<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 1998
REGISTRATION NO. 333-60633
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2952 22-3276290
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD A. WEINBERG, ESQ.
BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(973) 628-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
With a copy to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
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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<PAGE>
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 AUGUST 31, 1998
PROSPECTUS
OFFER FOR
ALL OUTSTANDING 7 3/4% SENIOR NOTES DUE 2005
IN EXCHANGE FOR SERIES B 7 3/4% SENIOR NOTES DUE 2005
OF
BUILDING MATERIALS CORPORATION OF AMERICA
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
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 7 3/4% Senior Notes due 2005 (the 'New Notes') for each $1,000
principal amount of its 7 3/4% Senior Notes due 2005 (the 'Old Notes'), of which
an aggregate principal amount of $150 million 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 5:00 p.m., 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 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 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 transaction. 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 8 5/8% Senior Notes due 2006 (the
'2006 Notes'), the Company's 8% Senior Notes due 2007 (the '2007 Notes') and the
Company's $75 million credit facility entered into on August 29, 1997 (the
'Credit Agreement'). Immediately following the issuance of the Notes, the
Company will not have any subordinated obligations. At June 28, 1998, the
outstanding indebtedness from borrowings of the Company and its subsidiaries was
$541.1 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 $176.4 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 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 11 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.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
PROSPECTUS 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 28 manufacturing facilities. The
Company believes that it holds the number one or two market position in each of
the asphalt roofing product lines in which it competes (based on unit sales),
including leadership of the fast growing, premium laminated residential shingle
market. The Company's Timberline(Registered) product is the leading brand in the
residential roofing market, and the Company's Ruberoid(Registered) product is
the leading brand in the modified bitumen market, the latter being the fastest
growing segment in the commercial roofing industry.
The Company has registered, through 1997, ten consecutive years of
increases in operating income. During the five-year period ended December 31,
1997, the Company's net sales and operating income have increased at average
annual compound rates of approximately 13.2% and 15.2%, respectively, and its
operating income margin has increased from 6.8% to 7.4%. 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 product 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 93% of industry residential roofing unit sales in
1997. Residential asphalt roofing materials consist of strip shingles and higher
margin, premium laminated shingles, which represented approximately 69% and 31%,
respectively, of industry asphalt roofing unit sales in 1997. While total
asphalt residential roofing unit sales grew during the past five years (from
January 1, 1993 through December 31, 1997) at an average annual compound rate of
approximately 2%, unit sales of laminated shingles grew at an average annual
compound rate of approximately 12%. During the same period, sales of strip
shingles declined at a compound annual rate of approximately 1%. 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
has experienced 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 a compound annual increase of 4%, while unit
sales of modified bitumen products grew at a compound annual rate of
approximately 9%.
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 for 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.
1
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RESIDENTIAL ROOFING
The Company is a leading manufacturer of a complete line of premium
residential roofing products, with residential roofing product sales
representing approximately 65% of the Company's net sales in 1997. The Company
has improved its sales mix of residential roofing products in recent years by
increasing its emphasis on its 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
strip shingles in the United States. The Company produces two principal lines of
shingles, the Timberline(Registered) series and the Sovereign(Registered)
series, as well as certain specialty shingles principally for regional markets.
The Company's sales of laminated shingles represented approximately 38% of
its residential sales in 1997, with sales of laminated shingles having grown
during the five years ended December 31, 1997 at an average annual compound rate
of approximately 9%. The Timberline(Registered) series offers a premium
laminated product line that adds dramatic shadow lines and substantially
improves the appearance of a roof. The series includes the
Timberline(Registered) 25 shingle, a mid-weight laminated shingle which serves
as an economic trade-up for consumers; the Timberline(Registered) shingle,
offering a natural random wood shake appearance with superior fire resistance
and durability; and the Timberline Ultra(Registered) shingle, a super
heavyweight laminated shingle with the same design features as the
Timberline(Registered) shingle, together with added durability.
The Company's sales of strip shingles have grown at an average annual
compound rate of approximately 5% during the past five years, representing
approximately 44% of the Company's residential sales in 1997. The
Sovereign(Registered) series includes the standard 3-tab Sentinel(Registered)
shingle, the Company's residential volume leader; the Royal
Sovereign(Registered) shingle, a heavier weight 3-tab shingle; and the
Marquis(Registered) shingle, a super heavyweight 3-tab shingle.
All of the Company's asphalt roofing shingles have a Class A fire rating
and are made from glass fiber mat, coated with waterproofing asphalt on both
sides and surfaced with colored ceramic-coated mineral granules. The Company's
other residential roofing products include Timbertex(Registered) and
Ridgetex(Trademark) Hip and Ridge shingles, Shingle-Mate(Registered)
underlayment, Weather Watch(Registered) ice and water barrier, a waterproof
underlayment, Cobra(Registered) Ridge Vent, a ventilation system on a coil,
soffit vents, and gable and wall louvres, all of which enable the Company to
offer a complete system of residential roofing components.
COMMERCIAL ROOFING
The Company manufactures a full line of modified bitumen products, asphalt
built-up roofing, liquid-applied membrane systems and roofing accessories.
Commercial roofing represented approximately 35% of the Company's net sales in
1997. 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, 1993 and through December 31, 1997, the Company's sales of such premium
shingles have increased at an average annual compound rate of approximately 14%.
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.
2
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ENHANCE LOW COST MANUFACTURING OPERATIONS
The Company believes that its plants are among the most modern in the
industry. Since 1985 and through December 31, 1997, the Company has invested
almost $300 million in new property, plant and equipment, principally in order
to increase capacity and implement process improvements to reduce manufacturing
costs. This capital program 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.
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 260 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 share. The Company is
primarily interested in acquiring businesses which can benefit from its strong
national distribution network, manufacturing technology and marketing expertise.
Effective June 1, 1998, the Company acquired substantially all of the assets of
Leslie-Locke, Inc. ('Leslie-Locke'), a subsidiary of Leslie Building Products,
Inc. which manufactures and markets specialty building products and accessories
for the professional and do-it-yourself remodeling and residential construction
industries. Other recent acquisitions include 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 assets of Major Group, Incorporated, the manufacturer of the
TOPCOAT(Registered) Roofing System, a liquid-applied polymer membrane system
designed to protect and waterproof existing metal roofing; and U.S. Intec, Inc.
('USI'), a leading national manufacturer of commercial roofing products.
* * *
On January 1, 1997, 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, (1) the Company's glass
fiber manufacturing facility in Nashville, Tennessee (and certain related assets
and liabilities) being transferred to GAF Fiberglass Corporation ('GFC'), a
subsidiary of GAF, and (2) USI, an indirect subsidiary of GAF, becoming a
subsidiary of the Company. In connection with the Separation Transactions, GFC
entered into a long-term supply agreement with the Company pursuant to which GFC
agreed to produce glass fiber for the Company. See 'Certain Relationships.' The
financial and statistical data regarding the Company presented herein reflect
the results of USI from and after October 20, 1995, the date on which USI was
acquired by a subsidiary of GAF, except as expressly set forth herein.
***
The Company'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.
3
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THE EXCHANGE OFFER
The Exchange Offer is being made with respect to all of BMCA's outstanding
7 3/4% Senior Notes due 2005 (the 'Old Notes'). On July 17, 1998, BMCA issued
and sold $150 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.'
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The Exchange Offer........................ $1,000 principal amount of New Notes in exchange for each $1,000
principal amount of Old Notes. As of the date hereof, $150 million
aggregate principal amount of the Old Notes are outstanding. The
terms of the New Notes and the Old Notes are substantially identical.
Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, BMCA believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a
holder thereof (other than any such holder that is an 'affiliate' of
BMCA within the meaning of Rule 405 promulgated under the Securities
Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that (i) such New
Notes are acquired in the ordinary course of business of such holder,
(ii) such holder is not engaging in and does not intend to engage in
a distribution of such New Notes, and (iii) such holder does not have
an arrangement or understanding with any person to participate in the
distribution of such New Notes. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of
the New Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of
such New Notes. See 'The Exchange Offer--Purpose and Effect' and
'Plan of Distribution.'
Registration Agreement.................... In connection with the issuance of the Old Notes pursuant to the
Offering, BMCA agreed to use its best efforts to cause a registration
statement to become effective with respect to an exchange offer of a
new security for the Old Notes (the 'Registration Agreement'). See
'The Exchange Offer--Purpose and Effect.'
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., 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.
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Withdrawal................................ The tender of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to 5:00 p.m., 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 7 3/4% per annum,
payable on January 15 and July 15 each year, commencing on January
15, 1999 to the persons who are registered holders on the immediately
preceding January 1 and July 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 (except those holders delivering an Agent's Message (as
defined herein)), 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 5:00 p.m., New York City time, on
the Expiration Date. By executing the Letter of Transmittal, each
holder will represent to the Company that, among other things, (i)
the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such holder, (ii) the
holder is not engaging in and does not intend to engage in a
distribution of such New Notes, (iii) the holder does not have an
arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) the holder is not an
'affiliate,' as defined under Rule 405 promulgated under the
Securities Act, of the Company. Pursuant to the Registration
Agreement, the Company is required to file a registration statement
for a continuous offering pursuant to Rule 415 under the Securities
Act in respect of the Old Notes of any holder that would not receive
freely tradeable New Notes in the Exchange Offer or is ineligible to
participate in the Exchange Offer and indicates that it wishes to
have its Old Notes registered under the Securities Act. See 'The
Exchange Offer--Procedures for Tendering.'
Book-Entry Transfer....................... The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility (as
defined herein) for purposes of the Exchange Offer within two
business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by
causing the Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility
in
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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 or an Agent's Message in lieu
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 followed.
Special Procedures for
Beneficial Owner........................ Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee
(with respect to the New Notes, each, a 'Registered Holder') and who
wishes to tender such Old Notes should contact the Registered Holder
promptly and instruct such Registered Holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering such owner's Old
Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly
completed bond power from the Registered Holder. The transfer of
registered ownership may take considerable time. See 'The Exchange
Offer--Procedures for Tendering.'
Guaranteed Delivery Procedures............ If a Registered Holder of the Old Notes desires to tender such Old
Notes and the Old Notes are not immediately available, or time will
not permit such holder's Old Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure
for book-entry transfer cannot be completed on a timely basis, a
tender may be effected according to the guaranteed delivery
procedures set forth in 'The Exchange Offer--Guaranteed Delivery
Procedures.'
Acceptance of Old Notes and Delivery of
New Notes............................... The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New Notes issued pursuant to
the Exchange Offer will be delivered promptly following the
Expiration Date. See 'The Exchange Offer--Terms of the Exchange
Offer.'
Exchange Agent............................ The Bank of New York is serving as the Exchange Agent in connection
with the Exchange Offer.
Consequences of Failure to Exchange....... The liquidity of the market for a holder's Old Notes could be
adversely affected upon completion of the Exchange Offer if such
holder does not participate in the Exchange Offer. See 'The Exchange
Offer--Consequences of Failure to Exchange.'
Federal Income Tax Consequences........... The exchange pursuant to the Exchange Offer should not be a taxable
event for federal income tax purposes. See 'Certain Federal Income
Tax Considerations.'
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TERMS OF THE NEW NOTES
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Issuer.................................... Building Materials Corporation of America, a direct wholly-owned
subsidiary of GAF Building Materials Corporation ('GAFBMC') and an
indirect wholly-owned subsidiary of GAF Corporation ('GAF').
Issue..................................... $150 million aggregate principal amount of Series B 7 3/4% Senior
Notes due 2005 (the 'New Notes').
Maturity.................................. July 15, 2005.
Interest Payment Dates.................... The New Notes will pay interest in cash at a rate of 7 3/4% per
annum, payable on January 15 and July 15, commencing January 15,
1999.
Change of Control Put and Call............ Upon the occurrence of a Change of Control (as defined) holders of
the Notes will have the right to require the Company to repurchase
such holder's Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any,
to the repurchase date, and after the expiration of such holder's
right, the Company will have the option to purchase all of the
outstanding Notes at a purchase price equal to 100% of the principal
amount thereof, plus the Applicable Premium (as defined), together
with any accrued and unpaid interest 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, the 2007 Notes and the Credit Agreement. Immediately
following the issuance of the Notes, the Company will not have any
subordinated obligations. As of June 28, 1998, the outstanding
indebtedness from borrowings of the Company and its subsidiaries was
$541.1 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
$176.4 million.
Certain Covenants......................... The Indenture limits the Company and its subsidiaries from incurring
additional Debt (as defined), issuing Preferred Stock (as defined),
and incurring Liens (as defined). The Indenture also contains
covenants that, among other things, limit the ability of the Company
and its subsidiaries to pay certain dividends or make certain other
Restricted Payments (as defined) and Restricted Investments (as
defined), engage in transactions with Affiliates (as defined) and
agree to certain additional limitations on dividends and other
payment restrictions affecting subsidiaries. As of June 28, 1998, the
Company would have been able to make Restricted Payments and
Restricted Investments in the aggregate amount of approximately $70.5
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.'
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Registration Rights....................... The Company has agreed to use its best efforts to cause to become
effective by November 14, 1998 a registration statement with respect
to the Exchange Offer. In the event that the Exchange Offer is not
completed by January 13, 1999, 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 January 13, 1999, (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 January 13, 1999 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 January
15 and July 15 at a rate per annum equal to 0.50% of the principal
amount of the Old Notes. See 'Description of 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 purchasers of the New Notes should carefully consider the
specific factors set forth under 'Risk Factors,' as well as the other
information and data included in this Prospectus.
</TABLE>
8
<PAGE>
SUMMARY FINANCIAL DATA
Set forth below are summary consolidated financial data of the Company
which are derived from the Consolidated Financial Statements beginning on page
F-1. The results of any interim period are not necessarily indicative of the
results to be expected for the full year. 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. ('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 million and $99.0 million for the years ended December 31, 1995
and 1996, respectively, and net income (loss) of ($0.5) and $1.3 million,
respectively. See Note 1 to Consolidated Financial Statements. The results for
the year ended December 31, 1997 include the results of the Leatherback business
from its date of acquisition (March 14, 1997), including sales of $30.2 million.
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 transactions given effect thereto had been completed at the dates
indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
YEAR ENDED DECEMBER 31, JUNE 29, JUNE 28,
--------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------ ------ ------------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.............................................. $687.2 $852.0 $ 944.6 $ 449.3 $ 498.7
Operating income....................................... 45.9 61.4 70.1 34.2 32.7
Interest expense....................................... 24.8 32.0 42.8 20.1 25.4
Income before income taxes............................. 16.5 27.9 42.8 19.5 21.7
Net income............................................. 10.1 17.1 26.1 11.9 13.2
</TABLE>
<TABLE>
<CAPTION>
JUNE 28, 1998
-------------------------------
DECEMBER 31, ACTUAL AS ADJUSTED(1)
1997 (UNAUDITED) (UNAUDITED)
------------ ------------ ---------------
(IN MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments.................................... $256.3 $179.2 $ 175.5
Total working capital.............................................. 284.8 253.7 250.0
Total assets....................................................... 807.3 804.8 809.4
Long-term debt less current maturities(2).......................... 555.4 534.8 550.4
Total stockholder's equity......................................... 83.0 87.2 76.3
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------
JUNE 29, JUNE 28,
-------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------ ------ ------ ----------- -----------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation................................................ $ 20.3 $ 23.9 $ 22.9 $ 10.9 $ 12.4
Goodwill amortization....................................... 1.2 1.7 1.9 0.9 1.0
Capital expenditures and acquisitions....................... 54.1 25.6 77.7 40.6 67.0
EBITDA(3)................................................... 62.8 85.4 110.4 51.4 60.5
Ratio of earnings to fixed charges(4)....................... 1.6x 1.8x 1.9x 1.9x 1.8x
Ratio of EBITDA to interest expense(3)...................... 2.5x 2.7x 2.6x 2.6x 2.4x
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 29, JUNE 28,
1997 1997 1998
------------ ------------- -------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(5):
Adjusted EBITDA(6)................................................ $115.5 $54.1 $ 62.6
Interest expense.................................................. 45.0 22.3 22.5
Net income........................................................ 27.8 12.2 16.3
Ratio of earnings to fixed charges(4)............................. 1.9x 1.8x 2.0x
Ratio of Adjusted EBITDA to interest expense(6)................... 2.6x 2.4x 2.8x
</TABLE>
(Footnotes on next page)
9
<PAGE>
- ------------------
(1) The As Adjusted balance sheet data give effect to the issuance of the Notes
and the purchase (and subsequent cancellation) of $150 million in aggregate
principal amount at maturity of Deferred Coupon Notes pursuant to the
Repurchase (as defined herein) as if such transactions had been completed as
of June 28, 1998. Stockholder's equity, As Adjusted, reflects an
extraordinary loss of $11.0 million (net of related income tax benefits)
assuming the Repurchase had been consummated on June 28, 1998, based on an
accreted value of the Deferred Coupon Notes at that date of 89.2%. As of
July 17, 1998, the Company had purchased (and subsequently cancelled)
approximately $132.6 million in aggregate principal amount at maturity of
Deferred Coupon Notes and recorded an extraordinary loss of $9.3 million in
July 1998 in connection with this purchase. On July 17, 1998, the accreted
value of the Deferred Coupon Notes was 89.7%. If the Company purchases an
additional $17.4 million in aggregate principal amount at maturity of
Deferred Coupon Notes with such an accreted value, the extraordinary loss
for the Repurchase will be approximately $10.0 million. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Financial Condition.'
(2) See 'Capitalization' and Note 9 to Consolidated Financial Statements.
(3) EBITDA is calculated as income before income taxes and extraordinary items,
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) For purposes of these computations, earnings consist of income before income
taxes plus fixed charges and extraordinary items. 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).
(5) The pro forma operating data give effect to the issuance of the Notes, the
Repurchase, the issuance of the 2007 Notes, and the acquisitions of the
assets of Leslie-Locke, Inc., Major Group, Incorporated and the Leatherback
Industries division of Hollinee Corporation (the 'Acquisitions'), as if such
transactions had been completed as of January 1, 1997. The net effect of
such assumptions was to increase the Company's pro forma income before
income taxes by $2.9, $0.5 and $5.0 million for the year 1997 and the first
six months of 1997 and 1998, respectively. As a result, the Company's pro
forma provision for income taxes increased by $1.1, $0.2 and $1.9 million
for the year 1997 and the first six months of 1997 and 1998, respectively,
based on an effective marginal income tax rate of 39%.
(6) The Adjusted EBITDA data are being presented because such data relate to
debt covenants under the indentures governing the Company's indebtedness.
Reference is made to these indentures for further information. Excluded from
the Adjusted EBITDA calculation is approximately $11.0 million in
extraordinary charges related to the Repurchase. The ratio of Adjusted
EBITDA to interest expense for the six months ended June 29, 1997 and June
28, 1998 has been calculated based on operating data for such six-month
periods rather than for the most recently completed four fiscal quarters
ended on such dates as contemplated in these indentures.
The details of the calculations of Adjusted EBITDA are set forth below:
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------
SIX SIX SIX SIX
MONTHS MONTHS YEAR MONTHS MONTHS
YEAR ENDED ENDED ENDED ENDED ENDED
ENDED JUNE 29, JUNE 28, DEC. 31, JUNE 29, JUNE 28,
DEC. 31, 1997 1998 1997 1997 1998
1997 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------- ------------ ------------ ----------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes(a)...... $42,771 $ 19,486 $ 21,691 $ 45,631 $ 19,957 $26,668
Add:
Interest expense................... 42,784 20,099 25,405 44,992 22,294 22,522
Goodwill amortization.............. 1,891 920 1,002 1,891 920 1,002
Depreciation....................... 22,936 10,916 12,378 22,936 10,916 12,378
-------- ------------ ------------ ----------- ----------- -----------
Adjusted EBITDA.................... $110,382 $ 51,421 $ 60,476 $ 115,450 $ 54,087 $62,570
-------- ------------ ------------ ----------- ----------- -----------
-------- ------------ ------------ ----------- ----------- -----------
</TABLE>
(a) Pro forma income before income taxes includes EBITDA related to the
Acquisitions.
10
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, the
following factors should be carefully considered by each holder of the Old Notes
before accepting the Exchange Offer, although the 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 June 28,
1998, the Company had total outstanding consolidated long-term debt of $539.0
million and stockholder's equity of $87.2 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 June 28, 1998 total outstanding
consolidated long-term debt of $554.6 million and stockholder's equity of $76.3
million. In addition, subject to certain restrictions contained in the Credit
Agreement, the indentures relating to the Deferred Coupon Notes, the 2006 Notes,
the 2007 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, the 2006 Notes, the 2007
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, a direct wholly owned subsidiary of GAF, G
Industries Corp. ('G Industries') 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
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 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 June 27, 1998, it is defending
approximately 113,000 pending alleged Asbestos Claims (having received notice of
approximately 55,900 new Asbestos Claims during the first six months of 1998)
and has resolved approximately 256,700 Asbestos Claims (including approximately
22,200 in the first six months of 1998). GAF has advised the Company that it
believes that a significant portion of the
11
<PAGE>
claims filed in the first six months of 1998 were already pending against other
defendants for some period of time, with GAF being added as a defendant upon the
lifting in 1997 of the injunction relating to the Georgine class action
settlement. During 1997, GAF resolved approximately 11,000 Asbestos Claims, of
which approximately 9,900 were resolved (including Asbestos Claims disposed of
at no cost to GAF) for an average cost of approximately $4,070 per claim. GAF's
share of the costs with respect to approximately 1,100 Asbestos Claims resolved
during 1997 has not yet been determined. There can be no assurance that the
actual costs of resolving pending and future Asbestos Claims will approximate
GAF's historic average costs.
GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims, and that it is exploring a number of options, both judicial
and legislative, to accomplish such resolution, but there can be no assurance
that this effort 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 'surfactants partnership'), a partnership in which GFC
holds an interest), 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 GFC 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, and the Company and Chief Executive
Officer of GAFBMC. 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
12
<PAGE>
Deferred Coupon Notes, the 2006 Notes and the 2007 Notes. See 'Description of
the New 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, the 2007 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')
all of its colored mineral granules requirements (except for the requirements of
its California roofing plant which are supplied by a third party) under a
requirements contract. USI purchases 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 requirements contract. Each such contract was renewed in 1998 and
is subject to annual renewal unless terminated by either party to such
agreement. In 1997 and the first six months of 1998, the Company and USI
purchased in the aggregate approximately $51.1 million and $32.0 million,
respectively, of mineral products from ISP. Although the 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. In 1997 and the first six
months of 1998, the Company purchased in the aggregate approximately $24.5
million and $12.6 million, respectively, of glass fiber products from GFC. See
'Certain Relationships--Certain Purchases.'
Pursuant to a management agreement which expires December 31, 1998, ISP
provides certain general management, administrative, legal, telecommunications,
information and facilities services to the Company (including the use of BMCA's
headquarters in Wayne, New Jersey). Charges to the Company by ISP for providing
such services aggregated $4.8 million and $2.1 million in 1997 and the first six
months of 1998, 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 was renewed for 1998 and expires December 31, 1998, GFC is obligated to
pay BMCA an annual management fee of $1.0 million. See 'Certain
Relationships--Management Agreements.'
The Company and its subsidiaries have entered into a Tax Sharing Agreement
(as defined) with GAF and
G-I Holdings with respect to the payment of federal income taxes and certain
related matters. See 'Certain Relationships--Tax Sharing Agreement.'
See 'Description of the New Notes--Certain Covenants--Limitations on
Transactions with Affiliates' for limitations that are 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
13
<PAGE>
liquidity of the trading market for the New Notes. Bear, Stearns & Co. Inc. and
BNY Capital Markets, 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 (or an
Agent's Message in lieu thereof) and all other required documents. All questions
as to the validity, form, eligibility (including time of receipt) and acceptance
of Old Notes tendered for exchange will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties.
Therefore, holders of Old Notes desiring to tender such Old Notes in exchange
for the New Notes should allow sufficient time to ensure timely delivery. Old
Notes that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and the Company will have no further
obligation to provide for the registration under the Securities Act of such Old
Notes except as described herein. See 'The Exchange Offer--Purpose and Effect.'
In addition, any holder of Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See 'Plan of
Distribution.' To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. The Company does not intend to extend the
Exchange Offer although it reserves the right to do so. See 'The Exchange
Offer.'
YEAR 2000 RISK
The Company has significantly upgraded its information systems capabilities
and is in the process of finalizing the roll-out of an interactive network
connecting all of its locations. In conjunction with this initiative, the
Company is addressing its 'Year 2000' compliance issues and does not believe
that the costs associated with, or the impact of, these issues will have a
material adverse effect on the operations, liquidity or capital resources of the
Company. There can, however, be no assurance that this will be the case. The
ability of third parties with whom the Company transacts business or companies
that the Company may acquire to adequately address their Year 2000 issues is
outside of the Company's control. At this time, the Company is in the process of
reviewing the Year 2000 compliance of its major suppliers and customers. There
can be no assurance that the failure to adequately address Year 2000 issues will
not have a material adverse effect on the Company's business, financial
condition, and results of operations. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Financial
Condition.'
14
<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 June 28, 1998
and as adjusted on a pro forma basis to give effect to the issuance of the Notes
and the purchase (and subsequent cancellation) of $150 million in aggregate
principal amount at maturity of the Deferred Coupon Notes (the 'Repurchase').
This table should be read in conjunction with the Company's Consolidated
Financial Statements and related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 28, 1998
(UNAUDITED)
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(THOUSANDS)
<S> <C> <C>
Short-term Debt and current maturities of Long-term Debt:
Short-term debt............................................................. $ 2,111 $ 2,111
Current maturities of long-term debt........................................ 4,183 4,183
-------- -----------
Total.................................................................. $ 6,294 $ 6,294
-------- -----------
-------- -----------
Long-term Debt (excluding current maturities)(1):
11 3/4% Senior Deferred Coupon Notes due 2004............................... $276,548 $ 142,734
7 3/4% Senior Notes due 2005................................................ -- 149,361
8 5/8% Senior Notes due 2006................................................ 99,579 99,579
8% Senior Notes due 2007.................................................... 99,306 99,306
Borrowings under the Credit Agreement....................................... -- --
Industrial revenue bonds.................................................... 11,125 11,125
Obligations on mortgaged properties......................................... 2,945 2,945
Obligations under capital leases............................................ 45,340 45,340
-------- -----------
Total Long-term Debt (excluding current maturities).................... $534,843 $ 550,390
-------- -----------
-------- -----------
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................................. 86,911 86,911
Accumulated deficit(2)...................................................... (851) (11,840)
Accumulated other comprehensive income...................................... 1,187 1,187
-------- -----------
Total Stockholder's Equity............................................. $ 87,247 $ 76,258
-------- -----------
-------- -----------
Total Capitalization................................................... $622,090 $ 626,648
-------- -----------
-------- -----------
</TABLE>
- ------------------
(1) For a description of long-term debt, see Note 9 to Consolidated Financial
Statements.
(2) On a pro forma basis, accumulated deficit reflects an extraordinary loss of
approximately $11.0 million (net of related income tax benefits) assuming
the Repurchase had been consummated on June 28, 1998, based on an accreted
value of the Deferred Coupon Notes at that date of 89.2%. As of July 17,
1998, the Company had purchased (and subsequently cancelled) approximately
$132.6 million in aggregate principal amount at maturity of Deferred Coupon
Notes and recorded an extraordinary loss of $9.3 million in July 1998 in
connection with this purchase. On July 17, 1998, the accreted value of the
Deferred Coupon Notes was 89.7%. If the Company purchases an additional
$17.4 million in aggregate principal amount at maturity of Deferred Coupon
Notes with such an accreted value, the extraordinary loss for the Repurchase
will be approximately $10.0 million. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Financial Condition.'
15
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected consolidated financial data of the Company
which have been derived from the Consolidated Financial Statements beginning on
page F-1. 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, 1993 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 and
$99.0 million for the years ended December 31, 1995 and 1996, respectively, and
net income (loss) of $(0.5) and $1.3 million, respectively. See Note 1 to
Consolidated Financial Statements. The results for the year ended December 31,
1997 include the results of the Leatherback business from its date of
acquisition (March 14, 1997), including sales of $30.2 million.
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 transactions given effect thereto had been completed at the dates
indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
YEAR ENDED DECEMBER 31, JUNE 29, JUNE 28,
---------------------------------------------- 1997 1998
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................ $559.2 $593.1 $687.2 $852.0 $944.6 $ 449.3 $ 498.7
Operating income......................... 41.5 44.7 45.9 61.4 70.1 34.2 32.7
Interest expense......................... 2.0 13.1 24.8 32.0 42.8 20.1 25.4
Income before income taxes............... 33.0 27.8 16.5 27.9 42.8 19.5 21.7
Net income............................... 20.4 16.7 10.1 17.1 26.1 11.9 13.2
</TABLE>
<TABLE>
<CAPTION>
JUNE 28, 1998
DECEMBER 31, ---------------------------------
---------------------------------------------- ACTUAL AS ADJUSTED(1)
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ -------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total working capital................... $ 4.8 $ 36.2 $ 54.6 $247.3 $284.8 $253.7 $ 250.0
Total assets............................ 259.4 452.3 559.3 701.6 807.3 804.8 809.4
Long-term debt less current
maturities(2) ........................ 38.7 229.2 310.3 405.7 555.4 534.8 550.4
Total Stockholder's equity (deficit).... 85.9 (28.9) 15.8 143.2 83.0 87.2 76.3
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------
YEAR ENDED DECEMBER 31, JUNE 29, JUNE 28,
---------------------------------------------- 1997 1998
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ -------------- --------------
(IN MILLIONS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation............................ $ 14.5 $ 16.8 $ 20.3 $ 23.9 $ 22.9 $ 10.9 $ 12.4
Goodwill amortization................... 0.6 1.1 1.2 1.7 1.9 0.9 1.0
Capital expenditures and acquisitions... 19.0 54.3 54.1 25.6 77.7 40.6 67.0
EBITDA(3)............................... 50.1 58.8 62.8 85.4 110.4 51.4 60.5
Ratio of earnings to fixed charges(4)... 8.6x 2.7x 1.6x 1.8x 1.9x 1.9x 1.8x
Ratio of EBITDA to interest
expense(3)............................ 24.5x 4.5x 2.5x 2.7x 2.6x 2.6x 2.4x
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 29, JUNE 28,
1997 1997 1998
---------------- -------------- ---------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(5):
Adjusted EBITDA(6)............................................ $115.5 $ 54.1 $62.6
Interest expense.............................................. 45.0 22.3 22.5
Net income.................................................... 27.8 12.2 16.3
Ratio of earnings to fixed charges(4)......................... 1.9x 1.8x 2.0x
Ratio of Adjusted EBITDA to interest expense(6)............... 2.6x 2.4x 2.8x
</TABLE>
- ------------------
(1) The As Adjusted balance sheet data give effect to the issuance of the Notes
and the purchase (and subsequent cancellation) of $150 million in aggregate
principal amount at maturity of Deferred Coupon Notes pursuant to the
Repurchase as if such transactions had been completed as of June 28, 1998.
Stockholder's equity, As Adjusted, reflects an extraordinary loss of
approximately $11.0 million (net of related income tax benefits) assuming
the Repurchase had been consummated on June 28, 1998, based on an accreted
value of the Deferred Coupon Notes at that date of 89.2%. As of July 17,
1998, the Company had purchased (and subsequently cancelled) approximately
$132.6 million in aggregate principal amount at maturity of Deferred Coupon
Notes and recorded an extraordinary loss of $9.3 million in July 1998 in
connection with this purchase. On July 17, 1998, the accreted value of the
Deferred Coupon Notes was 89.7%. If the Company purchases an additional
$17.4 million in aggregate principal amount at maturity of Deferred Coupon
Notes with such an accreted value, the extraordinary loss for the Repurchase
will be approximately $10.0 million. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Financial Condition.'
(2) See 'Capitalization' and Note 9 to Consolidated Financial Statements.
(3) EBITDA is calculated as income before income taxes and extraordinary items,
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) For purposes of these computations, earnings consist of income before income
taxes plus fixed charges and extraordinary items. 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).
(5) The pro forma operating data give effect to the issuance of the Notes, the
Repurchase, the issuance of the 2007 Notes, and the Acquisitions, as if such
transactions had been completed as of January 1, 1997. The net effect of
such assumptions was to increase the Company's pro forma income before
income taxes by $2.9, $0.5 and $5.0 million for the year 1997 and the first
six months of 1997 and 1998, respectively. As a result, the Company's pro
forma provision for income taxes increased by $1.1, $0.2 and $1.9 million
for the year 1997 and the first six months of 1997 and 1998, respectively,
based on an effective marginal income tax rate of 39%.
(6) The Adjusted EBITDA data are being presented because such data relate to
debt covenants under the indentures governing the Company's indebtedness.
Reference is made to these indentures for further information. Excluded from
the Adjusted EBITDA calculation is approximately $11.0 million in
extraordinary charges related to the Repurchase. The ratio of Adjusted
EBITDA to interest expense for the six months ended June 29, 1997 and June
28, 1998 has been calculated based on operating data for such six-month
periods rather than for the most recently completed four fiscal quarters
ended on such dates as contemplated in these indentures. See 'Summary
Financial Data' for the details of the calculations of Adjusted EBITDA.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company, an indirect subsidiary of GAF and G-I Holdings, was formed in
January 1994 to acquire the operating assets and certain liabilities of GAFBMC,
the Company's parent. 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. See Note 1 to Consolidated
Financial Statements. 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 million
and $99.0 million for the years ended December 31, 1995 and 1996, respectively,
and net income (loss) of $(0.5) million and $1.3 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 to the Company in
December 1996 of $82.5 million in cash and short-term investments. 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 Six Months of 1998 Compared With First Six Months of 1997
For the first six months of 1998, the Company recorded net income of $13.2
million compared with $11.9 million for the first six months of 1997. The 10.9%
increase in net income resulted from higher investment income, partially offset
by lower operating income and higher interest expense.
The Company's net sales for the first six months of 1998 were $498.7
million, an 11.0% increase over last year's sales of $449.3 million. The net
sales growth occurred in both the residential and commercial product lines and
resulted primarily from higher unit sales volumes.
Operating income for the first six months of 1998 was $32.7 million
compared with $34.2 million in the first six months of 1997. The decline in
operating income was attributable to higher distribution costs due to rail
service problems in certain regions of the country, requiring the use of
higher-cost transportation alternatives, and higher selling and administrative
expenses resulting from added marketing initiatives, partially offset by the
impact of higher product sales and lower manufacturing costs. Selling, general
and administrative expenses increased by 17.1% to $107.4 million compared with
last year's $91.7 million.
Interest expense increased to $25.4 million in the first six months of 1998
from $20.1 million in the first six months of 1997 due to higher debt levels,
mainly reflecting the issuance in October 1997 of $100 million in aggregate
principal amount at maturity of the 2007 Notes. Other income, net, was $14.4
million compared with $5.4 million last year, principally reflecting higher
investment income.
1997 Compared With 1996
The Company recorded net income in 1997 of $26.1 million compared with net
income of $17.1 million in 1996. The 53% increase in net income was attributable
to higher operating and other income, net, partially offset by higher interest
expense.
Net sales for 1997 increased $92.7 million (11%) to $944.6 million compared
with $852.0 million in 1996. The sales growth reflected increased unit volumes
of both residential and commercial roofing products as well as the sales of the
Leatherback Industries business ($30.2 million), which was acquired in March
1997.
Gross profit margin increased to 27.3% in 1997 from 27.0% in 1996,
resulting primarily from lower manufacturing costs and improved product mix.
Selling, general and administrative expenses increased 11% to $185.7 million in
1997 from $166.7 million in 1996, primarily reflecting increased costs of
distribution. Selling, general and administrative expenses as a percentage of
net sales increased slightly from 19.6% in 1996 to 19.7% in 1997.
18
<PAGE>
Operating income in 1997 was $70.1 million, an increase of $8.7 million
(14%) compared with $61.4 million in 1996. The increase in operating income was
attributable to the higher sales levels and improved margins.
Interest expense was $42.8 million in 1997 compared with $32.0 million in
1996, due to higher debt levels, primarily resulting from the issuance in
December 1996 of $100 million in aggregate principal amount at maturity of the
2006 Notes and the issuance in October 1997 of $100 million in aggregate
principal amount at maturity of the 2007 Notes.
Other income, net, was $15.5 million in 1997 compared with other expense,
net, of $1.5 million in 1996. The improvement was due principally to higher
investment income (up $20.0 million), partially offset by a $3.0 million
provision for estimated obligations related to product warranty claims for a
discontinued product.
1996 Compared With 1995
The Company recorded net income in 1996 of $17.1 million compared with net
income of $10.1 million in 1995. The 69% increase in net income was attributable
to higher operating income and lower other expense, net, partially offset by
higher interest expense.
Net sales for 1996 increased $164.8 million (24%) to $852.0 million
compared with $687.2 million in 1995. The sales growth reflected a 13% increase
in sales for the Company (excluding the effect of USI sales) due to increased
unit volumes of both residential and commercial roofing products and higher
average residential selling 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% 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 in 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
(34%) 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 in 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 $0.6
million) and certain litigation costs.
LIQUIDITY AND FINANCIAL CONDITION
Net cash inflow during the first six months of 1998 was $68.2 million
before financing activities, and included $70.9 million of cash generated from
operations, the reinvestment of $23.5 million for capital programs, the
acquisition of Leslie-Locke for $43.5 million (see Note 4 to Consolidated
Financial Statements), and the generation of $64.3 million from net sales of
available-for-sale and held-to-maturity securities.
Cash invested in additional working capital totaled $43.9 million during
the first six months of 1998, primarily reflecting a seasonal increase in
inventories of $31.9 million and a $26.8 million increase in receivables,
partially offset by a $16.6 million increase in accounts payable and accrued
liabilities. Accrued liabilities increased by $21.5 million to $47.8 million as
a result of additional accrued interest payable and seasonal increases in
accrued distribution costs and other plant operating accruals. Cash from
operating activities also reflected a $46.0 million cash inflow as a result of
repayments of advances by GAF, G-I Holdings and their respective subsidiaries
which were made by the Company in 1997, and a $16.1 million cash inflow from net
sales of trading securities.
Net cash used in financing activities totaled $47.0 million during the
first six months of 1998, mainly reflecting a $34.0 million paydown of
borrowings under the Company's bank revolving credit facility and a
19
<PAGE>
$24.8 million decrease in short-term borrowings, partially offset by a $6.2
million cash inflow from the repayment of a loan by a related party and $7.5
million proceeds from the sale of receivables.
As a result of the foregoing factors, cash and cash equivalents increased
by $21.1 million during the first six months of 1998 to $34.1 million (excluding
$145.2 million of trading and available-for-sale securities and other short-term
investments).
In June 1998, the Company terminated interest rate swap agreements related
to its Deferred Coupon Notes with an aggregate ending notional principal amount
of $60.0 million, resulting in gains of $0.7 million. The gains have been
deferred and will be amortized as a reduction of interest expense over the
remaining original life of the swaps.
On July 17, 1998, the Company issued $150 million in aggregate principal
amount at maturity of the Old Notes. The Company used a portion of the net
proceeds from this issue to purchase (and subsequently cancel) $132.6 million in
aggregate principal amount at maturity of the Deferred Coupon Notes and intends
to use the remaining net proceeds from this issue to purchase (and subsequently
cancel) up to an additional $17.4 million in aggregate principal amount at
maturity of such Deferred Coupon Notes in privately-negotiated transactions,
open market transactions or otherwise. If the Company purchases (and
subsequently cancels) an aggregate of $150 million in aggregate principal amount
at maturity of such Deferred Coupon Notes, the Company would record a total
extraordinary loss of approximately $10.0 million. See Note 13 to Consolidated
Financial Statements.
The Company used $10.3 million of cash for operations during 1997,
reinvested $77.7 million for capital programs and acquisitions, and invested
$43.5 million for net purchases of available-for-sale and held-to-maturity
securities, for a net cash outflow of $131.5 million before financing
activities. Cash used in operations included a cash outflow of $68.1 million for
net purchases of trading securities and a $39.1 million outflow for related
party transactions. See Note 11 to Consolidated Financial Statements.
Cash generated from a decrease in working capital totaled $17.9 million
during 1997. This amount primarily reflected a decrease in receivables of $7.8
million, a decrease in inventories of $8.0 million and a $5.1 million increase
in payables and accrued liabilities.
The Company generated $19.9 million from financing activities in 1997. On
October 20, 1997, the Company issued $100 million principal amount at maturity
of the 2007 Notes. Financing activities also included $34.0 million of
borrowings under the Company's bank revolving credit facility and $26.9 million
of short-term borrowings. The above cash flows were mostly offset by $91.0
million of distributions to the Company's parent, $35.3 million of repayments
related to the Company's receivables financing program, a $6.2 million loan to
the Company's parent and $3.5 million in repayments of long-term debt.
As a result of the foregoing factors, cash and cash equivalents decreased
by $111.6 million during 1997 to $12.9 million (excluding $243.3 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.
The Company's bank credit facilities were replaced on August 29, 1997 with
a new three-year, $75 million facility (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 June 28, 1998, no borrowings were outstanding under the Credit
Agreement, and $33.0 million of letters of credit were outstanding. Under the
terms of the Credit Agreement, the Company is subject to certain financial
covenants, including interest coverage and
20
<PAGE>
leverage ratios, and dividends and other restricted payments are limited. The
Company was in compliance with such covenants as of June 28, 1998.
Additional borrowings by the Company are subject to certain covenants
contained in the indentures relating to the Deferred Coupon Notes, the 2006
Notes, the 2007 Notes and the Credit Agreement.
The objectives of the Company in utilizing interest rate swap agreements
('swaps') are to lower funding costs, diversify sources of funding and manage
interest rate exposure. In the second quarter of 1998, all of the Company's
outstanding swaps were terminated. By utilizing swaps, the Company reduced its
interest expense by $1.5, $2.2, $2.0, $1.0 and $1.0 million in 1995, 1996 and
1997 and the first six months of 1997 and 1998, 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. See 'Business--Legal Proceedings' for further
information regarding asbestos-related matters. At June 28, 1998, the Company
had total outstanding consolidated indebtedness of $541.1 million, of which $4.2
million matures prior to June 30, 1999, and stockholder's equity of $87.2
million. See 'Investment Considerations--Substantial Leverage.' The Company
anticipates funding such obligations from its cash and investments, operations
and/or borrowings (which may include borrowings from affiliates).
In March 1993, the Company sold its trade accounts receivable
('receivables') to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company repurchased the receivables sold pursuant to the 1993
agreement and sold them to a special purpose subsidiary of the Company, BMCA
Receivables Corporation, without recourse, which in turn sold them to a new
trust, without recourse, pursuant to new agreements. The new agreements provide
for a maximum of $115 million in cash to be made available to the Company based
on eligible receivables outstanding from time to time. 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 June 28, 1998, 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 $0.7 million were outstanding at June 28, 1998.
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 2006 Notes, the 2007 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 June 28, 1998, after giving effect to the most restrictive of
the aforementioned restrictions, the Company could have paid dividends and other
Restricted Payments of up to $70.5 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,
11 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 2007 Notes to fund the cost of its capital expenditures and acquisitions.
21
<PAGE>
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.
The Company has significantly upgraded its information systems capabilities
and is in the process of finalizing the roll-out of an interactive network
connecting all of its locations. In conjunction with this initiative, the
Company is addressing its 'Year 2000' compliance issues and does not believe
that the costs associated with, or the impact of, these issues will have a
material adverse effect on the operations, liquidity or capital resources of the
Company. At this time, the Company is in the process of reviewing the Year 2000
compliance of its major suppliers and customers.
On July 15, 1998, the Company recorded a non-recurring charge of $7.6
million related to a grant to Sunil Kumar, President and Chief Operating Officer
of the Company, of 30,000 shares of restricted common stock of the Company and
certain cash payments to be made to such officer over a specified time period.
For a discussion of seasonality, see 'Business--Seasonal Variations and
Working Capital.'
FUTURE DEVELOPMENTS
From time to time, the Company reviews the reserves established for
estimated probable future warranty claims. The Company is currently undertaking
a review of these reserves and, before the end of this fiscal year, could
increase reserves relating to its residential roofing products by approximately
$6 million to $12 million on an after-tax basis.
FORWARD-LOOKING STATEMENTS
This Prospectus may contain certain 'forward-looking statements' intended
to qualify for the safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
generally can be identified by use of statements that include phrases such as
the Company or its management 'believes,' 'expects,' 'anticipates,' 'intends,'
'plans,' 'foresees' or other words or phrases of similar import. Similarly,
statements that describe the Company's objectives, plans or goals also are
forward-looking statements. All such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement.
Potential investors and other readers are urged to consider these factors
carefully in evaluating the forward-looking statements. The forward-looking
statements included herein are made only as of the date of this Prospectus and
the Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
22
<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, GFC and the Company and Chief
Executive Officer of G Industries and GAFBMC. The Company does business under
the name 'GAF Materials Corporation.'
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 28 manufacturing facilities. The
Company believes that it holds the number one or two market position in each of
the asphalt 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(Registered) product is the leading brand in residential
roofing, and the Company's Ruberoid(Registered) product is the leading brand in
the modified bitumen commercial roofing, the latter being the fastest growing
segment in the commercial roofing industry.
The Company's 28 manufacturing facilities consist of 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, one fiber-cement shingle and siding plant,
one attic ventilation and air distribution products plant and one iron security
door and fencing products plant. The Company has registered, through 1997, ten
consecutive years of increases in operating income. During the five year period
ended December 31, 1997, the Company's net sales and operating income have
increased at average annual compound rates of approximately 13.2% and 15.2%,
respectively, and its operating income margin has increased from 6.8% to 7.4%.
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, 'Investment Considerations--Parents' Dependence upon
Company's Cash Flow' and 'Certain Relationships--Tax Sharing Agreement.'
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.'
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INDUSTRY OVERVIEW
The United States residential roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 93% of industry residential roofing unit sales in
1997. Residential asphalt roofing materials consist of strip shingles and higher
margin, premium laminated shingles, which represented approximately 69% and 31%,
respectively, of industry asphalt roofing unit sales in 1997. While total
asphalt residential unit sales grew during the past five years (from January 1,
1993 through December 31, 1997) at an average annual compound rate of
approximately 2%, unit sales of laminated shingles grew at an average annual
compound rate of approximately 12%. During the same period, sales of strip
shingles declined at a compound annual rate of approximately 1%. 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 has
experienced 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 a compound annual increase of
4%, while unit sales of modified bitumen products grew at a compound annual rate
of approximately 9%.
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 for 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
The Company is a leading manufacturer of a complete line of premium
residential roofing products, with residential roofing product sales
representing approximately 65% of the Company's net sales in 1997. 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 strip
shingles in the United States.
The Company produces two principal lines of roofing shingles, the
Timberline(Registered) Series and the Sovereign(Registered) Series, as well as
certain specialty shingles for regional markets.
The Timberline(Registered) Series. The Timberline(Registered) Series
offers a premium laminated product line that adds dramatic shadow lines and
substantially improves the appearance of a roof. The Series includes the
Timberline(Registered) 25 shingle, a mid-weight laminated shingle which serves
as an economic trade-up for consumers, with a 25-year limited warranty; the
Timberline(Registered) shingle, with a 30-year limited warranty, offering a
natural random wood shake appearance with superior fire resistance and
durability; and the Timberline Ultra(Registered) shingle, with a 40-year limited
warranty, a super heavyweight laminated shingle with the same design features as
the Timberline(Registered) 25 shingle, together with added durability.
The Sovereign(Registered) Series. The Sovereign(Registered) Series
includes the standard 3-tab Sentinel(Registered) shingle with a 20-year limited
warranty; the Royal Sovereign(Registered) shingle, a heavier 3-tab shingle with
a 25-year limited warranty, designed to capitalize on the 'middle market' for
quality shingles; and the Marquis(Registered) Weathermax(Trademark) shingle, a
superior performing heavyweight 3-tab shingle with a 30-year limited warranty.
Specialty Shingles. The Company's specialty asphalt shingles include:
Slateline(Registered) and Slateline(Registered) Color Contrast(Trademark)
shingles offering the appearance of slate, labor savings in installation because
of their larger size and a 30-year limited warranty; Dubl-Coverage(Registered)
Tite-On(Registered) shingles offering a design feature that enables the shingles
to lock together to form a double layer roof, and a 25-year limited warranty;
the Grand Sequoia(Registered) shingle, a
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premier architectural shingle with a 40-year limited warranty; and the Country
Mansion(Trademark) shingle, a distinctive high end architectural shingle with a
limited lifetime warranty.
Weather Stopper(Trademark) Roofing System. In addition to shingles, the
Company supplies all the components necessary to install a complete roofing
system. The Company's Weather Stopper(Trademark) Roofing System begins with
Weather Watch(Registered) and Stormguard(Trademark) 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
Weather Stopper(Trademark) Roofing System also includes Shingle-Mate(Registered)
glass reinforced underlayment, Timbertex(Registered), TimberRidge(Trademark),
and Ridgetex(Trademark) Hip and Ridge shingles, which are significantly thicker
and larger than standard hip and ridge shingles and provide dramatic accents to
the slopes and planes of a roof and the Cobra(Registered) Ridge Vent which
provides attic ventilation.
COMMERCIAL ROOFING
The Company manufactures a full line of modified bitumen products, asphalt
built-up roofing, liquid applied membrane and roofing accessories for use in the
application of commercial roofing. Commercial roofing represented approximately
35% of the Company's net sales in 1997. Approximately 70% of commercial roofing
industry membrane unit sales utilize asphalt built-up roofing and modified
bitumen products, both of which the Company manufactures. The Company believes
that it is the second largest manufacturer of asphalt built-up roofing products
and the largest manufacturer of modified bitumen products in the United States.
The Company manufactures glass membranes under the trademarks
GAFGLAS(Registered) and Permaglas(Registered), which are made from asphalt
impregnated glass fiber mat for use as a component in asphalt built-up roofing
systems. Most of the Company's GAFGLAS(Registered) and Permaglas(Registered)
products are assembled on the roof by applying successive layers of roofing
membrane with asphalt and topped, in some applications, with gravel. Thermal
insulation may be applied beneath the membrane. The Company also manufactures
base sheets, flashings and other roofing accessories for use in these systems,
perlite roofing insulation products, which consist of low thermal insulation
that is installed as part of a commercial roofing application below the roofing
membrane, the TOPCOAT(Registered) roofing system, a liquid-applied membrane
system designed to protect and waterproof existing metal roofing, and roof
maintenance products. 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(Registered) trademark
by the Company and under the Brai(Registered) trademark by USI and are used
primarily in re-roofing applications or in combination with glass membranes in
GAF CompositeRoof(Trademark) 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.
SUBSTANTIAL CAPITAL PROGRAMS
The Company believes that its plants are among the most modern in the
industry. Since 1985 and through December 31, 1997, the Company has invested
almost $300 million in new property, plant and equipment, principally in order
to increase capacity and implement process improvements to reduce manufacturing
costs. This capital program 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(Registered),
which created an entire new product line within the asphalt roofing industry.
New products introduced by the Company in just the last five years include: the
Timberline(Registered) 25 and Timberline Ultra(Registered) shingles, which offer
a wood shake appearance, enhanced visual depth and contrast simulating shadows;
the Marquis(Registered) shingle, a heavyweight three-tab shingle designed for
Northern markets which offers greater
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<PAGE>
flexibility and added durability in cold temperatures; the Grand
Sequoia(Registered) shingle, a premier architectural shingle; the Country
Mansion(Trademark) shingle, a distinctive high end architectural shingle; and
Ruberoid(Registered)20/30, a polymer modified bitumen roofing system which
utilizes fiberglass reinforcements coated with modified asphalt to form a
durable high performance two-ply roofing membrane and which requires no
additional treatment or coating to qualify for an Underwriters Laboratory Class
A rating. In 1995, the Company introduced GAF CompositeRoof(Trademark), a new
commercial roofing product that combines the tensile strength of built-up
roofing with the flexibility and superior elongation of modified bitumen
membranes. In 1997, the Company introduced Flexply(Trademark) 6, an enhanced
performing premium built-up roofing felt, and Stratavent(Registered), a premium
venting base sheet used in built-up roofing systems.
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 share. The Company is
primarily interested in acquiring businesses which can benefit from its strong
national distribution network, manufacturing technology and marketing expertise.
Effective June 1, 1998, the Company purchased for approximately $44 million
substantially all of the assets of Leslie-Locke, a manufacturer and marketer of
specialty building products and accessories for the professional and
do-it-yourself remodeling and residential construction industries. Other recent
acquisitions include 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 assets of Major Group, Incorporated, the manufacturer of the
TOPCOAT(Registered) Roofing System, a liquid-applied polymer membrane system
designed to protect and waterproof existing metal roofing; and USI, a leading
national manufacturer of commercial roofing products.
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 190
experienced, full-time employees and independent sales representatives operating
from five regional sales offices located across the United States. USI markets
its roofing products through approximately 70 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. The Company believes that its
nationwide coverage has contributed to its roofing products being among the most
recognized and requested brands in the industry.
In September 1997, the Company launched its Customer Advantage(Trademark)
Program to establish a nationwide network of MasterElite(Trademark) contractors
and Authorized Installers. This program offers marketing and support services to
residential roofing contractors. The Company views the Master Elite(Trademark)
contractors and Authorized Installers as an effective extension of its sales
force, taking the Company's products directly to the homeowner.
No single customer accounted for as much as 10% of the Company's 1997
sales, except for American Builders and Contractors Supply Co., Inc., which
accounted for approximately 10% 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,
polyester 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
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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 requirements contract. USI purchases 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 requirements contract. Each such contract was renewed
in 1998 and is subject to annual renewal unless terminated by either party to
such agreement. 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 generally 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. From time to time, the Company reviews the reserves
established for estimated probable future warranty claims. The Company is
currently undertaking a review of these reserves and, before the end of this
fiscal year, could increase reserves relating to its residential roofing
products by approximately $6 million to $12 million on an after-tax basis.
COMPETITION
The roofing products industry is highly competitive and includes a number
of national competitors, which in the residential roofing and accessories
markets 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. The Company believes that it is
well positioned in the marketplace as a result of its broad product lines in
both the residential and commercial markets, consistently high product quality,
strong sales force and national distribution capabilities. As a result of the
growth in demand for premium laminated shingles, a number of roofing
manufacturers, including the Company, have increased their laminated shingle
production capacity in recent years and, accordingly, the Company has
experienced 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 $3.1 million, $4.5 million and $5.4 million in 1995, 1996 and
1997, 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.'
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The principal real properties either owned by, or leased to, the Company or
its subsidiaries are described below. Unless otherwise indicated, the properties
are owned in fee. In addition to the principal facilities listed below, the
Company maintains sales offices and warehouses, substantially all of which are
in leased premises under relatively short-term leases.
<TABLE>
<CAPTION>
LOCATION FACILITY
- ----------------------------------------------------------- -------------------------------------------
<S> <C>
Alabama
Mobile................................................... Plant, Warehouses*
California
Compton.................................................. Plant*, Warehouse*
Fontana.................................................. Plant, Sales Office
Hollister................................................ Plant, Plant*
Ontario.................................................. Plant, Sales Office
Stockton................................................. Plant, Plant, Warehouse*
Florida
Tampa.................................................... Plant, Sales Office*
Georgia
Atlanta.................................................. Sales Office*
Monroe................................................... Plant, Warehouse*
Savannah................................................. Plant, Sales Office
Indiana
Mount Vernon............................................. Plant, Sales Office
Illinois
Naperville............................................... Sales Office*
Kentucky
Florence................................................. Plant
Maryland
Baltimore................................................ Plant
Massachusetts
Millis................................................... Plant, Sales Office, Warehouse*
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
North Carolina
Burgaw................................................... Plant
Goldsboro................................................ Plant
Ohio
Wadsworth................................................ Plant*, Warehouse*
</TABLE>
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<TABLE>
<CAPTION>
LOCATION FACILITY
- ----------------------------------------------------------- -------------------------------------------
<S> <C>
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
Port Arthur.............................................. Plant, Plant, Warehouse, Sales Office,
Research Center
</TABLE>
- ------------------
* Leased Property
The Company believes that its plants and facilities, which are of varying
ages and are of different construction types, have been satisfactorily
maintained, are in good condition, are suitable for their respective operations
and generally provide sufficient capacity to meet production requirements. Each
plant has adequate transportation facilities for both raw materials and finished
products. In 1997, the Company made capital expenditures of more than $46
million relating to plant, property and equipment.
PATENTS AND TRADEMARKS
The Company owns or licenses approximately 87 domestic and 100 foreign
patents or patent applications and owns or licenses approximately 197 domestic
and 63 foreign trademark registrations or applications. While the Company
believes the patent protection covering certain of its products to be material
to those products, the Company does not believe that any single patent, patent
application or trademark is material to the Company's business or operations.
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 $400,000 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.
See '--Environmental Litigation.'
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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 June 27, 1998, it is defending
approximately 113,000 pending alleged Asbestos Claims (having received notice of
approximately 55,900 new Asbestos Claims during the first six months of 1998)
and has resolved approximately 256,700 Asbestos Claims (including approximately
22,200 in the first six months of 1998). GAF has advised the Company that it
believes that a significant portion of the claims filed in the first six months
of 1998 were already pending against other defendants for some period of time,
with GAF being added as a defendant upon the lifting in 1997 of the injunction
relating to the Georgine class action settlement. During 1997, GAF resolved
approximately 11,000 Asbestos Claims, of which approximately 9,900 were resolved
(including Asbestos Claims disposed of at no cost to GAF) for an average cost of
$4,070 per claim. GAF's share of the costs with respect to approximately 1,100
Asbestos Claims resolved during 1997 has not yet been determined. There can be
no assurance that the actual costs of resolving pending and future Asbestos
Claims will approximate GAF's historic average costs.
GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims, and that it is exploring a number of options, both judicial
and legislative, to accomplish such resolution, but there can be no assurance
that this effort 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 approximately 16 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 four 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 June 28,
1998, to pay asbestos-related bodily injury claims aggregate insurance coverage
of $216.5 million before discounting certain coverage (which amount 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 January 1993, the members of the Center for Claims Resolution (the
'CCR'), a non-profit organization of asbestos defendant companies, including
GAF, filed an 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 Coverage Action 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 obligated to provide
coverage for Asbestos Claims. The
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<PAGE>
insurers who are defendants in GAF's amended complaint are Atlanta
International, Employers Mutual and Northbrook. The insurance carrier defendants
have raised various defenses to the Coverage Action.
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.
ENVIRONMENTAL LITIGATION
The Company, 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 December 31, 1997, its liability in respect of the
environmental liabilities of GAFBMC not assumed by BMCA was approximately $14.0
million, before insurance recoveries reflected on its balance sheet of $7.7
million, as compared to BMCA's estimate of its liability as of December 31, 1997
in respect of assumed and other environmental liabilities of $1.1 million,
before insurance recoveries reflected on its balance sheet (discussed below) of
$0.8 million. Insurance recoveries reflected on such balance sheets relate to
both past expenses and estimated future liabilities ('estimated recoveries').
At most sites, BMCA anticipates that liability will be apportioned among
the companies found to be responsible for the presence of hazardous substances
at the site. Although it is difficult to predict the ultimate resolution of
these claims, based on BMCA's evaluation of the financial responsibility of the
parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, BMCA estimates that its liability in respect of all
Environmental Claims, including certain environmental compliance expenses, will
be as discussed above.
After considering the relevant legal issues and other pertinent factors,
BMCA believes that it will receive the estimated recoveries and that recoveries
could be well in excess of the estimated recoveries for all Environmental
Claims, although there can be no assurances in this regard. 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.
On March 8, 1995, GAF commenced litigation on behalf of itself and its
predecessors, successors, subsidiaries and related corporate entities in the
United States District Court for the District of New Jersey seeking amounts
substantially in excess of the estimated recoveries. The action was dismissed by
the court in December 1997 for lack of federal jurisdiction, and two defendant
insurers have filed briefs appealing the dismissal. On June 16, 1997, GAF filed
a similar action against the insurers in the Superior Court of New Jersey,
Somerset County, which action is pending. While BMCA believes that its claims
are meritorious, there can be no
31
<PAGE>
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 last paragraph of 'Bodily
Injury Claims.'
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 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 inequitable conduct. On May 14, 1998, Elk filed a notice of
appeal of the Court's ruling to the United States Court of Appeals for the
Federal Circuit. The Company believes that it will prevail on the appeal and on
Elk's remaining claims in the United States District Court.
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. 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. 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. On or
about December 1, 1997, an action was commenced in the Supreme Court of the
State of New York, County of Nassau, against GAFBMC and GAF on behalf of a
nationwide class of owners of structures with roof shingles manufactured and
distributed by GAFBMC which were installed between 1985 and 1993. On August 14,
1996, an action was commenced in Pointe Coupee Parish, Louisiana, against GAF
and GAFBMC on behalf of a purported nationwide class of those who own or did own
single family residences on which GAF Timberline(Registered) shingles were
installed. In all of these actions, the respective plaintiffs have alleged that
the shingles were defective and seek unspecified damages on behalf of the
purported classes. The Company does not believe certification of a class is
warranted in any of these actions.
* * *
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.
TAX CLAIM AGAINST GAF
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 a subsidiary of GAF, 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 liabilities significantly in
32
<PAGE>
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 GFC be unable to satisfy such liability.
EMPLOYEES
At June 30, 1998, the Company employed approximately 3,500 people
worldwide, approximately 1,150 of which were subject to 16 union contracts. The
contracts are effective for three- to four-year periods. During 1997, five labor
contracts expired and were renegotiated. 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.
33
<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.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD(1)(2) AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------------- --- ------------------------------------------------------------------------
<S> <C> <C>
Samuel J. Heyman ............... 59 Mr. Heyman has been a director and Chairman of BMCA since its formation
Director, Chairman and Chief and Chief Executive Officer of BMCA since June 1996. He has served as
Executive Officer a director and Chairman and Chief Executive Officer of ISP since its
formation in May 1991 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
Chairman and Chief Executive Officer of ISP Holdings Inc. ('ISP
Holdings'), the parent of ISP, 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 .................... 49 Mr. Kumar has been the President, Chief Operating Officer and a director
Director, President and of BMCA since July 1996, March 1996 and May 1995, respectively. He was
Chief Operating Officer President, Commercial Roofing Products Division, and Vice President of
BMCA from February 1995 to March 1996. He has been Chairman of USI
since March 1996 and a director of USI since October 1995. He was Vice
Chairman of USI from October 1995 to March 1996. From 1992 to February
1995, he was Executive Vice President of Bridgestone/Firestone Inc., a
retail distributor and manufacturer of tires and provider of
automobile services. From 1982 to 1990, Mr. Kumar was President of
Firestone Building Products Company, and from 1990 to 1992, he was
Vice President of Bridgestone/Firestone.
James P. Rogers ................ 47 Mr. Rogers has been a director of BMCA since its formation and Executive
Director and Executive Vice President of BMCA and USI since December 1996. Mr. Rogers has
Vice President been Executive Vice President and Chief Financial Officer of GAF, G-I
Holdings and certain of its subsidiaries, Executive Vice President and
Chief Financial Officer of ISP Holdings and Executive Vice
President--Finance of ISP since December 1996. He was Senior Vice
President of ISP from November 1993 to December 1996 and of BMCA and
ISP Holdings from their formation to December 1996. Mr. Rogers held
the same positions in USI from October 1995 to December 1996. Mr.
Rogers has been a director of USI since October 1995. 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.
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C>
Richard A. Weinberg ............ 38 Mr. Weinberg has been Executive Vice President and General Counsel of
Executive Vice President, BMCA since May 1998 and was Senior Vice President and General Counsel
Secretary and General Counsel from May 1996 to May 1998. He was Senior Vice President and General
Counsel of GAF, G-I Holdings, ISP and certain of their subsidiaries
from May 1996 to May 1998 and of ISP Holdings from its formation to
May 1998. He has served as Executive Vice President and General
Counsel of these companies since May 1998. 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 .............. 61 Dr. LaPalme has been Senior Vice President--Operations of BMCA and
Senior Vice President-- certain of its subsidiaries since April 1996. He was Vice President--
Operations 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 GAF Chemicals Corporation's Calvert City,
Kentucky manufacturing facility. From 1981 to 1984 he was Vice
President of Manufacturing of GAF's Building Materials Division.
William C. Lang ................ 54 Mr. Lang has been Senior Vice President and Chief Financial Officer of
Senior Vice President and BMCA since April 1997. He was Senior Vice President and Chief
Chief Financial Officer 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 ................. 54 Mr. Adair has been President and Chief Executive Officer, of USI since
President and Chief 1982.
Executive Officer,
U.S. Intec, Inc.
William W. Collins ............. 48 Mr. Collins has been Senior Vice President--Marketing and Sales,
Senior Vice President-- Residential Roofing Products of BMCA since November 1997. He was Vice
Marketing and Sales, President--Marketing Products and Sales, Commercial Roofing Products
Residential Roofing of BMCA from March 1996 to November 1997, Vice President--Sales,
Products Commercial of BMCA from December 1995 to March 1996, Director of
Insulation, Accessories and Cobra(Registered) 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 .................. 48 Mr. Tafaro has been Vice President--Marketing and Sales, Commercial
Vice President--Marketing Roofing Products of BMCA since November 1997. He was Vice
and Sales, Commercial President--Residential Marketing of BMCA from May 1997 to November
Roofing Products 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.
</TABLE>
- ------------------
(1) Under BMCA's By-laws, each director and executive officer continues in
office until BMCA's next annual meeting of stockholders and until his
successor is elected and qualified.
(2) In connection with the merger on July 15, 1998 of ISP with and into ISP
Holdings, the name of ISP Holdings was changed to International Specialty
Products Inc.
35
<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, 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL SARS (S)/ ALL OTHER
NAME AND PRINCIPAL POSITION(6) YEAR SALARY BONUS(1) COMPENSATION OPTIONS(O)(1) COMPENSATION
- --------------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman ................ 1997 (6) (6) (6) (6) (6)
Chairman and Chief 1996 (6) (6) (6) (6) (6)
Executive Officer 1995 (6) (6) (6) (6) (6)
Sunil Kumar ..................... 1997 $293,550 $256,238 $ 0 7,609(O) $ 16,737(2)
President and Chief 1996 274,500 165,000 0 2,190(O)/ 13,561(2)
Operating Officer 1995 208,336(2) 60,000(2) 28,608(2) 8,609(S)(7) 8,475(2)
9,201(S)
Danny J. Adair .................. 1997 $216,686 $ 35,815 $ 0 2,637(O) $ 12,772(3)
President and Chief Executive 1996 216,686 53,093 0 1,550(O) 3,972(3)
Officer, U.S. Intec, Inc. 1995 216,686(3) 25,000 0 0 3,953(3)
Donald W. LaPalme ............... 1997 $162,481 $ 55,601 $ 0 3,076(O) $ 17,756(4)
Senior Vice President-- 1996 154,750 59,774 0 1,200(O) 14,519(4)
Operations 1995 148,500 34,000 0 0 14,381(4)
William W. Collins .............. 1997 $148,242 $ 57,497 $ 0 8,218(O) $ 14,509(5)
Vice President--Marketing & 1996 128,000 42,588 0 900(O) 12,092(5)
Sales, Commercial Roofing 1995 110,071 20,000 0 0 9,859(5)
Products
</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 $11,450, $10,750 and $5,664
representing BMCA's contribution to the GAF Capital Accumulation Plan in
1997, 1996 and 1995, respectively; $3,324, $1,636 and $1,636 for premiums
paid by BMCA in each of 1997, 1996 and 1995, respectively, for a life
insurance policy; and $1,963, $1,175 and $1,175 for the premiums paid by
BMCA for a long-term disability policy in 1997, 1996 and 1995, respectively.
Mr. Kumar commenced employment with the Company in February 1995.
(3) Included in 'All Other Compensation' for Mr. Adair are $4,730, $1,260 and
$1,260 in 1997, 1996 and 1995, respectively, for the premiums paid by BMCA
for a life insurance policy; $1,701, $2,212 and $2,193 for premiums paid on
a long-term disability policy in 1997, 1996 and 1995, respectively, and
$6,341, $500 and $500 in each of 1997, 1996 and 1995, respectively,
representing the Company's contribution under the GAF Capital Accumulation
Plan. USI became a subsidiary of the Company in 1995.
(4) Included in these amounts for Dr. LaPalme are: $11,700, $11,000 and $11,000,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1997, 1996 and 1995, respectively; $4,781, $2,754 and $2,646 for the
premiums paid by BMCA for a life insurance policy in 1997, 1996 and 1995,
respectively; and $1,275, $765 and $735 for the premium paid by BMCA for a
long-term disability policy in 1997, 1996 and 1995, respectively.
(5) Included in these amounts for Mr. Collins are: $11,513, $10,633 and $9,859,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1997, 1996 and 1995, respectively; $1,884 and
(Footnotes continued on next page)
36
<PAGE>
(Footnotes continued from previous page)
$849 for the premiums paid by BMCA for a life insurance policy in 1997 and
1996, respectively; and $1,112 and $610 for the premiums paid by BMCA for a
long-term disability policy in 1997 and 1996, respectively.
(6) The salaries and other compensation of Messrs. Heyman, Weinberg and Rogers
are paid by ISP, an affiliate of BMCA. Messrs. Heyman, Rogers and Weinberg
render services to BMCA pursuant to a management agreement. No allocation of
compensation for services to BMCA is made pursuant to such management
agreement, except that BMCA reimbursed ISP $115,351 and $133,989 under the
management agreement in respect of bonus amounts earned by Messrs. Rogers
and Weinberg, respectively, for 1997 in connection with services performed
by them for BMCA during such year and that BMCA reimburses ISP, by virtue of
the management fees payable under the management agreement, for the
estimated costs ISP incurs for providing such services. See 'Certain
Relationships--Management.'
(7) Excluded are options to purchase redeemable preferred stock of ISP Holdings.
See Note (2) to the second table under '--Options/SARs' below.
OPTIONS/SARS
The following table summarizes options ('BMCA Preferred Options') to
acquire BMCA's redeemable convertible preferred stock granted during 1997 to the
executive officers named in the Summary Compensation Table above and the
potential realizable value of BMCA Preferred Options held by such persons. No
BMCA Preferred Options were exercised by such persons in 1997.
BMCA PREFERRED STOCK OPTION GRANTS IN 1997(1)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES
OF
BOOK VALUE
NUMBER OF SECURITIES % OF TOTAL OPTIONS APPRECIATION
UNDERLYING OPTIONS GRANTED TO EMPLOYEES -------------------
GRANTED IN FISCAL 1997 5% 10%
-------------------- -------------------- ------- --------
<S> <C> <C> <C> <C>
Sunil Kumar.................................... 7,609 10.9% $90,084 $328,506
Danny J. Adair................................. 2,637 3.8 31,220 113,850
Donald W. LaPalme.............................. 3,076 4.4 36,405 132,756
William W. Collins............................. 2,033 2.9 24,066 87,761
6,185 8.8 67,920 247,680
</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 Class A 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 five 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 Class A 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 five-year
period from the date of grant.
37
<PAGE>
BMCA PREFERRED STOCK OPTIONS/GAF STOCK APPRECIATION RIGHTS AND OPTIONS/SAR
VALUES
AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED BMCA PREFERRED IN-THE-MONEY BMCA PREFERRED
OPTIONS(O)/GAF SARS(S)(1) OPTIONS (O)/GAF SARS(S)
AT 12/31/97 AT 12/31/97
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------------ -------------------------- ---------------------------
<S> <C> <C>
Sunil Kumar(2)........................................ 3,680/14,130(S) $ 42,669/$233,282(S)
876/8,923(O) 12,342/18,523(O)(3)
Danny J. Adair........................................ 620/3,567(O) 8,740/13,110(O)(3)
Donald W. LaPalme..................................... 480/3,796(O) 6,767/10,150(O)(3)
William W. Collins.................................... 360/8,758(O) 5,075/7,613(O)(3)
</TABLE>
- ------------------
(1) The stock appreciation rights relating to GAF common stock ('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.
(2) In connection with the merger of ISP Holdings and ISP which was consummated
on July 15, 1998, among other things, all options to purchase shares of
redeemable convertible preferred stock of ISP Holdings and stock
appreciation rights relating to ISP Holdings common stock, including options
and stock appreciation rights held by Mr. Kumar, were cancelled. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
(3) Options for 2,190, 1,550, 1,200 and 900 shares of Preferred Stock were
in-the-money for Messrs. Kumar, Adair, LaPalme and Collins, respectively, at
December 31, 1997.
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
Approximately 98.5% of the outstanding Class A common stock of BMCA (the
'Class A 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. All of the outstanding Class B
common stock of BMCA (the 'Class B Common Stock,' and together with the Class A
Common Stock, the 'Common Stock') is owned of record by the children of Mr.
Kumar.
The following table sets forth information with respect to the ownership of
Common Stock, as of July 18, 1998, by each other person known to BMCA to own
beneficially more than 5% of either class 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.
38
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF TOTAL VOTING
NAME AND ADDRESS OF BENEFICIAL PERCENT OF POWER OF
TITLE OF CLASS BENEFICIAL OWNER(1) OWNERSHIP CLASS COMMON STOCK
- ------------------------------ ------------------------------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Class A Common Stock.......... Samuel J. Heyman 1,000,010 98.5%(2) 97%(2)
Sunil Kumar 15,000 1.5% 1.5%
All directors and executive
officers of BMCA as a
group (9 persons) 1,015,010 100%(2) 98.5%(2)
Class B Common Stock.......... Sunil Kumar 15,000(3) 100% 1.5%
All directors and executive
officers of BMCA as a
group (9 persons) 15,000(3) 100% 1.5%
</TABLE>
- ------------------
(1) The business address for each of Messrs. Heyman and Kumar is 1361 Alps Road,
Wayne, New Jersey 07470.
(2) 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 July 18, 1998, Mr. Heyman
beneficially owned approximately 97% of the capital stock of GAF.
(3) Such shares of Class B Common Stock are owned of record by Mr. Kumar's
children. Mr. Kumar disclaims beneficial ownership of all of these shares.
CERTAIN RELATIONSHIPS
MANAGEMENT AGREEMENTS
Pursuant to a management agreement (the 'Management Agreement') which
expires December 31, 1998, ISP (which is controlled by BMCA's Chief Executive
Officer, Samuel J. Heyman) provides certain general management, administrative,
legal, telecommunications, information and facilities services to BMCA
(including the use of BMCA's headquarters in Wayne, New Jersey). Charges to BMCA
by ISP for providing such services aggregated $4.8 million in 1997. Such charges
consist of management fees and other reimbursable expenses attributable to, or
incurred by ISP for the benefit of, the Company, which are based on an estimate
of the costs ISP incurs to provide such services. Effective January 1, 1998, the
term of the Management Agreement was extended through the end of 1998, and the
management fees payable thereunder were adjusted, including an adjustment to
reflect the direct payment by BMCA of the costs for certain services rendered by
third parties that were previously included in the management fees payable to
ISP. The Company and ISP further modified the agreement to allocate a portion of
the management fees payable by BMCA under the Management Agreement to separate
lease payments for the use of BMCA's headquarters. Based on the services
provided by ISP in 1997 under the Management Agreement, after taking into
account the modifications to the agreement described above, the aggregate amount
payable by the Company to ISP under the Management Agreement for 1998 is
expected to be approximately $4.7 million. BMCA also expects to pay directly
certain third party costs, which aggregated approximately $0.4 million in 1997,
that were previously included in the management fees. In addition, BMCA
currently anticipates that in 1998 it will require additional space for its
headquarters and will pay additional rent based on footage to be occupied.
Certain of BMCA's executive officers receive their compensation from ISP, with
ISP being indirectly reimbursed therefor by virtue of the management fee and
other reimbursable expenses payable under the Management Agreement.
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 was renewed for
1998 and expires December 31, 1998, GFC is obligated to pay BMCA an annual
management fee of $1.0 million.
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.
39
<PAGE>
CERTAIN PURCHASES
BMCA purchases from ISP all of its requirements for colored roofing
granules (except for the requirements of its California roofing plant which are
supplied by a third party) under a requirements contract. USI purchases
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 requirements contract.
Each such contract was renewed in 1998 and is subject to annual renewal unless
terminated by either party to such agreement. In 1997, BMCA and USI purchased in
the aggregate approximately $51.1 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. In 1997, the Company purchased approximately $24.5
million of glass fiber from GFC.
TAX SHARING AGREEMENT
BMCA and its subsidiaries have entered into a tax sharing agreement dated
January 31, 1994 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 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-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 5.85% and 5.95% per annum
during 1997). The highest amount of loans made by BMCA to G-I Holdings during
1997 was $6.2 million and no loans were made to BMCA by G-I Holdings and its
subsidiaries during 1997. As of June 28, 1998, 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 $0.7 million were
outstanding at June 28, 1998.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were issued by BMCA on July 17, 1998. 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 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 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange
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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 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 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, $150 million 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 5:00 p.m., 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 manner, by giving oral or written
notice of such delay or termination to the Exchange Agent, and by complying with
Rule 14e-l(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-l(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 (except
those holders delivering an Agent's Message) 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
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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 (or an Agent's Message in lieu thereof)
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, 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
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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 (or an Agent's Message in lieu thereof) and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Old Notes (or Old Notes in substitution therefor)
will be returned without expense to the tendering holder thereof (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to
such tendering holder's account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after receipt of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees (unless an Agent's Message is transmitted
in lieu thereof) 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.
The term 'Agent's Message' means a message, transmitted by the Book-Entry
Transfer Facility and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgement from a participant tendering Old Notes that
are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such agreement against such participant.
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 5:00 p.m., New York City
time, on the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof or an Agent's
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Message in lieu 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, the
Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu
thereof) 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 5:00 p.m., 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 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Old Notes to be
withdrawn (the 'Depositor'), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee register the transfer of such Old Notes
into the name of the person withdrawing the tender, and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form, and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender, or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under '--Procedures for Tendering' above at any time on or prior to
5:00 p.m., 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
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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:
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) 815-6339 (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.
DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued under an indenture dated as of July 17, 1998 (the
'Indenture') by and 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'),
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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. A
copy of the Indenture may be obtained from the Company. 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, the 2007 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 July 15, 2005 and will be limited to $150 million
in aggregate principal amount.
Interest on the Notes will accrue at the rate of 7 3/4% per annum, payable
semi-annually on January 15 and July 15 of each year commencing January 15, 1999
to the holders of record at the close of business on the January 1 or July 1
immediately preceding the interest payment date.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest, plus, to the extent permitted by law, any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date. Such special record date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a business day. At least 15 days before the
special record date, the Company shall mail or cause to be mailed to each Holder
and the Trustee a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
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.
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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 the Change of Control 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 'Investment Considerations--Substantial Leverage' and '--Change
of Control; Acceleration of Debt'.
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' have meanings correlative to the foregoing. For
the avoidance of doubt, ISP 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
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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.
'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
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'beneficial owner' (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of majority voting power of the Voting Stock
of the Company, whether as a result of issuance of securities of the
Company or any of its Affiliates, any merger, consolidation, liquidation or
dissolution of the Company or any of its Affiliates, any direct or indirect
transfer of securities by any Permitted Holder or by Parent or any of its
Subsidiaries or otherwise (for purposes of this clause (i) and clause (ii)
below, the Permitted Holders shall be deemed to beneficially own any Voting
Stock of a corporation (the 'specified corporation') held by any other
corporation (the 'parent corporation') so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, a majority of the
Voting Stock of the parent corporation);
(ii) any 'Person' (as such term is used in sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that a Person
shall be deemed to have 'beneficial ownership' of all shares that any such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or 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
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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).
'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 or 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 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
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(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-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 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.
'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
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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.
'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 July 17, 1998.
'Lien' means any lien, mortgage, charge, pledge, security interest, or
other encumbrance of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof).
'Management Agreement' means the amended and restated management agreement,
dated as of March 3, 1992, between the Company and ISP as amended through the
Issue Date.
'Margin Stock' shall have the meaning provided in Regulation U.
'Material Assets' means assets, singly or in the aggregate, the book or
fair market value of which equals 5% or more of the consolidated tangible assets
of the Company, as set forth on its most recently publicly available balance
sheet.
'Moody's' means Moody's Investors Service, Inc. or its successors.
'Net Cash Proceeds' means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by the Company or any of its Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable ((1) including, without
limitation, income taxes reasonably estimated to be actually payable as a result
of any disposition of property within two years of the date of disposition,
including under any tax sharing arrangements, and (2) after taking into account
any reduction in tax liability due to available tax credits or deductions
applicable to the transaction, (c) a reasonable reserve for the after-tax cost
of any indemnification obligations (fixed and/or contingent) attributable to
seller's indemnities to the purchaser undertaken by the Company or any of its
Subsidiaries in connection with such Asset Sale and (d) repayment of Debt that
is required to be repaid in connection with such Asset Sale, under the
agreements governing such Debt or Asset Sale.
'Non-Recourse Debt' of any Person means Debt or the portion of Debt (i) as
to which neither Parent nor any of its Subsidiaries (other than a Non-Recourse
Subsidiary) (A) provides credit support (including any undertaking, agreement or
instrument which would constitute Debt), (B) is directly or indirectly liable or
(C) constitutes the lender and (ii) no default with respect to which (including
any rights which the holders thereof may have to take enforcement action against
the assets of a Non-Recourse Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Debt of such Person or its Subsidiaries
(other than Non-Recourse Subsidiaries) to declare a default on such other Debt
or cause the payment thereof to be accelerated or payable prior to its Stated
Maturity.
'Non-Recourse Subsidiary' of any Person means a Subsidiary (A) which has
been designated as such by such Person, (B) which has not acquired any assets
directly or indirectly from Parent or any of its Subsidiaries other than at fair
market value, including by the receipt of Capital Stock of such Non-Recourse
Subsidiary; provided that, if any such acquisition or series of related
acquisitions involves assets having a value in excess of
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$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.
'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.
'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
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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 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 Series B 8 5/8% Senior Notes due 2006.
'2007 Notes' means the Company's 8% Senior Notes due 2007 and the Series B
8% Senior Notes due 2007.
'Unrestricted Affiliate' means a Person (other than a Subsidiary of the
Company except a Non-Recourse Subsidiary) controlled by, or under common control
with, the Company in which no Affiliate of the Company (other than (i) the
Company or a Wholly-Owned Recourse Subsidiary, (ii) any director or officer of
the Company or any of its Subsidiaries, whose primary employment is by the
Company or any of its Subsidiaries other than a Non-Recourse Subsidiary, except
for Permitted Holders or members of their immediate family and (iii) another
Unrestricted Affiliate) has an Investment.
'U.S. Government Obligations' means money or direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
'USI' means U.S. Intec, Inc., a Texas corporation, and its successors.
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'Voting Stock' means, with respect to any Person, Capital Stock of any
class or kind normally entitled to vote in the election of the board of
directors or other governing body of such Person.
'Wholly-Owned Recourse Subsidiary' means a Subsidiary of a Person (other
than a Non-Recourse Subsidiary) all the Capital Stock of which (other than
directors' qualifying shares) is owned by such Person or another Wholly-Owned
Recourse Subsidiary of such Person.
'Wholly-Owned Subsidiary' means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the applicable corporation
or another Wholly-Owned Subsidiary of the applicable corporation.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Debt and Preferred Stock of the Company and its Subsidiaries.
(a) The Indenture provides that the Company shall not, and shall not permit any
of its Subsidiaries to, Issue, directly or indirectly, any Debt unless, at the
time of such Issuance and after giving effect thereto, (i) no Default or Event
of Default shall have occurred and be continuing and (ii) the Consolidated
EBITDA Coverage Ratio of the Company for the period of its most recently
completed four consecutive fiscal quarters ending at least 45 days prior to the
date such Debt is Issued is at least 2.00 to 1.00.
(b) Notwithstanding the foregoing, there may be issued the following Debt:
(1) The Old Notes, 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 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 $80,000,000;
(4) Acquired Debt;
(5) (x) Debt outstanding on the Issue Date (including the Deferred
Coupon Notes, the 2006 Notes and the 2007 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 $150,000,000;
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(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
$100,000,000.
(c) The Company shall not, and shall not permit any of its Subsidiaries to,
Issue any Preferred Stock; provided that there may be issued the following
Preferred Stock:
(1) Preferred Stock of the Company or any Subsidiary of the Company
issued to and held by the Company or a Wholly-Owned Recourse Subsidiary of
the Company; provided that any subsequent transfer of such Preferred Stock
(other than to the Company or to a Wholly-Owned Recourse Subsidiary of the
Company) or such Wholly-Owned Recourse Subsidiary of the Company ceasing to
be a Wholly-Owned Recourse Subsidiary of the Company shall be deemed, in
each case, to constitute the Issuance of such Preferred Stock by the
Company or such Subsidiary;
(2) Preferred Stock (other than Preferred Stock described in clause
(1) but including the Preferred Stock referred to in the proviso to clause
(1) above); provided that the liquidation value of any Preferred Stock
issued pursuant to this clause (2) shall constitute Debt for purposes of
this covenant and dividends on such Preferred Stock shall be included in
determining Consolidated Interest Expense of the Company for purposes of
calculating the Consolidated EBITDA Coverage Ratio of the Company under
paragraph (a) of this covenant; and
(3) Preferred Stock (other than Redeemable Stock) of the Company.
(d) To the extent the Company or any of its Subsidiaries Guarantees any
Debt of the Company or any other Subsidiary, such Guarantee and such Debt will
be deemed to be the same Debt and only the amount of the Debt will be deemed to
be outstanding. If the Company or any of its Subsidiaries Guarantees any Debt of
a Person that, subsequent to the Issuance of such Guarantee, becomes a
Subsidiary of the Company, such Guarantee and the Debt so Guaranteed shall be
deemed to be the same Debt, which shall be deemed to have been Issued when the
Guarantee was Issued and shall be deemed to be permitted to the extent the
Guarantee was permitted when Issued.
Limitation on Restricted Payments and Restricted Investments. (a) So long
as no Default or an Event of Default shall have occurred and be continuing, the
Company may make, and may permit any of its Subsidiaries to make, directly or
indirectly, any Restricted Payment or Restricted Investment so long as, at the
time of such Restricted Payment or Restricted Investment and immediately after
giving effect thereto, the aggregate amount of Restricted Payments made since
the Issue Date and the aggregate amount of Restricted Investments made since the
Issue Date and then outstanding (the amount expended for such purposes, if other
than in cash, shall be the fair market value of such property as determined by
the Board of Directors of the Company in good faith as of the date of payment or
investment) shall not exceed the sum of:
(i) 75% 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;
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(iii) 100% of the net cash proceeds received by the Company from the
exercise of options or warrants on Capital Stock of the Company (other than
Redeemable Stock) since the Commencement Date;
(iv) 100% of the net cash proceeds received by the Company from the
conversion into Capital Stock (other than Redeemable Stock) of convertible
Debt or convertible Preferred Stock issued and sold (other than to a
Subsidiary of the Company) since the Commencement Date; and
(v) $60,000,000.
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 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 $40,000,000;
(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
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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 $60,000,000.
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 $10,000,000, 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 $35,000,000
(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.
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(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);
(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, 2006 Notes and 2007 Notes;
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(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:
(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, the 2006 Notes and 2007 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
purchase, 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 and then
offer to purchase any outstanding 2007 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 $25,000,000;
provided that (i) the Company and its Subsidiaries may retain up to $7,000,000
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'.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer.
Restriction on Transfer of Certain Assets to Subsidiaries. The Indenture
provides that if the Company transfers or causes to be transferred, in one or a
series of related transactions, Material Assets to any one or more Non-Recourse
Subsidiaries of the Company, the Company shall cause such transferee Subsidiary
to (i) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such transferee
Subsidiary shall unconditionally Guarantee, on a senior basis, all the Company's
obligations under the Notes and (ii) deliver to the Trustee an Opinion of
Counsel that such supplemental indenture has been duly executed and delivered by
such transferee Subsidiary.
Investment Company Act. The Indenture provides that the Company will not
take any action that would require it or any of its Subsidiaries to register as
an investment company under the Investment Company Act of 1940.
Reports to the Securities and Exchange Commission and Holders. The Company
shall file with the Trustee and provide Holders of record, within 15 days after
it files them with the Commission, copies of its annual report and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act, without exhibits in the case of Holders, unless the
Company is requested in writing by the Holders. Notwithstanding that the Company
may not be required to remain subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, the Company will continue to file with the
Commission and provide the Trustee and Holders with such annual reports and
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
are specified in Sections 13 and 15(d) of the Exchange Act, without exhibits in
the case of Holders, unless the Company is requested in writing by the Holders.
The Company also will comply with the other provisions of TIA Section 314(a).
So long as any of the Notes remain outstanding, the Company shall cause
each annual, quarterly and other financial report mailed or otherwise furnished
by it generally to public stockholders to be filed with the Trustee and mailed
to the Holders of record at their addresses appearing in the register of Notes
maintained by the Registrar, in each case at the time of such mailing or
furnishing to such stockholders.
The Company shall provide to any Holder or any beneficial owner of Notes
any information reasonably requested by such holder or such beneficial owner
concerning the Company and its Subsidiaries (including financial statements)
necessary in order to permit such holder or such beneficial owner to sell or
transfer Notes in compliance with Rule 144A under the Securities Act or any
similar rule or regulation adopted by the Commission.
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;
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(3) immediately before and after giving effect to such transaction,
the resulting, surviving or transferee Person could incur at least $1.00 of
additional Debt under paragraph (a) of 'Limitation on Debt and Preferred
Stock of the Company and its Subsidiaries'; and
(4) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person shall have a Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction.
In connection with any consolidation, merger, sale, assignment, transfer or
lease contemplated by this covenant, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, transfer or lease and the
supplemental indenture in respect thereto comply with this covenant and the TIA
and that all conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger or any sale, assignment, transfer or lease
of all or substantially all of the assets of the Company in accordance with the
preceding two paragraphs, the successor corporation formed by such consolidation
or into which the Company is merged or to which such sale, assignment, transfer
or lease is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture, with the same effect
as if such successor corporation had been named as the Company herein, and,
except in the case of a lease, the Company will be discharged from all
obligations and covenants under the Indenture and the Notes.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(1) the Company defaults in the payment of interest on any Note when
the same becomes due and payable and the default continues for a period of
30 days;
(2) (i) the Company defaults in the payment of the principal of any
Note when the same becomes due and payable at maturity or otherwise or (ii)
the Company fails to redeem or repurchase Notes when required pursuant to
the Indenture or the Notes;
(3) the Company fails to comply with provisions of '--Merger, etc.';
(4) the Company fails to comply for 30 days after notice with any of
its obligations described under '--Change of Control Put and Call' and
'--Certain Covenants';
(5) the Company fails to comply for 60 days after notice with its
other agreements contained in the Indenture or the Notes (other than those
referred to in clauses (1)-(4) above);
(6) principal of or interest on Debt of the Company or any of its
Significant Subsidiaries is not paid within any applicable grace period or
is accelerated by the holders thereof because of a default and the total
amount that is unpaid or accelerated exceeds $15,000,000 or its foreign
currency equivalent and such default continues for 5 days after notice;
(7) certain events of bankruptcy, insolvency or reorganization of the
Company or any of its Significant Subsidiaries occurs pursuant to or within
the meaning of any Bankruptcy Law; or
(8) any judgment or order for the payment of money in excess of
$15,000,000 in the aggregate is rendered against the Company or any of its
Significant Subsidiaries and (i) there is a period of 60 days following the
entry of such judgment or order during which such judgment or order is not
discharged, waived or the execution thereof stayed and such default
continues for 10 days after the notice specified below or (ii) foreclosure
proceedings therefor have begun and have not been stayed within five days
of the commencement of such foreclosure proceeding.
A Default under clauses (4), (5), (6) or (8) is not an Event of Default
until the Trustee or the Holders of at least 25% in aggregate principal amount
of the outstanding Notes notify the Company in writing of the Default, and the
Company does not cure the Default within the time specified in such clause after
receipt of such notice.
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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.
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 '--Events of Default' above and the
limitations contained in clause (3) or (4) described under '--Merger, Etc.'
above ('covenant defeasance').
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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 '--Events of Default' 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 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 United States federal income tax
consequences to tendering holders of Old Notes of the exchange of Old Notes for
New Notes.
This summary is based upon provisions of the Internal Revenue Code of 1986,
as amended (the 'Code'), Treasury Regulations promulgated thereunder (including
temporary regulations), administrative rulings and judicial decisions now in
effect, all of which are subject to change, possibly with retroactive effect.
This summary does not discuss all aspects of federal income taxation that may be
relevant to a particular holder in light of such holder's individual investment
circumstances or to certain types of holders subject to special treatment under
the federal income tax laws (for example, dealers in securities or foreign
currency, banks, life insurance companies, other financial institutions,
tax-exempt organizations and persons who hold (or will hold) the Notes as a
position in a 'straddle' or as part of a synthetic security or 'hedge,'
'conversion transaction' or other integrated investment, or persons that have a
'functional currency' other than the U.S. dollar), 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, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF TENDERING OLD NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute an exchange for federal income tax purposes. Accordingly,
not only should the Exchange Offer have no federal income tax consequences to
holders who exchange their Old Notes for New Notes (i.e., there should be no
change in the holder's tax basis and its holding period should carry over to the
New Notes), but the federal income tax consequences of holding and disposing of
the New Notes should also be the same as those applicable to the Old Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
New Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by all persons subject to the prospectus delivery requirements
of the Securities Act, including broker-dealers in connection with resales of
New Notes received in exchange for Old Notes, where such Old Notes were acquired
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by
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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 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, l3th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. 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 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.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Statements of Income for the three years ended December 31, 1997 and the first six months
ended June 29, 1997 and June 28, 1998 (Unaudited)........................................................ F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
as of June 28, 1998 (Unaudited).......................................................................... F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1997 and the first six months
ended June 29, 1997 and June 28, 1998 (Unaudited)........................................................ F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the three years ended December 31, 1997 and
the first six months ended June 28, 1998 (Unaudited)..................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)..................................................................... F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited the accompanying consolidated balance sheets of Building
Materials Corporation of America (a Delaware corporation and a wholly-owned
subsidiary of GAF Building Materials Corporation) and subsidiaries as of
December 31, 1996 and 1997, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. 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-24 of this Prospectus, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 20, 1998
F-2
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
YEAR ENDED DECEMBER 31, JUNE 29, JUNE 28,
--------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
-------- -------- ----------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................................ $687,184 $851,967 $ 944,629 $ 449,258 $ 498,656
-------- -------- ----------- ----------- -----------
Costs and expenses:
Cost of products sold.............................. 506,012 622,234 686,992 323,357 358,530
Selling, general and administrative................ 134,145 166,706 185,653 90,756 106,381
Goodwill amortization.............................. 1,170 1,664 1,891 920 1,002
-------- -------- ----------- ----------- -----------
Total costs and expenses........................ 641,327 790,604 874,536 415,033 465,913
-------- -------- ----------- ----------- -----------
Operating income..................................... 45,857 61,363 70,093 34,225 32,743
Interest expense..................................... (24,822) (32,044) (42,784) (20,099) (25,405)
Other income (expense), net.......................... (4,486) (1,455) 15,462 5,360 14,353
-------- -------- ----------- ----------- -----------
Income before income taxes........................... 16,549 27,864 42,771 19,486 21,691
Income taxes......................................... (6,450) (10,809) (16,680) (7,600) (8,459)
-------- -------- ----------- ----------- -----------
Net income........................................... $ 10,099 $ 17,055 $ 26,091 $ 11,886 $ 13,232
-------- -------- ----------- ----------- -----------
-------- -------- ----------- ----------- -----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-3
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
----------------------- 1998
1996 1997 (UNAUDITED)
-------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................. $124,560 $ 12,921 $ 34,067
Investments in trading securities......................................... 1,065 62,059 1,132
Investments in available-for-sale securities.............................. 82,016 161,290 122,600
Investments in held-to-maturity securities................................ 7,169 499 --
Other short-term investments.............................................. 15,944 19,488 21,438
Accounts receivable, trade, less reserve of $1,974, $2,752 and $3,584,
respectively............................................................ 9,870 13,643 32,373
Accounts receivable, other................................................ 23,235 50,839 57,913
Receivable from related parties, net...................................... -- 5,151 --
Loan receivable from related party........................................ -- 6,152 --
Inventories............................................................... 77,196 72,254 117,544
Other current assets...................................................... 3,751 6,243 8,671
-------- ----------- -----------
Total Current Assets.................................................... 344,806 410,539 395,738
Property, plant and equipment, net.......................................... 220,500 241,946 279,554
Excess of cost over net assets of businesses acquired, net of accumulated
amortization of $6,889, $8,780 and $9,782, respectively................... 60,469 70,046 80,752
Deferred income tax benefits................................................ 59,053 35,981 33,366
Receivable from related parties............................................. -- 31,661 --
Other assets................................................................ 16,755 17,113 15,404
-------- ----------- -----------
Total Assets................................................................ $701,583 $ 807,286 $ 804,814
-------- ----------- -----------
-------- ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Short-term debt........................................................... $ -- $ 26,944 $ 2,111
Current maturities of long-term debt...................................... 3,412 3,801 4,183
Accounts payable.......................................................... 47,879 55,642 65,664
Payable to related parties, net........................................... 2,287 -- 9,175
Accrued liabilities....................................................... 27,938 26,298 47,768
Reserve for asbestos claims............................................... 3,062 -- --
Reserve for product warranty claims....................................... 12,914 13,100 13,100
-------- ----------- -----------
Total Current Liabilities............................................... 97,492 125,785 142,001
-------- ----------- -----------
Long-term debt less current maturities...................................... 405,690 555,446 534,843
-------- ----------- -----------
Reserve for product warranty claims......................................... 30,755 23,881 21,591
-------- ----------- -----------
Other liabilities........................................................... 24,409 19,175 19,132
-------- ----------- -----------
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 1
Additional paid-in capital................................................ 182,699 86,910 86,910
Accumulated deficit....................................................... (40,174) (14,083) (851)
Accumulated other comprehensive income.................................... 711 10,171 1,187
-------- ----------- -----------
Stockholder's Equity........................................................ 143,237 82,999 87,247
-------- ----------- -----------
Total Liabilities and Stockholder's Equity.................................. $701,583 $ 807,286 $ 804,814
-------- ----------- -----------
-------- ----------- -----------
</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>
SIX MONTHS ENDED
--------------------------
YEAR ENDED DECEMBER 31, JUNE 29, JUNE 28,
------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ----------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents, beginning of period...... $29,015 $ 45,989 $124,560 $ 124,560 $ 12,921
------- -------- -------- ----------- -----------
Cash provided by (used in) operating activities:
Net income........................................ 10,099 17,055 26,091 11,886 13,232
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation................................. 20,252 23,857 22,936 10,916 12,378
Goodwill amortization........................ 1,170 1,664 1,891 920 1,002
Deferred income taxes........................ 6,250 10,609 16,481 7,499 8,358
Noncash interest charges..................... 21,432 23,718 27,222 13,116 14,920
(Increase) decrease in working capital items...... (8,050) (14,905) 17,859 (73,609) (43,931)
Purchases of trading securities................... -- (33,824) (123,483) (39,750) (61,049)
Proceeds from sales of trading securities......... -- 30,394 55,378 13,410 77,111
(Increase) decrease in other assets............... 1,924 (1,711) 1,773 1,220 1,819
Decrease in other liabilities..................... (4,502) (4,158) (9,356) (4,936) (2,594)
Change in net receivable from/payable to related
parties........................................ 1,939 (341) (39,099) (21,842) 45,987
Other, net........................................ 112 787 (8,001) (56) 3,642
------- -------- -------- ----------- -----------
Net cash provided by (used in) operating
activities........................................ 50,626 53,145 (10,308) (81,226) 70,875
------- -------- -------- ----------- -----------
Cash provided by (used in) investing activities:
Capital expenditures.............................. (24,992) (25,629) (46,844) (15,066) (23,548)
Acquisitions...................................... (29,119) -- (30,861) (25,531) (43,468)
Purchases of available-for-sale securities........ (45,706) (139,355) (223,804) (80,189) (32,808)
Purchases of held-to-maturity securities.......... -- -- (4,591) (4,591) --
Purchases of other short-term investments......... (2,069) (660) -- -- --
Proceeds from sales of available-for-sale
securities..................................... 8,416 101,095 173,547 84,363 96,604
Proceeds from held-to-maturity securities......... -- -- 11,361 7,917 499
------- -------- -------- ----------- -----------
Net cash used in investing activities............... (93,470) (64,549) (121,192) (33,097) (2,721)
------- -------- -------- ----------- -----------
Cash provided by (used in) financing activities:
Proceeds (repayments) from sale of accounts
receivable..................................... 7,919 8,015 (35,332) 23,694 7,478
Increase (decrease) in short-term debt............ -- -- 26,944 538 (24,833)
(Increase) decrease in loans receivable from
related party.................................. 23,633 -- (6,152) -- 6,152
Proceeds from issuance of debt.................... 40,002 99,502 99,916 -- --
Increase (decrease) in borrowings under revolving
credit facility................................ -- -- 34,000 -- (34,000)
Repayments of long-term debt...................... (10,440) (34,856) (3,521) (1,672) (1,629)
Decrease in restricted cash....................... 24,484 -- -- -- --
Capital contribution from (distribution to) parent
company........................................ 34,312 86,077 (91,000) (18,000) --
Payments of asbestos claims....................... (59,795) (66,224) (3,062) (3,062) --
Financing fees and expenses....................... (297) (2,539) (1,932) (207) (176)
------- -------- -------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ 59,818 89,975 19,861 1,291 (47,008)
------- -------- -------- ----------- -----------
Net change in cash and cash equivalents............. 16,974 78,571 (111,639) (113,032) 21,146
------- -------- -------- ----------- -----------
Cash and cash equivalents, end of period............ $45,989 $124,560 $ 12,921 $ 11,528 $ 34,067
------- -------- -------- ----------- -----------
------- -------- -------- ----------- -----------
</TABLE>
F-5
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
YEAR ENDED DECEMBER 31, JUNE 29, JUNE 28,
----------------------------- 1997 1998
1995 1996 1997 (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..................................... $ 666 $ (5,122) $ 7,773 $ (65,294) $ (26,759)
Inventories............................................. (4,557) (8,123) 8,001 (25,161) (31,911)
Other current assets.................................... 1,760 756 (3,029) (756) (1,827)
Accounts payable........................................ (6,093) (4,096) 10,210 12,655 4,279
Accrued liabilities..................................... 174 1,680 (5,096) 4,947 12,287
-------- -------- ------- ----------- -----------
Net effect on cash from (increase) decrease in working
capital items........................................ $ (8,050) $(14,905) $17,859 $ (73,609) $ (43,931)
-------- -------- ------- ----------- -----------
-------- -------- ------- ----------- -----------
Cash paid during the period for:
Interest (net of amount capitalized).................... $ 2,796 $ 6,442 $14,001 $ 6,994 $ 10,279
Income taxes (including taxes paid pursuant to the Tax
Sharing Agreement)................................... 213 537 346 138 800
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.................... $27,167 $ 27,167
Purchase price of acquisition........................... 25,531 25,531
------- -----------
Liabilities assumed..................................... $ 1,636 $ 1,636
------- -----------
------- -----------
Acquisition of Leslie-Locke, Inc.:
Fair market value of assets acquired.................... $ 59,318
Purchase price of acquisition........................... 43,468
-----------
Liabilities assumed..................................... $ 15,850
-----------
-----------
</TABLE>
- ------------------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net receivables from/payables to related
parties. Working capital acquired in connection with acquisitions is reflected
in '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
Inc. 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 ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE
CAPITAL INCOME (LOSS) DEFICIT INCOME (LOSS)
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994............................. $ 46,936 $ (588) $ (67,328)
Comprehensive income--year ended December 31, 1995:
Net income......................................... -- -- 10,099 $10,099
-------------
Other comprehensive income, net of tax:
Unrealized holding gains, net of income taxes of
$225............................................. 352 352
Less: Reclassification adjustment for gains
included in net income, net of income tax effect
of $51........................................... (80) (80)
------------- -------------
Unrealized gains on available-for-sale
securities....................................... -- 272 -- 272
Minimum pension liability adjustment............... -- (47) -- (47)
-------------
Comprehensive income................................. $10,324
-------------
-------------
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) -- --
---------- ------------- -----------
Balance, December 31, 1995............................. $ 73,374 $ (363) $ (57,229)
Comprehensive income--year ended December 31, 1996:
Net income......................................... -- -- 17,055 $17,055
-------------
Other comprehensive income, net of tax:
Unrealized holding gains, net of income taxes of
$1,883........................................... 3,020 3,020
Less: Reclassification adjustment for gains
included in net income, net of income tax effect
of $1,550........................................ (2,498) (2,498)
------------- -------------
Unrealized gains on available-for-sale
securities....................................... -- 522 -- 522
Minimum pension liability adjustment............... -- 552 -- 552
-------------
Comprehensive income................................. $18,129
-------------
-------------
Capital contribution from parent company............. 109,326 -- --
---------- ------------- -----------
Balance, December 31, 1996............................. $182,700 $ 711 $ (40,174)
Comprehensive income--year ended December 31, 1997:
Net income......................................... -- -- 26,091 $26,091
-------------
Other comprehensive income, net of tax:
Unrealized holding gains, net of income taxes of
$5,043........................................... 7,886 7,886
Less: Reclassification adjustment for losses
included in net income, net of income tax effect
of $1,548........................................ 2,422 2,422
------------- -------------
Unrealized gains on available-for-sale
securities....................................... -- 10,308 -- 10,308
Minimum pension liability adjustment............... -- (848) -- (848)
-------------
Comprehensive income................................. $35,551
-------------
-------------
Distribution to parent company....................... (91,000) -- --
Transfer of Nashville, Tennessee plant to GAF
Fiberglass Corporation............................. (4,789) -- --
---------- ------------- -----------
Balance, December 31, 1997............................. $ 86,911 $10,171 $ (14,083)
Comprehensive income--six months ended June 28, 1998
(unaudited):
Net income (unaudited)............................. -- -- 13,232 $13,232
-------------
Other comprehensive income, net of tax:
Unrealized holding gains, net of income taxes of
$1,471 (unaudited)............................... 2,305 2,305
Less: Reclassification adjustment for gains
included in net income, net of income tax effect
of $7,215 (unaudited)............................ (11,289) (11,289)
------------- -------------
Change in unrealized gains on available-for-sale
securities (unaudited)........................... -- (8,984) -- (8,984)
-------------
Comprehensive income (loss)(unaudited)............... $ 4,248
---------- ------------- ----------- -------------
-------------
Balance, June 28, 1998 (unaudited)..................... $ 86,911 $ 1,187 $ (851)
---------- ------------- -----------
---------- ------------- -----------
</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 ('BMCA' or 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 first six months
ended June 29, 1997 and June 28, 1998 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 is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the residential and commercial roofing
markets.
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 $35.0 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 (October 20, 1995),
including sales of $21.8 and $99.0 million for the years ended December 31, 1995
and 1996, respectively, and net income (loss) of $(0.5) million and $1.3
million, respectively.
On January 1, 1997, GAF effected a series of transactions involving its
subsidiaries (the 'Separation Transactions') that resulted in, among other
things, (i) 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 ISP Holdings Inc. ('ISP Holdings'), a
subsidiary of GAF, and the capital stock of ISP Holdings being distributed to
the stockholders of GAF, (ii) the Company's glass fiber manufacturing facility
in Nashville, Tennessee (and certain related assets and liabilities) being
transferred to GAF Fiberglass Corporation ('GFC'), (iii) USI becoming a
subsidiary of the Company and (iv) G-I Holdings making a contribution to the
Company in December 1996 of $82.5 million in cash and short-term investments. As
a result of the Separation Transactions, ISP Holdings and ISP are no longer
direct or indirect subsidiaries of GAF, while the Company and GFC remain
subsidiaries of GAF.
F-8
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. FORMATION OF THE COMPANY--(CONTINUED)
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 in conformity with generally
accepted accounting principles 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, 'Accumulated other
comprehensive income', and were $0.8, $11.1 and $2.1 million as of December 31,
1996 and 1997 and June 28, 1998, respectively. Investments classified as
'held-to-maturity' securities are carried at amortized cost in the Consolidated
Balance Sheets.
'Other income (expense), net' includes $0.4, $6.4, $26.4, $8.9 and $17.2
million of net realized and unrealized gains on securities in 1995, 1996 and
1997 and the first six months of 1997 and 1998, respectively. The determination
of cost in computing realized gains and losses is based on the specific
identification method.
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 were 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, 1996 and 1997 and June 28, 1998, the market value of the
Company's equity securities held long was $82.5, $223.0 and $123.3 million,
respectively, and the Company had $5.6, $18.6 and $3.5 million, respectively, of
short positions in common stocks, based on market value. As of December 31, 1996
and 1997, the market value of the Company's held-to-maturity securities was $7.6
and $0.5 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.
F-9
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
'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.
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
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed principally on the straight-line method
based on the estimated economic lives of the assets. The Company uses an
economic life of 5-25 years for land improvements, 10-40 years for buildings and
building equipment, and 3-20 years for machinery and equipment, which includes
furniture and fixtures. 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 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 and 1997 included sales to American Builders & Contractors
Supply Co., Inc., which accounted for approximately 11% and 10%, respectively,
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 shorter of the
remaining life of the swaps or the remaining period to maturity of the debt
issue with respect to which the swaps were entered.
F-10
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Research and Development
Research and development expenses are charged to operations as incurred and
were $3.1, $4.5, $5.4, $2.5 and $2.7 million for 1995, 1996 and 1997 and the
first six months of 1997 and 1998, 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 guarantees 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.
The Company's 1997 Consolidated Statement of Income includes a provision of
$3.0 million in connection with the Company's estimated obligations related to
product warranty claims for a discontinued product.
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 December 31, 1997, is $1.1 million,
before reduction for insurance recoveries reflected on its balance sheet of $0.8
million. The Company's liability is reflected on an undiscounted basis. See
'Business--Legal Proceedings--Environmental Litigation', which is incorporated
herein by reference, for further discussion with respect to environmental
liabilities and estimated insurance recoveries.
Accumulated Other Comprehensive Income
In June 1997, the Financial Accounting Standards Board (the 'FASB') issued
Statement of Financial Accounting Standards ('SFAS') No. 130, 'Reporting
Comprehensive Income', which establishes standards for reporting comprehensive
income and its components in annual and interim financial statements. The
Company adopted SFAS No. 130 as of January 1, 1998 and has reclassified
financial statements for earlier periods. In the Company's case, comprehensive
income includes net income, unrealized gains and losses from investments in
available-for-sale securities, net of income tax effect, and minimum pension
liability adjustments. The Company has chosen to disclose Comprehensive Income
in the Consolidated Statements of Stockholder's Equity (Deficit).
F-11
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Changes in the components of 'Accumulated other comprehensive income' for
the years 1996 and 1997 and the first six months ended June 28, 1998 are as
follows:
<TABLE>
<CAPTION>
UNREALIZED
GAINS ON MINIMUM ACCUMULATED
AVAILABLE- PENSION OTHER
FOR-SALE LIABILITY COMPREHENSIVE
SECURITIES ADJUSTMENT INCOME (LOSS)
----------- ---------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Balance, December 31, 1995.................................... $ 272 $ (635) $ (363)
Change for the year 1996...................................... 522 552 1,074
----------- ---------- -------------
Balance, December 31, 1996.................................... $ 794 $ (83) $ 711
Change for the year 1997...................................... 10,308 (848) 9,460
----------- ---------- -------------
Balance, December 31, 1997.................................... $11,102 $ (931) $10,171
Change for the first six months ended June 28, 1998
(unaudited)................................................. (8,984) -- (8,984)
----------- ---------- -------------
Balance, June 28, 1998 (unaudited)............................ $ 2,118 $ (931) $ 1,187
----------- ---------- -------------
----------- ---------- -------------
</TABLE>
New Accounting Standards
In June 1997, the FASB issued SFAS No. 131, 'Disclosures about Segments of
an Enterprise and Related Information', which establishes standards for
companies to report information about operating segments in annual financial
statements, based on the approach that management utilizes to organize the
segments within the Company for management reporting and decision making. In
addition, SFAS No. 131 requires that companies report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, and major customers. SFAS
No. 131 is effective for financial statements for fiscal years beginning after
December 15, 1997. Financial statement disclosures for prior periods are
required to be restated. The adoption of SFAS No. 131 will have no impact on the
Company's consolidated results of operations, financial position or cash flows.
In February 1998, the FASB issued SFAS No. 132, 'Employers' Disclosures
about Pensions and Other Postretirement Benefits', which standardizes employers'
disclosure requirements for pension and other postretirement benefit plans, but
does not change the measurement or recognition of those plans. SFAS No. 132 is
effective for fiscal years beginning after December 31, 1997. Restatement of
disclosures for earlier periods provided for comparative purposes is required.
The adoption of SFAS No. 132 will have no impact on the Company's consolidated
results of operations, financial position or cash flows.
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS
In connection with its formation, the Company 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, the Company had paid all
of its assumed asbestos-related liabilities. See also Note 1. G-I Holdings and
GAFBMC have jointly and severally agreed to indemnify the Company against any
claims related to asbestos-related liabilities, other than those contractually
assumed by the Company, in the event that claims in connection with liabilities
not assumed by the Company are asserted against it.
GAF has advised the Company that, as of June 27, 1998, it is defending
approximately 113,000 pending alleged Asbestos Claims (having received notice of
approximately 55,900 new Asbestos Claims during the first six months of 1998)
and has resolved approximately 256,700 Asbestos Claims (including approximately
22,200 in the first six months of 1998). GAF has advised the Company that it
believes that a significant portion of the
F-12
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS--(CONTINUED)
claims filed in the first six months of 1998 were already pending against other
defendants for some period of time, with GAF being added as a defendant upon the
lifting in 1997 of the injunction relating to the Georgine class action
settlement. During 1997, GAF resolved approximately 11,000 Asbestos Claims of
which approximately 9,900 were resolved (including Asbestos Claims disposed of
at no cost to GAF) for an average cost of approximately $4,070 per claim. GAF's
share of the costs with respect to approximately 1,100 Asbestos Claims resolved
during 1997 has not yet been determined. There can be no assurance that the
actual costs of resolving pending and future Asbestos Claims will approximate
GAF's historic average costs.
GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims, that it is exploring a number of options, both judicial and
legislative, to accomplish such resolution, but there can be no assurance that
this effort 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. See Note 9 for information regarding the Company's
debt instruments and facilities.
For a further discussion with respect to the foregoing, see
'Business--Legal Proceedings', which is incorporated herein by reference.
NOTE 4. ACQUISITIONS
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 $30.2
million for 1997, are included from the date of acquisition; the effects were
not material to 1997 operations.
Effective June 1, 1998, the Company purchased for approximately $43.5
million substantially all of the assets of Leslie-Locke Inc. ('Leslie-Locke'), a
wholly-owned subsidiary of Leslie Building Products, Inc., which manufactures
and markets a variety of specialty building products and accessories for the
professional and do-it-yourself remodeling and residential construction
industries from manufacturing facilities in Burgaw, North Carolina and Compton,
California. Leslie-Locke had 1997 sales of approximately $90 million. The
acquisition will be accounted for under the purchase method of accounting. The
results of Leslie-Locke are included from the date of acquisition and are not
material to the results presented in the foregoing financial statements. This
acquisition, if it had occurred on January 1, 1998, would not have had a
material impact on results of operations for the six months ended June 28, 1998.
F-13
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES
Income tax provision, which has been computed on a separate return basis,
consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------------
------------------------------- JUNE 29, 1997 JUNE 28, 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal--deferred....................... $(5,424) $ (9,241) $(14,081) $(6,456) $(7,169)
------- -------- -------- ------------- -------------
State and local:
Current............................... (200) (200) (200) (100) (100)
Deferred.............................. (826) (1,368) (2,399) (1,044) (1,190)
------- -------- -------- ------------- -------------
Total state and local............ (1,026) (1,568) (2,599) (1,144) (1,290)
------- -------- -------- ------------- -------------
Income tax provision.................... $(6,450) $(10,809) $(16,680) $(7,600) $(8,459)
------- -------- -------- ------------- -------------
------- -------- -------- ------------- -------------
</TABLE>
The differences between the income tax provision computed by applying the
statutory Federal income tax rate to pre-tax income, and the income tax
provision reflected in the Consolidated Statements of Income are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------------
------------------------------- JUNE 29, 1997 JUNE 28, 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory provision..................... $(5,792) $ (9,752) $(14,970) $(6,820) $(7,592)
Impact of:
State and local taxes, net of Federal
benefits........................... (667) (1,019) (1,689) (815) (838)
Nondeductible goodwill amortization... (260) (484) (564) (273) (359)
Other, net............................ 269 446 543 308 330
------- -------- -------- ------------- -------------
Income tax provision.................... $(6,450) $(10,809) $(16,680) $(7,600) $(8,459)
------- -------- -------- ------------- -------------
------- -------- -------- ------------- -------------
</TABLE>
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities related to property, plant and equipment.. $(11,782) $(14,742) $ (14,835)
-------- -------- -----------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes:
Reserve for asbestos claims................................... 1,195 -- --
Other......................................................... 38,774 29,294 31,747
Net operating losses not yet utilized under the Tax Sharing
Agreement..................................................... 30,866 21,429 16,454
-------- -------- -----------
Total deferred tax assets.......................................... 70,835 50,723 48,201
-------- -------- -----------
Net deferred tax assets............................................ $ 59,053 $ 35,981 $ 33,366
-------- -------- -----------
-------- -------- -----------
</TABLE>
F-14
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
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 (the
'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 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 liabilities 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 GFC be unable to satisfy such liability.
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
F-15
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. SALE OF ACCOUNTS RECEIVABLE--(CONTINUED)
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' and amounted to $4.6, $5.2, $5.1, $2.3 and $2.1 million in 1995,
1996 and 1997 and the first six months of 1997 and 1998, respectively.
NOTE 7. INVENTORIES
At December 31, 1996 and 1997 and June 28, 1998, $7.6, $7.8 and $9.8
million, respectively, of inventories were valued using the LIFO method.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
------------------ 1998
1996 1997 (UNAUDITED)
------- ------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Finished goods....................................................... $41,201 $38,459 $ 74,410
Work in process...................................................... 10,844 10,180 11,517
Raw materials and supplies........................................... 26,206 24,670 32,672
------- ------- -----------
Total........................................................... 78,251 73,309 118,599
Less LIFO reserve.................................................... (1,055) (1,055) (1,055)
------- ------- -----------
Inventories.......................................................... $77,196 $72,254 $ 117,544
------- ------- -----------
------- ------- -----------
</TABLE>
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Land and land improvements........................................ $ 25,722 $ 26,052 $ 26,909
Buildings and building equipment.................................. 46,001 48,525 57,964
Machinery and equipment (including equipment under capitalized
leases of $17,660, $15,466 and $14,232--see Note 9)............. 178,190 183,108 213,927
Construction in progress.......................................... 19,039 40,775 49,092
-------- -------- -----------
Total........................................................ 268,952 298,460 347,892
Less accumulated depreciation and amortization.................... (48,452) (56,514) (68,338)
-------- -------- -----------
Property, plant and equipment, net................................ $220,500 $241,946 $ 279,554
-------- -------- -----------
-------- -------- -----------
</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, JUNE 28,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -----------
(THOUSANDS)
<S> <C> <C> <C>
11 3/4% Senior Deferred Coupon Notes due 2004..................... $233,018 $261,203 $ 276,548
8 5/8% Senior Notes due 2006...................................... 99,504 99,554 99,579
8% Senior Notes due 2007.......................................... -- 99,268 99,306
Borrowings under revolving credit facility........................ -- 34,000 --
Industrial revenue bonds with various interest rates and maturity
dates to 2012................................................... 19,625 11,125 11,125
Obligations on mortgaged properties............................... 5,155 4,503 4,235
Obligations under capital leases (Note 12)........................ 51,800 49,594 48,233
-------- -------- -----------
Total........................................................ 409,102 559,247 539,026
Less current maturities........................................... (3,412) (3,801) (4,183)
-------- -------- -----------
Long-term debt less current maturities............................ $405,690 $555,446 $ 534,843
-------- -------- -----------
-------- -------- -----------
</TABLE>
On October 20, 1997, the Company issued $100 million in aggregate principal
amount at maturity of 8% Senior Notes due 2007 (the '8% Notes'). In December
1996, the Company issued $100 million in aggregate principal amount at maturity
of 8 5/8% Senior Notes due 2006 (the '8 5/8% Notes'). In June 1994, the Company
issued $310 million in principal amount of 11 3/4% Deferred Coupon Notes due
2004 (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, the 8% Notes and the 8 5/8% 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 therein) and the 8% Notes
and 8 5/8% Notes (collectively, 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 100% 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).
The indentures relating to the Notes and 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 June 28, 1998, after giving effect to the most restrictive of the
aforementioned restrictions, the Company could have paid dividends of up to
$70.5 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
June 28, 1998, the Company was in compliance with such covenants.
In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ('swaps') with banks, with an aggregate ending
notional principal amount of $142.0 million and a final maturity of July 1,
1999, all of which have been terminated as of June 28, 1998. In 1997, the
Company terminated swaps with an aggregate ending notional principal amount of
$82.0 million, resulting in gains totaling $2.1 million. In June 1998, the
Company terminated swaps with an aggregate ending notional principal amount of
$60.0 million, resulting in gains of $0.7 million. The gains have been deferred
and will be amortized as a reduction of interest expense over the remaining
original life of the swaps. As a result of the swaps, the effective interest
cost to the
F-17
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
Company of the portion of the Deferred Coupon Notes covered by the swaps varied
at a fixed spread over LIBOR. Based on the fair value of the swaps at December
31, 1996 and 1997, the Company would have incurred gains, including accrued
interest, of $8.0 and $3.1 million, respectively, representing the estimated
amount that would have been receivable by the Company if the swaps were
terminated at such dates.
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 June 28, 1998, $33.0
million of letters of credit were outstanding and no borrowings were outstanding
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.
Additionally, if a change of control (as defined in the Credit Agreement)
occurs, the credit facility could be terminated and the loans thereunder
accelerated by the lenders party thereto, an event which could also cause the
Deferred Coupon Notes and the Notes to be accelerated. As of June 28, 1998, 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.
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 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 range between 3.85% and 8.87% as of June 28,
1998. The weighted average interest rate on the Company's $2.1 million of
short-term borrowings as of June 28, 1998 was 6.1%.
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, 1996 and
1997 and June 28, 1998 was $268.9, $293.0 and $304.6 million, respectively. The
estimated fair value of the 8 5/8% Notes as of December 31, 1996 and 1997 and
June 28, 1998 was $100.0, $103.6 and $103.5 million, respectively. The estimated
fair value of the 8% Notes as of December 31, 1997 and June 28, 1998 was $99.6
and $100.5 million, respectively.
The aggregate maturities of long-term debt as of June 28, 1998 for the next
five years are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED JUNE 30, (THOUSANDS)
- ----------------------------------------------------------------------- -----------
<S> <C>
1999................................................................... $ 4,183
2000................................................................... 4,442
2001................................................................... 5,998
2002................................................................... 5,307
2003................................................................... 14,019
</TABLE>
F-18
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
In the above table, maturities for the twelve months ended June 30, 2003
include $10.6 million related to the Baltimore capital lease.
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 $2.7, $3.0, $3.5, $1.8 and $2.1 million for 1995, 1996 and 1997 and the
first six months of 1997 and 1998, respectively.
USI provides a defined contribution plan for eligible employees. USI may
contribute a discretionary matching contribution equal to 100% of each
participant's eligible contributions each plan year up to a maximum of $500 for
each participant. Such contributions by USI were immaterial for the period of
1995 after the acquisition of USI and were $157,000, $130,000, $121,000 and
$85,000 for 1996 and 1997 and the first six months of 1997 and 1998,
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,
-------------------------
1995 1996 1997
----- ----- -------
(THOUSANDS)
<S> <C> <C> <C>
Service cost................................................................ $ 463 $ 631 $ 658
Interest cost............................................................... 598 686 754
Actual income on plan assets................................................ (432) (829) (1,034)
Net deferral and amortization of unrecognized prior service
cost and actuarial losses................................................. 97 35 30
----- ----- -------
Net periodic pension cost................................................... $ 726 $ 523 $ 408
----- ----- -------
----- ----- -------
</TABLE>
Net periodic pension cost for the Hourly Retirement Plan was $0.3 and $0.2
million for the first six months of 1997 and 1998, respectively.
F-19
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
The following table sets forth the funded status of the Hourly Retirement
Plan:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
------- --------
(THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation:
Vested......................................................................... $ 8,407 $ 9,907
Nonvested...................................................................... 1,621 1,910
------- --------
Total accumulated benefit obligation............................................. $10,028 $ 11,817
------- --------
------- --------
Projected benefit obligation..................................................... $10,028 $ 11,817
Fair value of plan assets, primarily listed
stocks and U.S. Government securities.......................................... (9,530) (11,472)
------- --------
Projected benefit obligation in excess of plan assets............................ 498 345
Unrecognized prior service cost.................................................. (338) (307)
Unrecognized net loss............................................................ (83) (931)
------- --------
Unfunded accrued (prepaid) pension cost.......................................... $ 77 $ (893)
------- --------
------- --------
</TABLE>
At December 31, 1997, the difference between the 'Projected benefit
obligation in excess of plan assets' and the 'Unfunded accrued (prepaid) pension
cost,' in the amount of $1,238,000 has been recorded by the Company as an
intangible asset in the amount of $307,000 and a reduction of stockholder's
equity in the amount of $931,000. 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 7.75% and 7.25% for 1996 and 1997, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 1996 and 1997.
The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1995, 1996 and 1997 and the first six months of 1997 and 1998.
Preferred Stock Option Plan
On January 1, 1996, the Company issued options to certain employees to
purchase 23,590 shares of redeemable convertible preferred stock ('Preferred
Stock') of the Company, exercisable at a price of $100 per share. Options to
purchase 85,599 and 7,600 shares of Preferred Stock were issued in 1997 and the
first six months of 1998, respectively, exercisable at a price of $100 per
share. As of December 31, 1997 and June 28, 1998, options to purchase 103,541
and 105,084 shares of Preferred Stock, respectively, were outstanding. 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 five
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.
F-20
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
Book Value Appreciation Unit Plan
A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vest over five 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, $0.4, $0.2 and $0.3 million for 1996 and 1997 and the first six months
of 1997 and 1998, respectively.
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, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees, dependents and beneficiaries eligible for benefits.................... $ 5,108 $ 5,485
Active employees fully eligible for benefits.................................... 1,131 1,139
Active employees not fully eligible for benefits................................ 1,182 1,302
------- -------
Total accumulated postretirement benefit obligation............................... 7,421 7,926
Fair value of plan assets......................................................... -- --
Unrecognized prior service cost and net gain from earlier periods................. 4,039 3,556
------- -------
Accrued postretirement benefit obligation......................................... $11,460 $11,482
------- -------
------- -------
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
(THOUSANDS)
<S> <C> <C> <C>
Service cost............................................................................ $ 79 $ 95 $ 98
Interest cost........................................................................... 645 597 554
Amortization of unrecognized prior service cost and net gain
from earlier periods.................................................................. (415) (232) (274)
----- ----- -----
Net periodic postretirement benefit cost................................................ $ 309 $ 460 $ 378
----- ----- -----
----- ----- -----
</TABLE>
Net periodic postretirement benefit cost was $0.2 million for each of the
first six months of 1997 and 1998.
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1997 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 12% and 6% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 1998
for such retirees under and over age 65, respectively. To the extent that the
lifetime maximum benefits have not been reached, the foregoing rates were
assumed to decrease gradually to 7% and 6%, respectively, by the year 2003 and
remain at that level thereafter. The weighted
F-21
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
average assumed discount rate used in determining the accumulated postretirement
benefit obligation was 7.75% and 7.25% for 1996 and 1997, respectively.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1997 by $410,000 and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the year 1997 by $41,000.
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, JUNE 28,
------------------ 1998
1996 1997 (UNAUDITED)
------- ------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Receivable from (payable to):
GAF/G-I Holdings/G Industries....................................... $ 274 $ 9,684 $ 540
GAFBMC.............................................................. 115 713 921
GFC................................................................. -- (1,559) (2,628)
ISP................................................................. (2,676) (3,687) (8,008)
------- ------- -----------
Receivable from (payable to) related parties, net................... $(2,287) $ 5,151 $(9,175)
------- ------- -----------
------- ------- -----------
</TABLE>
The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates (between 5.68% and 6.03% during 1996 and
between 5.82% and 5.96% during 1997 and the first six months of 1998). The
highest amount of loans made by the Company to G-I Holdings during 1996 and 1997
was $45.4 million. No loans were made to the Company by G-I Holdings and its
subsidiaries during 1997 and the first six months of 1998, 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, 1996 and June 28, 1998, no loans were
owed to the Company by G-I Holdings, and no loans were owed by the Company to
affiliates. As of December 31, 1997, $6.2 million in loans were owed to the
Company by G-I Holdings, at a weighted average interest rate of 5.95%, and no
loans were owed by the Company to affiliates. In addition, the Company advances
funds on a non-interest bearing basis to GAF, G-I Holdings and their
subsidiaries. The balance of such advances as of December 31, 1997 and June 28,
1998 was $41.7 and $0.7 million, respectively, of which $10.0 and $0.7 million,
respectively, was classified within the short-term receivable from (payable to)
related parties, net, in the table above, and $31.7 million was classified as a
long-term receivable from related parties in the Consolidated Balance Sheet at
December 31, 1997. Also, during 1997, the Company made distributions of $91.0
million to its parent company.
Mineral Products: The Company purchases all of its colored roofing
granules requirements (except for the requirements of its California roofing
plant) from ISP under a requirements contract. 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.
Each such requirements contract was renewed for 1998 and is subject to annual
renewal unless terminated by either party to the respective agreement. Such
purchases by BMCA and USI totaled $45.8, $50.5, $51.1, $27.5 and $32.0 million
for 1995, 1996 and 1997 and the first six months of 1997 and 1998, respectively.
The amount payable to ISP at December 31, 1996 and 1997 and June 28, 1998 for
such purchases was $3.2, $2.7 and $6.7 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
F-22
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS--(CONTINUED)
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 $24.5, $11.6 and $12.6 million for the year 1997 and the first
six months of 1997 and 1998, respectively.
Management Agreements: The Company is a party to a Management Agreement
with ISP (the 'Management Agreement'), which expires December 31, 1998, pursuant
to which ISP provides certain general management, administrative, legal,
telecommunications, information and facilities services to the Company
(including the use of the Company's headquarters in Wayne, New Jersey). Charges
to the Company by ISP for providing such services aggregated $4.4, $5.0, $4.8,
$2.3 and $2.1 million for 1995, 1996 and 1997 and the first six months of 1997
and 1998, respectively. Such charges consist of management fees and other
reimbursable expenses attributable to, or incurred by ISP for the benefit of,
the Company. Effective January 1, 1998, the term of the Management Agreement was
extended through the end of 1998, and the management fees payable thereunder
were adjusted, including an adjustment to reflect the direct payment by the
Company of the costs for certain services rendered by third parties that were
previously included in the management fees payable to ISP. The Company and ISP
further modified the agreement to allocate a portion of the management fees
payable by the Company under the Management Agreement to separate lease payments
for the use of BMCA's headquarters. Based on the services provided by ISP to the
Company in 1997 under the Management Agreement, after taking into account the
modifications to the agreement described above, the aggregate amount payable by
the Company to ISP under the Management Agreement for 1998 is expected to be
approximately $4.7 million. The Company also expects to pay directly certain
third party costs, which aggregated approximately $0.4 million in 1997, that
were previously included in the management fee. In addition, BMCA currently
anticipates that in 1998 it will require additional space for its headquarters
and will pay additional rent based on the square footage to be occupied. Certain
of the Company's executive officers receive their compensation from ISP, with
ISP being indirectly reimbursed therefor by virtue of the management fee and
other reimbursable expenses payable under the Management Agreement.
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, 1998, 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 1997 and the first six months of 1997 and 1998.
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 flows of their subsidiaries, principally the Company, in order
to satisfy their net obligations of approximately $225.5 million, including as
of June 28, 1998, the asbestos-related liability discussed in Note 3, the G-I
Holdings 11.125% Senior Discount Notes due 1998, and various tax and other
liabilities (net of certain tax and insurance receivables), including tax
liabilities relating to the surfactants partnership (discussed in Note 5). Of
such obligations, $38.3 million (net of estimated insurance recoveries of $75.4
million) is estimated to be payable during the twelve months ended June 30,
1999. 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
F-23
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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. See Notes 3 and 5.
The leases for certain property, plant and equipment at certain of the
Company's roofing facilities are accounted for as capital leases (see Note 9).
The Company is also a lessee under operating leases principally for warehouses
and production, transportation and computer equipment. Rental expense on
operating leases was $7.0, $8.3 and $9.2 million for 1995, 1996 and 1997,
respectively. Future minimum lease payments for properties which were held under
long-term noncancellable leases as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
(THOUSANDS)
<S> <C> <C>
1998............................................................................. $ 6,953 $ 2,499
1999............................................................................. 6,953 2,161
2000............................................................................. 7,463 1,503
2001............................................................................. 8,108 852
2002............................................................................. 17,558 304
Later years...................................................................... 21,407 412
-------- ---------
Total minimum payments........................................................... 68,442 $ 7,731
---------
---------
Less interest included above..................................................... (18,848)
--------
Present value of net minimum lease payments...................................... $ 49,594
--------
--------
</TABLE>
NOTE 13. SUBSEQUENT EVENTS (UNAUDITED)
On July 15, 1998, the Company recorded a nonrecurring charge of $7.6
million related to a grant to an executive officer of 30,000 shares of
restricted common stock of the Company and certain cash payments to be made to
such officer over a specified time period.
On July 17, 1998, the Company issued $150 million in aggregate principal
amount at maturity of 7 3/4% Senior Notes due 2005. As of August 11, 1998, the
Company had used a portion of the net proceeds from this issue to purchase (and
subsequently cancel) $132.6 million in aggregate principal amount at maturity of
the Company's 11 3/4% Senior Deferred Coupon Notes due 2004. In connection with
this purchase, the Company recorded an extraordinary loss of $9.3 million in
July 1998.
F-24
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
SUPPLEMENTARY DATA (UNAUDITED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996 BY QUARTER 1997 BY QUARTER
------------------------------------ ------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......................... $166.7 $230.2 $251.6 $203.5 $193.3 $255.9 $274.4 $221.0
Cost of products sold............. 124.3 165.6 180.9 151.5 143.2 180.2 197.9 165.7
------ ------ ------ ------ ------ ------ ------ ------
Gross profit...................... $ 42.4 $ 64.6 $ 70.7 $ 52.0 $ 50.1 $ 75.7 $ 76.5 $ 55.3
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Operating income.................. $ 7.7 $ 20.7 $ 22.8 $ 10.2 $ 9.3 $ 24.9 $ 25.6 $ 10.3
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Interest expense.................. $ 7.8 $ 8.0 $ 7.9 $ 8.3 $ 9.8 $ 10.3 $ 10.4 $ 12.3
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes.................... $ (0.3) $ 12.4 $ 14.9 $ 0.9 $ 2.9 $ 16.6 $ 18.7 $ 4.6
Income tax (provision)
benefit......................... 0.1 (4.8) (5.8) (0.3) (1.1) (6.5) (7.3) (1.8)
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)................. $ (0.2) $ 7.6 $ 9.1 $ 0.6 $ 1.8 $ 10.1 $ 11.4 $ 2.8
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
F-25
<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. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. 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 AN 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 1
Risk Factors.................................. 11
Capitalization................................ 15
Selected Financial Data....................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 18
Business...................................... 23
Management.................................... 34
Executive Compensation........................ 36
Security Ownership of
Certain Beneficial Owners
and Management.............................. 38
Certain Relationships......................... 39
The Exchange Offer............................ 41
Description of the New Notes.................. 46
Certain Federal Income Tax Considerations..... 67
Plan of Distribution.......................... 67
Legal Matters................................. 68
Experts....................................... 68
Available Information......................... 68
Index to Consolidated Financial Statements.... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$150,000,000
BUILDING MATERIALS
CORPORATION OF AMERICA
SERIES B
7 3/4% SENIOR NOTES DUE 2005
--------------------
PROSPECTUS
--------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 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 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
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and
II-1
<PAGE>
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 Company 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
Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 4.1 to BMCA's Registration
Statement on Form S-8 (Registration No. 333-60589)).
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 July 17, 1998, 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 July 17, 1998, between BMCA, Bear, Stearns & Co. Inc. and BNY
Capital Markets, 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 -- Indenture, dated as of October 20, 1997, 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. 333-41531) (the '8% Notes Registration Statement').
10.4 -- 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)).
10.5 -- Amendment No. 1 dated as of January 1, 1994, to the Management Agreement (incorporated by reference
to Exhibit 10.10 to G-I Holdings' Form 10-K for the year ended December 31, 1993).
10.6 -- 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).
10.7 -- Amendment No. 3, dated as of December 31, 1994, to the Management Agreement (incorporated by
reference to Exhibit 10.4 to ISP's Form 10-K for the year ended December 31, 1994).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
10.8 -- 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)).
10.9 -- 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)).
10.10 -- 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)).
10.11 -- Amendment No. 7, dated as of December 31, 1997, to the Management Agreement (incorporated by
reference to Exhibit 10.10 to the 8% Notes Registration Statement).
10.12 -- Amendment No. 8, dated as of January 1, 1998, to the Management Agreement (incorporated by reference
to Exhibit 10.11 to the 8% Notes Registration Statement).
10.13 -- Amendment No. 9, dated as of March 30, 1998, to the Management Agreement (incorporated by reference
to Exhibit 10.10 to ISP Holdings' Registration Statement on Form S-4 (Registration No. 333-53709)).
10.14 -- 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).
10.15 -- 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')).
10.16 -- Forms of Amendment to Option Agreement relating to Series A Cumulative Redeemable Convertible
Preferred Stock (incorporated by reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
December 31, 1997 (the '1997 Form 10-K').
10.17 -- Form of Option Agreement relating to Series A Cumulative Redeemable Preferred Stock (incorporated by
reference to Exhibit 10.13 to the 1997 Form 10-K).
10.18 -- BMCA Preferred Stock Option Plan (incorporated by reference to Exhibit 4.2 to BMCA's Registration
Statement on Form S-8 (Registration No. 333-60589) ).
10.19 -- Reorganization Agreement, dated as of January 31, 1994, among GAFBMC, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note Registration Statement).
10.20 -- 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).
10.21 -- 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).
*10.22 -- Letter Agreement, dated July 8, 1998, among BMCA, ISP and Sunil Kumar.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*21 -- Subsidiaries of BMCA
*23.1 -- Consent of Arthur Andersen LLP.
*23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
**24 -- Power of Attorney.
*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 six months of fiscal year 1998, 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 six months ended June 28, 1998).
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
*99.1 -- Form of Letter of Transmittal.
*99.2 -- Form of Notice of Guaranteed Delivery.
*99.3 -- Form of Exchange Agreement between The Bank of New York and BMCA.
</TABLE>
- ------------------
* Filed herewith.
** Previously filed.
(b) Schedules
Consolidated Financial Statement Schedules:
<TABLE>
<S> <C>
Report of Independent Public Accountants..................................................... S-1
Schedule II--Valuation and Qualifying Accounts............................................... S-2
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling 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, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, in the
Township of Wayne, State of New Jersey, on the 31st day of August 1998.
BUILDING MATERIALS CORPORATION OF
AMERICA
By: /s/ JAMES P. ROGERS
-----------------------------------
Name: James P. Rogers
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ------------------------------------------------------------- ---------------
<S> <C> <C>
* Chairman, Chief Executive Officer
- ------------------------------- and Director (Principal Executive Officer)
Samuel J. Heyman August 31, 1998
* President, Chief Operating Officer
- ------------------------------- and Director
Sunil Kumar August 31, 1998
/s/ JAMES P. ROGERS Executive Vice President and Director
- -------------------------------
JAMES P. ROGERS August 31, 1998
* Senior Vice President and Chief Financial Officer
- ------------------------------- (Principal Financial and Accounting Officer)
William C. Lang August 31, 1998
*By: /s/ JAMES P. ROGERS
---------------------------
James P. Rogers
Attorney-in-fact
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Building Materials Corporation of America:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Building Materials Corporation of America
and subsidiaries included in this registration statement and have issued our
report thereon dated February 20, 1998. 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
February 20, 1998
S-1
<PAGE>
SCHEDULE II
BUILDING MATERIALS CORPORATION OF AMERICA
VALUATION AND QUALIFYING ACCOUNTS
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>
YEAR ENDED DECEMBER 31, 1997
(THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
JANUARY 1, SALES OR DECEMBER 31,
DESCRIPTION 1997 EXPENSES DEDUCTIONS OTHER 1997
- ---------------------------------------------------- ------------- ---------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Valuation and Qualifying Accounts Deducted from
Assets To Which They Apply:
Allowance for doubtful accounts................ $ 1,974 $ 2,224 $ 1,530(a) $ 84(c) $ 2,752(b)
Allowance for discounts........................ 22,468 80,989 88,443 4,389(c) 19,403
Reserve for inventory market valuation......... 2,509 821 1,824 -- 1,506
</TABLE>
- ------------------
(a) Represents write-offs of uncollectible accounts net of recoveries.
(b) The balances at December 31, 1995, 1996 and 1997 primarily reflect a reserve
for receivables sold to a trust (see Note 6 to Consolidated Financial
Statements).
(c) Represents balance acquired in an acquisition.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 4.1 to BMCA's Registration
Statement on Form S-8 (Registration No. 333-60589)).
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 July 17, 1998, 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 July 17, 1998, between BMCA, Bear, Stearns & Co. Inc. and BNY
Capital Markets, 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 -- Indenture, dated as of October 20, 1997, 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. 333-41531) (the '8% Notes Registration Statement').
10.4 -- 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)).
10.5 -- Amendment No. 1 dated as of January 1, 1994, to the Management Agreement (incorporated by reference
to Exhibit 10.10 to G-I Holdings' Form 10-K for the year ended December 31, 1993).
10.6 -- 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).
10.7 -- Amendment No. 3, dated as of December 31, 1994, to the Management Agreement (incorporated by
reference to Exhibit 10.4 to ISP's Form 10-K for the year ended December 31, 1994).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.8 -- 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)).
10.9 -- 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)).
10.10 -- 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)).
10.11 -- Amendment No. 7, dated as of December 31, 1997, to the Management Agreement (incorporated by
reference to Exhibit 10.10 to the 8% Notes Registration Statement).
10.12 -- Amendment No. 8, dated as of January 1, 1998, to the Management Agreement (incorporated by reference
to Exhibit 10.11 to the 8% Notes Registration Statement).
10.13 -- Amendment No. 9, dated as of March 30, 1998, to the Management Agreement (incorporated by reference
to Exhibit 10.10 to ISP Holdings' Registration Statement on Form S-4 (Registration No. 333-53709)).
10.14 -- 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).
10.15 -- 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')).
10.16 -- Forms of Amendment to Option Agreement relating to Series A Cumulative Redeemable Convertible
Preferred Stock (incorporated by reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
December 31, 1997 (the '1997 Form 10-K').
10.17 -- Form of Option Agreement relating to Series A Cumulative Redeemable Preferred Stock (incorporated by
reference to Exhibit 10.13 to the 1997 Form 10-K).
10.18 -- BMCA Preferred Stock Option Plan (incorporated by reference to Exhibit 4.2 to BMCA's Registration
Statement on Form S-8 (Registration No. 333-60589) ).
10.19 -- Reorganization Agreement, dated as of January 31, 1994, among GAFBMC, G-I Holdings and BMCA
(incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note Registration Statement).
10.20 -- 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).
10.21 -- 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).
*10.22 -- Letter Agreement, dated July 8, 1998, among BMCA, ISP and Sunil Kumar.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*21 -- Subsidiaries of BMCA
*23.1 -- Consent of Arthur Andersen LLP.
*23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
**24 -- Power of Attorney.
*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 six months of fiscal year 1998, 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 six months ended June 28, 1998).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
*99.1 -- Form of Letter of Transmittal.
*99.2 -- Form of Notice of Guaranteed Delivery.
*99.3 -- Form of Exchange Agreement between The Bank of New York and BMCA.
</TABLE>
- ------------------
* Filed herewith.
** Previously filed.
<PAGE>
WEIL, GOTSHAL & MANGES LLP
A LIMITED LIABILITY PARTNERSHIP INCLUDING
PROFESSIONAL CORPORATIONS
767 FIFTH AVENUE NEW YORK, NY 10153
(212) 310-8000
(FAX) (212) 310-8007
August 19, 1998
Building Materials Corporation
of America
1361 Alps Road
Wayne, New Jersey 07470
Ladies and Gentlemen:
We have acted as counsel to Building Materials Corporation of
America, a Delaware corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of the
Company's Registration Statement on Form S-4, Registration No. 333-60633 (as
amended, the "Registration Statement"), under the Securities Act of 1933, as
amended, relating to $150,000,000 aggregate principal amount of the Company's
Series B 7-3/4% Senior Notes due 2005 (the "Notes").
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Indenture dated as of July 17, 1998, between the Company and The Bank of New
York, as trustee (the "Trustee"), pursuant to which the Notes will be issued
(the "Indenture"), the form of the Notes included as Exhibit 4.2 to the
Registration Statement and such corporate records, agreements, documents and
other instruments, and such certificates or comparable documents of public
officials and of officers and representatives of the Company, and have made such
inquiries of such officers and representatives, as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to all questions
of fact material to this opinion that have not been
<PAGE>
Building Materials Corporation
of America
August 19, 1998
Page 2
independently established, we have relied upon certificates or comparable
documents of officers and representatives of the Company.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that the Notes are duly authorized, and,
when duly executed on behalf of the Company, authenticated by the Trustee and
delivered in accordance with the terms of the Indenture and as contemplated by
the Registration Statement, will constitute legal, valid and binding obligations
of the Company, enforceable against it in accordance with their terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
The opinion expressed herein is limited to the laws of the
State of New York, the corporate laws of the State of Delaware and the federal
laws of the United States, and we express no opinion as to the effect on the
matters covered by this letter of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE>
Exhibit 8
August 24, 1998
Building Materials
Corporation of America
1361 Alps Road
Wayne, NJ 07470
Re: SERIES B 7-3/4% SENIOR NOTES DUE 2005
Ladies and Gentlemen:
We have acted as counsel to Building Materials Corporation of
America, a Delaware corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of the
Company's Registration Statement (Registration No. 333-60633) on Form S-4 on
August 4, 1998, as amended to the date hereof (together with the exhibits
thereto, the "Registration Statement"), relating to the registration by the
Company of its Series B 7-3/4% Senior Notes due 2005 (collectively, the
"Securities").
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement,
including the Prospectus which is a part thereof (the "Prospectus"), and such
corporate records, agreements, documents and other instruments (the
aforementioned documents together, the "Documents"), and have made such
inquiries of such officers and representatives, as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth. In such examination,
we have assumed the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, the authenticity of the originals of such
latter documents, the genuineness of all signatures, and the correctness of all
representations made therein. (The terms of the Documents are incorporated
herein by reference.) We have further assumed that the final executed Documents
will be substantially the same as those which we have reviewed and that there
are no agreements or understandings between or among the parties to the
Documents with respect to the transactions contemplated therein other than those
contained in the Documents.
Based on the foregoing, subject to the next succeeding
paragraph, and assuming full compliance with all the terms of the Documents, it
is our opinion that the
<PAGE>
Building Materials
Corporation of America
August 24, 1998
discussion included in the Prospectus under the caption "Federal Income Tax
Consequences," insofar as it constitutes statements of law or legal conclusions
and except to the extent qualified therein, is accurate in all material
respects.
The foregoing opinion is based on current provisions of the
Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. No opinion
is expressed on any matters other than those specifically covered by the
foregoing opinion.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
2
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
1361 Alps Road
Wayne, New Jersey 07470
ISP HOLDINGS INC.
c/o ISP Management Company, Inc.
1361 Alps Road
Wayne, New Jersey 07470
July 8, 1998
Mr. Sunil Kumar
301 Westgate Road
Ridgewood, New Jersey 07450
Dear Mr. Kumar:
1. Termination of ISP Holdings Inc. Agreements
Reference is made to that certain (i) Agreement from ISP Holdings Inc.
("ISPH") to you dated January 1, 1997 (the "ISPH Option Agreement") with respect
to ISPH's grant to you of an option to purchase shares of ISPH's Series A
Cumulative Redeemable Convertible Preferred Stock and (ii) Agreement from ISPH
to you dated January 1, 1997 (the "ISPH SAR Agreement" and together with the
ISPH Option Agreement, the "ISPH Agreements") with respect to ISPH's grant to
you of the right to receive an amount in cash based upon the appreciation in
value in certain shares of common stock of ISPH. In connection with the
consummation of the merger (the "Merger") of International Specialty Products
Inc. ("ISP") with and into ISPH (which will be the surviving corporation of the
Merger and is hereinafter referred to as the "Surviving Corporation") pursuant
to that certain Agreement and Plan of Merger, dated as of March 30, 1998,
between ISP and ISPH, the ISPH Agreements will be terminated as of the effective
date of the Merger (the "Effective Date") and, in consideration therefor, you
will receive the cash payment referred to below in Section 2 on the terms and
conditions specified herein. In consideration for these cash payments, ISPH and
you agree that the ISPH Agreements will be terminated as of the Effective Date
in all respects and neither you nor ISPH shall have any rights or obligations
thereunder.
2. Cash Payments (a) Subject to the consummation of the Merger,
as of the Effective Date, you will be entitled
<PAGE>
to receive from ISPH cash payments in an aggregate amount equal to $5,073,212
(the "Cash Payment"), as and when provided on Schedule A hereto; provided,
however, that you shall only be entitled to receive such scheduled payments if
you are employed by Building Materials Corporation of America ("BMCA") or any of
its affiliates at the date of each such scheduled payment. Notwithstanding the
foregoing and subject to Section 2(b) below, if your employment is terminated by
BMCA or any of its affiliates (i) without Cause (as defined below) and you are
not offered employment with an affiliate of BMCA on substantially the same terms
as you were employed prior to such termination or (ii) as a result of your
Disability (as defined below) or death, you (or after your death, your legal
representative) will be entitled to receive from ISPH, in lieu of any other cash
payments, an amount of cash equal to (x) the cumulative amount of cash you would
have received as of the date of such termination had you received cash in
accordance with the vesting schedule on Schedule B minus (y) the cumulative
amount of cash that you had received as of the date of such termination, in
accordance with Schedule A.
(b) If a Change of Control (as defined below) of BMCA shall occur and
at any time following such Change of Control, BMCA (or any successor thereto)
terminates without Cause your employment, your employment is terminated as a
result of your death or Disability (as defined in ISP's 1991 Incentive Plan for
Key Employees and Directors, as amended (the "Plan")) or you terminate your
employment for Good Reason (as defined in the Plan), the Cash Payment (less any
portion thereof previously paid to you pursuant to this Agreement prior to the
acceleration provided in this paragraph (b)) shall become immediately due and
payable to you by BMCA (or its successor). You hereby acknowledge your receipt
of the Plan.
(c) The following terms shall have the meanings assigned below:
(i) "Cause" shall mean (a) the commission of a felony, the
commission of a misdemeanor involving moral turpitude or the commission
of any other act involving dishonesty, disloyalty or fraud with respect
to your employer or any affiliate thereof, (b) substantial and repeated
failure by you to perform your duties, (c) gross negligence or willful
misconduct with respect to your employer or any affiliate thereof or
(d) a material breach of any of the terms or provisions of
2
<PAGE>
any employment agreement to which you may be a party; provided,
however, that if at the time of termination of your employment you are
a party to an employment agreement with an entity controlled by or
under common control with Samuel J. Heyman that contains a definition
of "Cause" that is inconsistent with the provisions hereof, the
definition contained in that employment agreement shall govern for
purposes of this Agreement;
(ii) A "Change of Control" shall be deemed to have occurred if
the Heyman Group ceases to have, in the aggregate, directly or
indirectly, at least 20% of the voting power of BMCA. The "Heyman
Group" shall mean (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, 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 entity controlled
directly or indirectly, by Samuel J. Heyman or his heirs,
administrators or executors.
3. Grant of BMCA Common Stock
(a) Subject to the terms and conditions of this Agreement,
BMCA will issue to you on the Effective Date of the Merger (i) 15,000 shares of
Class A Common Stock, par value $.01 per share ("Class A Common Stock"), of BMCA
and (ii) 15,000 shares of Class B Common Stock, par value $.01 per share ("Class
B Common Stock" and together with the Class A Common Stock, the "Common Stock"),
of BMCA. Subject to the terms of this Agreement, all of the Common Stock granted
to you pursuant to this Section 3 shall be immediately vested. The Common Stock
granted to you pursuant to this Agreement will not have the right to participate
in cash dividends paid on such Common Stock and you hereby agree to waive any
such right to receive such dividends.
(b) The Book Value (as defined below) of each share of Common Stock
shall equal the book value as of January 1, 1998 determined in accordance with
generally accepted accounting principles ("GAAP"). All changes in book value of
Common Stock after January 1, 1998 shall be calculated as described in the next
paragraph:
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<PAGE>
"Book Value" shall mean (i) Book Value of BMCA determined in accordance
with GAAP as of January 1, 1998, (which you and BMCA agree is $82,999,000 at
such date) plus the sum of (i) the cumulative consolidated net income or loss of
BMCA for the period January 1, 1998 through the date of determination and (ii)
the cumulative operating income (or loss), net of an amount equal to imputed
income taxes on such operating income calculated at the same tax rate as is
accrued as an expense by BMCA in its income statement for the applicable period,
of GAF Fiberglass Corporation ("GAF Fiberglass") for the period January 1, 1998
through the date of determination, and excluding, to the extent occurring after
December 31, 1997, (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
BMCA or any subsidiary other than in the ordinary course of business, (3) any
dividends or distributions paid to the holders of BMCA's capital stock, (4) any
capital contributions made to BMCA by its stockholders, (5) any amounts received
by BMCA for shares of its capital stock (including from the exercise of options
or warrants to purchase capital stock or from the conversion into capital stock
of convertible debt or convertible preferred stock) and (6) any charges relating
to amortization of goodwill and other intangibles arising from the management
buy-out of GAF Corporation in March 1989. The Book Value per share of Common
Stock shall equal the Book Value divided by 1,030,010. There shall be deducted
from Book Value an amount equal to a 15% per annum charge on the aggregate
capital contributions made to BMCA by its stockholders during the period
commencing January 1, 1998 and ending with the date of determination (the
"Period"), amounts received by BMCA during the Period for shares of its capital
stock and, to the extent not actually charged to BMCA, on the outstanding
principal amount of loans and other advances made to BMCA by affiliates
(excluding subsidiaries of BMCA) during the Period. There shall be added to Book
Value a 15% per annum credit on the aggregate dividends or distributions made by
BMCA to its stockholders during the Period and, to the extent not actually
charged to the borrower, on the outstanding principal amount of loans and other
advances made by BMCA to affiliates (excluding subsidiaries of BMCA) during the
Period. Any adjustments to Book Value (including the 15% charge and credit
referred to in the preceding two sentences) shall include the tax effects, if
any, associated therewith. If the shares of Common Stock are converted into or
exchanged for other securities or property pursuant to a
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<PAGE>
recapitalization, stock split, combination, reorganization, merger, exchange or
similar transaction, or if GAF Fiberglass becomes a direct or indirect
subsidiary of BMCA, or if BMCA directly or indirectly acquires the Nashville,
Tennessee manufacturing facility of GAF Fiberglass, or if a sale of all or
substantially all of the Common Stock of BMCA shall occur or be pending, Book
Value, and the terms hereof shall be modified by the Board of Directors of BMCA
in such manner as is reasonable under the circumstances. Moreover, in the event
affiliates of BMCA, other than a subsidiary of BMCA, purchase a building
products business, the formula for determining Book Value of BMCA shall be
adjusted, as the Board of Directors determines reasonably appropriate, to ensure
that you are treated the same as if such business were acquired by BMCA. All
determinations by the Board of Directors hereunder shall be made in good faith
and shall be binding and conclusive.
4. Transfer of Securities. (a) You agree that you will not, prior
to July 15, 2005 directly or indirectly, sell, pledge, give, bequeath, transfer,
assign or in any other way whatsoever encumber or dispose of (hereinafter
collectively called "transfer") any Common Stock or any interest in any Common
Stock, or any stock certificate representing or any voting trust certificate
issued with respect to, any Common Stock, except as provided in herein or as may
be specifically authorized by the Board of Directors of BMCA; provided, however,
that, subject to Section 11 herein, the restrictions imposed by this Section 4
shall cease and terminate on any date (the "Public Offering Date") on which BMCA
or its parent first effects a registration of any of its equity securities
(other than pursuant to an employee benefit plan) under the Securities Act of
1933, as amended (the "Act"). The period from the date hereof and ending on the
earlier of July 15, 2005 or the Public Offering Date is sometimes hereinafter
referred to as the "Restricted Period."
(b) If, after July 15, 2005, but prior to the Public Offering
Date you desire to sell any of your Common Stock, you must first offer to sell
to BMCA such Common Stock at Book Value thereof determined as of the end of the
calendar quarter immediately preceding the date on which the offer is made. You
must notify BMCA in writing of the amount and class of Common Stock you wish to
sell (the "Sale Notice"). Upon receipt of the Sale Notice, BMCA shall have the
option, exercisable for 30 days after BMCA receives the Sale Notice (the "Option
Period"), to purchase all (but not
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<PAGE>
less than all) of the Common Stock specified in the Sale Notice. The option may
be exercised by giving notice to you within the Option Period. If BMCA elects to
purchase the Common Stock you have offered prior to the end of the Option
Period, it shall be obligated to purchase, and you will be obligated to sell,
such Common Stock at the price and on the terms described above, and the closing
shall be held within 60 days after the expiration of the Option Period (or if
such day is not a business day, on the next succeeding business day) at the
principal executive offices of BMCA. If BMCA does not elect to purchase the
Common Stock you have offered, and if otherwise permitted under this Agreement,
you may, at any time thereafter within a period of 120 days after the expiration
of the Option Period, transfer such Common Stock to any third party; provided,
however, that in the event you have not so transferred the Common Stock within
the 120 day period, then any transfer of such Common Stock shall thereafter
again be subject to all of the restrictions contained in this Section 4.
(c) Notwithstanding anything to the contrary contained herein,
you agree that you will not transfer any Common Stock except in compliance with
the Act.
(d) BMCA agrees that it will not transfer on its books any
certificate for Common Stock in violation of the provisions of this Agreement.
5. Put and Call Rights. (a) In the event you leave the employ of
BMCA or its subsidiaries for any reason, whether as a result of your termination
for Cause, death, Disability or otherwise (any such date of leaving, the
"Termination Date"), you may, at your option, by delivering written notice to
BMCA within 30 days after the Termination Date, elect to sell, and upon the
giving of the notice BMCA shall be obligated to purchase, all, but not less than
all, of the Common Stock owned by you at the time of the Termination Date at the
Book Value determined as of the last day of the calendar quarter in which the
Termination Date occurs.
(b) BMCA may, at its option, exercisable by a written notice
delivered to you within 30 days after the Termination Date, elect to purchase,
and upon the giving of the notice BMCA shall be obligated to purchase, and you
shall be obligated to sell, all, but not less than all, of the Common Stock
owned by you at the time of the Termination
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<PAGE>
Date at the Book Value determined as of the last day of the calendar quarter in
which the Termination Date occurs.
(c) For each calendar year commencing in 1999, you may, at
your option, exercisable by delivering to BMCA a written notice prior to March
31 of such year, elect to sell, and upon the giving of the notice BMCA shall be
obligated to purchase, any amount of shares of Common Stock owned by you at the
time of delivering such notice, at the Book Value thereof determined as of the
last day of the immediately preceding calendar year.
(d) In the event your right to receive the Cash Payment
becomes immediately due and payable on the terms set forth in Section 2(b)
above, you may, at your option, by delivering written notice to BMCA within 30
days after the date such payment becomes due and payable, elect to sell, and
upon the giving of the notice BMCA shall be obligated to purchase, all, but not
less than all, of the Common Stock owned by you at the time the Cash Payment
becomes due and payable, at the Book Value determined as of the last day of the
calendar quarter in which the Termination Date occurs.
(e) The closing for all purchases of Common Stock pursuant to
Sections 5(a) through (d) above shall be held at the principal executive offices
of BMCA within one year after the event giving rise to BMCA's obligation or
election to purchase the Common Stock.
(f) In the event a transaction (the "Transaction") is
announced publicly prior to January 1, 2000 that, if consummated, would result
in a Change of Control (as defined in the Plan) of ISPH, you shall have the
right (the "Put Right") for 30 days following such Change of Control,
exercisable by delivering written notice thereof to BMCA or its successor, to
elect to sell all, but not less than all, of the Common Stock owned by you on
such date to BMCA (or its successor), at an amount equal to 546,501 times the
difference between the Market Value (as defined below) of ISPH at the time of
such Change of Control and $16.125 (the "Change of Control Cash Amount"). For
purposes of this clause (f), "Market Value" shall mean, (i) in the event only
cash is paid to the stockholders of ISPH in the Transaction, such per share cash
consideration, (ii) in the event cash and/or publicly traded securities are paid
to the stockholders of ISPH in such Transaction, the sum of the average closing
price of such securities during the first 15 trading days immediately following
the date of the
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<PAGE>
Transaction and the per share cash consideration, if any, paid to such
stockholders, (iii) in the event any other property is paid to such stockholders
in such Transaction, the fair market value thereof as determined by the Board of
Directors of BMCA (or its successor) in good faith and (iv) in the event no cash
or other property is paid to such stockholders in such Transaction, the average
closing price of the ISPH common stock during the 15 trading days immediately
following the date of the Transaction.
(g) In the event that you elect to exercise the Put Right, you
will be entitled to receive the Change of Control Cash Amount as and when
provided on Schedule C; provided, however, that you shall only be entitled to
receive such Change of Control Cash amount if you are employed by BMCA or any of
its affiliates at the date of each such scheduled payment. Notwithstanding the
foregoing, if following a Change of Control of ISPH you terminate your
employment with BMCA for Good Reason (as defined in the Plan), or your
employment is terminated by BMCA without Cause, or is terminated as a result of
your death or Disability, the Change of Control Cash Amount (less any portion
thereof previously paid to you pursuant to this Agreement prior to the
acceleration provided in this paragraph (g)) shall become immediately due and
payable to you by ISPH (or its successor).
(h) Notwithstanding the foregoing provisions of this Section
5, the put and call rights described in this Section 5 shall terminate at such
date as BMCA or its parent sells common stock in a public offering pursuant to a
registration statement under the Act (other than a registration statement filed
with respect to employee benefit plans).
6. Closings and Terms of Payment.
(a) The closing (each, a "Closing") for all purchases of
Common Stock hereunder shall be held at the principal executive offices of BMCA.
The purchase price to be paid by BMCA for shares of Common Stock purchased
hereunder shall be paid in full by BMCA in cash or by certified or official bank
check at the Closing.
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<PAGE>
(b) You shall cause the Common Stock sold pursuant to this
Agreement to be delivered to BMCA at the Closing free and clear of all liens,
charges and encumbrances of any kind. In addition, you shall take all such
actions as BMCA shall request as necessary to vest in BMCA at the Closing good
and marketable title to the Common Stock, free and clear of all liens, charges
and encumbrances.
(c) In the event a purchase of Common Stock pursuant to this
Agreement shall be prohibited or would cause a default under the terms of any
institutional credit agreement, indenture or other like instrument with respect
to the borrowing of money, in each case as the same may be amended from time to
time, the rights and obligations of you and BMCA pursuant hereto shall be
suspended until the prohibition lapses or is waived and no default would be
caused. Upon the lapse or waiver of the restrictions, the price to be paid by
BMCA for your Common Stock shall be determined as of the last day of the
calendar quarter in which such restrictions are waived or lapsed.
7. Registration Rights. (a) You shall not be entitled to
participate in any manner with respect to the first registration of BMCA's
common stock under the Act if all of the securities to be sold in such
registration are offered solely by BMCA or its parent. If a stockholder of BMCA,
other than its parent, proposes to register under the Act any of such holder's
common stock or if BMCA at any time after its initial registration proposes to
register any shares of its common stock under the Act, in each case other than
in connection with a registration filed with respect to employee benefit plans
(each a "Registration"), you may participate in the Registration as provided in
this Section 7. If the Registration relates to any common stock of BMCA, whether
or not for sale on its own account, on a form and in a manner which would permit
the sale of your Class B Common Stock to the public under the Act, BMCA shall
include any of your Class B Common Stock in the Registration subject to the
provisions described in this Section 7.
(b) BMCA shall give written notice of any proposed
registration of its common stock to you and all subsequent holders of such Class
B Common Stock who acquired them directly or indirectly from you in a
transaction permitted by the terms of this Agreement at least thirty (30) days
prior to the filing of the registration statement in connection with the
Registration. Each such holder of
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<PAGE>
the shares of Class B Common Stock (a "Holder") shall have the right to request
that all or any part of such Holder's shares of Class B Common Stock be included
in the registration by giving written notice to BMCA within fifteen (15) days
after the giving of the notice by BMCA (any Holder giving BMCA a notice
requesting that shares of Class B Common Stock owned by such Holder be included
in a proposed registration shall be hereinafter referred to as a "Registering
Holder").
(c) Limitations on Underwritten Offerings. If a Registration
is in connection with an underwritten offering on behalf of BMCA, and the
managing underwriters of such offering determine that the inclusion of some or
all of the shares proposed to be included in the registration statement by
Registering Holders would interfere with the underwritten public offering, the
number of shares of Class B Common Stock (in the case of an underwritten
offering of BMCA's common stock) included shall be reduced in the proportion
requested by the underwriters and BMCA shall include in the registration, first,
the shares that BMCA or its parent proposes to sell and second, any other shares
requested to be included in the registration, including the shares of the
Registering Holders that, in the opinion of the managing underwriters, would not
interfere with the offering. In the event that all shares of participating
Registering Holders will not be included in the offering, the number of shares
of each Registering Holder to be included in the offering shall be pro rata
based on the number of shares owned by such Holder. Shares of Class B Common
Stock proposed to be registered and sold for the account of any Registering
Holder under this Section 7 shall be sold to prospective underwriters selected
or approved by BMCA and on the terms and subject to the conditions of one or
more underwriting agreements negotiated between BMCA and the prospective
underwriters. BMCA may withdraw any registration statement described in this
Section 7 at any time before it becomes effective, or postpone any offering of
securities, without obligation or liability to any Registering Holder.
(d) Registration Procedures. In connection with any
registration of shares of Class B Common Stock under the Act pursuant to this
Agreement, BMCA will furnish each Registering Holder with a copy of the
registration statement and all amendments to it and will supply each Registering
Holder with copies of any prospectus included in the registration statement
(including a preliminary prospectus and all amendments and supplements to it),
in quantities
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that are reasonably necessary for the purposes of the proposed sale or
distribution covered by the registration. BMCA shall not, however, be required
to maintain the registration statement and to supply copies of a prospectus for
a period beyond 90 days after the effective date of the registration statement
and, at the end of that period, BMCA may deregister any shares of Class B Common
Stock covered by the registration statement and not then sold or distributed. In
connection with any registration of shares of Class B Common Stock, BMCA will,
at the request of the managing underwriters with respect to it, use its best
efforts to qualify the registered shares for sale under the securities or "blue
sky" laws of those states in which it is reasonably required to permit the
distribution of the registered shares, provided that BMCA shall not be required
to qualify to do business in any state where it is not then qualified or to take
any action that would subject it to tax or to the general service of process in
any state where it is not then subject.
(e) Limitations on Public Sale. Notwithstanding any other
provision of this Section 7, you agree that you will not (and it shall be a
condition to the rights of each Registering Holder under this Section 7 that the
Registering Holder does not) offer for public sale any securities of BMCA or its
parent during the 14 days prior to, and the 90 days after, the effective date of
any registration statement in connection with an underwritten public offering,
unless such securities are covered by that registration statement or a separate
effective registration statement.
(f) Fees and Expenses. Except as otherwise required by state
securities or "blue sky" laws or the rules and regulations promulgated
thereunder, all expenses, disbursements and fees incurred by BMCA in connection
with carrying out its obligations under this Section 7 shall be borne by BMCA;
provided, however, that each Registering Holder shall pay (i) all costs and
expenses of counsel for such Holder, (ii) all underwriting discounts,
commissions and expenses and all transfer taxes with respect to the shares sold
by such Holder, and (iii) all other expenses incurred by him which are
incidental to the sale and delivery of the shares to be sold by such Holder.
(g) Conditions. It shall be a condition to each Registering
Holder's rights to register Class B Common Stock that:
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(i) the Registering Holder cooperate with BMCA by
supplying information and executing appropriate documents
relating to him or his securities in connection with the
registration;
(ii) the Registering Holder take all actions relating
to the conduct of a proposed offering of Class B Common Stock
which BMCA or the underwriters may reasonably request as being
necessary to insure compliance with federal or state
securities laws or the rules or other requirements of The
National Association of Securities Dealers, Inc., or otherwise
to effectuate the offering; and
(iii) the Registering Holder shall execute and
deliver an agreement to indemnify and hold harmless BMCA, each
of its directors, each of its officers who has signed the
registration statement, any underwriter (as defined in the
Act), and each person, if any, who controls BMCA or such
underwriter, within the meaning of the Act, against those
losses, claims, damages or liabilities (including
reimbursement for legal and other expenses) to which BMCA or
any such director, officer, underwriter or controlling person
may become subject under the Act or otherwise, the
indemnification agreement to be in the form that is customary
for registrations of the type then proposed and, in any event,
equivalent in scope to indemnities given by BMCA in connection
with the registration; provided, however, that the liability
of any Registering Holder pursuant to any indemnification
agreement shall only be with respect to information furnished
by such Registering Holder in connection with the registration
and shall be limited to the offering price of the securities
being offered by the Registering Holder in the registration.
8. Tag-Along Rights. (a) At least ten days prior to the
consummation of any sale or transfer by any member of the Heyman Group of shares
of Common Stock to any unrelated third party during the Restricted Period, those
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members of the Heyman Group (the "Selling Member") shall deliver to you a
written notice (a "Tag-Along Notice"), which shall fully disclose the identity
of the prospective transferee and the terms and conditions of the proposed sale.
No member of the Heyman Group will consummate any such sale until ten days after
the Tag-Along Notice has been mailed to you. You may elect to participate in the
contemplated sale with respect to your Class B Common Stock by delivering
written notice to the Selling Member within seven days of receipt of such
Tag-Along Notice. If you elect to sell in the contemplated sale, you will be
entitled to sell in the contemplated sale, at the same price and on the same
terms applicable to the Selling Member, in amounts bearing the same proportion
to your holdings of Class B Common Stock as the amounts to be so transferred by
the Selling Member bear to the Heyman Group's aggregate holdings of Common
Stock. This Section shall apply to any sales or transfers of Common Stock,
whether or not made pursuant to an effective registration statement in
accordance with the Act.
(b) The Heyman Group will not sell any shares of Common Stock
unless the purchaser of such stock agrees to purchase all of your Class B Common
Stock which you have elected, and are permitted, to sell pursuant to clause (a)
above.
9. Preemptive Rights, etc. You shall have the right to
participate in any equity offering made to affiliates of BMCA, based on the pro
rata percentage of Common Stock outstanding represented by your Class B Common
Stock, such participation to be on the same terms and condition as such
affiliates purchase such equity, except that in such offering you shall only be
entitled to purchase Class B Common Stock.
10. Initial Public Offering
If BMCA or its parent sells common stock in a public offering
(the "IPO") pursuant to a registration statement under the Act (other than a
registration statement filed with respect to employee benefit plans), then the
following shall occur:
(a) With respect to the Class A Common Stock held by you at the
time of the IPO, you shall sell to BMCA or such other entity
determined by BMCA, and BMCA or such other entity shall
purchase from you, all
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of these shares for an amount in cash equal to the Book Value
per share (without taking into consideration any gain from the
IPO) of Class A Common Stock as of the last day of the fiscal
quarter immediately preceding the date of the IPO;
(b) With respect to the Class B Common Stock held by
you at the time of the IPO, the terms of the Class
B Common Stock shall be amended, if necessary, to
have the same rights as the holders of the shares
of common stock being sold in the IPO, with the
total number of shares owned by you being adjusted
for any recapitalization, reorganization or
similar transaction occurring in connection with
the IPO;
(c) With respect to the Class B Common Stock held by
you at the time of the IPO, the terms of the Class
B Common Stock shall be further amended, if
necessary, if in connection with an IPO, a
recapitalization reorganization or similar
transaction of BMCA (or its parent's stockholders,
if the parent's shares are sold in the IPO) occurs
such that dividends are paid to BMCA (or its
parent, as per the case may be) stockholders prior
to, and in connection with, the IPO. The
adjustments referred to in the foregoing sentence
shall be those which are necessary, in the
reasonable judgment of the Board of Directors of
BMCA, to ensure that the value of the Class B
Common Stock held by you is not adversely affected
in any material way as a result of such
transaction. Under no circumstances shall BMCA
have any liability to you resulting from the
pricing of the common stock in the IPO or its
performance thereafter;
(d) For a period of 18 months following the consummation of IPO,
you shall not be permitted to sell 50% of the Common Stock
that you own as of the date of such consummation (the
"Restricted Stock"). The Restricted Stock shall not be subject
to forfeiture under any circumstance.
In addition, pursuant to the share incentive plan adopted in
connection with the IPO, you shall receive a grant of an
option to purchase shares of common stock (in the discretion
of the Board of
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Directors of such entity) in an amount designed, in the
reasonable judgment of the Board of Directors of such entity,
to provide you with a potential appreciation in value equal to
that anticipated to be realized by the Class A Common Stock
held by you prior to the IPO. Such option shall have an
exercise price equal to the price of Common Stock sold to the
public in the IPO and shall vest in accordance with the terms
of such incentive plan.
11. Legend on Certificates. Each stock certificate issued to
represent any shares of the Common Stock (the "Common Shares") shall bear the
following (or a substantially equivalent) legend on its face or reverse side:
"These securities have not been registered under the
Securities Act of 1933, as amended, or under the applicable securities
laws of any other jurisdiction. These securities may not be sold unless
registered under the Securities Act of 1933, as amended, and any other
applicable securities laws, unless an exemption from such registration
is available. In addition, the transfer of these securities is subject
to restrictions set forth in an Agreement, dated as of _______ __,
1998, and any amendments thereto, a copy of which is available for
inspection at the office of the Company."
Any stock certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear the same legend, unless and to
the extent, in the opinion of counsel acceptable to the Company (which counsel
may be an employee of the Company or its affiliates), the Common Shares
represented thereby are no longer subject to the restrictions referred to in
such legend. For purposes of this Agreement, the term "Common Shares" shall mean
any securities or property into which the Common Shares may be converted or
exchanged pursuant to a recapitalization, stock split, combination,
reorganization, merger, exchange or similar transaction occurring after the date
hereof.
12. Miscellaneous.
(a) This Agreement constitutes the entire agreement of the
parties to this Agreement with respect to the subject matter hereof and may not
be modified or amended except by a written agreement signed by BMCA (following
the
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specific approval of such modification or amendment by
BMCA's Board of Directors) and you.
(b) It is acknowledged that the BMCA will be irreparably
damaged in the event that this Agreement is not specifically enforced. In the
event of a breach or threatened breach of the terms, covenants and/or conditions
of this Agreement by you or any other Holder, BMCA shall, in addition to all
other remedies, be entitled (without any bond or other security being required)
to a temporary and/or permanent injunction, without showing any actual damage or
that monetary damages would not provide an adequate remedy, and/or a decree for
specific performance, in accordance with the provisions of this Agreement.
(c) Each party to this Agreement shall cooperate and shall
take such further action and shall execute and deliver such further documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
(d) No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
(e) All notices or other communications under this Agreement
shall be given in writing and shall be deemed duly given and received on the
third full business day following the date of its mailing by registered or
certified mail, return receipt requested, or when delivered personally, as
follows:
if to BMCA:
Building Materials Corporation
of America
1361 Alps Road
Wayne, New Jersey 07470
or at such other place as BMCA shall have
designated by notice as herein provided to
you;
if to you, at your address as it appears on
the first page hereof, or at such other address as you shall
have designated by notice as herein provided to BMCA; and
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if to any other Holder, the
Holder's last address appearing in stock
transfer records.
(f) No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
(g) Except as otherwise expressly provided in this Agreement,
this Agreement, as amended, shall be binding upon and inure to the benefit of
BMCA, its successors and assigns, and you and your heirs, personal
representatives and assigns; provided, however, that you shall not have the
right to assign any of your rights under this Agreement except as expressly
provided herein; and provided, further, that nothing contained in this Agreement
shall be construed as granting you the right to transfer any of your Common
Stock except in accordance with this Agreement.
(h) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
in this Agreement.
(i) All determinations by the Board of Directors of BMCA or
ISPH (or their successors) hereunder shall be binding and conclusive.
(j) The section headings contained herein are for convenience
only and are not intended to define or limit the contents of any section.
(k) Nothing in this Agreement shall confer on you any right to
continue in the employ of the BMCA or any subsidiary or affiliate of BMCA or any
successor to any of the, affect the right of BMCA or any such subsidiary,
affiliate or successor to terminate your employment at any time, or be deemed a
waiver or modification of any provision contained in any agreement between you
and BMCA or any such subsidiary, affiliate or successor.
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<PAGE>
(l) This Agreement may be executed in counterparts, all of
which taken together shall be deemed one original.
(m) This Agreement shall be deemed to be a contract under the
laws of the State of New York and for all purposes shall be construed and
enforced in accordance with the internal laws of that state without regard to
the principles of conflicts of law.
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(n) NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, THIS AGREEMENT WILL BE OF NO FORCE AND EFFECT IF
THE MERGER IS NOT CONSUMMATED.
If you are in agreement with the foregoing, please sign and return the
extra copy of this Agreement, whereupon this Agreement shall become a binding
agreement between you and the Company.
Very truly yours,
BUILDING MATERIALS CORPORATION
OF AMERICA
By: /s/ Richard A. Weinberg
---------------------------
Name: Richard A. Weinberg
Title: Executive Vice
President, General
Counsel and Secretary
ISP HOLDINGS INC.
By: /s/ Richard A. Weinberg
--------------------------
Name: Richard A. Weinberg
Title: Executive Vice
President, General
Counsel and Secretary
AGREED AND ACCEPTED:
/s/ Sunil Kumar
- --------------------
Sunil Kumar
19
<PAGE>
SCHEDULE A
CASH VESTING SCHEDULE
CASH
PAYMENTS
PAYMENT AS CUMULATIVE CUMULATIVE
DATES ADJUSTED PAYMENTS VESTING
------- -------- ---------- ----------
SAR Payment 16-July-98 $1,428,158 $1,428,158 28.2%
SAR Payment 10-Apr-99* $598,292 $2,026,450 39.9%
Pref Optn Pmt 11-Jun-99 $0 $2,026,450 39.9%
SAR Payment 12-Feb-2000 $0 $2,026,450 39.9%
Pref Optn Pmt 11-Jun-2000 $0 $2,026,450 39.9%
Pref Optn Pmt 11-Jun-2001 $761,691 $2,788,141 55.0%
Pref Optn Pmt 11-Jun-2002 $761,691 $3,549,832 70.0%
Pref Optn Pmt 11-Jun-2003 $761,691 $4,311,523 85.0%
Pref Optn Pmt 11-Dec-2003 $761,689 $5,073,212 100.0%
TOTAL $5,073,212
* Original date per SAR agreement was Feb 12, 1999
<PAGE>
SCHEDULE B
ORIGINAL CASH VESTING SCHEDULE
ORIGINAL
CASH ORIGINAL
PAYMENT PAYMENT CUMULATIVE CUMULATIVE
DATES SCHEDULE PAYMENTS VESTING
------- --------- ---------- ----------
SAR Payment 16-July-98 $1,828,029 $1,823,029 35.9%
SAR Payment 12-Feb-99 $598,292 $2,421,321 47.7%
Pref Optn Pmt 11-Jun-99 $643,861 $3,065,182 60.4%
SAR Payment 12-Feb-2000 $583,503 $3,648,685 71.9%
Pref Optn Pmt 11-Jun-2000 $346,877 $3,995,562 78.8%
Pref Optn Pmt 11-Jun-2001 $311,746 $4,307,308 84.9%
Pref Optn Pmt 11-Jun-2002 $279,584 $4,586,892 90.4%
Pref Optn Pmt 11-Jun-2003 $249,896 $4,836,788 95.3%
Pref Optn Pmt 11-Dec-2003 $236,424 $5,073,212 100.0%
TOTAL $5,073,212
<PAGE>
SCHEDULE C
CHANGE OR CONTROL CASH VESTING SCHEDULE
VESTING ON CUMULATIVE
DATES EACH DATE VESTING
16-July-98 35.9% 35.9%
12-Feb-99 11.8% 47.7%
11-Jun-99 12.7% 60.4%
12-Feb-2000 11.5% 71.9%
11-Jun-2000 6.9% 78.8%
11-Jun-2001 6.1% 84.9%
11-Jun-2002 5.5% 90.4%
11-Jun-2003 4.9% 95.3%
11-Dec-2003 4.7% 100%
100.0%
<PAGE>
EXHIBIT 12
BUILDING MATERIALS CORPORATION OF AMERICA
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(THOUSANDS, EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income before income taxes.............................. $ 32,982 $ 27,819 $ 16,549 $ 27,864 $ 42,771
Add:
Interest expense...................................... 2,045 13,149 24,822 32,044 42,784
Interest component of rental expense.................. 2,091 2,366 2,329 2,769 3,058
--------- --------- --------- --------- ---------
Earnings available for fixed charges.................... $ 37,118 $ 43,334 $ 43,700 $ 62,677 $ 88,613
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
FIXED CHARGES:
Interest expense........................................ $ 2,045 $ 13,149 $ 24,822 $ 32,044 $ 42,784
Add:
Capitalized interest.................................. 178 413 499 381 581
Interest component of rental expense.................. 2,091 2,366 2,329 2,769 3,058
--------- --------- --------- --------- ---------
Total fixed charges..................................... $ 4,314 $ 15,928 $ 27,650 $ 35,194 $ 46,423
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of earnings to fixed charges...................... 8.60 2.72 1.58 1.78 1.91
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS ENDED ---------------------------------
--------------------- SIX SIX
JUNE 29, JUNE 28, YEAR MONTHS MONTHS
1997 1998 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income before income taxes............................. $19,486 $21,691 $ 45,631 $ 19,957 $ 26,668
Add:
Interest expense..................................... 20,099 25,405 44,992 22,294 22,522
Interest component of rental expense................. 1,529 1,605 3,058 1,529 1,605
--------- --------- --------- --------- ---------
Earnings available for fixed charges................... $41,114 $48,701 $ 93,681 $ 43,780 $ 50,795
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
FIXED CHARGES:
Interest expense....................................... $20,099 $25,405 $ 44,992 $ 22,294 $ 22,522
Add:
Capitalized interest................................. 238 706 581 238 706
Interest component of rental expense................. 1,529 1,605 3,058 1,529 1,605
--------- --------- --------- --------- ---------
Total fixed charges.................................... $21,866 $27,716 $ 48,631 $ 24,061 $ 24,833
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of earnings to fixed charges..................... 1.88 1.76 1.93 1.82 2.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<PAGE>
Exhibit 21
BUILDING MATERIALS CORPORATION OF AMERICA
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
COMPANY STATE OF INCORPORATION D/B/A
- ------- ---------------------- -----
<S> <C> <C>
Building Materials Corporation of America Delaware GAF Materials Corporation and
Old American Products
U.S. Intec Holdings Inc. Delaware
U.S. Intec Inc. Texas Tri-Ply Corporation and
Intec/Permaglas Corporation
Exterior Technologies Corporation Texas
Intec Marine Inc. Texas
USI Materials Inc. Delaware
GAF Leatherback Corp. Delaware
BMCA Insulation Products Inc. Delaware
BMC Warehousing Inc. Delaware
GAFTECH Corporation Delaware
South Ponca Realty Corp. Delaware
GAF Real Properties Inc. Delaware
BMCA Receivables Corp. Delaware
TOPCOAT, Inc. Delaware
GAF Kalamazoo Acquisition Corp. Delaware
GAF Materials Corporation (Canada) Delaware
Pequannock Valley Claim Service Company, Inc. Delaware
LL Building Products Inc. Delaware
BMCA Goldsboro, Inc. Delaware
GAF Premium Products Inc. Delaware
Wind Gap Real Property Acquisition Corp. Delaware
</TABLE>
<PAGE>
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
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
August 31, 1998
<PAGE>
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
(Exact name of obligor as specified in its charter)
Delaware 22-3276290
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
BUILDING MATERIALS CORPORATION OF AMERICA
1361 Alps Road
Wayne, New Jersey 07470
(Address of principal executive offices) (Zip code)
--------------------------
Series B 7-3/4% Senior Notes due 2005
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 18th day of August, 1998.
THE BANK OF NEW YORK
By: /S/ ILIANA ACEVEDO
-----------------------------
Name: ILIANA ACEVEDO
Title: ASSISTANT TREASURER
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK Exhibit 7
of 48 Wall Street, New York, N.Y. 10286 ---------
And Foreign and Domestic Subsidiaries, a member of the Federal
Reserve System, at the close of business March 31, 1998, published in
accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 6,397,993
Interest-bearing balances .......... 1,138,362
Securities:
Held-to-maturity securities ........ 1,062,074
Available-for-sale securities ...... 4,167,240
Federal funds sold and Securities pur-
chased under agreements to resell... 391,650
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................36,538,242
LESS: Allowance for loan and
lease losses ..............631,725
LESS: Allocated transfer risk
reserve..........................0
Loans and leases, net of unearned
income, allowance, and reserve 35,906,517
Assets held in trading accounts ...... 2,145,149
Premises and fixed assets (including
capitalized leases) ................ 663,928
Other real estate owned .............. 10,895
Investments in unconsolidated
subsidiaries and associated
companies .......................... 237,991
Customers' liability to this bank on
acceptances outstanding ............ 992,747
Intangible assets .................... 1,072,517
Other assets ......................... 1,643,173
-----------
Total assets ......................... $55,830,236
===========
LIABILITIES
Deposits:
In domestic offices ................ $24,849,054
Noninterest-bearing ......10,011,422
Interest-bearing .........14,837,632
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,319,002
Noninterest-bearing .........707,820
Interest-bearing .........14,611,182
Federal funds purchased and Securities
sold under agreements to repurchase. 1,906,066
Demand notes issued to the U.S.
Treasury ........................... 215,985
Trading liabilities .................. 1,591,288
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,991,119
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,574
Bank's liability on acceptances exe-
cuted and outstanding .............. 998,145
Subordinated notes and debentures .... 1,314,000
Other liabilities .................... 2,421,281
-----------
Total liabilities .................... 50,631,514
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,328,050
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 40,198
Cumulative foreign currency transla-
tion adjustments ................... ( 36,129)
------------
Total equity capital ................. 5,198,722
------------
Total liabilities and equity
capital ............................ $55,830,236
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi |
Alan R. Griffith | Directors
J. Carter Bacot |
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
BUILDING MATERIALS CORPORATION OF AMERICA
OFFER FOR ALL OUTSTANDING
7 3/4% SENIOR NOTES DUE 2005
IN EXCHANGE FOR
SERIES B 7 3/4% SENIOR NOTES DUE 2005,
PURSUANT TO THE PROSPECTUS
DATED AUGUST , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, (THE 'EXPIRATION DATE'). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
The Bank of New York (Eligible Institutions and 101 Barclay Street
101 Barclay Street - 7E Withdrawal Notices Only) Corporate Trust Services Window
New York, New York 10286 (212) 815-6339 Ground Level
Attn: Reorganization Section Confirm by Telephone: New York, New York 10286
(212) 815-2791 Attn: Reorganization Section
For Information Call:
(212) 815-2791
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS BY ELIGIBLE INSTITUTIONS VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated August ,
1998 (the 'Prospectus'), of Building Materials Corporation of America, a
Delaware corporation (the 'Company'), and this Letter of Transmittal (the
'Letter'), which together constitute the Company's offer (the 'Exchange Offer')
to exchange an aggregate principal amount at maturity of up to $150,000,000 of
Series B 7 3/4% Senior Notes due 2005 (the 'New Notes') of the Company for a
like principal amount at maturity of the issued and outstanding 7 3/4% Senior
Notes due 2005 (the 'Old Notes') of the Company from the holders thereof.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. 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
the New Notes. Interest on the New Notes will accrue from their respective dates
of issuance. Holders of Old Notes accepted for exchange will be deemed to have
waived the right to receive any other payments or interest on the Old Notes. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term 'Expiration Date'
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by means of a
press release or other public announcement prior to 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
This Letter (or an Agent's Message in lieu thereof) is to be completed by a
holder of Old Notes either if certificates are to be forwarded herewith or if a
tender of certificates for Old Notes, if available, is to be made by book-entry
transfer to the account maintained by The Bank of New York (the 'Exchange
Agent') at The Depository Trust Company (the 'Book-Entry Transfer Facility')
pursuant to the procedures set forth in 'The Exchange Offer--Book-Entry
Transfer' section of the Prospectus. Holders of Old Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility (a 'Book-Entry
Confirmation') and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Old Notes according
to the guaranteed delivery procedures set forth in 'The Exchange
Offer--Guaranteed Delivery Procedures' section of the Prospectus. See
Instruction 1. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
In lieu of delivering this letter, an Agent's Message will constitute valid
delivery. The term 'Agent's Message' means a message, transmitted by the
Book-Entry Transfer Facility and received by the Exchange Agent and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgement from a participant tendering
Old Notes that are the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Company may enforce such agreement against such participant.
<PAGE>
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount at
maturity of Old Notes should be listed on a separate signed schedule affixed
hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- --------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT PRINCIPAL AMOUNT
REGISTERED HOLDER(S) (PLEASE CERTIFICATE AT MATURITY AT MATURITY
FILL IN, IF BLANK) NUMBER(S)* OF OLD NOTE(S) TENDERED**
- --------------------------------------------------------------------------------
________________________________________________
________________________________________________
________________________________________________
________________________________________________
TOTAL
________________________________________________
- --------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the Old Notes indicated in
column 2. See Instruction 2. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple
thereof. See Instruction 1.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) __________________________________________
Window Ticket No. (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery _______________________
Name of Institution which Guaranteed Delivery ____________________________
If delivered by Book-Entry Transfer, complete the following:
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name _____________________________________________________________________
Address __________________________________________________________________
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
1. Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
2. The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person is engaging in or intends to engage in a distribution of such New Notes,
that neither the holder of such Old Notes nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder of such Old Notes nor any such
other person is an 'affiliate,' as defined in Rule 405 under the Securities Act
of 1933, as amended (the 'Securities Act'), of the Company.
3. The undersigned also acknowledges that the Exchange Offer is being made
in reliance on an interpretation, made to third parties, by the staff of the
Securities and Exchange Commission (the 'SEC') that the New Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder that is an 'affiliate' of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business, such
holders are not engaging in and do not intend to engage in the distribution of
such New Notes and such holders have no arrangements or understandings with any
person to participate in the distribution of such New Notes. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of New Notes. If the
undersigned is a broker-dealer that will receive New Notes for its own account
in exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Notes. However, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
4. The undersigned may, if, and only if, it would not receive freely
tradeable New Notes in the Exchange Offer or is not eligible to participate in
the Exchange Offer, elect to have its Old Notes registered in the shelf
registration described in the Registration Rights Agreement, dated as of July
17, 1998, among the Company, Bear, Stearns & Co. Inc. and BNY Capital Markets,
Inc. (the 'Registration Agreement') in the form filed as Exhibit 4.3 to the
Registration Statement of the Company, Registration No. 333-60633. Capitalized
terms used in this paragraph 4 and not otherwise defined herein shall have the
meanings given them in the Registration Agreement. Such election may be made by
checking the box under 'Special Registration Instructions' below. By making such
election, the undersigned agrees, as a holder of Old Notes participating in a
Shelf Registration, to comply with the Registration Agreement and to indemnify
and hold harmless each Initial Purchaser and each person, if any, who controls
any Initial Purchaser within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), and the Company, each director and officer of the Company and
each person, if any, who controls the Company within the meaning of either such
Section, from and against any losses, claims, damages and liabilities or any
actions in respect thereof, to which such Initial Purchaser or any controlling
person of such Initial Purchaser, and the Company or any of its directors,
officers or controlling persons 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 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
any omission or alleged omission to state therein a material fact necessary to
make the statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement
3
<PAGE>
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 the undersigned
specifically for inclusion therein; and shall reimburse, as incurred, the
Company for any legal or other expenses reasonably incurred by the Company or
any director, officer or controlling person thereof in connection with the
investigation 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. Any such indemnification shall be governed by the
terms and subject to the conditions set forth in the Registration Agreement,
including, without limitation, the provisions regarding notice, retention of
counsel, contribution and payment of expenses set forth therein. The above
summary of the indemnification provisions of the Registration Agreement is not
intended to be exhaustive and is qualified in its entirety by the Registration
Agreement.
5. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in 'The Exchange Offer--Withdrawal Rights' section
of the Prospectus. See Instruction 9.
6. Unless otherwise indicated in the box entitled 'Special Issuance
Instructions' below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the name
of the undersigned or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled 'Special
Delivery Instructions' below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled 'Description
of Old Notes.'
4
<PAGE>
THE UNDERSIGNED ACKNOWLEDGES THAT THE EXCHANGE OFFER IS SUBJECT TO THE MORE
DETAILED TERMS SET FORTH IN THE PROSPECTUS AND, IN CASE OF ANY CONFLICT BETWEEN
THE TERMS OF THE PROSPECTUS AND THIS LETTER, THE PROSPECTUS SHALL PREVAIL.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED 'DESCRIPTION OF OLD NOTES'
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY IF certificates for Old Notes To be completed ONLY IF certificates for Old Notes not
not exchanged and/or New Notes are to be issued in the exchanged and/or New Notes are to be sent to someone
name of someone other than the person or persons whose other than the person or persons whose signature(s)
signature(s) appear(s) on this Letter below, or if Old appear(s) on this Letter below or to such person or
Notes delivered by book-entry transfer which are not persons at an address other than shown in the box
accepted for exchange are to be returned by credit to an entitled 'Description of Old Notes' on this Letter above.
account maintained at the Book-Entry Transfer Facility
other than the account indicated above.
Issue: / / New Notes and/or / / Old Notes to: Mail: / / New Notes and/or / / Old Notes to:
Name(s): Name(s):
------------------------------- -------------------------------
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
------------------------------- -------------------------------
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
Address: Address:
------------------------------- -------------------------------
- -------------------------------------- ---------------------------------------
(ZIP CODE) (ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Old Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility account
set forth below:
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
</TABLE>
5
<PAGE>
SPECIAL REGISTRATION INSTRUCTIONS
(SEE PARAGRAPH 4 ABOVE)
To be completed ONLY IF (i) the undersigned satisfies the conditions set forth
in paragraph 4 above, (ii) the undersigned elects to register its Old Notes in
the shelf registration described in the Registration Agreement, and (iii) the
undersigned agrees to comply with the Registration Agreement and to indemnify
certain entities and individuals as set forth in paragraph 4 above.
/ / By checking this box the undersigned hereby (i) represents that it is
entitled to have its Old Notes registered in a shelf registration in accordance
with the Registration Agreement, (ii) elects to have its Old Notes registered
pursuant to the shelf registration described in the Registration Agreement, and
(iii) agrees to comply with the Registration Agreement and to indemnify certain
entities and individuals identified in, and to the extent provided in, paragraph
4 above.
________________________________________________________________________________
IMPORTANT: THIS LETTER (OR AN AGENT'S MESSAGE IN LIEU THEREOF) OR A FACSIMILE
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
________________________________________________________________________________
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
x
_____________________________________________________ ___________________1998
x
_____________________________________________________ ___________________1998
x
_____________________________________________________ ___________________1998
SIGNATURE(S) OF OWNER DATE
Area Code and Telephone Number _________________________________________________
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) exactly as the name(s) appear(s) on the certificate(s) for
the Old Notes or, if tendered by a participant in the Book-Entry Transfer
Facility, exactly as such name appears on a security position listing as the
owner of the Old Notes, or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s): _______________________________________________________________________
________________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: _____________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDING ZIP CODE)
Employer Identification or Social Security Number_______________________________
(PLEASE COMPLETE SUBSTITUTE
FORM W-9, IF APPLICABLE. SEE
'IMPORTANT TAX INFORMATION'
BELOW)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: _______________________________________________________
(AUTHORIZED SIGNATURE)
________________________________________________________________________________
(TITLE)
________________________________________________________________________________
(NAME AND FIRM)
6
<PAGE>
INSTRUCTIONS
1. Delivery of This Letter and Notes; Guaranteed Delivery Procedures. This
Letter (or an Agent's Message in lieu thereof) is to be completed by holders of
Old Notes either if certificates are to be forwarded herewith or if tenders are
to be made pursuant to the procedures for delivery by book-entry transfer set
forth in 'The Exchange Offer--Book-Entry Transfer' section of the Prospectus.
Certificates for all physically tendered Old Notes, or Book-Entry Confirmation,
as the case may be, as well as a properly completed and duly executed Letter (or
manually signed facsimile thereof), with any required signature guarantees
(unless an Agent's Message is transmitted in lieu thereof), and any other
documents required by this Letter, must be received by the Exchange Agent at the
address set forth herein on or prior to the Expiration Date, or the tendering
holder must comply with the guaranteed delivery procedures set forth below. Old
Notes tendered hereby must be in denominations of principal amount at maturity
of $1,000 or any integral multiple thereof.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in 'The Exchange
Offer--Guaranteed Delivery Procedures' section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution
(as defined below), (ii) on or prior to 5:00 p.m., New York City time, on the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or a facsimile thereof) and
Notice of Guaranteed Delivery (or an Agent's Message with respect to guaranteed
delivery in lieu thereof), substantially in the form provided by the Company (by
facsimile transmission, 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 (including by
means of an Agent's Message), as the case may be, and any other documents
required by this Letter 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 Book-Entry Confirmation, as the case may
be, and all other documents required by this Letter, must be received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER, THE OLD NOTES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE
AGENT. 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 PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY.
See 'The Exchange Offer' section in the Prospectus.
2. Partial Tenders. If less than all of the Old Notes evidenced by a
submitted certificate are to be tendered, the tendering holder(s) should fill in
the aggregate principal amount at maturity of Old Notes to be tendered in the
box above entitled 'Description of Old Notes--Principal Amount at Maturity
Tendered.' A reissued certificate representing the balance of nontendered Old
Notes of a tendering holder who physically delivered Old Notes will be sent to
such tendering holder, unless otherwise provided in the appropriate box on this
Letter, promptly after the Expiration Date. All of the Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
3. Signatures on This Letter; Bond Powers and Endorsements; Guarantee of
Signatures. If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
7
<PAGE>
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) or bond
powers must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificates must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must be
guaranteed by an Eligible Institution.
If this Letter or any certificates 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,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed 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' and collectively, 'Eligible Institutions').
Signatures on the Letter need not be guaranteed by an Eligible Institution
if (A) the Old Notes are tendered (i) by a registered holder of Old Notes (which
term, for purposes of the Exchange Offer, includes any participant in the
Book-Entry Transfer Facility system whose name appears on a security position
listing as the holder of such Old Notes) who has not completed the box entitled
'Special Issuance Instructions' or 'Special Delivery Instructions' on this
Letter, or (ii) for the account of an Eligible Institution and (B) the box
entitled 'Special Registration Instructions' on this Letter has not been
completed.
4. Special Issuance and Delivery Instructions. Tendering holders of Old
Notes should indicate in the applicable box the name and address to which New
Notes issued pursuant to the Exchange Offer and/or substitute certificates
evidencing Old Notes not exchanged are to be issued or sent, if different from
the name or address of the person signing this Letter. In the case of issuance
in a different name, the employer identification or social security number of
the person named must also be indicated. Noteholders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such noteholder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name and address of the person signing this
Letter.
5. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason other
than the transfer of Old Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
6. Waiver of Conditions. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
8
<PAGE>
7. No Conditional Tenders. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
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 any such
notice.
8. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
9. Withdrawal of Tenders. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., 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 above prior to 5:00 p.m., 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 this Letter by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the trustee under the
Indenture pursuant to which the Old Notes were issued register the transfer of
such Old Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. Any Old Notes so properly 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 the procedures described above at any time on or prior
to 5:00 p.m., New York City time, on the Expiration Date.
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 of this Letter)
will be final and binding on all parties.
10. Requests for Assistance or Additional Copies. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus, this Letter and other related documents may be directed to the
Exchange Agent, at the address and telephone number indicated above.
9
<PAGE>
IMPORTANT TAX INFORMATION
Under current federal income tax law to prevent backup withholding on any
New Notes delivered pursuant to the Exchange Offer and any payments made in
respect of the New Notes, a holder of New Notes generally is required to provide
the Company (as payor) with such holder's correct taxpayer identification number
('TIN') on Substitute Form W-9 or otherwise to establish a basis for exemption
from backup withholding. If a holder of New Notes is an individual, the TIN is
such holder's social security number. If a holder required to do so fails to
provide the Company with the correct taxpayer identification number, the holder
may be subject to a $50 penalty imposed by the Internal Revenue Service.
Accordingly, each prospective holder of New Notes to be issued pursuant to
Special Issuance Instructions should complete the attached Substitute Form W-9.
The Substitute Form W-9 need not be completed if the box entitled Special
Issuance Instructions has not been completed.
Certain holders of New Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt prospective holders of New Notes should indicate
their exempt status on Substitute Form W-9. A foreign individual may qualify as
an exempt recipient by submitting to the Company, through the Exchange Agent, a
properly completed Internal Revenue Service Form W-8 (which the Exchange Agent
will provide upon request) signed under penalty of perjury, attesting to the
holder's exempt status. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of New Notes or other payee. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any New Notes delivered pursuant to the
Exchange Offer and any payments received in respect of the New Notes, each
prospective holder of New Notes to be issued pursuant to Special Issuance
Instructions should provide the Company, through the Exchange Agent, with
either: (i) such prospective holder's correct TIN by completing the form below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
prospective holder is awaiting a TIN) and that (A) such prospective holder has
not been notified by the Internal Revenue Service that he or she is subject to
backup withholding as a result of a failure to report all interest or dividends
or (B) the Internal Revenue Service has notified such prospective holder that he
or she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective holder of New Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the New Notes. If the New Notes will be held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance regarding which number to report.
10
<PAGE>
<TABLE>
<CAPTION>
PAYOR'S NAME: THE BANK OF NEW YORK
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND -------------------------
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. Social Security Number(s)
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE OR
PAYOR'S REQUEST FOR -------------------------
TAXPAYER Employer Identification
IDENTIFICATION Number(s)
NUMBER ('TIN')
PART 2 -- CERTIFICATION-- Under penalties of perjury, I PART 3
certify that: Awaiting TIN
(1) The number shown on this form is my currenttaxpayer ------------
identification number (or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup withholding because: (a) I am
an exempt holder, (b) I have not been notified by the
Internal Revenue Service (the 'IRS') that I am subject
to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) in
Part 2 above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you are subject to backup
withholding you receive another notification from the IRS
stating that you are no longer subject to backup withholding,
do not cross out such item (2).
SIGNATURE DATE , 1998
----------------- --------
</TABLE>
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF NEW NOTES TO BE ISSUED PURSUANT TO THE
SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS FORM MAY
RESULT IN BACKUP WITHHOLDING OF 31% OF THE NEW NOTES DELIVERED TO YOU
PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED BY YOU IN RESPECT
OF THE NEW NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide such
a number.
SIGNATURE DATE , 1998
---------------------- ------
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
7 3/4% SENIOR NOTES DUE 2005
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
BUILDING MATERIALS CORPORATION OF AMERICA
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer relating to the tender of 7 3/4% Senior Notes due 2005 (the 'Old
Notes') of Building Materials Corporation of America (the 'Company') made
pursuant to the Prospectus, dated , 1998 (the 'Prospectus'), if
certificates for Old Notes of the Company are not immediately available or if
the procedure for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Exchange Agent prior to
5:00 p.m., New York City time, on , 1998 (the 'Expiration Date'). Such
form may be delivered or transmitted by facsimile transmission, mail or hand
delivery to The Bank of New York (the 'Exchange Agent') as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, the Exchange Agent must receive from an
Eligible Institution prior to 5:00 p.m., New York City time, on the Expiration
Date, a completed, signed and dated Letter of Transmittal relating to the Old
Notes (or facsimile thereof or an Agent's Message in lieu thereof). Capitalized
terms used herein and not defined herein are used as so defined in the
Prospectus.
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Facsimile By Hand/Overnight
Certified Mail: Transmission Number: Delivery:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street--7E (212) 815-6339 101 Barclay Street
New York, New York 10286 Confirm by Telephone: Corporate Trust Services Window
Attn: Reorganization Section (212) 815-2791 Ground Level
For Information Call: New York, New York 10286
(212) 815-2791 Attn: Reorganization Section
</TABLE>
------------------------
DELIVERY OF THIS NOTICE TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS NOTICE VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Building Materials Corporation of
America, a Delaware corporation (the 'Company'), in accordance with the
Company's offer, upon the terms and subject to the conditions set forth in the
Prospectus dated August , 1998 (the 'Prospectus'), and in the accompanying
Letter of Transmittal, receipt of which is hereby acknowledged,
$ in aggregate principal amount of Old Notes pursuant to the
guaranteed delivery procedures described in the Prospectus.
Name(s) of Record Holder(s) ____________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________
Area Code & Telephone No.
---------------------------
Certificate Number(s) for Old Notes (if available) _____________________________
Total Principal Amount Represented by Certificate(s): $
-------------------------
________________________________________________________________________________
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
________________________________________________________________________________
PLEASE SIGN HERE
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
Signature(s) of Holder(s) Date
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Capacity:
-------------------------------------------------------
Address(es):
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
/ / The Depository Trust Company
(Check if Old Notes will be tendered by book-entry transfer)
Account Number
---------------------------
THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, 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
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Old Notes being tendered hereby or confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company, in proper form for transfer, together with any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the Expiration Date.
- ----------------------------------- -----------------------------------
Name of Firm Authorized Signature
- ----------------------------------- -----------------------------------
Address Title
- ----------------------------------- Name:
Zip Code -------------------------------
(Please Type or Print)
Area Code and Tel. No. Dated:
-------------- -----------------------------
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
3
<PAGE>
Exhibit 99.3
August __, 1998
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
Building Materials Corporation of America (the "Company")
proposes to make an offer (the "Exchange Offer") to exchange its 7 3/4% Senior
Notes due 2005 (the "Old Securities") for its Series B 7 3/4% Series Notes due
2005 (the "New Securities"). The terms and conditions of the Exchange Offer as
currently contemplated are set forth in a prospectus, dated August __, 1998
(the "Prospectus"), proposed to be distributed to all record holders of the
Old Securities. The Old Securities and the New Securities are collectively
referred to herein as the "Securities".
The Company hereby appoints The Bank of New York to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the
Company on or about August __, 1998. The Letter of Transmittal accompanying
the Prospectus (or in the case of book entry securities, the ATOP system) is
to be used by the holders of the Old Securities to accept the Exchange Offer
and contains instructions with respect to the delivery of certificates for Old
Securities tendered in connection therewith.
The Exchange Offer shall expire at 5:00 p.m., New York City
time, on September __, 1998 or on such later date or time to which the Company
may extend the Exchange Offer (the "Expiration Date"). Subject to the terms
and conditions set forth in the Prospectus, the Company expressly reserves the
right to extend the Exchange Offer from time to time and may extend the
Exchange Offer by giving oral (confirmed in writing) or written notice to you
before 9:00 A.M., New York City time, on the business day following the
previously scheduled Expiration Date.
<PAGE>
The Company expressly reserves the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old
Securities not theretofore accepted for exchange, upon the occurrence of any
of the conditions of the Exchange Offer specified in the Prospectus under the
caption "The Exchange Offer -- Expiration Date; Amendments." The Company will
give oral (confirmed in writing) or written notice of any amendment,
termination or nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to
act in accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The
Exchange Offer" or as specifically set forth herein; provided, however, that
in no way will your general duty to act in good faith be discharged by the
foregoing.
2. You will establish an account with respect to the Old
Securities at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Exchange Offer within two business days after
the date of the Prospectus, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of the Old Securities by causing the Book-Entry Transfer Facility to
transfer such Old Securities into your account in accordance with the
Book-Entry Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Securities (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Securities to
ascertain whether: (i) the Letters of Transmittal and any such other documents
are duly executed and properly completed in accordance with instructions set
forth therein and (ii) the Old Securities have otherwise been properly
tendered. In each case where the Letter of Transmittal or any other document
has been improperly completed or executed or any of the certificates for Old
Securities are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Exchange Offer exists, you will endeavor
to inform the presenters of the need for fulfillment of all requirements and
to take any other action as may be
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necessary or advisable to cause such irregularity to be corrected.
4. With the approval of the Chief Executive Officer, Senior
Vice President, Executive Vice President, or any Vice President of the Company
(such approval, if given orally, to be confirmed in writing) or any other
party designated by such an officer in writing, you are authorized to waive
any irregularities in connection with any tender of Old Securities pursuant to
the Exchange Offer.
5. Tenders of Old Securities may be made only as set forth
in the Letter of Transmittal and in the section of the Prospectus captioned
"The Exchange Offer -- Procedures for Tendering", and Old Securities shall be
considered properly tendered to you only when tendered in accordance
with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old
Securities which the Chief Executive Officer, Senior Vice President, Executive
Vice President, or any Vice President of the Company shall approve as having
been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Old
Securities received subsequent to the Expiration Date and accept its
instructions with respect to disposition of such Old Securities.
7. You shall accept tenders:
(a) in cases where the Old Securities are registered in two
or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old
Securities provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
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You shall accept partial tenders of Old Securities
where so indicated and as permitted in the Letter of Transmittal and deliver
certificates for Old Securities to the transfer agent for split-up and return
any untendered Old Securities to the holder (or such other person as may be
designated in the Letter of Transmittal) as promptly as practicable after
expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to
the Exchange Offer, the Company will notify you (such notice if given orally,
to be confirmed in writing) of its acceptance, promptly after the Expiration
Date, of all Old Securities properly tendered and you, on behalf of the
Company, will exchange such Old Securities for New Securities and cause such
Old Securities to be cancelled. Delivery of New Securities will be made on
behalf of the Company by you at the rate of $1,000 principal amount of New
Securities for each $1,000 principal amount of the corresponding series of Old
Securities tendered promptly after notice (such notice if given orally, to be
confirmed in writing) of acceptance of said Old Securities by the Company;
provided, however, that in all cases, Old Securities tendered pursuant to the
Exchange Offer will be exchanged only after timely receipt by you of
certificates for such Old Securities (or confirmation of book-entry transfer
into your account at the Book-Entry Transfer Facility), a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) with any
required signature guarantees and any other required documents. You shall
issue New Securities only in denominations of $1,000 or any integral multiple
thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Old Securities tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Old
Securities tendered if any of the conditions set forth in the Exchange Offer
are not met. Notice of any decision by the Company not to exchange any Old
Securities tendered shall be given (and confirmed in writing) by the Company
to you.
11. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Old Securities tendered because of an
invalid tender, the
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occurrence of certain other events set forth in the Prospectus under the
caption "The Exchange Offer -- Conditions" or otherwise, you shall as soon as
practicable after the expiration or termination of the Exchange Offer return
those certificates for unaccepted Old Securities (or effect appropriate
book-entry transfer), together with any related required documents and the
Letters of Transmittal relating thereto that are in your possession, to the
persons who deposited them.
12. All certificates for reissued Old Securities, unaccepted
Old Securities or for New Securities shall be forwarded by first-class mail.
13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, bank or
other persons or to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other
than those specifically set forth herein or in the Section of the Prospectus
captioned "The Exchange Offer" as may be subsequently agreed to in writing by
you and the Company;
(b) will be regarded as making no representa-
tions and having no responsibilities as to the validity, sufficiency, value or
genuineness of any of the certificates or the Old Securities represented
thereby deposited with you pursuant to the Exchange Offer, and will not be
required to and will make no representation as to the validity, value or
genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal
action hereunder which might in your reasonable judgment involve any expense
or liability, unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be pro-
tected in acting in reliance upon any certificate, instrument, opinion,
notice, letter, telegram or other document or security delivered to you and
reasonably believed by you to be genuine and to have been signed by the proper
party or parties;
(e) may reasonably act upon any tender,
statement, request, comment, agreement or other instrument
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whatsoever not only as to its due execution and validity and effectiveness of
its provisions, but also as to the truth and accuracy of any information
contained therein, which you shall in good faith believe to be genuine or to
have been signed or represented by a proper person or persons;
(f) may rely on and shall be protected in
acting upon written or oral instructions from any officer of
the Company;
(g) may consult with your counsel with
respect to any questions relating to your duties and responsibilities and the
advice or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken by
you hereunder in good faith and in accordance with the advice or opinion of
such counsel; and
(h) shall not advise any person tendering Old
Securities pursuant to the Exchange Offer as to the wisdom of making such
tender or as to the market value or decline or appreciation in market value of
any Old Securities.
15. You shall take such action as may from time to time be
requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the
Prospectus) or such other forms as may be approved from time to time by the
Company, to all persons requesting such documents and to accept and comply
with telephone requests for information relating to the Exchange Offer,
provided that such information shall relate only to the procedures for
accepting (or withdrawing from) the Exchange Offer. The Company will furnish
you with copies of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to the Company,
Attention: Investors Relations.
16. You shall advise by facsimile transmission or telephone,
and promptly thereafter confirm in writing to the Treasurer of the Company and
such other person or persons as it may request, daily (and more frequently
during the week immediately preceding the Expiration Date and if otherwise
requested) up to and including the Expiration Date, as to the number of Old
Securities which have been tendered pursuant to the Exchange Offer and the
items received by you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
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received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made
from time to time prior to the Expiration Date of such other information as it
or he or she reasonably requests. Such cooperation shall include, without
limitation, the granting by you to the Company and such person as the Company
may request of access to those persons on your staff who are responsible for
receiving tenders, in order to ensure that immediately prior to the Expiration
Date the Company shall have received information in sufficient detail to
enable it to decide whether to extend the Exchange Offer. You shall prepare a
final list of all persons whose tenders were accepted, the aggregate principal
amount of Old Securities tendered, the aggregate principal amount of Old
Securities accepted and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed
Delivery shall be stamped by you as to the date and the time of receipt
thereof and shall be preserved by you for a period of time at least equal to
the period of time you preserve other records pertaining to the transfer of
securities. You shall dispose of unused Letters of Transmittal and other
surplus materials by returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or
right of set-off whatsoever that you may have with respect to funds deposited
with you for the payment of transfer taxes by reasons of amounts, if any,
borrowed by the Company, or any of its subsidiaries or affiliates pursuant to
any loan or credit agreement with you or for compensation owed to you
hereunder.
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on Schedule I attached
hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification
of you as Exchange Agent, which shall be controlled by this Agreement.
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21. The Company covenants and agrees to indemnify and hold
you harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorneys' fees and expenses, arising
out of or in connection with any act, omission, delay or refusal made by you
in reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably
believed by you to be valid, genuine and sufficient and in accepting any
tender or effecting any transfer of Old Securities reasonably believed by you
in good faith to be authorized, and in delaying or refusing in good faith to
accept any tenders or effect any transfer of Old Securities; provided,
however, that the Company shall not be liable for indemnification or otherwise
for any loss, liability, cost or expense to the extent arising out of your
gross negligence or willful misconduct. In no case shall the Company be liable
under this indemnity with respect to any claim against you unless the Company
shall be notified by you, by letter or by facsimile confirmed by letter, of
the written assertion of a claim against you or of any other action commenced
against you, promptly after you shall have received any such written assertion
or notice of commencement of action. The Company shall be entitled to
participate at its own expense in the defense of any such claim or other
action, and, if the Company so elects, the Company shall assume the defense of
any suit brought to enforce any such claim. In the event that the Company
shall assume the defense of any such suit, the Company shall not be liable for
the fees and expenses of any additional counsel thereafter retained by you so
long as the Company shall retain counsel satisfactory to you to defend such
suit, and so long as you have not determined, in your reasonable judgment,
that a conflict of interest exists between you and the Company.
22. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the
Internal Revenue Service. The Company understands that you are required to
deduct 31% on payments to holders who have not supplied their correct Taxpayer
Identification Number or required certification. Such funds will be turned
over to the Internal Revenue Service in accordance with applicable
regulations.
23. You shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any
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transfer taxes are payable in respect of the exchange of Old Securities, the
Company's check in the amount of all transfer taxes so payable, and the
Company shall reimburse you for the amount of any and all transfer taxes
payable in respect of the exchange of Old Securities; provided, however, that
you shall reimburse the Company for amounts refunded to you in respect of your
payment of any such transfer taxes, at such time as such refund is received by
you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles, and
shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
26. In case any provision of this Agreement 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.
27. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the
party to be charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to
it, at its address or telecopy number set forth below:
If to the Company:
Building Material Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Facsimile: (973) 628-3306
Attention: Executive Vice President-Finance
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If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date.
Notwithstanding the foregoing, Paragraphs 19, 21 and 23 shall survive the
termination of this Agreement. Upon any termination of this Agreement, you
shall promptly deliver to the Company any certificates for Securities, funds
or property then held by you as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
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Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
BUILDING MATERIALS CORPORATION OF
AMERICA
By:
------------------------------
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:
-----------------------------
Name:
Title:
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SCHEDULE I
FEES
$2,500.00
12
