purchase 24,095 shares of ISP Holdings preferred
stock and 9,201 ISP Holdings SARs held by Mr. Kumar, none of which were
exercisable. All of such ISP Holdings SARs were in the money and had a
value of $546,980 as of December 31, 1996. The ISP Holdings SARs are on
substantially the same terms as the GAF SARs described in Note (2) to the
preceding table.
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.
44
<PAGE>
The following table sets forth information with respect to the ownership
of Common Stock, as of November 1, 1997, 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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE 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 1,000,010 100%(1) 100%(1)
1361 Alps Road
Wayne, New Jersey 07470
All directors and executive
officers of BMCA as a
group (9 persons) 1,000,010 100%(1) 100%(1)
</TABLE>
- ---------------------------
(1) The number of shares shown as being beneficially owned by Mr. Heyman and by
all directors and executive officers of the Company as a group attributes
ownership of GAFBMC's shares to Mr. Heyman. As of November 1, 1997, Mr.
Heyman beneficially owned approximately 96.7% of the capital stock of GAF.
45
<PAGE>
CERTAIN RELATIONSHIPS
MANAGEMENT AGREEMENTS
Pursuant to a management agreement which expires December 31, 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 management fees of $3.9 million in 1996. In
addition to the management fee, BMCA paid approximately $0.8 million to ISP in
1996 primarily for telecommunications and information services and approximately
$0.3 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
Separation 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 supply
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 Separation 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 attributes will carry
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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 consolidated tax
group (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<0- 45>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 September 28,
1997, no loans were owed to BMCA by G-I Holdings and no loans were owed by BMCA
to affiliates. In addition, BMCA makes non-interest bearing advances to
affiliates, of which $27.2 million were outstanding at September 28, 1997.
Prior to the consummation of the Separation 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 $0.1
million.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were issued by BMCA on October 20, 1997. 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 (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 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 two 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
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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 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 __________ __, 1998, 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
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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 deliver 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 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 hereto 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,
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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
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
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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 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
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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 or prior to 12:00 midnight, New York City time, on the Expiration Date.
CONDITIONS
Notwithstanding any other provision 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 from 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.
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:
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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 term 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 October 20, 1997
(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. 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, the 2006 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 October 15, 2007 and will be limited to
$100,000,000 in aggregate principal amount.
Interest on the Notes will accrue at the rate of 8% per annum, payable
semi-annually on April 15 and October 15 of each year commencing April 15, 1998
to the holders of record at the close of business on the April 1 or October 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
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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.
The Company shall 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 otherwise subject to redemption at the option of the Company.
Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
The Notes will not have the benefit 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, 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 purchase any Notes not tendered at the Call Price; and
(7) the circumstances and relevant facts regarding such Change of Control.
In the event a Change of Control occurs, the Company may purchase all, but
not less than all, of the Notes then outstanding, at a price equal to 100% of
the principal amount thereof plus accrued interest to the date of purchase, plus
the Applicable Premium (the "Call Price"). Notice of any purchase 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 and the terms of its debt
instruments. See "Risk Factors--Substantial Leverage" and "--Change of
Control--Acceleration of Debt".
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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 the maturity date of the Note to the
applicable date of purchase 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 purchase
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
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 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.
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"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 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 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,
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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 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
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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.
"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 interest expense related to Non-Recourse Debt)
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 Agreement" means the credit agreement, dated as of August 29,
1997, among the Company, the Lenders party thereto and The Bank of New York, as
administrative agent, 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
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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
the "Limitation on Asset Sales", Debt of the Company or any of its Subsidiaries
shall include the provision for existing or future asbestos<0- 45>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 and Series B 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.
"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.
"GFC" means GAF Fiberglass Corporation, a Delaware corporation, and its
successors.
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"G-I Holdings" means G-I Holdings Inc., a Delaware corporation, and its
successors.
"Glass Fiber Contract" means the supply agreement effective as of January
1, 1997 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.
"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 October 20, 1997.
"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.
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"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 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, the Private Exchange 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.
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"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 non-delinquent 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.
"Private Exchange Notes" mean a like principal amount of debt securities
of the Company identical in all material respects to the Old Notes that may be
issued to the Initial Purchasers under the circumstances set forth in the
Registration Agreement.
"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.
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"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 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.
"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
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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.
"2006 Notes" means the Company's 8 5/8% Senior Notes due 2006 and the
Series B 8 5/8% Senior Notes due 2006.
"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.
"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, the New Notes and the Private Exchange 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
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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; 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 $60,000,000;
(4) Acquired Debt;
(5) (x) Debt outstanding on the Issue Date (including the Deferred
Coupon Notes and 2006 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;
(7) Debt under the Credit Agreement or any Refinancing thereof;
provided that the aggregate outstanding amount thereunder does not at any
time exceed $100,000,000;
(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 $75,000,000.
(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;
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(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 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;
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(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) $50,000,000.
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 improvements or
additions to such assets, or replacements thereof; provided that (i) such
acquisition, improvement or
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addition is otherwise permitted by the 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;
(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
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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 $25,000,000
(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 each member of 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
has a 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 Agreement or any Refinancings
thereof (or, if such agreement is not outstanding, under the unsecured
bank debt of the Company);
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(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 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).
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 indentures governing the Deferred Coupon
Notes and 2006 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 Agreement, the Receivables Financing Agreement or
other Debt existing on the Issue Date; and
(7) any Refinancing of the Credit Agreement, 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:
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(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 indentures governing
the Deferred Coupon Notes and 2006 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, and
then offer to purchase any outstanding 2006 Notes, in a tender offer at a
redemption price equal to 100% of the principal amount thereof plus
accrued interest thereon to the date of purchase, 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.
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Reports to the Securities and Exchange Commission and Holders.<0- 32>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.
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 in a 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.
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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);
(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.
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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 Holder
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 Holders. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each 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.
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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; (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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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.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. 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 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 persons who hold
(or will hold) the 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.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Note that is (i) a citizen or resident
(as defined in Section 7701(b)(1) of the Code) of the United States, (ii) a
corporation or other entity organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate whose income is
subject to federal income tax regardless of the source, or (iv) a trust with
respect to the administration of which a court within the United States is able
to exercise primary supervision and one or more U.S. persons have the authority
to control all substantial decisions of the trust (a "U.S. Holder"). Certain
material U.S. federal income tax consequences relevant to a holder other than a
U.S. Holder are discussed separately below.
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 U.S.
Holders. 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 tax 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 U.S. Holder
should not recognize any gain or loss on the consummation of the Exchange Offer.
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FEDERAL INCOME TAX CONSEQUENCES OF OWNING NEW NOTES
STATED INTEREST
Interest on a 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 federal income tax purposes.
SALE OR REDEMPTION
The sale, exchange, redemption (including pursuant to an offer by the
Company) or other disposition of Notes generally will be a taxable event for
federal income tax purposes. A U.S. 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).
Assuming the Note is held as a capital asset, such gain or loss (except to
the extent that the market discount rules otherwise provide) will generally
constitute capital gain or loss, which will be either long-term or short-term if
the U.S. Holder is a corporation, or long-term, mid-term or short-term if the
U.S. Holder is a non-corporate entity, in each case depending on the U.S.
Holder's holding period.
MARKET DISCOUNT
Except as discussed below, gain recognized on the disposition of Notes
having market discount will be treated as ordinary income, and not capital gain,
to the extent of the accrued market discount thereon, provided the amount of
market discount to the U.S. Holder exceeds a de minimis amount. Market discount
is defined generally as the excess of (i) the "stated redemption price at
maturity" of a debt obligation over (ii) the tax basis of the debt obligation in
the hands of the holder immediately after its acquisition.
If a holder of 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 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 Notes also would be includable as ordinary income to
the extent of any accrued market discount on such Notes. A holder of 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 Notes until they are disposed of in a taxable
transaction.
A holder of 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 Internal Revenue Service (the "Service"). If a holder of
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 U.S. Holder in any Note 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
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acquisition date of such 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 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 only with the consent
of the Service.
BACKUP WITHHOLDING
Under the Code, a U.S. Holder of 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 Notes should consult their tax advisors as to their
qualification for exemption from withholding and the procedure for obtaining
such an exemption.
NON-U.S. HOLDERS
The following discussion is limited to certain material U.S. federal
income tax consequences relevant to a holder of a Note who, for U.S. federal
income tax purposes, is (i) a nonresident alien individual, (ii) a foreign
corporation, (iii) a foreign estate which is not subject to federal income tax
on a net income basis in respect of income or gain from a Note or (iv) a trust
if a U.S. court is not able to exercise primary supervision over administration
of the trust or one or more U.S. persons do not have the authority to control
all substantial decisions of the trust (a "Non-U.S. Holder").
IN GENERAL
Under present U.S. federal income and estate tax law, and subject to the
discussion below concerning backup withholding:
(a) payments of principal and interest on the Notes by the Company
or any paying agent to any Non-U.S. Holder will not be subject to U.S.
federal withholding tax; provided that, in the case of interest, (i) such
Non-U.S. Holder does not own, actually or constructively, ten percent or
more of the total combined voting power of all classes of stock of the
Company entitled to vote, is not a controlled foreign corporation related,
directly or indirectly, to the Company through stock ownership, and is not
a bank receiving interest described in Section 881(c)(3)(A) of the Code
and (ii) the beneficial owner fulfills the statement requirement set forth
in Section 871(h) or Section 881(c) of the Code;
(b) a Non-U.S. Holder of a Note will not be subject to U.S. federal
income tax on any gain realized on the sale, exchange or other disposition
of such Note unless (i) subject to certain exceptions, such Non-U.S.
Holder is an individual who is present in the United States for 183 days
or more during the taxable year of disposition and certain other
requirements are met; (ii) such gain is effectively
82
<PAGE>
connected with the conduct by such Non-U.S. Holder of a trade or business
in the United States; or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code applicable to certain former
citizens and residents of the United States; and
(c) a Note held by an individual, who is not a citizen or resident
of the United States at the time of his death, will not be subject to U.S.
federal estate tax as a result of such individual's death, provided that
the individual does not own, actually or constructively, ten percent or
more of the total combined voting power of all classes of stock of the
Company entitled to vote and, at the time of the individual's death,
payments with respect to such Note would not have been effectively
connected to the conduct by such individual of a trade or business in the
United States.
In order to obtain the portfolio interest exemption from U.S. federal
withholding tax under Sections 871(h) and 881(c) of the Code, described in
paragraph (a) above, either the beneficial owner or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the Note on behalf of such beneficial owner
must file a statement with the withholding agent to the effect that the
beneficial owner of the Note is not a United States person. Under temporary
United States Treasury Regulations, such requirement is considered to have been
fulfilled if the beneficial owner of a Note certifies on IRS Form W-8, under
penalties of perjury, that he is not a United States person and provides his
name and address, and any Financial Institution holding the Note on behalf of
the beneficial owner certifies that such a statement has been received from the
beneficial owner by it, or by a Financial Institution between it an the
beneficial owner, and furnishes the withholding agent with a copy thereof.
An IRS Form W-8 generally remains in effect for three calendar years.
Interest paid to a Non-U.S. Holder may also be exempt from U.S.
withholding taxes provided such Non- U.S. Holder delivers (i) IRS Form 1001
signed by the beneficial owner of the Note or such holder's agent claiming
complete exemption from withholding under an applicable tax treaty, or (ii) IRS
Form 4224 signed by the beneficial owner of the Note or such owner's agent
claiming exemption from withholding tax on income connected with the conduct of
a trade or business in the United States; provided that in any such case (x) the
applicable form is delivered pursuant to applicable procedures and is properly
transmitted to the United States entity otherwise required to withhold tax and
(y) none of the entities receiving the form has actual knowledge that the
Non-U.S. Holder is a U.S. person or that any certification on the form is false.
Under recently-enacted legislation, Non-U.S. Holders that are classified as
partnerships for federal income tax purposes but classified as corporations for
foreign tax purposes may not be entitled to the benefits of otherwise-applicable
tax treaties.
Recently-adopted Treasury Regulations, that are not yet in effect (the
"Final Regulations") and generally are to be effective January 1, 1999 would
alter the foregoing rules in certain respects. Under the Final Regulations, a
Non-U.S. Holder seeking an exemption under (i) or (ii) of the preceding
paragraph will generally be required to provide a beneficial owner certificate
on IRS Form W-8, which form may require, among other things, the Non-U.S.
Holder's taxpayer identification number. The Final Regulations also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, interest paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or to those holding interests in
the entity. As the foregoing is not a complete discussion of the provisions of
the Final Regulations, Non-U.S. Holders are urged to consult their advisors with
respect to the effect that the Final Regulations will have when they become
effective.
83
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
As noted in the above discussion for U.S. Holders, a 31% backup
withholding tax and information reporting requirements also may apply to
payments of principal and interest made to, and to the proceeds of sales before
maturity by, a noncorporate United States person. Under current Treasury
Regulations, however, backup withholding will not apply to payments made on a
Note to a non-U.S. Holder if the certifications required by Sections 871(h) and
881(c) of the Code (described above) are received; provided that the Company or
such paying agent, as the case may be, does not have actual knowledge that the
payee is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or
other disposition of a Note made to or through a foreign office of a broker are
not subject to backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for U.S. tax purposes, or a foreign
person 50% or more of whose gross income is effectively connected with a United
States trade or business for a specified three-year period or certain other
foreign entities with a U.S. connection, information reporting is required
unless the broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain conditions are met or the
beneficial owner otherwise establishes an exemption. Payments to or through the
United States office of a broker are subject to backup withholding and
information reporting unless the Non-U.S. Holder certifies, under penalties of
perjury, that it is not a United States person or otherwise establishes an
exemption.
The Final Regulations would provide certain presumptions under which a
Non-U.S. Holder would be subject to backup withholding and information reporting
unless the Non-U.S. Holder provided a certification of non-U.S. status.
Non-U.S. Holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, and availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Any amounts withheld from a payment
to a Non-U.S. Holder under the backup withholding rules would be allowed as a
credit against such Non-U.S. Holder's U.S. federal income tax liability and may
entitle such Non-U.S. Holder to a refund, provided that the required information
is furnished to the Service.
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
84
<PAGE>
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
Latham & Watkins, 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, 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 audited consolidated financial statements and schedules of Building
Materials Corporation of America 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.
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, 5000 West Madison Street, Suite 1400,
Chicago, Illinois 60601-2511. Copies of such reports 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
85
<PAGE>
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.
86
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants...................................F-2
Consolidated Statements of Income for the three years ended
December 31, 1996 and the nine months ended September 29, 1996
and September 28, 1997 (Unaudited)......................................F-3
Consolidated Balance Sheets as of December 31, 1995 and 1996 and as of
September 28, 1997 (Unaudited)..........................................F-4
Consolidated Statements of Cash Flows for the three years ended
December 31, 1996 and the nine months ended September 29, 1996 and
September 28, 1997(Unaudited)...........................................F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the
three years ended December 31, 1996 and the nine months ended
September 28, 1997 (Unaudited)..........................................F-7
Notes to Consolidated Financial Statements.................................F-8
Supplementary Data (Unaudited)
Quarterly Financial Data (Unaudited)...................................F-26
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, 1995 and 1996, 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, 1996. 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-25 of this Prospectus, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 3, 1997
F-2
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- -----------------
SEPT. 29, SEPT. 28,
1996 1997
1994 1995 1996 (UNAUDITED) (UNAUDITED)
------------------------------- ----------------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................................ $593,147 $687,184 $851,967 $648,426 $723,614
-------- -------- -------- -------- --------
Costs and expenses:
Cost of products sold............................. 425,080 506,012 622,234 470,678 521,291
Selling, general and administrative............... 122,274 134,145 166,706 125,360 141,100
Goodwill amortization............................. 1,064 1,170 1,664 1,201 1,421
-------- -------- -------- ----------- -----------
Total costs and expenses.......................... 548,418 641,327 790,604 597,239 663,812
-------- -------- -------- ---------- ----------
Operating income..................................... 44,729 45,857 61,363 51,187 59,802
Interest expense..................................... (13,149) (24,822) (32,044) (23,741) (30,494)
Other income (expense), net.......................... (3,761) (4,486) (1,455) (490) 8,864
-------- --------- --------- ----------- -----------
Income before income taxes........................... 27,819 16,549 27,864 26,956 38,172
Income taxes......................................... (11,159) (6,450) (10,809) (10,474) (14,887)
-------- --------- -------- ---------- ----------
Net income........................................... $ 16,660 $ 10,099 $ 17,055 $ 16,482 $ 23,285
======== ======== ======== ========== ==========
</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
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPT. 28,
1997
1995 1996 (UNAUDITED)
---- ---- -----------
(THOUSANDS)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents..................................................... $ 45,989 $124,560 $ 44,114
Investments in trading securities............................................. 6,095 1,065 18,470
Investments in available-for-sale securities.................................. 31,951 82,016 56,206
Investments in held-to-maturity securities.................................... - 7,169 1,202
Other short-term investments.................................................. 2,069 15,944 16,837
Accounts receivable, trade, less reserve of $1,794, $1,180 and
$2,506, respectively....................................................... 12,735 9,870 28,277
Accounts receivable, other.................................................... 23,263 23,235 50,659
Inventories................................................................... 69,073 77,196 89,349
Deferred income tax benefits.................................................. 3,845 - -
Other current assets.......................................................... 5,402 3,751 4,145
-------- -------- ----------
Total Current Assets....................................................... 200,422 344,806 309,259
Property, plant and equipment, net............................................ 223,784 220,500 227,776
Excess of cost over net assets of businesses acquired, net of accumulated
amortization of $5,225, $6,889 and $8,310, respectively.................... 57,702 60,469 70,330
Deferred income tax benefits.................................................. 66,059 59,053 43,798
Receivable from related parties............................................... - - 27,179
Other assets.................................................................. 11,304 16,755 16,374
-------- -------- ----------
Total Assets.................................................................. $559,271 $701,583 $694,716
======== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt.......................................... $ 8,990 $ 3,412 $ 3,728
Accounts payable.............................................................. 51,975 47,879 52,242
Payable to related parties, net............................................... 2,749 2,287 7,184
Accrued liabilities........................................................... 22,970 27,938 39,823
Reserve for asbestos claims................................................... 48,176 3,062 -
Reserve for product warranty claims........................................... 11,000 12,914 10,700
-------- -------- ----------
Total Current Liabilities.................................................. 145,860 97,492 113,677
-------- -------- ----------
Long-term debt less current maturities............................................ 310,260 405,690 415,902
-------- -------- ----------
Reserve for asbestos claims....................................................... 21,110 - -
-------- -------- ----------
Reserve for product warranty claims............................................... 39,395 30,755 25,925
-------- -------- ----------
Other liabilities................................................................. 26,864 24,409 22,668
-------- -------- ----------
Commitments and Contingencies.....................................................
Stockholder's Equity:
Series A Cumulative Redeemable Convertible Preferred
Stock, $.01 par value per share; 100,000
shares authorized; no shares issued........................................ - - -
Common Stock, $.001 par value per share; 1,050,000 shares
authorized; 1,000,010 shares issued and outstanding........................ - 1 1
Additional paid-in capital.................................................... 73,374 182,699 131,910
Accumulated deficit........................................................... (57,229) (40,174) (16,889)
Other......................................................................... (363) 711 1,522
-------- -------- ---------
Stockholder's Equity.......................................................... 15,782 143,237 116,544
-------- -------- ----------
Total Liabilities and Stockholder's Equity........................................ $559,271 $701,583 $694,716
======== ======== ==========
</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>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- -----------------
SEPT. 29, SEPT. 28,
1996 1997
1994 1995 1996 (UNAUDITED) (UNAUDITED)
---------- ------- ------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents, beginning of period........... $ 821 $ 29,015 $ 45,989 $ 45,989 $124,560
--------- --------- --------- -------- --------
Cash provided by operating activities:
Net income............................................ 16,660 10,099 17,055 16,482 23,285
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation.......................................... 16,796 20,252 23,857 18,072 16,796
Goodwill amortization................................. 1,064 1,170 1,664 1,201 1,421
Deferred income taxes................................. 10,959 6,250 10,609 10,260 14,736
Noncash interest charges.............................. 10,480 21,432 23,718 17,661 20,125
Increase in working capital items........................ (12,842) (8,050) (14,905) (46,182) (52,316)
Purchases of trading securities.......................... - - (33,824) (28,726) (60,470)
Proceeds from sales of trading securities................ - - 30,394 25,868 46,217
(Increase) decrease in other assets...................... 2,720 1,924 (1,711) (940) 1,621
Decrease in other liabilities............................ (6,384) (4,502) (4,158) (1,390) (6,336)
Increase (decrease) in payable to related parties........ (11,663) 1,939 (341) 4,831 (22,282)
Other, net............................................... 757 112 787 1,043 1,351
--------- ------- -------- --------- ---------
Net cash provided by (used in) operating activities...... 28,547 50,626 53,145 18,180 (15,852)
--------- ------- -------- --------- --------
Cash provided by (used in) investing activities:
Capital expenditures and acquisitions................. (54,279) (54,111) (25,629) (15,726) (56,713)
Purchases of available-for-sale securities............ - (45,706) (139,355) (106,452) (103,427)
Purchases of held-to-maturity securities.............. - - - - (4,591)
Purchases of other short-term investments............. - (2,069) (660) - -
Proceeds from sales of available-for-sale securities . - 8,416 101,095 120,305 125,445
Proceeds from held-to-maturity securities............. - - - - 10,558
--------- ------- -------- --------- ---------
Net cash used in investing activities.................... (54,279) (93,470) (64,549) (1,873) (28,728)
-------- ------- ------- -------- --------
Cash provided by (used in) financing activities:
Proceeds from sale of accounts receivable............. 12,217 7,919 8,015 16,378 15,574
Increase in short-term debt........................... - - - 256 -
(Increase) decrease in loans receivable from/payable
to related party................................... (24,502) 23,633 - (21,953) -
Proceeds from issuance of debt........................ 195,528 40,002 99,502 - 662
Repayments of long-term debt.......................... (15,317) (10,440) (34,856) (11,880) (2,610)
(Increase) decrease in restricted cash................ (24,484) 24,484 - - -
Capital contribution from (distribution to)
parent company..................................... - 34,312 86,077 11,627 (46,000)
Dividend to parent company............................ (7,900) - - - -
Payments of asbestos claims........................... (75,340) (59,795) (66,224) (43,716) (3,062)
Financing fees and expenses........................... (6,276) (297) (2,539) (56) (430)
-------- ------ ------- -------- --------
Net cash provided by (used in) financing activities... 53,926 59,818 89,975 (49,344) (35,866)
--------- ------- -------- -------- --------
Net change in cash and cash equivalents.................. 28,194 16,974 78,571 (33,037) (80,446)
--------- ------- -------- -------- --------
Cash and cash equivalents, end of period................. $ 29,015 $ 45,989 $ 124,560 $ 12,952 $ 44,114
========= ======== ========= ========= =========
</TABLE>
F-5
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWSC(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------- -----------------
SEPT. 29, SEPT. 28,
1996 1997
1994 1995 1996 (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....................................$(14,340) $ 666 $ (5,122) $(52,858) $(57,587)
Inventories............................................ (6,534) (4,557) (8,123) (11,855) (9,094)
Other current assets................................... 151 1,760 756 1,329 (931)
Accounts payable....................................... 11,900 (6,093) (4,096) 4,833 5,560
Accrued liabilities.................................... (4,019) 174 1,680 12,369 9,736
-------- -------- -------- --------- ---------
Net effect on cash from increase in working
capital items....................................$(12,842) $ (8,050) $(14,905) $(46,182) $(52,316)
======== ======== ======== ======== ========
Cash paid during the period for:
Interest (net of amount capitalized)...................... $2,583 $2,796 $6,442 $4,632 $8,193
Income taxes (including taxes paid pursuant to the
Tax Sharing Agreement)................................. 9,609 213 537 143 130
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
=========
Acquisition of Leatherback Industries business, net of $8 cash acquired:
Fair market value of assets acquired................... $ 27,037
Purchase price of acquisition.......................... 25,231
--------
Liabilities assumed.................................... $ 1,806
========
</TABLE>
- -------------------------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net payables to related parties.
Working capital acquired in connection with acquisitions is reflected in
ACapital 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 certain of the Company's receivables (see Note 6); such proceeds are
reflected in cash from financing activities. As discussed in Notes 1 and
2, in connection with the Separation Transactions, G-I Holdings made a
noncash contribution to the Company in December 1996 of $2.8 million of
available-for-sale securities, $7.1 million of held-to-maturity
securities and $13.2 million of other short-term investments.
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, 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 - -
Reclassification to additional paid-in capital of the
excess of purchase price over the adjusted historical
cost of predecessor company shares............................... (7,874) - -
Unrealized gain on available-for-sale securities, net of
income tax effect of $174........................................ - 272 -
Adjusted of unfunded pension liability.............................. - (47) -
-------- --------- --------
Balance, December 31, 1995............................................. $ 73,374 $ (363) $(57,229)
Net income.......................................................... - - 17,055
Capital contribution from parent company............................ 109,326 - -
Unrealized gain on available-for-sale securities, net of
income tax effect of $333........................................ - 522 -
Adjustment of unfunded pension liability............................ - 552 -
-------- --------- ---------
Balance, December 31, 1996............................................. $182,700 $ 711 $(40,174)
Net income (unaudited).............................................. - - 23,285
Distribution to parent company (unaudited).......................... (46,000) - -
Transfer of Nashville, Tennessee plant to GAF Fiberglass
Corporation (unaudited).......................................... (4,789) - -
Unrealized gain on available-for-sale securities, net of
income tax effect of $519 (unaudited)............................ - 811 -
---------- ---------- ---------
Balance, September 28, 1997 (unaudited)................................ $131,911 $ 1,522 $(16,889)
======== ========= ========
</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 September 29,
1996 and September 28, 1997 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
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) all of GAFBMC's tax liabilities, other than tax liabilities
arising from the operations or business of the Company 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 upon the Company's formation as of
January 31, 1994.
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. Accordingly, the
Company's historical consolidated financial statements include USI's results of
operations from the date of its acquisition by G-I Holdings, including sales of
$21.8 and $99 million for the years ended December 31, 1995 and 1996,
respectively, and $76.3 million for the nine months ended September 29, 1996,
and net income (loss) of $(0.5) million, $1.3 million and $0.8 million,
respectively.
F-8
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. FORMATION OF THE COMPANY--(CONTINUED)
On January 1, 1997, GAF effected a series of transactions involving its
subsidiaries (the "Separation Transactions") that resulted in, among other
things, (1) the approximately 83.5% of the issued and outstanding common stock
of International Specialty Products Inc. ("ISP"), an affiliate, 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 GAF Fiberglass
Corporation ("GFC"), (3) USI becoming a subsidiary of the Company and (4) G-I
Holdings making a contribution of approximately $82.5 million in cash and
short-term investments to the Company. As a result of the Separation
Transactions, ISP Holdings Inc. ("ISP Holdings") and ISP are no longer direct or
indirect subsidiaries of GAF, while the Company and GFC remain subsidiaries of
GAF.
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 Separation 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.
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. 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
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 were $0.3, $0.8 and $1.6 million as of December 31, 1995 and 1996 and
September 28, 1997, respectively. Investments classified as "held-to-maturity"
securities are carried at amortized cost in the Consolidated Balance Sheet.
"Other income (expense), net" includes $0.4, $6.4, $5.4 and $14.5 million
of net realized and unrealized gains on securities in 1995 and 1996 and the
first nine months of 1996 and 1997, respectively. The determination of cost in
computing realized gains and losses is based on the specific identification
method.
F-9
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
In connection with the Separation Transactions (see Note 1), in December
1996, G-I Holdings made a capital contribution to the Company of $2.8 million of
available-for-sale securities, $7.1 million of held-to- maturity securities and
$13.2 million of other short-term investments.
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 $0.5 million as "Other Income".
As of December 31, 1995 and 1996 and September 28, 1997, the market value
of the Company's equity securities held long was $38.2, $82.5 and $74.8 million,
respectively, and the Company had $5.9, $5.6 and $13.0 million, respectively, of
short positions in common stocks, based on market value. As of December 31, 1996
and September 28, 1997, the market value of the Company's held-to-maturity
securities was $7.6 and $1.2 million, respectively. 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.
"Other short-term investments" are investments in limited partnerships
which are accounted for by the equity method. Gains and losses are reflected in
"other income (expense), net". Liquidation of partnership interests generally
require a 30 to 45 day notice period.
Cash and cash equivalents 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
Deferred Coupon 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.
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.
Excess of Purchase Price Over the Adjusted Historical Cost of Predecessor
Company Shares
Stockholder's equity 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
F-10
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
accounting (which was applied to the Acquisition) does not apply to their
shares. Such amount has been reclassified to be reflected as a reduction of
additional paid-in capital.
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.
Revenues in 1996 included sales to American Builders and Contractors
Supply Co., Inc., which accounted for approximately 11% of the Company's net
sales.
Interest Rate Swaps
Gains (losses) on interest rate swap agreements ("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 were $2.5, $3.1, $4.5, $3.0 and $3.8 million for 1994, 1995 and 1996 and the
first nine months of 1996 and 1997, 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 duration on its
commercial roofing products; income from warranty contracts related to
commercial roofing products is recognized over the life of the agreements. 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 28, 1997, is $1.0 million,
before
F-11
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
reduction for insurance recoveries reflected on its balance sheet of $0.5
million. The Company's liability is reflected on an undiscounted basis. See
"Business--Legal Proceedings--Environmental Litigation" for further discussions
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. As of March 30, 1997, the Company had paid all of its
assumed asbestos-related liabilities. 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.
The reserves of GAF and G-I Holdings for asbestos bodily injury claims, as
of September 28, 1997, were $277.1 million (before estimated present value of
recoveries from products liability insurance policies of $184.3 million and
related deferred tax benefits of $33.4 million). GAF and G-I Holdings have
advised the Company that certain components of the asbestos-related liabilities
and the related insurance recoveries have been reflected on a discounted basis
in their financial statements. 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 28, 1997, G-I Holdings' consolidated expected net
payments (receipts) for the remainder of 1997 and the years 1998, 1999, 2000,
2001 and 2002 are $9.3, $(9.8), $24.2, $28.1, $34.3 and $17.6 million,
respectively, and the aggregate expected payments to be made after 2002 are $8.8
million.
The amount of such reserves was based on the effectiveness of a proposed
class action settlement of future asbestos claims (the "Settlement") and on
assumptions which relate, among other things, to the number of new cases filed,
the cost of resolving (either by settlement or litigation) 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. On June 25, 1997, the United States
Supreme Court affirmed the ruling of the United States Court of Appeals for the
Third Circuit that the class proposed in the Settlement was not certifiable,
thus rendering the Settlement inoperable. GAF and G-I Holdings have advised the
Company that they are presently evaluating the effect of this Supreme Court
decision on the amount of their reserves for asbestos-related liabilities
(including the impact on discounted reserves), that such analysis could result
in GAF and G-I Holdings increasing their estimates of asbestos-related
liabilities, and that it is not currently possible to estimate the range or
amount, if any, of such possible additional reserves. GAF and G-I Holdings have
stated that they remain committed to effectuating a comprehensive resolution of
asbestos claims, that they are presently exploring a number of options, both
judicial and legislative, to accomplish such resolution, but that there can be
no assurance that these efforts will be successful.
The Company believes that it will not sustain any additional liability in
connection with asbestos-related claims. While the Company cannot predict
whether any asbestos-related claims will be asserted against it or its assets,
or the outcome of any litigation relating 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.
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
F-12
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS--(CONTINUED)
holdings of common stock of the Company, and such enforcement could result in a
change of control with respect to the Company.
For a further discussion with respect to the foregoing, see
"Business--Legal Proceedings", which is incorporated herein by reference.
NOTE 4. ACQUISITIONS
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.
On March 14, 1997, the Company acquired the assets of the Leatherback
Industries division of Hollinee Corporation, which is engaged in the manufacture
and sale of asphalt-saturated felts and other felt and construction paper
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 the Leatherback business, including sales of $21.3
million for the first nine months of 1997, are included from the date of
acquisition; the effects were not material to the first nine months 1997
operations.
NOTE 5. INCOME TAXES
Income tax provision, which has been computed on a separate return basis,
consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
SEPT. 29, SEPT. 28,
1996 1997
1994 1995 1996 (UNAUDITED) (UNAUDITED)
----------------------------- -------------------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal C Deferred...................................... $(9,438) $(5,424) $(9,241) $(9,094) $(12,592)
------- ------- ------- ------- --------
State and Local:
Current.............................................. (200) (200) (200) (214) (151)
Deferred............................................. (1,521) (826) (1,368) (1,166) (2,144)
--------- -------- --------- --------- ---------
Total state and local........................... (1,721) (1,026) (1,568) (1,380) (2,295)
--------- -------- --------- --------- ---------
Income tax provision.................................... $(11,159) $(6,450) $(10,809) $(10,474) $(14,887)
======== ======= ======== ======== ========
</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:
F-13
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
SEPT. 29, SEPT. 28,
1996 1997
1994 1995 1996 (UNAUDITED) (UNAUDITED)
----------------------------- ------------------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory provision..................................... $(9,737) $(5,792) $(9,752) $(9,434) $(13,360)
Impact of:
State and local taxes, net of Federal benefits....... (1,119) (667) (1,019) (897) (1,492)
Nondeductible goodwill amortization.................. (372) (260) (484) (291) (371)
Other, net........................................... 69 269 446 148 336
---------- -------- --------- ---------- ----------
Income tax provision.................................... $(11,159) $(6,450) $(10,809) $(10,474) $(14,887)
======== ======= ======== ======== ========
</TABLE>
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPT. 28,
1997
1995 1996 (UNAUDITED)
---------- ---------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities related to property, plant
and equipment.............................................. $(10,173) $(11,782) $(13,331)
-------- -------- -------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes:
Reserve for asbestos claims.............................. 27,022 1,195 -
Other.................................................... 35,437 38,774 35,947
Net operating losses not yet utilized under the Tax
Sharing Agreement........................................ 17,618 30,866 21,182
-------- -------- --------
Total deferred tax assets.................................. 80,077 70,835 57,129
-------- -------- --------
Net deferred tax assets.................................... 69,904 59,053 43,798
Less current portion....................................... 3,845 - -
-------- --------- -------
Noncurrent deferred tax assets............................. $66,059 $59,053 $43,798
======= ======= =======
</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 entered into a tax sharing agreement
dated January 31, 1994 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. If the Company were no
longer a member of the GAF consolidated tax group (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
F-14
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
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.
On September 15, 1997, GAF received a notice from the Internal Revenue
Service (the "Service") of a deficiency in the amount of $84.4 million (after
taking into account the use of net operating losses and foreign tax credits
otherwise available for use in later years) in connection with the formation in
1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the "surfactants
partnership"), a partnership in which GFC holds an interest. The claim of the
Service for interest and penalties, after taking into account the effect on the
use of net operating losses and foreign tax credits, could result in GFC
incurring iabilities significantly in excess of the deferred tax liability of
$131.4 million that GAF recorded in 1990 in connection with this matter.
GAF has advised the Company that it believes that GFC will prevail in this
matter, although there can be no assurance in this regard. The Company believes
that the ultimate disposition of this matter will not have a material adverse
effect on its financial position or results of operations. GAF, G-I Holdings and
certain subsidiaries of GAF have agreed to jointly and severally indemnify the
Company against any tax liability associated with the surfactants partnership,
which the Company would be severally liable for, together with GAF and several
current and former subsidiaries of GAF, should GAF and certain of its
subsidiaries be unable to satisfy such indemnity.
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. This facility 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 income (expense), net."
NOTE 7. INVENTORIES
At December 31, 1995 and 1996 and September 28, 1997, $6.2, $7.6 and $10.2
million, respectively, of inventories were valued using the LIFO method.
Inventories consist of the following:
F-15
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. INVENTORIES--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPT. 28,
1997
1995 1996 (UNAUDITED)
---------- ---------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Finished goods............................................ $36,363 $41,201 $51,026
Work in process........................................... 7,594 10,844 10,578
Raw materials and supplies................................ 25,621 26,206 28,800
------- ------- -------
Total................................................... 69,578 78,251 90,404
Less LIFO reserve......................................... (505) (1,055) (1,055)
-------- -------- -------
Inventories............................................... $69,073 $77,196 $89,349
======= ======= =======
</TABLE>
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPT. 28,
1997
1995 1996 (UNAUDITED)
---------- ---------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Land and land improvements...................................... $ 25,255 $ 25,722 $ 25,705
Buildings and fixtures.......................................... 40,608 46,001 46,998
Machinery and equipment (including equipment under
capitalized leases of $20,450, $17,660 and $16,089 C
see Note 9)................................................... 172,993 178,190 181,328
Construction in progress........................................ 20,879 19,039 31,929
--------- --------- ---------
Total......................................................... 259,735 268,952 285,960
Less accumulated depreciation and amortization.................. (35,951) (48,452) (58,184)
--------- --------- ---------
Property, plant and equipment, net.............................. $223,784 $220,500 $227,776
======== ======== ========
</TABLE>
F-16
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPT. 28,
1997
1995 1996 (UNAUDITED)
---------- ---------- ---------
(THOUSANDS)
<S> <C> <C> <C>
11-3/4% Senior Deferred Coupon Notes due 2004................... $207,814 $233,018 $253,955
8-5/8% Senior Notes due 2006.................................... C 99,504 99,542
Borrowings under revolving credit facilities.................... 24,412 C C
Industrial revenue bonds with various interest rates
and maturity dates to 2012.................................... 19,625 19,625 11,125
Obligations on mortgaged properties............................. 7,639 5,155 4,754
Obligations under capital leases (Note 12)...................... 59,760 51,800 50,254
--------- --------- ---------
Total......................................................... 319,250 409,102 419,630
Less current maturities......................................... (8,990) (3,412) (3,728)
--------- --------- ---------
Long-term debt less current maturities.......................... $310,260 $405,690 $415,902
======== ======== ========
</TABLE>
On December 9, 1996, the Company issued $100 million in aggregate
principal amount at maturity of 8-5/8% Senior Notes due 2006 (the "Notes"). 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 and the Notes have the
right under the indentures governing such notes to require the Company to
purchase the Deferred Coupon Notes at a price of 101% of Accreted Value (as
defined herein) and the Notes at a price of 101% of the principal amount
thereof, and the Company has the right to redeem the Deferred Coupon Notes at
Accreted Value and the Notes at a price of 101% of the principal amount thereof,
plus, in each case, the Applicable Premium (as defined therein), together with
any accrued and unpaid interest, in the event of a Change of Control (as defined
therein).
F-17
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
The indentures relating to the Notes, the Deferred Coupon Notes and the
Credit Agreement (see below) contain 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 28, 1997, after giving effect to the most restrictive of the
aforementioned covenants, the Company could have paid dividends of up to $82.0
million. Under the indentures relating to the Notes and the Deferred Coupon
Notes, 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 its consolidated interest expense for its most recently
completed four fiscal quarters is at least 2 to 1. For the four quarters ended
September 28, 1997, 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 with a remaining aggregate
ending notional principal amount of $80 million and 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, 1995 and
1996 and September 28, 1997, the Company would have incurred gains of $9.3, $8.0
and $3.9 million, respectively, representing the estimated amount that would be
receivable by the Company if the swaps were terminated at such dates. No cash
interest will be paid on the swaps until maturity. In June and September 1997,
the Company terminated swaps each with an aggregate ending notional principal
amount of $31 million, resulting in gains of $0.4 and $1.4 million,
respectively. The gains have been deferred and will be amortized as a reduction
of interest expense over the remaining life of the Deferred Coupon Notes. 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 August 1997, the Company entered into a new three-year bank credit
facility (the "Credit Agreement"). The terms of the Credit Agreement provide for
a $75 million revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $75 million in the aggregate. As of September 28, 1997,
$38.6 million of letters of credit were outstanding and no amounts had been
borrowed under the Credit Agreement. Under the terms of the Credit Agreement,
the Company is subject to certain financial covenants, including interest
coverage and leverage ratios, and dividends and other restricted payments are
limited. As of September 28, 1997, the Company was in compliance with such
covenants. The Credit Agreement replaced previous bank credit facilities which
provided up to $42 million in total borrowings and outstanding letters of
credit.
In connection with the Credit Agreement, USI's revolving credit facility,
which provided for borrowings of up to $29.6 million, and letters of credit of
up to $2.0 million (such total borrowings and outstanding letters of credit not
to exceed $29.6 million), was terminated.
F-18
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
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 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 two 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 28, 1997.
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 estimates of
the fair values from an independent source believed to be reliable. The
estimated fair value of the Deferred Coupon Notes as of December 31, 1995 and
1996 and September 28, 1997 was $210.8, $268.9 and $289.1 million, respectively.
The estimated fair value of the Notes as of December 31, 1996 and September 28,
1997 was $100 and $103.5 million, respectively.
The aggregate maturities of long-term debt as of September 28, 1997 for
the next five years are as follows:
TWELVE MONTHS
ENDED SEPTEMBER 30, (THOUSANDS)
1998......................... $3,728
1999......................... 4,048
2000......................... 4,660
2001......................... 6,015
2002......................... 5,420
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 $2.6, $2.7, $3.0, $2.3 and $2.7 million for 1994, 1995 and 1996 and the
first nine months of 1996 and 1997, respectively.
F-19
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
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 of
1995 after the acquisition of USI and were $157,000, $138,000 and $126,000 for
1996 and the first nine months of 1996 and 1997, respectively.
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.
The Company's net periodic pension cost for the Hourly Retirement Plan
included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1995 1996
------- ------ -----
(THOUSANDS)
<S> <C> <C> <C>
Service cost................................................. $501 $463 $631
Interest cost................................................ 551 598 686
Actual income on plan assets................................. (380) (432) (829)
Net deferral and amortization of unrecognized prior
service cost and actuarial losses.......................... 175 97 35
---- ----- -----
Net periodic pension cost.................................... $847 $726 $523
==== ==== ====
</TABLE>
Net periodic pension cost for the Hourly Retirement Plan was $0.3
and $0.4 million, respectively, for the first nine months of 1996 and 1997.
The following table sets forth the funded status of the Hourly
Retirement Plan:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1996
---------- ----------
(THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation:
Vested....................................................... $7,623 $ 8,407
Nonvested.................................................... 1,266 1,621
------- --------
Total accumulated benefit obligation........................... $8,889 $10,028
====== =======
Projected benefit obligation................................... $8,889 $10,028
Fair value of plan assets, primarily publicly traded
stocks and U.S. Government securities........................ (7,092) (9,530)
------- --------
Projected benefit obligation in excess of plan assets.......... 1,797 498
Unrecognized prior service cost................................ (368) (338)
Unrecognized net loss.......................................... (635) (83)
-------- ---------
Unfunded accrued pension cost.................................. $ 794 $ 77
======== =========
</TABLE>
F-20
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
At December 31, 1996, the difference between the "Projected benefit
obligation in excess of plan assets" and the "Unfunded accrued pension cost," in
the amount of $421,000 was recorded by the Company as a liability, offset by an
intangible asset in the amount of $338,000 and a reduction of stockholder's
equity in the amount of $83,000. 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 7.5% and 7.75% for 1995 and 1996, respectively. The
expected long-term rate or return on assets, used in determining net periodic
pension cost, was 9% for 1995 and 11% for 1996.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1994, 1995 and 1996 and the first nine months of 1996 and 1997.
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. Options to
purchase 71,578 shares of Preferred Stock were issued in 1997, exercisable at a
price of $100 per share. Each share of Preferred Stock is convertible, at the
holder's option, into shares of common stock of the Company at a formula price
based on Book Value (as defined in the option agreement) as of the date of
grant. The 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 under the option agreements). The exercise price
of the options to purchase Preferred Stock was equal to estimated fair value per
share of the Preferred Stock at the date of grant. No expense is accrued in
connection with the preferred stock options.
Income Appreciation Unit Plan and Book Value Appreciation Unit Plan
The Company provided 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, $0.2, $0.4 and $0.8 million for 1994, 1995 and
1996 and the first nine months of 1996, respectively.
The Income Appreciation Unit Plan was terminated as of December 31, 1996,
and the values were frozen as of that date. Participants who hold vested units
will be entitled to receive a 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 in the plan). Expense accrued under this plan
was $0.1 million for 1996, was immaterial for the first nine months of 1996 and
was $0.4 million for the first nine months of 1997.
F-21
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
Postretirement Medical and Life Insurance
The Company generally does not provide postretirement medical and life
insurance benefits, although it subsidizes such benefits for certain employees
and certain retirees. Such subsidies were reduced or ended as of January 1,
1997.
The following table shows the components of the accrued postretirement
health care cost obligation as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1996
---------- ----------
(THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees, dependents and beneficiaries eligible
for benefits............................................... $ 5,866 $ 5,108
Active employees fully eligible for benefits................. 1,193 1,131
Active employees not fully eligible for benefits............. 1,154 1,182
-------- --------
Total accumulated postretirement benefit obligation............ 8,213 7,421
Fair value of plan assets...................................... - -
Unrecognized net gain.......................................... 3,284 4,039
-------- --------
Accrued postretirement benefit obligation...................... $11,497 $11,460
======= =======
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1995 1996
------- ------ -----
(THOUSANDS)
<S> <C> <C> <C>
Service cost.................................................. $ 86 $ 79 $ 95
Interest cost................................................. 599 645 597
Amortization of net gain from earlier periods................. (200) (415) (232)
---- ---- ----
Net periodic postretirement benefit cost...................... $485 $309 $460
==== ==== ====
</TABLE>
Net periodic postretirement benefit cost was $0.3 million for each of the
first nine months of 1996 and 1997.
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1996 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $700 to $1,000 per year. For retirees over age
65, this subsidy may be replaced by participation in a managed care program.
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 13% and 7% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 1997
for such retirees under and over 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 7.5% and 7.75%
for 1995 and 1996, respectively.
F-22
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
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, 1996 by $345,000 and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the year 1996 by $77,000.
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, SEPT. 28,
1997
1995 1996 (UNAUDITED)
---------- ---------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Receivable from (payable to):
GAF/G-I Holdings/G Industries................................. $ 208 $ 274 $ 259
GAFBMC........................................................ (55) 115 579
GFC........................................................... - - (1,278)
International Specialty Products Inc.......................... (2,902) (2,676) (6,744)
-------- -------- -------
Payable to related parties, net............................... $(2,749) $(2,287) $(7,184)
======= ======= =======
</TABLE>
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 6.03% during 1996). The highest amount of loans made by the
Company to G-I Holdings during 1995 and 1996 was $45.4 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 1996 was $24.3 million. As of December 31, 1995 and 1996 and September
28, 1997, no loans were owed to the Company by G-I Holdings, and no loans were
owed by the Company to affiliates. In addition, the Company advances funds on a
non-interest bearing basis to G-I Holdings and its subsidiaries. The balance of
such advances as of September 28, 1997 was $27.2 million and was classified as a
long-term receivable from related parties in the Consolidated Balance Sheet.
Also, through September 28, 1997, the Company had made distributions of $46
million to its parent company.
Mineral Products: The Company purchases all of its colored roofing
granules requirements (except for the requirements of the California roofing
plant) from ISP under a requirements contract which was renewed in 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) pursuant to a requirements
contract which expires December 31, 1997. Such purchases by BMCA and USI totaled
$42.5, $45.8, $50.5, $39.0 and $40.8 million for 1994, 1995 and 1996 and the
first nine months of 1996 and 1997, respectively. The amount payable to ISP at
December 31, 1995 and 1996 and September 28, 1997 for such purchases was $2.8,
$3.2 and $5.1 million, respectively.
Glass Fiber Supply Agreement: As a result of the Separation
Transactions (see Note 1), the Company's glass fiber manufacturing facility in
Nashville, Tennessee, which manufactures a significant portion of the Company's
glass fiber requirements, was transferred to GFC as of January 1, 1997. In
connection with that transaction, the Company entered into a seven-year supply
agreement with GFC under which GFC produces glass fiber for the Company.
Purchases under this agreement totaled $17.8 million for the first nine months
of 1997.
F-23
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS--(CONTINUED)
Management Agreements: The Company is a party to a Management
Agreement with ISP (the "Management Agreement"), which expires December 31,
1997, 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 $3.5, $3.6, $3.9, $2.9 and $3.5 million for 1994, 1995 and 1996 and the
first nine months of 1996 and 1997, respectively. In addition to the management
fee, the Company paid to ISP approximately $0.7 million in each of 1994 and
1995, $0.8 million in 1996, and $0.6 million in the first nine months of 1996,
primarily for telecommunications and information services, and the Company paid
approximately $0.2, $0.1 and $0.3 million to ISP in 1994, 1995 and 1996,
respectively, for certain legal services, which in each case were not
encompassed within the Management Agreement. In connection with the Separation
Transactions (see Note 1), the Management Agreement was modified to incorporate
such services, and, in that connection, the total charges for management fees
were increased to an annual rate of $4.7 million, effective January 1, 1997.
As of January 1, 1997, the Company and GFC entered into a management
agreement under which the Company provides certain general management,
administrative and financial services to GFC. Under the management agreement,
which expires December 31, 1997, GFC is obligated to pay the Company an annual
management fee of $1.0 million.
Tax Sharing Agreement: See Note 5.
Stock Appreciation Rights: An executive officer of the Company was
granted stock appreciation rights in 1995 and 1996 relating to GAF's common
stock. Compensation expense in connection with such stock appreciation rights is
reflected in G-I Holdings' operating expenses, and was immaterial for 1995, 1996
and the first nine months of 1996, respectively, and was $0.4 million for the
first nine months of 1997.
NOTE 12. COMMITMENTS AND CONTINGENCIES
The discussions as to legal matters involving the Company contained in
"Business--Legal Proceedings--Environmental Litigation" and "--Other Litigation"
are incorporated herein by reference.
GAF, G-I Holdings, G Industries and GAFBMC are presently dependent upon
the earnings and cash flow of their subsidiaries, principally the Company, in
order to satisfy their obligations, including as of September 28, 1997, the
asbestos-related liability discussed in Note 3, $5.7 million of G-I Holdings'
11.125% Senior Discount Notes due 1998, $0.1 million of G-I Holdings' Series B
10% Senior Notes due 2006, and approximately $155.6 million of various tax and
other liabilities, including tax liabilities relating to the surfactants
partnership (discussed in Note 5). Of such obligations, $20.9 million (net of
estimated insurance recoveries of $95.8 million) is estimated to be payable
during the twelve months ended September 30, 1998. GAF has advised the Company
that it expects to obtain funds to satisfy such obligations from, among other
things, dividends and loans from subsidiaries (principally the Company), as to
which there are restrictions under the indentures relating to the Deferred
Coupon Notes, the Notes and the Credit Agreement, and from payments pursuant to
the Tax Sharing Agreement between GAF and the Company. 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.
F-24
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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 $7.1, $7.0 and $8.3 million for 1994, 1995 and
1996, respectively. Future minimum lease payments for properties which were held
under long-term noncancellable leases as of December 31, 1996 were as follows:
CAPITAL OPERATING
LEASES LEASES
------ ------
(THOUSANDS)
1997................................... $ 6,862 $ 4,396
1998................................... 6,862 3,126
1999................................... 6,862 1,748
2000................................... 7,302 1,158
2001................................... 8,108 467
Later years............................ 38,964 148
------- --------
Total minimum payments................. 74,960 $11,043
=======
Less interest included above........... (23,160)
-------
Present value of net minimum lease payment. $51,800
=======
NOTE 13. SUBSEQUENT EVENT (UNAUDITED)
In October 1997, the Company issued in a private placement offering $100
million in aggregate principal amount at maturity of 8% Senior Notes due 2007.
F-25
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 BY QUARTER 1996 BY QUARTER
-------------------------------------- ---------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
-------- --------- -------- -------- ------- --------- -------- ---------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................. $138.6 $177.1 $191.9 $179.6 $166.7 $230.2 $251.6 $203.5
Cost of products sold................. 102.9 127.0 139.7 136.4 124.3 165.6 180.9 151.5
----- ----- ----- ----- ----- ----- ----- -----
Gross profit.......................... $ 35.7 $ 50.1 $ 52.2 $ 43.2 $ 42.4 $ 64.6 $ 70.7 $ 52.0
====== ====== ====== ====== ====== ====== ====== ======
Operating income...................... $ 7.0 $ 15.8 $ 15.6 $ 7.5 $ 7.7 $ 20.7 $ 22.8 $ 10.2
======= ====== ====== ====== ====== ====== ====== ======
Interest expense...................... $ 6.0 $ 6.0 $ 6.2 $ 6.6 $ 7.8 $ 8.0 $ 7.9 $ 8.3
====== ====== ====== ====== ====== ====== ====== ======
Income (loss) before income taxes..... $ .6 $ 8.0 $ 8.0 $ (.1) $ (.3) $ 12.4 $ 14.9 $ .9
Income tax (provision) benefit........ (.2) (3.2) (3.2) .2 .1 (4.8) (5.8) (.3)
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)..................... $ .4 $ 4.8 $ 4.8 $ .1 $ (.2) $ 7.6 $ 9.1 $ .6
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-26
<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 transactions 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 of 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 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
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
II-1
<PAGE>
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 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
EXHIBIT
NUMBER DESCRIPTION
*3.1 - Certificate of Incorporation of BMCA.
3.2 - By-laws of BMCA (incorporated by reference to Exhibit 3.2 to BMCA's
Registration Statement on Form S-4 (Registration No. 33-81808) (the
"Deferred Coupon Note Registration Statement").
*4.1 - Indenture, dated as of October 20, 1997 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 October 20, 1997, between BMCA,
Bear, Stearns & Co. Inc., BNY Capital Markets, Inc. and Chase
Securities 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 - Indenture dated as of December 9, 1996, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to
BMCA's Registration Statement on Form S-4 (Registration No.
333-20859)).
10.3 - 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)).
10.4 - 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).
II-2
<PAGE>
10.5 - 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).
10.6 - Amendment No. 4, 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).
10.7 - 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)).
10.8 - 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)).
10.9 - Amendment No. 6, dated as of January 1, 1997, to the Management
Agreement (incorporated by reference to Exhibit 10.8 to the 2006
Notes Registration Statement on Form S-4 (Registration No.
333-20859)).
10.10 - 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).
10.11 - Form of Option Agreement relating to Series A Cumulative Redeemable
Convertible Preferred Stock (incorporated by reference to Exhibit
10.9 to BMCA's Form 10-K for the year ended December 31, 1996 (the
"1996 Form 10-K")).
10.12 - Stock Appreciation Right Agreement dated January 1, 1997 between GAF
Corporation and Sunil Kumar (incorporated by reference to Exhibit
10.11 to the 1996 Form 10-K).
10.13 - Amended and Restated Stock Appreciation Right Agreement dated
January 1, 1997 between GAF Corporation and Sunil Kumar
(incorporated by reference to Exhibit 10.12 to the 1996 Form 10-K).
*12 - Computation of Ratio of Earnings to Fixed Charges.
21 - Subsidiaries of BMCA (incorporated by reference to Exhibit 21 to the
1996 Form 10-K).
*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 - Financial Data Schedule for the first nine months of fiscal year
1997, which is submitted electronically to the Securities and
Exchange Commission for information only (incorporated by reference
to Exhibit 27 to the Company's Form 10-Q for the fiscal quarter
ended September 28, 1997).
**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.
- ----------------------------------
* Filed herewith.
** To be filed by Amendment.
II-3
<PAGE>
(B) SCHEDULES
Consolidated Financial Statement Schedules:
Report of Independent Public Accountants..........................S-1
Schedule II - Valuation and Qualifying Accounts...................S-2
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 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 3rd day of December 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 and Lang
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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Samuel J. Heyman Chairman, Chief Executive Officer December 3, 1997
- ------------------------- and Director (Principal Executive
Samuel J. Heyman Officer)
/s/ Sunil Kumar President, Chief Operating Officer December 3, 1997
- ------------------------- and Director
Sunil Kumar
/s/ James P. Rogers Executive Vice President and December 3, 1997
- ------------------------- Director
James P. Rogers
/s/ William R. Lang Senior Vice President and Chief December 3, 1997
- ------------------------- Financial Officer (Principal
William R. Lang Financial and Accounting
Officer)
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 3, 1997. 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.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 3, 1997
S-1
<PAGE>
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
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>
YEAR ENDED DECEMBER 31, 1996
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1996 EXPENSES DEDUCTIONS 1996
- ----------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Valuation and Qualifying Accounts
Deducted from Assets To Which
They Apply:
Allowance for doubtful accounts................... $ 3,217 $ 716 $1,959(a) $1,974(b)
Allowance for discounts........................... 18,797 73,936 70,265 22,468
Reserve for inventory market valuation............ 574 2,025 90 2,509
</TABLE>
S-2
<PAGE>
- ------------------------
Notes:
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balance at December 31, 1994 principally represents a reserve for
receivables sold to a trust (see Note 6 to Consolidated Financial
Statements) and is reflected in the Consolidated Balance Sheets as a
reduction of "Accounts receivable, other". The balances at December 31,
1995 and 1996, in addition to representing such reserve for receivables
sold to a trust, include a reserve of $1,261,000 and $647,000,
respectively, related to USI trade receivables.
(c) Represents balance acquired in an acquisition.
S-3
<PAGE>
================================================================================
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON 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 ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE NOTES
TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................................................
Risk Factors......................................................
Capitalization....................................................
Selected Financial Data...........................................
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................................
Business..........................................................
Management........................................................
Executive Compensation............................................
Security Ownership of Certain Beneficial
Owners and Management.............................................
Certain Relationships.............................................
The Exchange Offer................................................
Description of the New Notes......................................
Certain U.S. Federal Income Tax
Considerations....................................................
Plan of Distribution..............................................
Legal Matters.....................................................
Independent Auditors..............................................
Available Information.............................................
Index to Consolidated Financial
Statements...................................................... F-1
================================================================================
================================================================================
$100,000,000
SERIES B 8%
SENIOR NOTES DUE 2007
BUILDING MATERIALS
CORPORATION OF AMERICA
-------------------------
PROSPECTUS
-------------------------
________ __, 199_
================================================================================
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
*3.1 - Certificate of Incorporation of BMCA.
3.2 - By-laws of BMCA (incorporated by reference to Exhibit 3.2 to BMCA's
Registration Statement on Form S-4 (Registration No. 33-81808) (the
"Deferred Coupon Note Registration Statement").
*4.1 - Indenture, dated as of October 20, 1997 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 October 20, 1997, between BMCA,
Bear, Stearns & Co. Inc., BNY Capital Markets, Inc. and Chase
Securities 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 - Indenture dated as of December 9, 1996, between BMCA and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.1 to
BMCA's Registration Statement on Form S-4 (Registration No.
333-20859)).
10.3 - 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)).
10.4 - 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).
<PAGE>
10.5 - 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).
10.6 - Amendment No. 4, 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).
10.7 - 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)).
10.8 - 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)).
10.9 - Amendment No. 6, dated as of January 1, 1997, to the Management
Agreement (incorporated by reference to Exhibit 10.8 to the 2006
Notes Registration Statement on Form S-4 (Registration No.
333-20859)).
10.10 - 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).
10.11 - Form of Option Agreement relating to Series A Cumulative Redeemable
Convertible Preferred Stock (incorporated by reference to Exhibit
10.9 to BMCA's Form 10-K for the year ended December 31, 1996 (the
"1996 Form 10-K")).
10.12 - Stock Appreciation Right Agreement dated January 1, 1997 between GAF
Corporation and Sunil Kumar (incorporated by reference to Exhibit
10.11 to the 1996 Form 10-K).
10.13 - Amended and Restated Stock Appreciation Right Agreement dated
January 1, 1997 between GAF Corporation and Sunil Kumar
(incorporated by reference to Exhibit 10.12 to the 1996 Form 10-K).
*12 - Computation of Ratio of Earnings to Fixed Charges.
21 - Subsidiaries of BMCA (incorporated by reference to Exhibit 21 to the
1996 Form 10-K).
*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 - Financial Data Schedule for the first nine months of fiscal year
1997, which is submitted electronically to the Securities and
Exchange Commission for information only (incorporated by reference
to Exhibit 27 to the Company's Form 10-Q for the fiscal quarter
ended September 28, 1997).
**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.
- ----------------------------------
* Filed herewith.
** To be filed by Amendment.
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
GAF NEWCO INC.
THE UNDERSIGNED, being a natural person for the purposes of
organizing a corporation under the General Corporation Law of the State of
Delaware, hereby certifies that:
FIRST: The name of the Corporation is GAF Newco Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 32 Loockerman Square, Suite L-100, City of Dover,
County of Kent, State of Delaware. The name of the registered agent of the
Corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 1,000, all of which shares shall be
Common Stock having a par value of $.001.
FIFTH: The name and mailing address of the incorporator is Shelley
A. Sorkin, c/o ISP Management Company, Inc., 1361 Alps Road, Wayne, New Jersey
07470.
SIXTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in these articles of
incorporation, By-laws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any By-laws adopted
by the board of directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
SEVENTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages for
breach of fiduciary
<PAGE>
duty as a director, except (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, or (ii) for acts or omissions which are
not in good faith or which involve intentional misconduct or knowing violation
of the law, or (iii) for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the General Corporation Law of the State
of Delaware or any amendment thereto or successor provision thereto, or (iv) for
any transaction from which the director shall have derived an improper personal
benefit. Neither amendment nor repeal of this paragraph (a) nor the adoption of
any provision of the Certificate of Incorporation inconsistent with this
paragraph (a) shall eliminate or reduce the effect of this paragraph (a) in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this paragraph (a) of this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or testifies in, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative in nature, by reason of the fact that such person is or was a
director, office, employee or agent 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, employee benefit plan, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding to the full extent permitted
by law, and the Corporation may adopt By-laws or enter into agreements with any
such person for the purpose of providing for such indemnification.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Incorporation on this 31st day of January 1994.
/s/ Shelley A. Sorkin
-----------------------------
Shelley A. Sorkin
Sole Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
GAF NEWCO INC.
ADOPTED IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 242 OF THE
DELAWARE GENERAL CORPORATION LAW
It is hereby certified that:
1. The present name of the corporation (the "Corporation") is GAF
Newco Inc.
2. The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of Delaware on January 31, 1994.
3. Article FIRST of the Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
"The name of the Corporation is Building Materials Corporation of
America."
4. The foregoing amendment was declared advisable by a resolution
duly adopted by unanimous written consent of the directors of the Corporation
dated February 18, 1994 and was duly adopted in accordance with the provisions
of Section 242 of the Delaware General Corporation Law by the affirmative vote
of the sole stockholder of the Corporation.
IN WITNESS WHEREOF, the undersigned have executed this certificate
as of February 22, 1994.
GAF Newco Inc.
By: /s/ Mark A. Buckstein
-------------------------
Mark A. Buckstein
Executive Vice President
Attest:
/s/ Elisa D. Garcia C.
- ------------------------------
Elisa D. Garcia C.
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
BUILDING MATERIALS CORPORATION OF AMERICA
(Pursuant to Section 242 of the
General Corporation Law of Delaware)
------------------------------------
Building Materials Corporation of America, a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), does
hereby certify as follows:
1. The Certificate of Incorporation of the Corporation (the
"Certificate") was filed with the Secretary of State of Delaware on January 31,
1994. The Corporation was formerly known as GAF Newco Inc.
2. Article FOURTH of the Certificate is hereby amended to read in
its entirety as follows:
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is One Million
One Hundred Thousand (1,100,000) shares, consisting of:
(a) One Million Fifty Thousand (1,050,000) shares of
Common Stock, par value $.001 (hereinafter referred to as
"Common Stock"); and
(b) Fifty Thousand (50,000) shares of Preferred Stock,
par value $.01 (hereinafter referred to as "Preferred Stock").
A. PREFERRED STOCK: Shares of Preferred Stock may be issued
from time to time in one or more series, as may from time to time be
<PAGE>
determined by the Board of Directors, each of said series to be
distinctly designated. All shares of any one series of Preferred
Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be
cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special
rights of each series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all
other series at any time outstanding; and, subject to the provisions
of subparagraph 1 of Paragraph C of this Article FOURTH, the Board
of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of preferred Stock,
the voting powers and the designations, preferences and relative,
optional and other special rights, and the qualifications,
limitations and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(a) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute such series,
which number may be increased (except where otherwise provided
by the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(b) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other class or classes or series of the same or other
classes of stock and whether such dividends shall be
cumulative or non-cumulative;
(c) The right, if any, of the holders of Preferred Stock
of such series to convert the same into, or exchange the same
for, shares of any other class or classes or of
2
<PAGE>
any series of the same or any other class or classes of stock
of the Corporation and the terms and conditions of such
conversion or exchange;
(d) Whether or not Preferred Stock of such series shall
be subject to redemption, and the redemption price or prices,
including, without limitation, cash, property, or rights
(including securities of the Corporation or any other
corporation), and the time or times at which, and the terms
and conditions on which, Preferred Stock of such series may be
redeemed;
(e) The rights, if any, of the holders of Preferred
Stock of such series upon the voluntary or involuntary
liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding-up of the Corporation;
(f) The terms of the sinking fund or redemption or
purchase account, to be provided for the Preferred Stock of
such series; and
(g) The voting powers, if any, of the holders of such
series of Preferred Stock which may, without limiting the
generality of the foregoing, include the right, voting as a
series by itself or together with other series of preferred
Stock or all series of Preferred Stock as a class, to elect
one or more directors of the Corporation if there shall have
been a default in the payment of dividends on any one or more
series of Preferred Stock or under such other circumstances
and on such conditions as the Board of Directors may
determine.
B. COMMON STOCK
1. After the requirements with respect to
preferential dividends on the Preferred Stock (fixed in accordance
with the provisions of Paragraph A of this Article FOURTH), if any,
shall have been met and after the Corporation shall have
3
<PAGE>
complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of Paragraph A of
this Article FOURTH), and subject further to any other conditions
which may be fixed in accordance with the provisions of Paragraph A
of this Article FOURTH, then and not otherwise the holders of Common
Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors.
2. After distribution in full of the preferential
amount, if any (fixed in accordance with the provisions of Paragraph
A of this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the
holders of the Common Stock, subject to the rights, if any, of the
holders of Preferred Stock to participate therein (fixed in
accordance with Paragraph A of this Article FOURTH), shall be
entitled to receive all the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for distribution
to stockholders ratably in proportion to the number of shares of
Common Stock held by them, respectively.
3. Except as may otherwise be required by law or
by the provisions of such resolutions as may be adopted by the Board
of Directors pursuant to Paragraph A of this Article FOURTH, each
holder of Common Stock shall have one vote in respect of each share
of Common Stock held by him on all matters voted upon by the
stockholders.
C. OTHER PROVISIONS:
1. No holder of any of the shares of any class or
series of stock or of options, warrants or other rights to purchase
shares of any class or series of stock or of other securities of the
Corporation shall have any preemptive right to purchase or subscribe
for any unissued stock of any class or series or any additional
shares of any class or series to be issued by reason of any
4
<PAGE>
increase of the authorized capital stock of the Corporation of any
class or series, or bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for stock of
the Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to a resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms, as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
2. The relative powers, preferences and rights of
each series of preferred Stock in relation to the powers,
preferences and rights of each other series of Preferred Stock
shall, in each case, be as fixed from time to time by the Board of
Directors in the resolution or resolutions adopted pursuant to
authority granted in Paragraph A of this Article FOURTH, and the
consent, by class or series vote or otherwise, of the holders of
such of the series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed
by the Board of directors as senior to, or on a parity with, the
powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in
the resolution or resolutions as to any series of Preferred Stock
adopted pursuant to Paragraph A of this Article FOURTH that the
consent of the holders of a majority (of such greater proportion as
shall be therein fixed) of the outstanding shares of such series
voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
5
<PAGE>
3. Subject to the provisions of sub-paragraph 2 of
this Paragraph C, shares of any series of Preferred Stock may be
issued from time to time as the Board of Directors of the
Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
4. Shares of Common Stock may be issued from time
to time as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be fixed by
the Board of Directors.
5. The authorized amount of shares of Common Stock
and of Preferred Stock may, without a class or series vote, be
increased or decreased from time to time by the affirmative vote of
the holders of a majority of the stock of the Corporation entitled
to vote thereon.
3. The foregoing Amendment to the Certificate was duly adopted in
accordance with Section 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its duly authorized officers this 26th day of
August, 1996.
By: /s/ James P. Rogers
--------------------------------
James P. Rogers
Senior Vice President
Attest: /s/ Richard A. Weinberg
--------------------------------
Richard A. Weinberg
Secretary
6
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF BUILDING MATERIALS CORPORATION OF AMERICA
-----------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-----------------------
We, the undersigned, Senior Vice President and Secretary,
respectively, of Building Materials Corporation of America (the "Corporation"),
a corporation organized and existing under the General Corporation Law of the
State of Delaware (the "General Corporation Law"), in accordance with the
provisions of Section 151 thereof, do hereby certify that the Board of Directors
of the Corporation duly adopted the following resolutions by unanimous consent
dated as of August 15, 1996:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation of the Corporation, this Board of Directors hereby
creates and authorizes the issuance of a series of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share, and hereby
fixes the designation, dividend rate, redemption provisions, voting powers,
rights on liquidation, dissolution or winding up, and other preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations, or restrictions thereof, as follows:
1. Designation. The Preferred Stock created and authorized hereby
shall be designated as the "Series A Cumulative Redeemable Convertible Preferred
Stock" (the "Series A Preferred Stock"). The number of shares of Series A
Preferred Stock shall be 50,000. The liquidation preference of the Series A
Preferred Stock shall be $100 per share (the "Liquidation Preference").
2. Dividends.
(a) Each holder of a share of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of the funds of
1
<PAGE>
the Corporation legally available therefor pursuant to the General Corporation
Law (the "Legally Available Funds"), cumulative cash dividend payments of $2.00
per share for each full Quarterly Dividend Period (as defined in Section 2(f)
hereof) that such share of Series A preferred Stock is outstanding; provided, if
a share of Series A Preferred Stock is not outstanding for a full Quarterly
Dividend Period, the dividend payment per share in respect of such partial
Quarterly Dividend Period shall be equal to $2.00 multiplied by a fraction, the
number of which is the number of days such share was outstanding (but not more
than 30 days for any calendar month fully occurring in such portion), and the
denominator of which is 90. Such dividends, if and to the extent declared, shall
be payable quarterly in arrears on January 1, April 1, July 1 and October 1 of
each year (each, a "Dividend Payment Date"); provided that if any such date is
not a Business Day (as defined in Section 2(f) hereof), then the applicable
dividend shall be payable, if and to the extend declared, on the next succeeding
Business Day. Such dividends shall be fully cumulative.
(b) Dividends shall accrue (whether or not declared or paid)
on each share of Series A Preferred Stock from the date on which such share is
issued.
(c) Quarterly dividends, if and to the extent declared, shall
be paid to the holders of record of shares of Series A Preferred Stock as they
appear on the stock register of the Corporation on the record date therefor,
which record date shall be the December 15, March 15, June 15 and September 15
immediately preceding the Dividend Payment Date relating thereto.
(d) If dividends are not paid in full, or not declared in full
and sums set apart for the payment thereof, on the Series A Preferred Stock and
any Capital Stock (as defined in Section 2(f) hereof) of the Corporation ranking
on a parity with the Series A Preferred Stock as to the payment of dividends,
all dividends declared upon shares of Series A Preferred Stock and shares of
such other stock shall be declared pro rata so that in all cases the amount of
dividends declared per share on the Series A Preferred Stock and such other
stock shall bear to each other the same ratio that accumulated, unpaid dividends
per share on the Series A Preferred Stock and such other stock shall bear to
each other. Except as provided in the preceding sentence, unless full cumulative
dividends on the Series A Preferred
2
<PAGE>
Stock have been paid or declared in full and sums set aside for the payment
thereof, no dividends shall be declared or paid or set aside for payment, or
other distribution made, on any Capital Stock of the Corporation ranking on a
parity with or junior to the Series A Preferred Stock as to the payment of
dividends, nor shall any such stock be purchased, redeemed or otherwise
acquired, except as provided in Section 2(e) hereof, for any consideration (or
any payment made to or available for a sinking fund for the redemption of any
such stock).
(e) Except as provided in Section 2(d) hereof, the Corporation
may not pay cash dividends or make cash distributions on, or repurchase, redeem
or otherwise acquire (except in exchange for shares of Capital Stock ranking
junior to the Series A Preferred Stock as to the payment of dividends and as to
the distribution of assets upon liquidation, dissolution or winding up of the
Corporation or options, rights or warrants to acquire such shares) any of its
Capital Stock other than Capital Stock ranking senior to the Series A Preferred
Stock as to the payment of dividends, if, at such date, there are accumulated,
unpaid dividends on the Series A Preferred Stock; provided that the Corporation
may purchase outstanding shares of Common Stock and Series A Preferred Stock
from the holders thereof in accordance with the terms and conditions of the
Option Agreements (as defined in Section 2(f)).
(f) The following terms shall have the meanings set forth
below:
"Book Value" shall mean, as of any date of determination, (x)
shareholder's equity of the Corporation as of that date determined in accordance
with generally accepted accounting principles, but adding back (A) the charge to
shareholder's equity relating to the assumption by the Corporation of certain
asbestos-related liabilities of GAF Building Materials Corporation in connection
with the Corporation's formation, (B) the reduction in shareholder's equity
resulting from purchases of the capital stock of GAF Corporation ("GAF") by
persons who participated in promoting the management buy-out of GAF in March
1989 (the "Acquisition") (predecessor cost basis adjustment) and (C) any amounts
reflecting the liquidation preferences of any outstanding preferred stock of the
Corporation and excluding, to the extent occurring after December 31, 1995, (1)
nonrecurring non-operating losses and charges to
3
<PAGE>
stockholder's equity and nonrecurring non-operating gains and increases in
stockholder's equity, including any further charge relating to asbestos-related
liabilities and any increase in stockholder's equity attributable to a public
offering of capital stock of the Corporation, (2) net gains or losses in respect
of dispositions of assets by the Corporation other than in the ordinary course
of business, and (3) any charges relating to amortization of goodwill and other
intangibles arising from the Acquisition divided by (y) 1,000,000. Any
adjustments to Book Value shall include the tax effects, if any, associated
therewith. If the Series A Preferred Stock or Common Stock are converted or
exchanged for other securities or property pursuant to a recapitalization, stock
split, combination, reorganization, merger, exchange or similar transaction, or
if a sale of all or substantially all of the Common Stock of the Corporation
shall occur or be pending, Book Value shall be modified by the Board of
Directors in such manner as is reasonable under the circumstances. All
determinations by the Board of Directors hereunder shall be made in good faith
and shall be binding and conclusive.
"Business Day" means any day other than a Saturday, a Sunday or any
other day on which commercial banking institutions in the City of New York are
authorized by law to be closed.
"Capital Stock" of any person means any and all shares, interests,
participations or other equivalents (however designated) of equity interests in
such person.
"Common Stock" means the Corporation's common stock, par value $.001
per share, and any securities or property into which the Corporation's Common
Stock may be converted or exchange pursuant to a recapitalization, stock split,
combination, reorganization, merger, exchange or similar transaction.
"Corporation" means the party named as such in the preamble to this
Certificate.
"Option Agreements" means option agreements between the Corporation
and employees of the Corporation or U.S. Intec, Inc. relating to the Series A
Preferred Stock.
"person" means any individual, partnership, joint venture, firm,
corporation, association, trust or other
4
<PAGE>
enterprise or any government or political subdivision or agency, department or
instrumentality thereof.
"Quarterly Dividend Period" means the applicable period from January
1, through the next March 31, from April 1 through the next June 30, from July 1
through the next September 30 or from October 1 through the next December 31.
3. Redemption.
(a) The Series A Preferred Stock shall be redeemable, at any
time in whole or from time to time in part, out of Legally Available Funds, at
the option of the Corporation, upon giving notice as provided in Section 3(b)
hereof, at the Liquidation Preference thereof plus accumulated but unpaid
dividends to the date of redemption.
(b) At least 30 days but not more than 60 days prior to the
date fixed for the redemption of shares of the Series A Preferred Stock pursuant
to Section 3(a) hereof (each a "Redemption Date"), written notice of such
redemption shall be mailed to each holder of record of shares of Series A
Preferred Stock to be redeemed in a postage prepaid envelope addressed to such
holder at his mailing address as shown on the records of the Corporation;
provided, however, that no failure of any holder of Series A Preferred Stock to
receive such notice nor any defect therein shall affect the validity of the
proceeding for the redemption of the shares of Series A Preferred Stock, to be
redeemed. Each such notice shall state (i) the Redemption Date; (ii) the number
of shares of Series A Preferred Stock to be redeemed and, if fewer than all of
the shares held by such holder are to be redeemed from such holder, the number
of shares to be redeemed from such holder; (iii) the cash redemption price being
paid; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
shares to be redeemed shall cease to accrue on the Redemption Date. On or after
the Redemption Date, each holder of shares of Series A Preferred Stock to be
redeemed shall present and surrender his certificate or certificates for such
shares to the Corporation at the place designated in such notice and thereupon
the redemption price of such shares shall be paid to the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. In case fewer than all of the shares
represented by such certificate
5
<PAGE>
are redeemed, a new certificate shall be issued representing the unredeemed
shares. From and after the Redemption Date (unless default shall be made by the
Corporation in payment of the redemption price) all dividends on the shares of
Series A Preferred Stock designated for redemption in such notice shall cease to
accrue and all rights of the holders thereof as stockholders of the Corporation,
except the right to receive the redemption price thereof, without interest, upon
the surrender of certificates representing the same, shall cease and terminate
and such shares shall not thereafter be transferred (except with the written
consent of the Corporation) on the books of the Corporation and such shares
shall not be deemed to be outstanding for any purpose whatsoever.
(c) If fewer than all of the shares of Series A Preferred
Stock are to be redeemed, the Board of Directors of the Corporation shall select
the shares to be redeemed on such basis as the Board of Directors shall
determine in its sole discretion. The Board of Directors shall not be required
to redeem shares of Series A Preferred Stock on a pro rata basis. The Board of
Directors may elect to redeem shares of Series A Preferred Stock held by one
holder or group of holders and elect not to redeem shares of Series A Preferred
Stock held by other holders. Regardless of the method used, the calculation of
the number of shares to be redeemed shall be based upon whole shares, such that
the Corporation shall in no event be required to issue fractional shares of
Series A Preferred Stock or cash in lieu thereof. In the event a method
requiring proration is used, the number of shares to be redeemed from a holder
shall be rounded downward to the nearest whole number of shares. The holders of
Series A Preferred Stock shall have no right to request the Corporation to
redeem such shares at any time, and the Corporation shall have no obligation to
honor any such request if made.
4. Voting Rights. The holders of Series A Preferred Stock shall be
entitled to one vote for each share held on all matters to be voted on by the
stockholders of the Corporation and shall vote together with the holders of
Common Stock and the holders of any other class of stock entitled to vote in
such manner. The holders of Series A Preferred Stock shall not, except as
required by law, be entitled to vote as a separate class. Without limiting the
generality of the preceding sentence, a class vote or the consent of the holders
of the outstanding shares of Series A Preferred Stock as a separate class shall
not be required in
6
<PAGE>
connection with: (i) the creation of any class or series of Capital Stock of the
Corporation; (ii) any merger, consolidation or transfer of all or substantially
all the assets of the Corporation or other transaction involving the Corporation
and a third party in which the Corporation is the survivor or in which the
Corporation is not the survivor and in which the Series A Preferred Stock shall
(a) remain outstanding as an equivalent security of the survivor with no adverse
change to the powers, preferences or special rights provided for in this
Certificate or (B) be redeemed for an amount per share equal to the Liquidation
Preference plus accrued and unpaid dividends; or (iii) any increase in the total
number of authorized or issued shares of Capital Stock of any class, including
without limitation Series A Preferred Stock.
5. Priority of Series A Preferred Stock in Event of Liquidation,
Dissolution or Winding Up. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of the Series A Preferred Stock shall be entitled to
receive, out of the remaining net assets of the Corporation, an amount per share
in cash equal to the Liquidation Preference plus all dividends accrued and
unpaid on each such share up to the date fixed for distribution before any
distribution shall be made to the holders of any Capital Stock of the
Corporation ranking junior to the Series A Preferred Stock as to the
distribution of assets upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets distributable among the holders of Series A Preferred
Stock and any Capital Stock of the Corporation ranking on a parity with the
Series A Preferred Stock as to the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series A Preferred Stock and such other
stock of all preferential amounts payable to all such holders, then the assets
thus distributable shall be distributed ratably among the holders of the Series
A Preferred Stock and any Capital Stock of the Corporation ranking on a parity
with the Series A Preferred Stock as to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation in proportion to the
respective amounts that would be payable per share if such assets were
sufficient to permit payment in full. Except as otherwise provided in this
Section 5, holders of Series A
7
<PAGE>
Preferred Stock shall not be entitled to any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Corporation. For
the purposes of this Section 5, neither the voluntary sale, lease, conveyance,
exchange or transfer (for cash, securities or other consideration) of all or
substantially all the property or assets of the Corporation, nor the
consolidation or merger of the Corporation with one or more other corporations,
shall be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary.
6. Conversion.
(a) The holders of shares of Series A Preferred Stock shall
have the right, at any time or from time to time, at their option, to convert
all or any portion of such shares into shares of Common Stock on the following
basis: Each share of Series A Preferred Stock shall be convertible into the
number of shares of Common Stock equal to 100 divided by 115% of Book Value as
of December 31, 1995. The Corporation may, at its option, pay to any holder cash
in lieu of any fractional share of Common Stock issuable upon conversion of
shares of Series A preferred Stock.
(b) In the case of a redemption pursuant to Section 3 hereof
of any shares of Series A Preferred Stock, the right of conversion under this
Section 6 shall cease and terminate, as to the shares to be redeemed, at the
close of business on the second day preceding the date fixed for such
redemption, unless default shall be made in the payment of the Redemption Price
for the shares to be so redeemed.
(c) In order to convert shares of Series A Preferred Stock
into shares of Common Stock pursuant to the right of conversion set forth in
Section 6(a), the holder thereof shall surrender the certificate or certificates
representing Series A Preferred Stock, duly endorsed to the Corporation or in
blank, at the principal office of the Corporation and shall give written notice
the Corporation that such holder elects to convert the same. Within five
business days, the Corporation shall deliver at said office to such holder of
Series A Preferred Stock a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Shares of
Series A Preferred Stock shall be deemed to have been converted as of the date
of the surrender of such shares for conversion as provided above, and the person
entitled to
8
<PAGE>
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock on
such date. Upon conversion of only a portion of the number of shares covered by
a certificate representing shares of Series A Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver to the holder of the
certificate so surrendered for conversion, at the expense of the Corporation, a
new certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so surrendered, which
new certificate shall entitle the holder thereof to the rights of the shares of
Series A Preferred Stock represented thereby to the same extent as if the
certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
(d) The issuance of certificates for shares of Common Stock
upon the conversion of shares of Series A Preferred Stock shall be made without
charge to the converting stockholder for any original issue or transfer tax in
respect of the issuance of such certificates and any such tax shall be paid by
the Corporation.
(e) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
Series A Preferred Stock, the full number of shares of Common Stock then
deliverable upon the conversion of all shares of Series A Preferred Stock at the
time outstanding. The Corporation shall take at all times such corporate action
as shall be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the conversion of
Series A Preferred Stock in accordance with the provisions hereof, free from all
taxes, liens, charges and security interests with respect to the issue thereof.
The Corporation will, at its expense, use its best efforts to cause such shares
to be listed (subject to issuance or notice of issuance) on all stock exchanges,
if any, on which the Corporation's Common Stock may become listed.
7. Cancellation of Reacquired Series A Preferred Stock. Shares of
Series A Preferred Stock which have been issued and reacquired in any manner,
including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of the laws of the State of Delaware)
9
<PAGE>
have the status of authorized and unissued shares of preferred stock
undesignated as to series and may be redesignated and reissued as part of any
series of preferred stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed on its behalf, this 26th day of August, 1996.
Building Materials Corporation of America
By: /s/ James P. Rogers
----------------------------------
Senior Vice President
James P. Rogers
ATTEST:
/s/ Richard A. Weinberg
- --------------------------------------
Secretary, Richard A. Weinberg
(Corporate Seal)
10
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATION OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
------------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
------------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on January 31, 1994.
The Corporation was formerly known as GAF Newco Inc.
THIRD: The Certificate of Designations (the "Certificate of
Designations") of Series A Cumulative Redeemable Convertible Preferred Stock,
par value $.01 per share (the "Preferred Stock"), of the Corporation was filed
with the Secretary of State of the State of Delaware on August 27, 1996.
FOURTH: No shares of Preferred Stock have been issued.
<PAGE>
FIFTH: The Board of Directors of the Corporation has duly adopted
the following resolution amending the Certificate of Designation, by unanimous
consent dated as of December 19, 1996:
RESOLVED, that pursuant to authority expressly granted to the Board
of Directors by the Certificate of Incorporation, the definition of
"Book Value" contained in Section 2(f) as the Certificate of
Designation shall be amended to read as follows:
"Book Value" shall mean, as of December 31, 1995, (x) the combined
shareholder's equity of the Corporation and U.S. Intec, Inc. as of
that date determined in accordance with generally accepted
accounting principles and treating U.S. Intec Holdings as a
wholly-owned subsidiary of the Corporation after December 31, 1996,
but adding back (A) the charge to shareholder's equity relating to
the assumption by the Corporation of certain asbestos-related
liabilities of GAF Building Materials Corporation in connection with
the Corporation's formation, (B) the reduction in shareholder's
equity resulting from purchases of the capital stock of GAF
Corporation ("GAF") by persons who participated in promoting the
management buy-out of GAF in March 1989 (the "Acquisition")
(predecessor cost basis adjustment) and (C) any amounts reflecting
the liquidation preferences of any outstanding preferred stock of
the Corporation and excluding, to the extent occurring after
December 31, 1995, (1) non-recurring non-operating losses and
charges to stockholder's equity and non-recurring non-operating
gains and increases in stockholder's equity, including any further
charge relating to asbestos-related liabilities and any increase in
stockholder's equity attributable to a public offering of capital
stock of the Corporation, (2) net gains or losses in respect of
disposition of assets by the Corporation other than in the ordinary
course of business, and (3) any charges relating to amortization of
goodwill and other intangibles arising from the Acquisition divided
<PAGE>
by (y) 1,000,000. Any adjustments to Book Value shall include the
tax effects, if any, associated therewith.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be executed this 24th day of December 1996.
BUILDING MATERIALS CORPORATION OF AMERICA
By: /s/Richard A. Weinberg
-------------------------------------
Richard A. Weinberg
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
---------------------------------------------
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
---------------------------------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on January 31, 1994.
THIRD: The Certificate of Designations of Series A Cumulative Redeemable
Convertible Preferred Stock, par value $.01 per share (the "Certificate of
Designations") of the Corporation was filed with the Secretary of State of the
State of Delaware on August 27, 1996.
FOURTH: The defined term "Book Value" contained in this Section 2(f) of
the Certification of Designations has been amended by:
(i) deleting the first sentence thereof and replacing it with the
following new sentence:
"`Book Value' shall mean, as of any date of determination, (x) the sum of
(i) shareholder's equity of the Corporation (of, in the case of Book Value as of
December 31, 1995, the combined shareholder's equity of the Corporation and U.S.
Intec, Inc.) as of that date determined in accordance with generally accepted
accounting principles and treating U.S. Intec Holdings Inc. as a wholly-owned
subsidiary of the Corporation after December 31, 1995 and (ii) the cumulative
operating profit (or loss) of the Nashville, Tennessee fiberglass manufacturing
facility (the "Nashville Facility") of GAF Fiberglass Corporation ("GAF
<PAGE>
Fiberglass") during the period commencing January 1, 1997 through the date of
determination, and adding back (A) the charge to shareholder's equity relating
to the assumption by the Corporation of certain asbestos-related liabilities of
GAF Building Materials Corporation in connection with the Corporation's
formation, (B) the reduction in shareholder's equity resulting from purchases of
the capital stock of GAF Corporation ("GAF") by persons who participated in
promoting the management buy-out of GAF in March 1989 (the "Acquisition")
(predecessor cost basis adjustment) and (C) any amounts reflecting the
liquidation preferences of any outstanding preferred stock of the Corporation
and excluding, to the extent occurring after December 31, 1995, (1) nonrecurring
non-operating losses and nonrecurring non-operating gains, including any further
charge relating to asbestos-related liabilities, (2) net gains or losses in
respect of dispositions of assets by the Corporation other than in the ordinary
course of business, and (3) any charges relating to amortization of goodwill and
other intangibles arising from the Acquisition divided by (y) in the case of
Book Value as of December 31, 1995, 1,000,000 and, in the case of all other
calculations of Book Value, the number of shares of Common Stock of the
Corporation outstanding on the date of determination."; and
(ii) by adding the following phrases after the phrase "exchange or
similar transaction," in the penultimate sentence thereof, "if GAF Fiberglass
becomes a direct or indirect subsidiary of the Corporation, if the Corporation
directly or indirectly acquires the Nashville Facility".
FIFTH: Written consent to the adoption of this amendment to the
Certificate of Designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by a duly authorized officer thereof on this 13th day of May 1997.
/s/ Richard A. Weinberg
-------------------------------------
Name: Richard A. Weinberg
Title: Senior Vice President
and Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BUILDING MATERIALS CORPORATION OF AMERICA
(Pursuant to Section 242 of the
General Corporation Law of Delaware)
------------------------------------
Building Materials Corporation of America, a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), does
hereby certify as follows:
1. The Certificate of Incorporation of the Corporation (the
"Certificate") was filed with the Secretary of State of Delaware on January 31,
1994. The Corporation was formerly known as GAF Newco Inc.
2. The first paragraph of Article FOURTH of the Certificate is
hereby amended to read in its entirety as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is One Million One Hundred
Fifty Thousand (1,150,000) shares, consisting of:
(a) One Million Fifty Thousand (1,050,000) shares of
Common Stock, par value $.001 (hereinafter referred to as
"Common Stock"); and
(b) One Hundred Thousand (100,000) shares of Preferred
Stock, par value $.01
<PAGE>
(hereinafter referred to as "Preferred Stock")."
3. The foregoing Amendment to the Certificate was duly adopted in
accordance with Section 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its duly authorized officers this 6th day of August,
1997.
By: /s/ Richard A. Weinberg
----------------------------------
Senior Vice President
& Secretary
Attest: /s/ Barry Kerschner
----------------------------------
Assistant Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
BUILDING MATERIALS CORPORATION OF AMERICA
CERTIFICATE OF DESIGNATIONS OF
SERIES A CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
--------------------
Adopted in accordance with the provisions of
Section 242 of the General Corporation Law
of the State of Delaware
--------------------
It is hereby certified that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Building Materials Corporation of America.
SECOND: The Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on January 31, 1994.
THIRD: The Certificate of Designations of Series A Cumulative
Redeemable Convertible Preferred Stock, par value $.01 per share (the
"Certificate of Designations") of the Corporation was filed with the Secretary
of State of the State of Delaware on August 27, 1996.
FOURTH: Section 1 of the Certificate of Designations is hereby
amended to read in its entirety as follows:
"1. Designation. The Preferred Stock created and authorized hereby
shall be designated as the "Series A Cumulative Redeemable
Convertible Preferred Stock" (the "Series A Preferred Stock"). The
number of shares of Series A Preferred Stock shall be 100,000. The
liquidation preference of the Series A Preferred Stock shall be $100
per share (the "Liquidation Preference")."
<PAGE>
FIFTH: Written consent to the adoption of this amendment to the
Certificate of designations has been given in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed by a duly authorized officer thereof on this 6th day of August, 1997.
/s/ Richard A. Weinberg
---------------------------------
Name: Richard A. Weinberg
Title: Senior Vice President
and Secretary
EXHIBIT 4.1
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
8% Senior Notes due 2007
and
Series B 8% Senior Notes due 2007
--------------------------
INDENTURE
Dated as of October 20, 1997
--------------------------
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)(l)............................................. 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.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE................ 1
Section 1.01. Definitions............................................ 1
Section 1.02. Incorporation by Reference of Trust Indenture Act...... 18
Section 1.03. Rules of Construction.................................. 18
ARTICLE II
THE SECURITIES.............................. 19
Section 2.01. Form and Dating........................................ 19
Section 2.02. Execution and Authentication; Aggregate Principal
Amount.......................................................... 19
Section 2.03. Registrar and Paying Agent............................. 20
Section 2.04. Paying Agent To Hold Money in Trust.................... 20
Section 2.05. Securityholder Lists................................... 21
Section 2.06. Transfer and Exchange.................................. 21
Section 2.07. Replacement Securities................................. 23
Section 2.08. Outstanding Securities................................. 23
Section 2.09. Treasury Securities.................................... 23
Section 2.10. Temporary Securities................................... 23
Section 2.11. Cancellation........................................... 23
Section 2.12. Defaulted Interest..................................... 24
Section 2.13. CUSIP Number........................................... 24
Section 2.14. Deposit of Moneys...................................... 24
ARTICLE III
REDEMPTION................................ 24
Section 3.01. Notices to Trustee..................................... 24
Section 3.02. [Reserved]............................................. 25
Section 3.03. Notice of Redemption................................... 25
Section 3.04. Effect of Notice of Redemption......................... 25
Section 3.05. Deposit of Redemption Price............................ 25
Section 3.06. Securities Redeemed in Part............................ 26
ARTICLE IV
COVENANTS................................ 26
Section 4.01. Payment of Securities.................................. 26
Section 4.02. Maintenance of Office or Agency........................ 26
Section 4.03. Corporate Existence.................................... 26
Section 4.04. Payment of Taxes and Other Claims...................... 27
i
<PAGE>
Section 4.05. Compliance Certificates................................ 27
Section 4.06. Securities and Exchange Commission Reports............. 27
Section 4.07. Waiver of Stay, Extension or Usury Laws................ 28
Section 4.08. Maintenance of Properties.............................. 28
Section 4.09. Limitation on Debt and Preferred Stock of the
Company and its Subsidiaries.................................... 29
Section 4.10. Limitation on Restricted Payments and Restricted
Investments..................................................... 31
Section 4.11. Limitation on Liens.................................... 32
Section 4.12. Limitation on Transactions with Affiliates............. 33
Section 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.......................................... 35
Section 4.14. Change of Control...................................... 36
Section 4.15. Limitation on Asset Sales.............................. 38
Section 4.16. Restriction on Transfer of Certain Assets to
Subsidiaries.................................................... 40
Section 4.17. Investment Company Act................................. 40
Section 4.18. Consents, etc.......................................... 40
ARTICLE V
SUCCESSOR CORPORATION.......................... 40
Section 5.01. When the Company May Merge, etc........................ 40
Section 5.02. Successor Corporation Substituted...................... 41
ARTICLE VI
DEFAULTS AND REMEDIES.......................... 42
Section 6.01. Events of Default...................................... 42
Section 6.02. Acceleration........................................... 43
Section 6.03. Other Remedies......................................... 43
Section 6.04. Waiver of Past Defaults................................ 43
Section 6.05. Control by Majority.................................... 44
Section 6.06. Limitation on Remedies................................. 44
Section 6.07. Rights of Holders To Receive Payment................... 44
Section 6.08. Collection Suit by Trustee............................. 44
Section 6.09. Trustee May File Proofs of Claim....................... 45
Section 6.10. Priorities............................................. 45
Section 6.11. Undertaking for Costs.................................. 45
Section 6.12. Restoration of Rights and Remedies..................... 46
ARTICLE VII
TRUSTEE................................. 46
Section 7.01. Rights of Trustee...................................... 46
Section 7.02. Individual Rights of Trustee........................... 46
Section 7.03. Money Held in Trust.................................... 47
Section 7.04. Trustee's Disclaimer................................... 47
ii
<PAGE>
Section 7.05. Notice of Defaults..................................... 47
Section 7.06. Reports by Trustee to Holders.......................... 47
Section 7.07. Compensation and Indemnity............................. 47
Section 7.08. Replacement of Trustee................................. 48
Section 7.09. Successor Trustee by Merger, etc....................... 49
Section 7.10. Eligibility; Disqualification.......................... 49
Section 7.11. Preferential Collection of Claims Against the Company.. 49
Section 7.12. Duties of Trustee...................................... 50
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE.................... 51
Section 8.01. Discharge of Liability on Securities Defeasance........ 51
Section 8.02. Conditions to Defeasance............................... 51
Section 8.03. Application of Trust Money............................. 53
Section 8.04. Repayment to Company................................... 53
Section 8.05. Indemnity for Government Obligations................... 53
Section 8.06. Reinstatement.......................................... 53
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS................... 53
Section 9.01. Without Consent of Holders............................. 53
Section 9.02. With Consent of Holders................................ 54
Section 9.03. Revocation and Effect of Consents...................... 55
Section 9.04. Record Date............................................ 56
Section 9.05. Notation on or Exchange of Securities.................. 56
Section 9.06. Trustee May Sign Amendments, etc....................... 56
Section 9.07. Compliance with TIA.................................... 56
ARTICLE X
MISCELLANEOUS.............................. 56
Section 10.01. Trust Indenture Act of 1939........................... 56
Section 10.02. Notices............................................... 57
Section 10.03. Communication by Holders with Other Holders........... 57
Section 10.04. Certificate and Opinion as to Conditions Precedent.... 57
Section 10.05. Statements Required in Certificate or Opinion......... 58
Section 10.06. Rules by Trustee, Paying Agent, Registrar............. 58
Section 10.07. Governing Law......................................... 58
Section 10.08. No Interpretation of Other Agreements................. 58
Section 10.09. No Recourse Against Others............................ 58
Section 10.10. Legal Holidays........................................ 58
Section 10.11. Successors............................................ 59
Section 10.12. Duplicate Originals................................... 59
Section 10.13. Separability.......................................... 59
iii
<PAGE>
Section 10.14. Table of Contents, Headings etc....................... 59
Section 10.15. Benefits of Indenture................................. 59
iv
<PAGE>
INDENTURE, dated as of October 20, 1997, 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% Senior Notes
due 2007 (the "Initial Securities") and the Company's Series B 8% Senior Notes
due 2007 (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 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 Affiliates of the
Company.
"Agent" means any Registrar, Paying Agent or co-Registrar of the
Securities.
<PAGE>
"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 the maturity date of the
Security to the applicable date of purchase at a per annum interest rate equal
to the Treasury Yield for such purchase date plus 100 basis points, over (b) the
sum of the principal amount of such Security plus accrued and unpaid interest to
the purchase 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 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.
2
<PAGE>
"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 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.
"Cedel" means Cedel Bank, S.A.
"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
3
<PAGE>
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
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.
"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.
4
<PAGE>
"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.
"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 interest expense related to Non-Recourse
Debt) 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).
5
<PAGE>
"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.
"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 Agreement" means the credit agreement, dated as of August
29, 1997, among the Company, the Lenders party thereto and The Bank of New York,
as administrative agent, as amended and supplemented from time to time.
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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.
"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 and Series B 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
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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.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"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.
"GAF" means GAF 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.
"GFC" means GAF Fiberglass Corporation, a Delaware corporation, and
its successors.
"G-I Holdings" means G-I Holdings Inc., a Delaware corporation, and
its successors.
"Glass Fiber Contract" means the supply agreement effective as of
January 1, 1997 between GFC and the Company.
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"Global Security" means a Security evidencing all or a part of the
Securities to be issued as Book-Entry Securities, including a Regulation S
Global Security, 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) 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.
"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., BNY Capital
Markets, Inc. and Chase Securities Inc.
"Initial Securities" has the meaning assigned to that term in the
preambles to this Indenture.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
"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
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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 October 20, 1997.
"Legal Holiday" has the meaning set forth in Section 10.10.
"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
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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 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 October
15, 1997, 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 Assistant Treasurer or Assistant
Secretary of such corporation and delivered to the Trustee and which complies
with Section 10.05.
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"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.
"Participant" means with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"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, 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;
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(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 non-delinquent 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 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.
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"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.
"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.
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"Registration Rights Agreement" means the registration rights
agreement dated October 15, 1997, between the Company and the Initial
Purchasers.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Security" means a global security substantially
in the form of Exhibit A hereto bearing the legend prescribed in Exhibit C and
deposited with or on behalf of the Depository and registered in the name of the
Depository or its nominee and issued in a denomination equal to the outstanding
principal amount of the Securities initially resold by the Initial Purchasers in
reliance on Rule 903 of Regulation S.
"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 Period" means the 40-day restricted period referred to
in Regulation S.
"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 Statements" 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
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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 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.
"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 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
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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.
"2006 Notes" means the Company's 8 5/8% Senior Notes due 2006 and
the Company's Series B 8 5/8% Senior Notes due 2006.
"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.
"U.S. Person" means a U.S. Person as defined in Rule 902 under the
Securities Act.
"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.
"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.
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"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 obliger 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;
(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, 1996.
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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 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 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.
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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.
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
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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 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; and provided further that
prior to the expiration of the Restricted Period, transfers of book-entry
interests in the Regulation S Global Security may not be made to a U.S. Person
or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). 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 Institutional Buyer, an Accredited Investor
or a Holder pursuant to Regulation S, 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.
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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 Company notifies the Trustee that the Depository 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 90 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.
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.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of book-entry interests in the Regulation S Global
Securities that are held by Participants through Euroclear or Cedel Bank.
The Company shall not have any liability to any Person relating to
(i) the performance by the Depositary, Euroclear, Cedel or any of their
respective direct or indirect Participants under the rules and procedures
governing, the Depository, Euroclear or Cedel,
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including with respect to transferring book-entry interests in the Securities,
or (ii) maintaining, supervising or reviewing any records of such entities
relating to the Securities.
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 direction, 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.
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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 one or more "CUSIP" numbers. 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 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 a 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.
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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.
Section 3.02. [Reserved]
Section 3.03. Notice of Redemption. At such 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) 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
(F) 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.
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) and (C) 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
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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.
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
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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 (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 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
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and regulations prescribe) which the Company is required to file with the
Commission pursuant to Sections 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 Section 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 the
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 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
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
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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;
(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; 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 $60,000,000;
(4) Acquired Debt;
(5) (x) Debt outstanding on the Issue Date (including the Deferred Coupon
Notes and 2006 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
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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;
(7) Debt under the Credit Agreement or any Refinancing thereof; provided
that the aggregate outstanding amount thereunder does not at any time
exceed $100,000,000;
(8) 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
(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
$75,000,000.
(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
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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.
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;
(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
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(v) $50,000,000.
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
(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;
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(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 improvements or additions 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;
(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
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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 $25,000,000
(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 each member of 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
has a 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 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;
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(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 transactions 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 Agreement or any Refinancings
thereof (or, if such agreement is not outstanding, under the 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 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
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(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 indentures governing the Deferred Coupon Notes
and 2006 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 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 Agreement, the Receivables Financing Agreement or other
Debt existing on the Issue Date; and
(7) any Refinancing of the Credit Agreement, 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, 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
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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 of control offer is being made pursuant to this Section 4.14 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 purchase any securities not tendered
as provided therein.
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.
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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 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 indentures governing the Deferred Coupon Notes and 2006 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, and then offer to purchase any outstanding 2006 Notes,
in a tender offer at a redemption price equal to 100% of the principal
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amount thereof plus accrued interest thereon to the date of purchase,
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 adjustments 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
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(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 accordance with item (b)(l) 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 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 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
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of its properties and assets (either in one transaction or in a 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 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.
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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;
(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.
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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.
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
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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.
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 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
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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;
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.
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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):
(A) The Trustee may conclusively rely on any document whether in its
original or facsimile form 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
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with the Company or any of its Affiliates with the same rights it would have if
it were not Trustee. Any Agent or Affiliate (including without limitation BNY
Capital Markets, Inc., one of the Initial Purchasers) 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. 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 withholding notice is in the
interests of the Holders.
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 expenses
shall also include any taxes or other reasonable costs incurred by the trust
created under Section 8.01.
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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 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.
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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 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
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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
(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).
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ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01. Discharge of Liability on Securities Defeasance. (a)
When (i) the Company delivers to the Trustee 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 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
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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 (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 and paragraph 5(a) of the Securities (including by
utilizing amounts under deposit).
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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
otherwise 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;
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(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 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;
(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;
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(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;
(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.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder; provided that if such amendment, supplement or
waiver makes a change
55
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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.
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.
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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 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
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(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 complied 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
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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.
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.
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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/ James P. Rogers
-----------------------------------
Name: James P. Rogers
Title: Executive Vice President
THE BANK OF NEW YORK,
as Trustee
By: /s/ Marie E. Trimboli
-----------------------------------
Name: Marie E. Trimboli
Title: Assistant Treasurer
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EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A OR REGULATION S THEREUNDER. BY ITS 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 NOT A U.S. PERSON (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) AND IS NOT ACQUIRING THIS SECURITY FOR
THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
IN THE CASE OF A TRANSFER PURSUANT TO CLAUSE (b) OR (d), BASED UPON AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IF THE COMPANY SO REQUESTS),
(2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE UNITED
STATES OR ANY STATE THEREOF OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
A-1
<PAGE>
No. $___________________
CUSIP No.
BUILDING MATERIALS CORPORATION OF AMERICA
8% SENIOR NOTES DUE 2007
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), promises to pay to
, or registered assigns, the principal sum of
Dollars on October 15, 2007.
Interest Payment Dates: April 15 and October 15, commencing April
15, 1998.
Record Dates: April 1 and October 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:
By:
-----------------------------------
Name:
Title:
Dated: October 20, 1997
Trustee's Certificate of Authentication
This is one of the 8% Senior Notes due 2007 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% Senior Notes due 2007
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% per annum, payable on April 15 and
October 15 of each year (the "Interest Payment Date"), commencing April 15,
1998. The Company shall pay interest on overdue principal at the rate of 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 October 20, 1997 (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.
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.
A-4
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5. Redemption.
(a) Optional Redemption.
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.
(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, 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 such 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.
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, provide certain certifications
and legal opinions as described herein 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.
A-5
<PAGE>
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.
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
A-6
<PAGE>
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 redemption 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% Senior Notes Due 2007 (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-7
<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-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:
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the date that is two 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-9
<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 to a non-U.S. Person 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, (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-10
<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-11
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE*]
No. $____________________
CUSIP No.
BUILDING MATERIALS CORPORATION OF AMERICA
SERIES B 8% SENIOR NOTES DUE 2007
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), promises to pay to
, or registered assigns, the principal sum of Dollars on October
15, 2007.
Interest Payment Dates: April 15 and October 15, commencing April
15, 1998.
Record Dates: April 1 and October 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.
- ---------------------
* 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:
By:
-------------------------------------------
Name:
Title:
Dated:
Trustee's Certificate of Authentication
This is one of the Series B 8% Senior Notes due 2007 [Private Exchange 8% Senior
Notes due 2007] 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% Senior Notes due 2007
Private Exchange 8% Senior Notes due 2007
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% per annum, payable on April 15 and
October 15 of each year (the "Interest Payment Date"), commencing April 15,
1998. The Company shall pay interest on overdue principal at the rate of 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 October 20, 1997 (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 tile 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.
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.
B-3
<PAGE>
5. Redemption.
(a) Optional Redemption. 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.
(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, 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 such 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.
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, provide certain certifications
and legal opinions as described herein 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
B-4
<PAGE>
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.
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
B-5
<PAGE>
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 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-6
<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-7
<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-8
<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% Senior Notes Due 2007 (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) (A) 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 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.
D-1
<PAGE>
The undersigned understands that the Notes were 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 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 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-2
EXHIBIT 4.3
BUILDING MATERIALS CORPORATION OF AMERICA
$100,000,000
8% Senior Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
-----------------------------
October 20, 1997
Bear, Stearns & Co. Inc.
BNY Capital Markets, Inc.
Chase Securities 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 October 15,
1997 (the "Purchase Agreement"), $100,000,000 aggregate principal amount of its
8% Senior Notes due 2007 (the "Notes"). The Notes will be issued pursuant to an
indenture (the AIndenture") between the Company and The Bank of New York, as
trustee (the ATrustee@) dated October 20, 1997, 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:
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@) and 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 ARegistered 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
<PAGE>
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 APlan 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 Commission 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 APrivate 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
<PAGE>
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;
(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 Exchange, 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:
<PAGE>
(a) as promptly as reasonably 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 two 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.
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
<PAGE>
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
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.
<PAGE>
(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
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 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
Holders of the Notes and any known Participating Broker-Dealer shall
<PAGE>
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 ll(a) of the Securities Act) an earnings
statement satisfying the provisions of Section ll(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 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)
<PAGE>
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
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 Latham &
Watkins, 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. (a) 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
<PAGE>
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 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 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) The Company agrees to indemnify and hold harmless each
Initial Purchaser, any Participating Broker-Dealer and each person, if any, who
controls an Initial Purchaser or a 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 an Initial Purchaser or a
Participating Broker-Dealer and each director, officer, employee or agent of
<PAGE>
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 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).
<PAGE>
(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, employee 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 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,
<PAGE>
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 indemnified 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.
<PAGE>
(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 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 (x) 60 days after the Issue Date
and (y) 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 two
years (or such later date if such two-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 (l) 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 two years
(or such later 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.
<PAGE>
(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
Attention: Michael L. Offen
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Roger H. Kimmel, 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
<PAGE>
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.
(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.
<PAGE>
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:
---------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written:
BEAR, STEARNS & CO. INC.
By:
----------------------------------------
Name:
Title:
BNY CAPITAL MARKETS, INC.
By:
----------------------------------------
Name:
Title:
CHASE SECURITIES INC.
By:
----------------------------------------
Name:
Title:
EXHIBIT 12
BUILDING MATERIALS CORPORATION OF AMERICA
RATION OF EARNINGS TO FIXED CHARGES
(Unaudited)
(Thousands, except ratio data)
<TABLE>
<CAPTION>
Pro Forma
Nine Months Ended ----------------------
Year Ended December 31, ------------------ Nine Nine
------------------------------------ Sept. 29, Sept. 28, Year Months Months
1992 1993 1994 1995 1996 1996 1997 1996 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME BEFORE INCOME TAXES 23,144 32,982 27,819 16,549 27,864 26,956 38,172 18,641 20,125 32,155
ADD:
Interest Expense 3,623 2,045 13,149 24,822 32,044 23,741 30,494 46,518 34,758 36,687
Interest Component Of Rental Expense 1,984 2,091 2,366 2,329 2,769 2,077 2,181 2,769 2,077 2,181
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings Available For Fixed Charges 28,751 37,118 43,334 43,700 62,677 52,774 70,847 67,928 56,960 71,023
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
FIXED CHARGES:
Interest Expense 3,623 2,045 13,149 24,822 32,044 23,741 30,494 46,518 34,758 36,687
Add:
Capitalized Interest 0 178 413 499 381 365 383 381 365 383
Interest Component of Rental Expense 1,984 2,091 2,366 2,329 2,769 2,077 2,181 2,769 2,077 2,181
----- ----- ------ ------ ------ ------ ----- ------ ------ ------
Total Fixed Charges 5,607 4,314 15,928 27,650 35,194 26,183 33,058 49,668 37,200 39,251
===== ===== ====== ====== ====== ====== ====== ====== ====== ======
Ratio Of Earnings To Fixed Charges 5.13 8.60 2.72 1.58 1.78 2.02 2.14 1.37 1.53 1.81
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
Building Materials Corporation of America:
As independent public accountants, we hereby consent to the use of our reports
included in or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 4, 1997
