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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2952 22-3276290
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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BUILDING MATERIALS CORPORATION OF AMERICA
1361 ALPS ROAD
WAYNE, NEW JERSEY 07470
(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. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
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Series B 7 3/4% Senior Notes due 2005... $150,000,000 99.574% $149,361,000 $44,062
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not 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 effecitve. 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 4, 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 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON , 1998.
------------------------
Building Materials Corporation of America, a Delaware corporation (the
'Company' or 'BMCA'), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the 'Exchange Offer'), to exchange $1,000 principal amount of its
Series B 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 $150,000,000 is outstanding.
The form and terms of the New Notes are identical to the form and terms of
the Old Notes except that the New Notes have been registered under the
Securities Act of 1933, as amended (the 'Securities Act'), and will not bear any
legends restricting the transfer thereof. The New Notes will evidence the same
debt as the Old Notes and will be issued pursuant to, and entitled to the
benefits of, the Indenture governing the Old Notes (the 'Indenture'). See
'Description of the New Notes.'
The Exchange Offer is being made in order to satisfy certain contractual
obligations of BMCA. There will be no cash proceeds to BMCA from the exchange
pursuant to the Exchange Offer. See 'The Exchange Offer' and 'Description of the
New Notes.' As used herein, the term 'Notes' means the Old Notes and the New
Notes treated as a single class.
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of such New
Notes, such interest to be payable with the first interest payment on such New
Notes. Holders whose Old Notes are accepted for exchange will not receive any
payment in respect of interest thereon accrued after the issuance of the New
Notes.
BMCA will accept for exchange any and all Old Notes validly tendered and not
withdrawn prior to 12:00 midnight, New York City time, on , 1998
unless extended (as so extended, the 'Expiration Date'). Tenders of Old Notes
may be withdrawn at any time prior to the Expiration Date. The Exchange Offer is
subject to certain customary conditions. See 'The Exchange Offer.' The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the 'Commission') to third parties, BMCA believes that the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by a holder thereof (other than any such holder
that is an 'affiliate' of BMCA within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder is not engaging in
and does not intend to engage in a distribution of such New Notes and such
holder has no arrangement 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 March 29, 1998, the
outstanding indebtedness from borrowings of the Company and its subsidiaries was
$568.5 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 $162.4 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, $150,000,000
aggregate principal amount of the Old Notes are outstanding. The
terms of the New Notes and the Old Notes are substantially identical.
Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, BMCA believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a
holder thereof (other than any such holder that is an 'affiliate' of
BMCA within the meaning of Rule 405 promulgated under the Securities
Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that (i) such New
Notes are acquired in the ordinary course of business of such holder,
(ii) such holder is not engaging in and does not intend to engage in
a distribution of such New Notes, and (iii) such holder does not have
an arrangement or understanding with any person to participate in the
distribution of such New Notes. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of
the New Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of
such New Notes. See 'The Exchange Offer--Purpose and Effect' and
'Plan of Distribution.'
Registration Agreement.................... In connection with the issuance of the Old Notes pursuant to the
Offering, BMCA agreed to use its best efforts to cause a registration
statement to become effective with respect to an exchange offer of a
new security for the Old Notes (the 'Registration Agreement'). See
'The Exchange Offer--Purpose and Effect.'
Expiration Date........................... The Exchange Offer will expire at 12:00 midnight, New York City time,
on , 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 12:00 midnight, New York City time, on
the Expiration Date. Any Old Notes not accepted for exchange for any
reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Interest on the New Notes and
Old Notes............................... The Notes will pay interest in cash at the rate of 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 12:00 midnight, New York City time,
on the Expiration Date. By executing the Letter of Transmittal, each
holder will represent to the Company that, among other things, (i)
the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such holder, (ii) the
holder is not engaging in and does not intend to engage in a
distribution of such New Notes, (iii) the holder does not have an
arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) the holder is not an
'affiliate,' as defined under Rule 405 promulgated under the
Securities Act, of the Company. Pursuant to the Registration
Agreement, the Company is required to file a registration statement
for a continuous offering pursuant to Rule 415 under the Securities
Act in respect of the Old Notes of any holder that would not receive
freely tradeable New Notes in the Exchange Offer or is ineligible to
participate in the Exchange Offer and indicates that it wishes to
have its Old Notes registered under the Securities Act. See 'The
Exchange Offer--Procedures for Tendering.'
Book-Entry Transfer....................... The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility (as
defined herein) for purposes of the Exchange Offer within two
business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by
causing the Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility
in
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5
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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 12:00 midnight, New
York City time, on the Expiration Date. The New Notes issued pursuant
to the Exchange Offer will be delivered promptly following the
Expiration Date. See 'The Exchange Offer--Terms of the Exchange
Offer.'
Exchange Agent............................ The Bank of New York is serving as the Exchange Agent in connection
with the Exchange Offer.
Consequences of Failure to Exchange....... The liquidity of the market for a holder's Old Notes could be
adversely affected upon completion of the Exchange Offer if such
holder does not participate in the Exchange Offer. See 'The Exchange
Offer--Consequences of Failure to Exchange.'
Federal Income Tax Consequences........... The exchange pursuant to the Exchange Offer should not be a taxable
event for federal income tax purposes. See 'Certain Federal Income
Tax Considerations.'
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6
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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..................................... $150,000,000 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 March 29, 1998, the outstanding
indebtedness from borrowings of the Company and its subsidiaries was
$568.5 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
$162.4 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 March 29, 1998,
the Company would have been able to make Restricted Payments and
Restricted Investments in the aggregate amount of approximately $29.8
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>
THREE MONTHS ENDED
--------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
--------------------------------- 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 $ 193.3 $ 212.4
Operating income....................................... 45.9 61.4 70.1 9.3 6.0
Interest expense....................................... 24.8 32.0 42.8 9.8 12.7
Income before income taxes............................. 16.5 27.9 42.8 2.9 3.6
Net income............................................. 10.1 17.1 26.1 1.8 2.2
</TABLE>
<TABLE>
<CAPTION>
MARCH 29, 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 $206.2 $ 202.5
Total working capital.............................................. 284.8 300.2 296.5
Total assets....................................................... 807.3 812.3 818.3
Long-term debt less current maturities(2).......................... 555.4 548.2 567.4
Total stockholder's equity......................................... 83.0 81.4 68.1
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------
MARCH 30, MARCH 29,
-------------------------- 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 $ 5.3 $ 6.0
Goodwill amortization....................................... 1.2 1.7 1.9 0.4 0.5
Capital expenditures and acquisitions....................... 54.1 25.6 77.7 31.9 11.7
EBITDA(3)................................................... 62.8 85.4 110.4 18.4 22.8
Ratio of earnings to fixed charges(4)....................... 1.6x 1.8x 1.9x 1.3x 1.2x
Ratio of EBITDA to interest expense(3)...................... 2.5x 2.7x 2.6x 1.9x 1.8x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, MARCH 30, MARCH 29,
1997 1997 1998
------------ ------------- -------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(5):
Adjusted EBITDA(6)................................................ $115.5 $18.8 $ 23.6
Interest expense.................................................. 45.4 11.1 11.4
Net income........................................................ 27.6 1.2 3.5
Ratio of earnings to fixed charges(4)............................. 1.9x 1.2x 1.4x
Ratio of Adjusted EBITDA to interest expense(6)................... 2.5x 1.7x 2.1x
</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 March 29, 1998. Stockholder's equity, As Adjusted, reflects an
extraordinary loss of $13.3 million (net of related income tax benefits)
assuming the Repurchase had been consummated on March 29, 1998, based on an
accreted value of the Deferred Coupon Notes at that date of 86.7%. 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. 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 $10.6 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 (decrease) the Company's pro forma income
before income taxes by $2.4, $(0.9) and $2.1 million for the year 1997 and
the first three months of 1997 and 1998, respectively. As a result, the
Company's pro forma provision for income taxes increased (decreased) by
$0.9, $(0.3) and $0.8 million for the year 1997 and the first three 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 $13.3 million in
extraordinary charges related to the Repurchase. The ratio of Adjusted
EBITDA to interest expense for the three months ended March 30, 1997 and
March 29, 1998 has been calculated based on operating data for such three-
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
-----------------------------------------
THREE THREE THREE THREE
MONTHS MONTHS YEAR MONTHS MONTHS
YEAR ENDED ENDED ENDED ENDED ENDED
ENDED MARCH 30, MARCH 29, DEC. 31, MARCH 30, MARCH 29,
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 $ 2,872 $ 3,604 $ 45,182 $ 2,008 $ 5,716
Add:
Interest expense................... 42,784 9,846 12,692 45,441 11,053 11,373
Goodwill amortization.............. 1,891 428 492 1,891 428 492
Depreciation....................... 22,936 5,263 5,998 22,936 5,263 5,998
-------- ------------ ------------ ----------- ----------- -----------
Adjusted EBITDA.................... $110,382 $ 18,409 $ 22,786 $ 115,450 $ 18,752 $23,579
-------- ------------ ------------ ----------- ----------- -----------
-------- ------------ ------------ ----------- ----------- -----------
</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 March 29,
1998, the Company had total outstanding consolidated long-term debt of $552.0
million and stockholder's equity of $81.4 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 March 29, 1998 total outstanding
consolidated long-term debt of $571.3 million and stockholder's equity of $68.1
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 March 28, 1998, it is defending
approximately 98,700 pending alleged Asbestos Claims (having received notice of
approximately 29,900 new Asbestos Claims during the first quarter of 1998) and
has resolved approximately 245,000 Asbestos Claims (including approximately
10,500 in the first quarter of 1998). GAF has advised the Company that it
believes that a significant portion of the claims
11
<PAGE>
filed in the first quarter 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 1 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 three months of 1998, the Company and USI
purchased in the aggregate approximately $51.1 million and $15.6 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
three months of 1998, the Company purchased in the aggregate approximately $24.5
million and $6.4 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 $1.1 million in 1997 and the first
three 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 March 29,
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 $150,000,000 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 MARCH 29, 1998
(UNAUDITED)
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(THOUSANDS)
<S> <C> <C>
Short-term Debt and current maturities of Long-term Debt:
Short-term debt............................................................. $ 16,478 $ 16,478
Current maturities of long-term debt........................................ 3,875 3,875
-------- -----------
Total.................................................................. $ 20,353 $ 20,353
-------- -----------
-------- -----------
Long-term Debt (excluding current maturities)(1):
11 3/4% Senior Deferred Coupon Notes due 2004............................... $268,875 $ 138,780
7 3/4% Senior Notes due 2005................................................ -- 149,361
8 5/8% Senior Notes due 2006................................................ 99,567 99,567
8% Senior Notes due 2007.................................................... 99,287 99,287
Borrowings under the Credit Agreement(2).................................... 20,000 20,000
Industrial revenue bonds.................................................... 11,125 11,125
Obligations on mortgaged properties......................................... 3,213 3,213
Obligations under capital leases............................................ 46,088 46,088
-------- -----------
Total Long-term Debt (excluding current maturities).................... $548,155 $ 567,421
-------- -----------
-------- -----------
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(3)...................................................... (11,883) (25,187)
Accumulated other comprehensive income...................................... 6,335 6,335
-------- -----------
Total Stockholder's Equity............................................. $ 81,363 $ 68,059
-------- -----------
-------- -----------
Total Capitalization................................................... $629,518 $ 635,480
-------- -----------
-------- -----------
</TABLE>
- ------------------
(1) For a description of long-term debt, see Note 9 to Consolidated Financial
Statements.
(2) No borrowings were outstanding under the Credit Agreement as of June 28,
1998.
(3) On a pro forma basis, accumulated deficit reflects an extraordinary loss of
approximately $13.3 million (net of related income tax benefits) assuming
the Repurchase had been consummated on March 29, 1998, based on an accreted
value of the Deferred Coupon Notes at that date of 86.7%. 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. 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 $10.6
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>
THREE MONTHS ENDED
--------------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
---------------------------------------------- 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 $ 193.3 $ 212.4
Operating income......................... 41.5 44.7 45.9 61.4 70.1 9.3 6.0
Interest expense......................... 2.0 13.1 24.8 32.0 42.8 9.8 12.7
Income before income taxes............... 33.0 27.8 16.5 27.9 42.8 2.9 3.6
Net income............................... 20.4 16.7 10.1 17.1 26.1 1.8 2.2
</TABLE>
<TABLE>
<CAPTION>
MARCH 29, 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 $300.2 $ 296.5
Total assets............................ 259.4 452.3 559.3 701.6 807.3 812.3 818.3
Long-term debt less current
maturities(2) ........................ 38.7 229.2 310.3 405.7 555.4 548.2 567.4
Total Stockholder's equity (deficit).... 85.9 (28.9) 15.8 143.2 83.0 81.4 68.1
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
---------------------------------------------- 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 $ 5.3 $ 6.0
Goodwill amortization................... 0.6 1.1 1.2 1.7 1.9 0.4 0.5
Capital expenditures and acquisitions... 19.0 54.3 54.1 25.6 77.7 31.9 11.7
EBITDA(3)............................... 50.1 58.8 62.8 85.4 110.4 18.4 22.8
Ratio of earnings to fixed charges(4)... 8.6x 2.7x 1.6x 1.8x 1.9x 1.3x 1.2x
Ratio of EBITDA to interest
expense(3)............................ 24.5x 4.5x 2.5x 2.7x 2.6x 1.9x 1.8x
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, MARCH 30, MARCH 29,
1997 1997 1998
---------------- -------------- ---------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(5):
Adjusted EBITDA(6)............................................ $115.5 $ 18.8 $23.6
Interest expense.............................................. 45.4 11.1 11.4
Net income.................................................... 27.6 1.2 3.5
Ratio of earnings to fixed charges(4)......................... 1.9x 1.2x 1.4x
Ratio of Adjusted EBITDA to interest expense(6)............... 2.5x 1.7x 2.1x
</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 March 29, 1998.
Stockholder's equity, As Adjusted, reflects an extraordinary loss of
approximately $13.3 million (net of related income tax benefits) assuming
the Repurchase had been consummated on March 29, 1998, based on an accreted
value of the Deferred Coupon Notes at that date of 86.7%. 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. 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 $10.6
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 (decrease) the Company's pro forma income
before income taxes by $2.4, $(0.9) and $2.1 million for the year 1997 and
the first three months of 1997 and 1998, respectively. As a result, the
Company's pro forma provision for income taxes increased (decreased) by
$0.9, $(0.3) and $0.8 million for the year 1997 and the first three 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 $13.3 million in
extraordinary charges related to the Repurchase. The ratio of Adjusted
EBITDA to interest expense for the three months ended March 30, 1997 and
March 29, 1998 has been calculated based on operating data for such three-
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 Quarter 1998 Compared With First Quarter 1997
The Company recorded first quarter 1998 net income of $2.2 million compared
with $1.8 million in the first quarter of 1997. The 22.2% increase in net income
reflected higher investment income, partially offset by lower operating income
and higher interest expense.
The Company's net sales for the first quarter of 1998 were $212.4 million,
a 9.9% increase over last year's net sales of $193.3 million. The sales growth
occurred in both residential and commercial products. The increase in
residential product sales reflected higher unit volumes, partially offset by
lower average selling prices. The increase in commercial product sales reflected
both higher unit volumes and higher average selling prices.
Gross profit margin decreased slightly to 25.6% in the first quarter of
1998 from 25.9% in the first quarter of 1997, resulting primarily from the lower
average residential selling prices, partially offset by lower manufacturing
costs.
Operating income for the first quarter of 1998 was $6.0 million compared
with $9.3 million in the first quarter of 1997. The decline in operating income
was attributable to increased selling, general and administrative expenses,
partially offset by the impact of higher product sales. Selling, general and
administrative expenses increased by 18.3% to $48.4 million compared with last
year's $40.9 million. In addition to higher expenses resulting from increased
sales volume, the Company incurred increased distribution costs due to rail
carrier service problems in certain regions of the country requiring utilization
of higher-cost transportation alternatives, together with higher expenses
relating to expanded marketing efforts.
Interest expense increased to $12.7 million in the first quarter of 1998
from $9.8 million last year 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 $10.3 million for the quarter
compared with $3.4 million last year, 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
18
<PAGE>
$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.
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 quarter of 1998 was $21.6 million before
financing activities, and reflected the use of $2.6 million of cash for
operations, the reinvestment of $11.7 million for capital programs, and the
generation of $35.9 million from net sales of available-for-sale and
held-to-maturity securities.
Cash invested in additional working capital totaled $36.8 million during
the first quarter of 1998, primarily reflecting a seasonal increase in
inventories of $31.8 million and a $28.9 million increase in the receivable from
the trust which purchases the Company's trade accounts receivable, partially
offset by a $25.4 million increase in accounts payable and accrued liabilities.
Accrued liabilities increased by $14.7 million to $41.0 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 $10.3 million cash inflow from related party
transactions and a $4.0 million cash inflow from net sales of trading
securities.
19
<PAGE>
Net cash used in financing activities totaled $22.3 million during the
first quarter of 1998, mainly reflecting a $14.0 million decrease in borrowings
under the Company's bank revolving credit facility and a $10.5 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.
As a result of the foregoing factors, cash and cash equivalents decreased
by $0.7 million during the first quarter to $12.2 million (excluding $194.0
million of trading and available-for-sale securities and other short-term
investments).
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 March 29, 1998, $30.5 million of letters of credit were
outstanding and $20.0 million had been borrowed under the Credit Agreement.
Under the terms of the Credit Agreement, the Company is subject to certain
financial covenants, including interest coverage and leverage ratios, and
dividends and other restricted payments are limited. The Company was in
compliance with such covenants as of March 29, 1998. As of June 28, 1998, no
borrowings were outstanding under the Credit Agreement, and $33.0 million of
letters of credit were outstanding.
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. As of March 29, 1998, the Company had swaps outstanding
which had a remaining aggregate principal amount of $60.0 million and a final
maturity of July 1, 1999. By utilizing swaps, the Company reduced its interest
expense by $1.5, $2.2, $2.0, $0.6 and $0.5 million in 1995, 1996 and 1997 and
the first quarters of 1997 and 1998, respectively. See Note 9 to Consolidated
Financial Statements. In the second quarter of 1998, all of the outstanding
swaps were terminated.
20
<PAGE>
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 March 29, 1998, the Company
had total outstanding consolidated indebtedness of $568.5 million, of which $3.9
million matures prior to March 31, 1999, and stockholder's equity of $81.4
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 March 29, 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 $37.0 million were outstanding at March 29, 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, 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 March 29, 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 $29.8 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.
The Company intends to use the remaining proceeds of the Offering to purchase
(and subsequently cancel) Deferred Coupon Notes, in privately-negotiated
transactions, in open market transactions or otherwise.
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,
21
<PAGE>
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.
For a discussion of seasonality, see 'Business--Seasonal Variations and
Working Capital.'
FUTURE DEVELOPMENTS
The Company expects to record in the third quarter of 1998 a nonrecurring
charge to net income of between approximately $3.5 million and $4.5 million
related to a grant to an executive officer of restricted common stock of the
Company and certain cash payments to be made to such officer over time.
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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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
Ohio
Wadsworth................................................ Plant*, Warehouse*
Oregon
Corvallis................................................ Plant
</TABLE>
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<TABLE>
<CAPTION>
LOCATION FACILITY
- ----------------------------------------------------------- -------------------------------------------
<S> <C>
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 March 28, 1998, it is defending
approximately 98,700 pending alleged Asbestos Claims (having received notice of
approximately 29,900 new Asbestos Claims during the first quarter of 1998) and
has resolved approximately 245,000 Asbestos Claims (including approximately
10,500 in the first quarter of 1998). GAF has advised the Company that it
believes that a significant portion of the claims filed in the first quarter 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 five 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 December 31,
1997, to pay asbestos-related bodily injury claims aggregate insurance coverage
of $246.1 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 fraud and 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 1, 1998, the Company employed approximately 3,000 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 .............. 60 Dr. LaPalme has been Senior Vice President--Operations of BMCA and
Senior Vice President-- certain of its subsidiaries since April 1996. He was Vice
Operations President--Operations of BMCA and certain of its subsidiaries from
January 1994 to April 1996 and held the same position with GAFBMC from
1987 to May 1994. From 1985 to 1987 he was plant manager and Director
of Manufacturing Polymers of GFC's Calvert City, Kentucky
manufacturing facility. From 1981 to 1984 he was Vice President of
Manufacturing of GAF's Building Materials Division.
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 March 29, 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 $37.0 million were
outstanding at March 29, 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 12:00 midnight, New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in
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exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000 in principal amount.
The form and terms of 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, $150,000,000 aggregate principal amount
of the Old Notes were outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders and to others believed to
have beneficial interests in the Old Notes. Holders of Old Notes do not have any
appraisal or dissenters' rights in connection with the Exchange Offer under the
General Corporation Law of the State of Delaware or the Indenture. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange
Act'), and the rules and regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, except as set forth below under
'--Transfer Taxes,' transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
'--Fees and Expenses' below.
EXPIRATION DATE; AMENDMENTS
The term 'Expiration Date' shall mean 12:00 midnight, New York City time,
on , 1998, unless the Company, in its sole discretion, extends
the Exchange Offer (in which case the term 'Expiration Date' shall mean the
later date and time to which the Exchange Offer is extended). The Company does
not intend to extend the Exchange Offer although it reserves the right to do so
by giving oral or written notice of such extension to the Exchange Agent and by
giving each registered holder notice by means of a press release or other public
announcement of any extension, in each case, prior to 9:00 A.M., New York City
time, on the next business day after the scheduled Expiration Date. The Company
also reserves the right, in its sole discretion, (i) to delay accepting any Old
Notes or, if any of the conditions set forth below under '--Conditions' shall
not have been satisfied or waived, to terminate the Exchange Offer or (ii) to
amend the terms of the Exchange Offer in any 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 12:00 midnight, New York
City time, on the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof 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 12:00 midnight,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth below under '--Exchange Agent' prior to 12:00
midnight, New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the 'Depositor'), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Old Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form, and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under '--Procedures for Tendering' above at any time
on or prior to 12:00 midnight, New York City time, on the Expiration Date.
CONDITIONS
Notwithstanding any other provision of the Exchange Offer and subject to
its obligations pursuant to the Registration Agreement, the Company shall not be
required to accept for exchange, or to issue New Notes in exchange for, any Old
Notes and may terminate or amend the Exchange Offer, if at any time before the
acceptance of such New Notes for exchange any of the following events shall
occur:
A. any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
B. the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened by the Commission
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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) 571-3080 (212) 815-6333
The Exchange Agent also acts as trustee under the Indenture.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $ 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 Trust Indenture Act of 1939, as amended (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 $150,000,000
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 Holdings and its Affiliates (so long as they are
under common control with the Company) shall be deemed to be Affiliates of the
Company.
'Applicable Premium' means, with respect to any Note, the greater of (x)
1.0% of the principal amount of such Note and (y) the excess, if any, of (a) the
present value of the remaining interest payments, principal and
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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.
'ISP Holdings' means ISP Holdings Inc., a Delaware corporation, and its
successors.
'Issue' means issue, assume, Guarantee, incur or otherwise become liable
for; provided that any Debt or Capital Stock of a Person existing at the time
such Person becomes a Subsidiary of another Person (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary of such other Person.
'Issue Date' means 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
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other than at fair market value, including by the receipt of Capital Stock of
such Non-Recourse Subsidiary; provided that, if any such acquisition or series
of related acquisitions involves assets having a value in excess of $2,000,000,
such acquisition or series of related acquisitions shall be approved by a
majority of the members of the Board of Directors of the Company in a Board
Resolution which shall set forth that such acquisitions are being, or have been,
made at fair market value, and (C) which has no Debt other than Non-Recourse
Debt.
'Notes' means the Old Notes, the Private Exchange Notes and the New Notes,
treated as a single class of securities.
'Parent' means GAF so long as it owns, and any other Person which acquires
or owns, directly or indirectly, 80% or more of the Voting Stock of the Company.
'Permitted Holders' means (i) Samuel J. Heyman, his heirs, administrators,
executors and entities of which a majority of the Voting Stock is owned by
Samuel J. Heyman, his heirs, administrators or executors and (ii) any Person
controlled, directly or indirectly, by Samuel J. Heyman or his heirs,
administrators or executors.
'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 quarters ended
March 30, 1997 and March 29, 1998 (Unaudited)............................................................ F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
as of March 29, 1998 (Unaudited)......................................................................... F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1997 and the first quarters
ended March 30, 1997 and March 29, 1998 (Unaudited)...................................................... F-5
Consolidated Statements of Stockholder's Equity (Deficit) for the three years ended December 31, 1997 and
the first quarter ended March 29, 1998 (Unaudited)....................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)..................................................................... F-24
</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-23 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>
FIRST QUARTER ENDED
-------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
--------------------------------- 1997 1998
1995 1996 (UNAUDITED) (UNAUDITED)
-------- -------- 1997 ----------- -----------
-----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................................ $687,184 $851,967 $ 944,629 $ 193,324 $ 212,429
-------- -------- ----------- ----------- -----------
Costs and expenses:
Cost of products sold.............................. 506,012 622,234 686,992 143,166 158,034
Selling, general and administrative................ 134,145 166,706 185,653 40,438 47,874
Goodwill amortization.............................. 1,170 1,664 1,891 428 492
-------- -------- ----------- ----------- -----------
Total costs and expenses........................ 641,327 790,604 874,536 184,032 206,400
-------- -------- ----------- ----------- -----------
Operating income..................................... 45,857 61,363 70,093 9,292 6,029
Interest expense..................................... (24,822) (32,044) (42,784) (9,846) (12,692)
Other income (expense), net.......................... (4,486) (1,455) 15,462 3,426 10,267
-------- -------- ----------- ----------- -----------
Income before income taxes........................... 16,549 27,864 42,771 2,872 3,604
Income taxes......................................... (6,450) (10,809) (16,680) (1,119) (1,404)
-------- -------- ----------- ----------- -----------
Net income........................................... $ 10,099 $ 17,055 $ 26,091 $ 1,753 $ 2,200
-------- -------- ----------- ----------- -----------
-------- -------- ----------- ----------- -----------
</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, MARCH 29,
----------------------- 1998
1996 (UNAUDITED)
-------- 1997 -----------
-----------
(THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................. $124,560 $ 12,921 $ 12,236
Investments in trading securities......................................... 1,065 62,059 53,946
Investments in available-for-sale securities.............................. 82,016 161,290 119,593
Investments in held-to-maturity securities................................ 7,169 499 --
Other short-term investments.............................................. 15,944 19,488 20,459
Accounts receivable, trade, less reserve of $1,974, $2,752 and $2,922,
respectively............................................................ 9,870 13,643 17,412
Accounts receivable, other................................................ 23,235 50,839 79,321
Receivable from related parties, net...................................... -- 5,151 26,561
Loan receivable from related party........................................ -- 6,152 --
Inventories............................................................... 77,196 72,254 104,093
Other current assets...................................................... 3,751 6,243 7,354
-------- ----------- -----------
Total Current Assets.................................................... 344,806 410,539 440,975
Property, plant and equipment, net.......................................... 220,500 241,946 247,474
Excess of cost over net assets of businesses acquired, net of accumulated
amortization of $6,889, $8,780 and $9,272, respectively................... 60,469 70,046 69,556
Deferred income tax benefits................................................ 59,053 35,981 37,077
Receivable from related parties............................................. -- 31,661 --
Other assets................................................................ 16,755 17,113 17,219
-------- ----------- -----------
Total Assets................................................................ $701,583 $ 807,286 $ 812,301
-------- ----------- -----------
-------- ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Short-term debt........................................................... $ -- $ 26,944 $ 16,478
Current maturities of long-term debt...................................... 3,412 3,801 3,875
Accounts payable.......................................................... 47,879 55,642 66,336
Payable to related parties, net........................................... 2,287 -- --
Accrued liabilities....................................................... 27,938 26,298 41,032
Reserve for asbestos claims............................................... 3,062 -- --
Reserve for product warranty claims....................................... 12,914 13,100 13,100
-------- ----------- -----------
Total Current Liabilities............................................... 97,492 125,785 140,821
-------- ----------- -----------
Long-term debt less current maturities...................................... 405,690 555,446 548,155
-------- ----------- -----------
Reserve for product warranty claims......................................... 30,755 23,881 23,401
-------- ----------- -----------
Other liabilities........................................................... 24,409 19,175 18,561
-------- ----------- -----------
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) (11,883)
Accumulated other comprehensive income.................................... 711 10,171 6,335
-------- ----------- -----------
Stockholder's Equity........................................................ 143,237 82,999 81,363
-------- ----------- -----------
Total Liabilities and Stockholder's Equity.................................. $701,583 $ 807,286 $ 812,301
-------- ----------- -----------
-------- ----------- -----------
</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>
FIRST QUARTER ENDED
--------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
------------------------------- 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 1,753 2,200
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation................................. 20,252 23,857 22,936 5,263 5,998
Goodwill amortization........................ 1,170 1,664 1,891 428 492
Deferred income taxes........................ 6,250 10,609 16,481 1,069 1,357
Noncash interest charges..................... 21,432 23,718 27,222 6,486 7,448
(Increase) decrease in working capital items...... (8,050) (14,905) 17,859 (49,638) (36,827)
Purchases of trading securities................... -- (33,824) (123,483) (24,095) (26,353)
Proceeds from sales of trading securities......... -- 30,394 55,378 2,807 30,368
(Increase) decrease in other assets............... 1,924 (1,711) 1,773 (34) (15)
Decrease in other liabilities..................... (4,502) (4,158) (9,356) (1,047) (800)
Change in net receivable from/payable to related
parties........................................ 1,939 (341) (39,099) (22,879) 10,251
Other, net........................................ 112 787 (8,001) (992) 3,330
------- -------- -------- ----------- -----------
Net cash provided by (used in) operating
activities........................................ 50,626 53,145 (10,308) (80,879) (2,551)
------- -------- -------- ----------- -----------
Cash provided by (used in) investing activities:
Capital expenditures and acquisitions............. (54,111) (25,629) (77,705) (31,899) (11,731)
Purchases of available-for-sale securities........ (45,706) (139,355) (223,804) (64,189) (16,031)
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 18,058 51,439
Proceeds from held-to-maturity securities......... -- -- 11,361 5,955 499
------- -------- -------- ----------- -----------
Net cash provided by (used in) investing
activities........................................ (93,470) (64,549) (121,192) (76,666) 24,176
------- -------- -------- ----------- -----------
Cash provided by (used in) financing activities:
Proceeds (repayments) from sale of accounts
receivable..................................... 7,919 8,015 (35,332) (1,858) (2,944)
Increase (decrease) in short-term debt............ -- -- 26,944 42,178 (10,466)
(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................................ -- -- 34,000 425 (14,000)
Repayments of long-term debt...................... (10,440) (34,856) (3,521) (827) (921)
Decrease in restricted cash....................... 24,484 -- -- -- --
Capital contribution from (distribution to) parent
company........................................ 34,312 86,077 (91,000) -- --
Payments of asbestos claims....................... (59,795) (66,224) (3,062) (3,062) --
Financing fees and expenses....................... (297) (2,539) (1,932) (57) (131)
------- -------- -------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ 59,818 89,975 19,861 36,799 (22,310)
------- -------- -------- ----------- -----------
Net change in cash and cash equivalents............. 16,974 78,571 (111,639) (120,746) (685)
------- -------- -------- ----------- -----------
Cash and cash equivalents, end of period............ $45,989 $124,560 $ 12,921 $ 3,814 $ 12,236
------- -------- -------- ----------- -----------
------- -------- -------- ----------- -----------
</TABLE>
F-5
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
----------------------------- 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 $ (39,736) $ (29,307)
Inventories............................................. (4,557) (8,123) 8,001 (19,903) (31,839)
Other current assets.................................... 1,760 756 (3,029) (1,267) (1,111)
Accounts payable........................................ (6,093) (4,096) 10,210 7,787 10,694
Accrued liabilities..................................... 174 1,680 (5,096) 3,481 14,736
-------- -------- ------- ----------- -----------
Net effect on cash from (increase) decrease in working
capital items........................................ $ (8,050) $(14,905) $17,859 $ (49,638) $ (36,827)
-------- -------- ------- ----------- -----------
-------- -------- ------- ----------- -----------
Cash paid during the period for:
Interest (net of amount capitalized).................... $ 2,796 $ 6,442 $14,001 $ 1,058 $ 1,006
Income taxes (including taxes paid pursuant to the Tax
Sharing Agreement)................................... 213 537 346 101 598
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
------- -----------
------- -----------
</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 'Capital expenditures and acquisitions'. The effects of reclassifications
between noncurrent and current assets and liabilities are excluded from the
amounts shown above. In addition, the increase in receivables shown above does
not reflect the cash proceeds from the sale of 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--first quarter ended March 29,
1998 (unaudited):
Net income (unaudited)............................. -- -- 2,200 $ 2,200
-------------
Other comprehensive income, net of tax:
Unrealized holding gains, net of income taxes of
$1,849 (unaudited)............................... 2,894 2,894
Less: Reclassification adjustment for gains
included in net income, net of income tax effect
of $4,302 (unaudited)............................ (6,730) (6,730)
------------- -------------
Change in unrealized gains on available-for-sale
securities (unaudited)........................... -- (3,836) -- (3,836)
-------------
Comprehensive income (loss)(unaudited)............... $(1,636)
---------- ------------- ----------- -------------
-------------
Balance, March 29, 1998 (unaudited).................... $ 86,911 $ 6,335 $ (11,883)
---------- ------------- -----------
---------- ------------- -----------
</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 quarters
ended March 30, 1997 and March 29, 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 $7.3 million as of December 31,
1996 and 1997 and March 29, 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, $3.6 and $11.9
million of net realized and unrealized gains on securities in 1995, 1996 and
1997 and the first quarters 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 March 29, 1998, the market value of
the Company's equity securities held long was $82.5, $223.0 and $175.7 million,
respectively, and the Company had $5.6, $18.6 and $46.9 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, $1.0 and $1.3 million for 1995, 1996 and 1997 and the
first quarters 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).
Changes in the components of 'Accumulated other comprehensive income' for
the years 1996 and 1997 and the first quarter ended March 29, 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 quarter ended March 29, 1998
(unaudited)................................................. (3,836) -- (3,836)
----------- ---------- -------------
Balance, March 29, 1998 (unaudited)........................... $ 7,266 $ (931) $ 6,335
----------- ---------- -------------
----------- ---------- -------------
</TABLE>
F-11
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 March 28, 1998, it is defending
approximately 98,700 pending alleged Asbestos Claims (having received notice of
approximately 29,900 new Asbestos Claims during the first quarter of 1998) and
has resolved approximately 245,000 Asbestos Claims (including approximately
10,500 in the first quarter of 1998). GAF has advised the Company that it
believes that a significant portion of the claims filed in the first quarter 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.
F-12
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS--(CONTINUED)
For a further discussion with respect to the foregoing, see
'Business--Legal Proceedings', which is incorporated herein by reference.
NOTE 4. ACQUISITION
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.
NOTE 5. INCOME TAXES
Income tax provision, which has been computed on a separate return basis,
consists of the following:
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
------------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal--deferred....................... $(5,424) $ (9,241) $(14,081) $ (925) $(1,172)
------- -------- -------- ------------- -------------
State and local:
Current............................... (200) (200) (200) (50) (50)
Deferred.............................. (826) (1,368) (2,399) (144) (182)
------- -------- -------- ------------- -------------
Total state and local............ (1,026) (1,568) (2,599) (194) (232)
------- -------- -------- ------------- -------------
Income tax provision.................... $(6,450) $(10,809) $(16,680) $(1,119) $(1,404)
------- -------- -------- ------------- -------------
------- -------- -------- ------------- -------------
</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>
FIRST QUARTER ENDED
------------------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory provision..................... $(5,792) $ (9,752) $(14,970) $(1,005) $(1,261)
Impact of:
State and local taxes, net of Federal
benefits........................... (667) (1,019) (1,689) (127) (152)
Nondeductible goodwill amortization... (260) (484) (564) (37) (148)
Other, net............................ 269 446 543 50 157
------- -------- -------- ------------- -------------
Income tax provision.................... $(6,450) $(10,809) $(16,680) $(1,119) $(1,404)
------- -------- -------- ------------- -------------
------- -------- -------- ------------- -------------
</TABLE>
F-13
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 29,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities related to property, plant and equipment.. $(11,782) $(14,742) $ (15,134)
-------- -------- -----------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes:
Reserve for asbestos claims................................... 1,195 -- --
Other......................................................... 38,774 29,294 30,150
Net operating losses not yet utilized under the Tax Sharing
Agreement..................................................... 30,866 21,429 22,061
-------- -------- -----------
Total deferred tax assets.......................................... 70,835 50,723 52,211
-------- -------- -----------
Net deferred tax assets............................................ $ 59,053 $ 35,981 $ 37,077
-------- -------- -----------
-------- -------- -----------
</TABLE>
Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that future taxable income will more likely
than not be sufficient to utilize fully the deferred tax assets recorded.
The Company and its subsidiaries entered into a tax sharing agreement (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
F-14
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. INCOME TAXES--(CONTINUED)
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 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, $1.4
and $1.2 million in 1995, 1996 and 1997 and the first quarters of 1997 and 1998,
respectively.
NOTE 7. INVENTORIES
At December 31, 1996 and 1997 and March 29, 1998, $7.6, $7.8 and $11.0
million, respectively, of inventories were valued using the LIFO method.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 29,
------------------ 1998
1996 1997 (UNAUDITED)
------- ------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Finished goods....................................................... $41,201 $38,459 $ 66,051
Work in process...................................................... 10,844 10,180 11,652
Raw materials and supplies........................................... 26,206 24,670 27,445
------- ------- -----------
Total........................................................... 78,251 73,309 105,148
Less LIFO reserve.................................................... (1,055) (1,055) (1,055)
------- ------- -----------
Inventories.......................................................... $77,196 $72,254 $ 104,093
------- ------- -----------
------- ------- -----------
</TABLE>
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 29,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Land and land improvements........................................ $ 25,722 $ 26,052 $ 26,204
Buildings and building equipment.................................. 46,001 48,525 48,783
Machinery and equipment (including equipment under capitalized
leases of $17,660, $15,466 and $14,826--see Note 9)............. 178,190 183,108 188,666
Construction in progress.......................................... 19,039 40,775 46,296
-------- -------- -----------
Total........................................................ 268,952 298,460 309,949
Less accumulated depreciation and amortization.................... (48,452) (56,514) (62,475)
-------- -------- -----------
Property, plant and equipment, net................................ $220,500 $241,946 $ 247,474
-------- -------- -----------
-------- -------- -----------
</TABLE>
F-15
<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, MARCH 29,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -----------
(THOUSANDS)
<S> <C> <C> <C>
11 3/4% Senior Deferred Coupon Notes due 2004..................... $233,018 $261,203 $ 268,875
8 5/8% Senior Notes due 2006...................................... 99,504 99,554 99,567
8% Senior Notes due 2007.......................................... -- 99,268 99,287
Borrowings under revolving credit facility........................ -- 34,000 20,000
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 4,254
Obligations under capital leases (Note 12)........................ 51,800 49,594 48,922
-------- -------- -----------
Total........................................................ 409,102 559,247 552,030
Less current maturities........................................... (3,412) (3,801) (3,875)
-------- -------- -----------
Long-term debt less current maturities............................ $405,690 $555,446 $ 548,155
-------- -------- -----------
-------- -------- -----------
</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 March 29, 1998, after giving effect to the most restrictive of the
aforementioned restrictions, the Company could have paid dividends of up to
$29.8 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
March 29, 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 which have a remaining
aggregate ending notional principal amount of $60.0 million and a final maturity
of July 1, 1999. As a result of the swaps, the effective interest cost to the
Company of the portion of the Deferred Coupon Notes covered by the swaps varies
at a fixed spread over LIBOR. Based on the fair value of the swaps at December
31, 1996 and 1997 and March 29, 1998, the Company would have incurred gains,
including accrued interest, of $8.0, $3.1 and $3.4 million, respectively,
representing the estimated amount that would be receivable by the Company if the
swaps were terminated at such dates. No cash interest will be paid on
F-16
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
the swaps until maturity. In 1997, the Company terminated swaps with an
aggregate ending notional principal amount of $82.0 million, resulting in gains
totaling $2.1 million. The gains have been deferred and will be amortized as a
reduction of interest expense over the remaining life of the swaps. The Company
may be considered to be at risk, to the extent of the costs of replacing such
swaps at current market rates, in the event of nonperformance by counterparties.
However, since the counterparties are major financial institutions, the credit
ratings of which are continually monitored by the Company, the risk of such
nonperformance is considered by the Company to be remote.
In August 1997, the Company entered into a new three-year bank credit
facility (the 'Credit Agreement'). The terms of the Credit Agreement provide for
a $75 million revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $75 million in the aggregate. As of March 29, 1998, $30.5
million of letters of credit were outstanding and $20.0 million had been
borrowed under the Credit Agreement. Under the terms of the Credit Agreement,
the Company is subject to certain financial covenants, including interest
coverage and leverage ratios, and dividends and other restricted payments are
limited. 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 March 29,
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 March 29,
1998. The weighted average interest rate on the Company's $16.5 million of
short-term borrowings as of March 29, 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 March 29, 1998 was $268.9, $293.0 and $299.2 million, respectively. The
estimated fair value of the 8 5/8% Notes as of December 31, 1996 and 1997 and
March 29, 1998 was $100.0, $103.6 and $103.8 million, respectively. The
estimated fair value of the 8% Notes as of December 31, 1997 and March 29, 1998
was $99.6 and $101.3 million, respectively.
F-17
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. LONG-TERM DEBT--(CONTINUED)
The aggregate maturities of long-term debt as of March 29, 1998 for the
next five years are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MARCH 31, (THOUSANDS)
- ----------------------------------------------------------------------- -----------
<S> <C>
1999................................................................... $ 3,875
2000................................................................... 4,211
2001................................................................... 25,992
2002................................................................... 5,196
2003................................................................... 14,509
</TABLE>
In the above table, maturities for the twelve months ended March 31, 2001
include the $20.0 million of borrowings outstanding under the Credit Agreement
as of March 29, 1998, based on the expiration of the Credit Agreement in August
2000. Maturities for the twelve months ended March 31, 2003 include $11.2
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, $0.9 and $1.1 million for 1995, 1996 and 1997 and the
first quarters 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, $104,000 and
$51,000 for 1996 and 1997 and the first quarters 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>
F-18
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. BENEFIT PLANS--(CONTINUED)
Net periodic pension cost for the Hourly Retirement Plan was $0.1 million
for each of the first quarters of 1997 and 1998.
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 quarters of 1997 and 1998.
Preferred Stock Option Plan
On January 1, 1996, the Company issued options to certain employees to
purchase 24,509 shares of redeemable convertible preferred stock ('Preferred
Stock') of the Company, exercisable at a price of $100 per share. Options to
purchase 77,509 and 7,675 shares of Preferred Stock were issued in 1997 and the
first quarter of 1998, respectively, exercisable at a price of $100 per share.
As of December 31, 1997 and March 29, 1998, options to purchase 85,994 and
93,663 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-19
<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 seven years.
Upon exercise, employees are entitled to receive a cash payment based on the
increase in Book Value (as defined in the plan). Expense accrued under this plan
was $0.1, $0.4, $0.1 and $0.1 million for 1996 and 1997 and the first quarters
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 $0.1 million for each of the
first quarters 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-20
<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, MARCH 29,
------------------ 1998
1996 1997 (UNAUDITED)
------- ------- -----------
(THOUSANDS)
<S> <C> <C> <C>
Receivable from (payable to):
GAF/G-I Holdings/G Industries....................................... $ 274 $ 9,684 $37,003
GAFBMC.............................................................. 115 713 843
GFC................................................................. -- (1,559) (5,016)
ISP................................................................. (2,676) (3,687) (6,269)
------- ------- -----------
Receivable from (payable to) related parties, net................... $(2,287) $ 5,151 $26,561
------- ------- -----------
------- ------- -----------
</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 quarter 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 quarter 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 March 29, 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 March 29,
1998 was $41.7 and $37.0 million, respectively, of which $10.0 and $37.0
million, respectively, was classified as a short-term receivable from 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, $13.7 and $15.6 million
for 1995, 1996 and 1997 and the first quarters of 1997 and 1998, respectively.
The amount payable to ISP at December 31, 1996 and 1997 and March 29, 1998 for
such purchases was $3.2, $2.7 and $7.3 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-21
<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, $6.0 and $6.4 million for the year 1997 and the first
quarters 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,
$1.2 and $1.1 million for 1995, 1996 and 1997 and the first quarters 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 quarters 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 $185.2 million, including as
of March 29, 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).
During the twelve months ended March 31, 1999, such parent companies expect net
receipts of $33.4 million, principally from a tax refund. GAF has advised the
Company that it expects to obtain funds to satisfy such obligations from, among
other things, dividends and loans from subsidiaries (principally the Company),
as to
F-22
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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)
Effective June 1, 1998, the Company purchased for approximately $44 million
substantially all of the assets of Leslie-Locke, Inc., an Atlanta, Georgia-based
company which manufactures and markets a variety of specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. Leslie-Locke, Inc. had 1997 sales of
approximately $90 million. The acquisition will be accounted for under the
purchase method of accounting. This acquisition, if it had occurred on January
1, 1997, would not have had a material impact on 1997 results of operations.
In June 1998, the Company terminated swaps relating 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 in a private placement offering $150
million aggregate principal amount at maturity of 7 3/4% Senior Notes due 2005.
F-23
<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-24
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<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.
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)).
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).
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)).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
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 -- 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).
10.14 -- 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')).
10.15 -- 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).
10.16 -- 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).
10.17 -- 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).
10.18 -- 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 (incorporated by reference to Exhibit 21 to the 1997 Form 10-K).
*23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
*24 -- Power of Attorney (included on signature pages to Registration Statement).
**25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of
New York, as Trustee under the Indenture.
27 -- Financial Data Schedule for the first three 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 fiscal quarter ended March 29, 1998).
**99.1 -- Form of Letter of Transmittal.
**99.2 -- Form of Notice of Guaranteed Delivery.
**99.3 -- Form of Exchange Agreement between The Bank of New York and BMCA.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by Amendment.
(b) Schedules
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
II-3
<PAGE>
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to to be signed on its behalf by the
undersigned thereunto duly authorized, in the Township of Wayne, State of New
Jersey, on the 3rd day of August 1998.
BUILDING MATERIALS CORPORATION OF
AMERICA
By: /s/ James P. Rogers
------------------------------
Name: James P. Rogers
Title: Executive Vice President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of Messrs. Heyman, Kumar and Lang
hereby constitutes James P. Rogers such person's true and lawful attorney, with
full power of substitution to sign for such person and in such person's name and
capacity indicated below, any and all amendments to this Registration Statement,
and to file the same with the Securities and Exchange Commission, hereby
ratifying and confirming such person's signature as it may be signed by said
attorney to any and all amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- -------------------------------------------------------------- --------------
<S> <C> <C>
/s/ Samuel J. Heyman
- ---------------------------- Chairman, Chief Executive Officer
Samuel J. Heyman and Director (Principal Executive Officer) August 3, 1998
/s/ Sunil Kumar
- ---------------------------- President, Chief Operating Officer
Sunil Kumar and Director August 3, 1998
/s/ James P. Rogers
- ---------------------------- Executive Vice President and Director
James P. Rogers August 3, 1998
/s/ William C. Lang
- ---------------------------- Senior Vice President and Chief Financial Officer
William C. Lang (Principal Financial and Accounting Officer) August 3, 1998
</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 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 3, 1998
<PAGE>
EXECUTION COPY
- -------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
7 3/4% Senior Notes due 2005
and
Series B 7 3/4% Senior Notes due 2005
-------------------------------------
INDENTURE
Dated as of July 17, 1998
-------------------------------------
THE BANK OF NEW YORK
-------------------------------------
Trustee
- -------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture
Act Section Indenture Section
310(a)(1)............................................. 7.10
(a)(2)........................................... 7.10
(a)(3)........................................... N.A.
(a)(4)........................................... N.A.
(a)(5)........................................... 7.08
(b).............................................. 7.08; 7.10; 10.02
(c).............................................. N.A.
311(a).............................................. 7.11
(b).............................................. 7.11
(c).............................................. N.A.
312(a).............................................. 2.05
(b).............................................. 10.03
(c).............................................. 10.03
313(a).............................................. 7.06
(b)(1)........................................... N.A.
(b)(2)........................................... 7.06
(c).............................................. 7.06; 10.02
(d).............................................. 7.06
314(a).............................................. 4.05; 4.06; 10.02
(b).............................................. N.A.
(c)(l)........................................... 10.04
(c)(2)........................................... 10.04
(c)(3)........................................... N.A.
(d).............................................. N.A.
(e).............................................. 10.05
(f).............................................. N.A.
315(a).............................................. 7.12(b)
(b).............................................. 7.05; 10.02
(c).............................................. 7.12(a)
(d).............................................. 7.12(c)
(e).............................................. 6.11
316(a)(last sentence)............................... 2.09
(a)(1)(A)........................................ 6.05
(a)(1)(B)........................................ 6.04
(a)(2)........................................... N.A.
(b).............................................. 6.07
(c).............................................. 9.04
317(a)(1)........................................... 6.08
(a)(2)........................................... 6.09
(b).............................................. 2.04
318(a).............................................. 10.01
- ---------------------------
N.A. means "not applicable".
*This Cross-Reference Table shall not, for any purpose, be deemed to be a part
of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.......................1
SECTION 1.01. DEFINITIONS...................................................1
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT............18
SECTION 1.03. RULES OF CONSTRUCTION........................................18
ARTICLE II. THE SECURITIES.................................................19
SECTION 2.01. FORM AND DATING..............................................19
SECTION 2.02. EXECUTION AND AUTHENTICATION; AGGREGATE PRINCIPAL AMOUNT.....19
SECTION 2.03. REGISTRAR AND PAYING AGENT...................................20
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST..........................20
SECTION 2.05. SECURITYHOLDER LISTS.........................................21
SECTION 2.06. TRANSFER AND EXCHANGE........................................21
SECTION 2.07. REPLACEMENT SECURITIES.......................................23
SECTION 2.08. OUTSTANDING SECURITIES.......................................23
SECTION 2.09. TREASURY SECURITIES..........................................23
SECTION 2.10. TEMPORARY SECURITIES.........................................24
SECTION 2.11. CANCELLATION.................................................24
SECTION 2.12. DEFAULTED INTEREST...........................................24
SECTION 2.13. CUSIP NUMBER.................................................24
SECTION 2.14. DEPOSIT OF MONEYS............................................24
ARTICLE III. REDEMPTION....................................................25
SECTION 3.01. NOTICES TO TRUSTEE...........................................25
SECTION 3.02. [RESERVED]...................................................25
SECTION 3.03. NOTICE OF REDEMPTION.........................................25
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION...............................26
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE..................................26
SECTION 3.06. SECURITIES REDEEMED IN PART..................................26
ARTICLE IV. COVENANTS......................................................26
SECTION 4.01. PAYMENT OF SECURITIES........................................26
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY..............................26
SECTION 4.03. CORPORATE EXISTENCE..........................................27
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS............................27
SECTION 4.05. COMPLIANCE CERTIFICATES......................................27
SECTION 4.06. SECURITIES AND EXCHANGE COMMISSION REPORTS...................28
SECTION 4.07. WAIVER OF STAY, EXTENSION OR USURY LAWS......................28
SECTION 4.08. MAINTENANCE OF PROPERTIES....................................29
SECTION 4.09. LIMITATION ON DEBT AND PREFERRED STOCK OF THE COMPANY
AND ITS SUBSIDIARIES.........................................29
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS AND RESTRICTED
INVESTMENTS..................................................31
SECTION 4.11. LIMITATION ON LIENS..........................................33
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES...................34
SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.......................................36
SECTION 4.14. CHANGE OF CONTROL............................................37
SECTION 4.15. LIMITATION ON ASSET SALES....................................38
SECTION 4.16. RESTRICTION ON TRANSFER OF CERTAIN ASSETS TO SUBSIDIARIES....41
SECTION 4.17. INVESTMENT COMPANY ACT.......................................41
SECTION 4.18. CONSENTS, ETC................................................41
i
<PAGE>
ARTICLE V. SUCCESSOR CORPORATION...........................................41
SECTION 5.01. WHEN THE COMPANY MAY MERGE, ETC..............................41
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED............................42
ARTICLE VI. DEFAULTS AND REMEDIES..........................................42
SECTION 6.01. EVENTS OF DEFAULT............................................42
SECTION 6.02. ACCELERATION.................................................43
SECTION 6.03. OTHER REMEDIES...............................................44
SECTION 6.04. WAIVER OF PAST DEFAULTS......................................44
SECTION 6.05. CONTROL BY MAJORITY..........................................44
SECTION 6.06. LIMITATION ON REMEDIES.......................................45
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.........................45
SECTION 6.08. COLLECTION SUIT BY TRUSTEE...................................45
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.............................45
SECTION 6.10. PRIORITIES...................................................46
SECTION 6.11. UNDERTAKING FOR COSTS........................................46
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES...........................46
ARTICLE VII. TRUSTEE.......................................................47
SECTION 7.01. RIGHTS OF TRUSTEE............................................47
SECTION 7.02. INDIVIDUAL RIGHTS OF TRUSTEE.................................47
SECTION 7.03. MONEY HELD IN TRUST..........................................47
SECTION 7.04. TRUSTEE'S DISCLAIMER.........................................48
SECTION 7.05. NOTICE OF DEFAULTS...........................................48
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS................................48
SECTION 7.07. COMPENSATION AND INDEMNITY...................................48
SECTION 7.08. REPLACEMENT OF TRUSTEE.......................................49
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.............................50
SECTION 7.10. ELIGIBILITY: DISQUALIFICATION................................50
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY........50
SECTION 7.12. DUTIES OF TRUSTEE............................................50
SECTION 7.13. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY......51
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE...........................52
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES DEFEASANCE..............52
SECTION 8.02. CONDITIONS TO DEFEASANCE.....................................52
SECTION 8.03. APPLICATION OF TRUST MONEY...................................54
SECTION 8.04. REPAYMENT TO COMPANY.........................................54
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.........................54
SECTION 8.06. REINSTATEMENT................................................54
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS............................54
SECTION 9.01. WITHOUT CONSENT OF HOLDERS...................................54
SECTION 9.02. WITH CONSENT OF HOLDERS......................................55
SECTION 9.03. REVOCATION AND EFFECT OF CONSENTS............................56
SECTION 9.04. RECORD DATE..................................................57
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES........................57
SECTION 9.06. TRUSTEE MAY SIGN AMENDMENTS, ETC.............................57
SECTION 9.07. COMPLIANCE WITH TIA..........................................57
ARTICLE X. MISCELLANEOUS...................................................57
ii
<PAGE>
SECTION 10.01. TRUST INDENTURE ACT OF 1939.................................57
SECTION 10.02. NOTICES.....................................................57
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.................58
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT..........58
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION...............59
SECTION 10.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR...................59
SECTION 10.07. GOVERNING LAW...............................................59
SECTION 10.08. NO INTERPRETATION OF OTHER AGREEMENTS.......................59
SECTION 10.09. NO RECOURSE AGAINST OTHERS..................................59
SECTION 10.10. LEGAL HOLIDAYS..............................................59
SECTION 10.11. SUCCESSORS..................................................60
SECTION 10.12. DUPLICATE ORIGINALS.........................................60
SECTION 10.13. SEPARABILITY................................................60
SECTION 10.14. TABLE OF CONTENTS, HEADINGS, ETC............................60
SECTION 10.15. BENEFITS OF INDENTURE.......................................60
iii
<PAGE>
INDENTURE, dated as of July 17, 1998, between BUILDING
MATERIALS CORPORATION OF AMERICA, a Delaware corporation, and THE BANK OF NEW
YORK, a New York banking corporation (the "Trustee"), having its Corporate
Trust Office at 101 Barclay Street, New York, New York 10286.
The parties agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Company's 7 3/4%
Senior Notes due 2005 (the "Initial Securities") and the Company's Series B 7
3/4% Senior Notes due 2005 (the "Exchange Securities"):
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Accredited Investor" has the meaning set forth in Rule
501(a)(l), (2), (3) or (7) under the Securities Act.
"Acquired Debt", with respect to any Person, means (i) Debt
(including any then unutilized commitment under any revolving working capital
facility) of an entity, which entity is acquired by such Person or any of its
Subsidiaries after the Issue Date; provided that such Debt (including any such
facility) is outstanding at the time of the acquisition of such entity, is not
created in contemplation of such acquisition and is not, directly or
indirectly, recourse (including by way of set-off) to such Person or its
Subsidiaries or any of their respective assets other than to the entity and
its Subsidiaries so acquired and the assets of the entity and its Subsidiaries
so acquired, (ii) Debt of such Person that is not, directly or indirectly,
recourse (including by way of set-off) to such Person and its Subsidiaries or
any of their respective assets other than to specified assets acquired by such
Person or its Subsidiaries after the Issue Date, which Debt is outstanding at
the time of the acquisition of such assets and is not created in contemplation
of such acquisition, or (iii) Refinancings of Debt described in clause (i) or
(ii), provided that the recourse with respect to such Refinancing Debt is
limited to the same extent as the Debt so Refinanced.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" 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.
"Agent" means any Registrar, Paying Agent or co-Registrar of
the Securities.
"Applicable Premium" means, with respect to any Security,
the greater of (x) 1.0% of the principal amount of such Security and (y) the
excess, if any, of (a) the present value
<PAGE>
of the remaining interest payments, principal and future optional redemption
premium (if applicable) of such security, discounted on a semi-annual bond
equivalent basis from the maturity date of the Security to the applicable date
of purchase at a per annum interest rate equal to the Treasury Yield for such
redemption date plus 100 basis points, over (b) the sum of the principal
amount of such Security plus accrued and unpaid interest to the purchase date.
"Asset Sale" means, with respect to any Person, the sale,
lease, assignment or other disposition (including, without limitation,
dispositions pursuant to any consolidation, merger or sale and leaseback
transaction) by such Person or any of its Subsidiaries in any single
transaction or series of related transactions which consists of the
disposition of (i) any Capital Stock of any Subsidiary or (ii) all or
substantially all of the properties and assets of any division or line of
business of such Person or any Subsidiary of such Person (other than of a
Non-Recourse Subsidiary) to any other Person which is not the Company or a
Subsidiary of the Company. For the purposes of this definition, the term
"Asset Sale" shall not include (A) any sale, lease, assignment or other
disposition of properties or assets that is governed by the provisions of
Article V or (B) any sale, lease, assignment or other disposition by a Person
that has outstanding senior debt securities all of which (I) are rated BBB- or
higher by S&P and have not been placed on credit watch by S&P for a possible
downgrade or (II) are rated Baa3 or higher by Moody's and have not been placed
on credit watch by Moody's for a possible downgrade.
"Average Life" means, with respect to any Debt, the quotient
obtained by dividing (i) the sum of the products of (a) the number of years
from the date of the transaction or event giving rise to the need to calculate
the Average Life of such Debt to the date, or dates, of each successive
scheduled principal payment of such Debt multiplied by (b) the amount of each
such principal payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"Board of Directors" of any Person means the Board of
Directors or similar governing body of such Person, or any duly authorized
committee of such Board of Directors or similar governing body.
"Board Resolution" means, with respect to the Board of
Directors of any Person, a copy of a resolution certified by the Secretary or
Assistant Secretary of such Person to have been duly adopted by such Board of
Directors and to be in full force and effect on the date of such certification
and delivered to the Trustee.
"Book-Entry Security" means a Security represented by a
Global Security and registered in the name of the nominee of the Depository.
"Business Day" means a day that is not a Legal Holiday.
"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
2
<PAGE>
of Debt represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due in
respect of such obligation.
"Capital Stock" of any Person means any and all shares,
interests (including partnership interests), warrants, rights, options or
other interests, participations or other equivalents of or interests in
(however designated) equity of such Person, including common or preferred
stock, whether now outstanding or issued after the Issue Date, but excluding
any debt securities convertible into or exchangeable for such equity.
"Cash Equivalents" means (i) marketable direct obligations
Issued by, or unconditionally Guaranteed by, the United States Government or
Issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof, (ii) marketable direct obligations Issued by any State of
the United States of America or any political subdivision of any such State or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's, (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's, (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof Issued by any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital surplus of not less
than $500,000,000, (v) Eurodollar time deposits maturing within one year from
the date of acquisition thereof and issued or accepted by any commercial bank
having at the date of acquisition thereof combined capital and surplus of not
less than $500,000,000, (vi) repurchase obligations with a term of not more
than thirty days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above and (vii) investments in money market funds having assets in
excess of $500,000,000 and which invest substantially all their assets in
securities of the types described in clauses (i) through (vi) above.
"Cedel" means Cedel Bank, S.A.
"Change of Control" means the occurrence of any of the
following events:
(i) prior to the time that at least 15% of the then
outstanding Voting Stock of Parent, the Company, or any Subsidiary of
Parent of which the Company is also a Subsidiary is publicly traded
on a national securities exchange or in the NASDAQ (national market
system), the Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of majority voting power of the Voting Stock of the
Company, whether as a result of issuance of securities of the Company
or any of its Affiliates, any merger, consolidation, liquidation or
dissolution of the Company or any of its Affiliates, any direct or
indirect
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transfer of securities by any Permitted Holder or by Parent or any of
its Subsidiaries or otherwise (for purposes of this clause (i) and
clause (ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, a majority of the Voting Stock
of the parent corporation);
(ii) any "Person" (as such term is used in sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in clause (i)
above, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the
Voting Stock of Parent or the Company; provided that the Permitted
Holders beneficially own (as defined in clause (i) above), directly
or indirectly, in the aggregate a lesser percentage of the Voting
Stock of Parent or the Company than such other Person and do not have
the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of
Parent or the Company; or
(iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the
shareholders of the Company including predecessors, was approved by a
vote of a majority of the directors of the Company then still in
office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Change of Control Payment Date" has the meaning set forth in
Section 4.14.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commencement Date" means April 3, 1994.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act, or if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body
performing such duties at such time.
"Common Stock" of any Person means any and all shares,
interests, participations, or other equivalents (however designated) of such
Person's common stock whether now outstanding or issued after the Issue Date.
"Company" means Building Materials Corporation of America, a
Delaware corporation, and its successors.
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"Consolidated EBITDA Coverage Ratio" with respect to any
Person for any period means the ratio of (i) the aggregate amount of EBITDA of
such Person for such period to (ii) Consolidated Interest Expense of such
Person for such period; provided that (A) if such Person or any Subsidiary of
such Person has Issued any Debt or Capital Stock since the beginning of such
period that remains outstanding on the date such calculation is made or if the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio is an Issuance of Debt or Capital Stock, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect, on a pro forma basis, to the issuance of such Debt or Capital Stock as
if such Debt or Capital Stock had been Issued on the first day of such period
and the discharge of any other Debt or Capital Stock Refinanced or otherwise
discharged with the proceeds of such new Debt or Capital Stock as if such
discharge had occurred on the first day of such period, (B) if since the
beginning of such period such Person or any Subsidiary of such Person shall
have made any asset sales out of the ordinary course of business, EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such asset sale
for such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Interest
Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt or Capital
Stock of such Person or any Subsidiary of such Person Refinanced or otherwise
discharged with respect to such Person and its continuing Subsidiaries
(including as a result of the assumption of such Debt or Capital Stock by the
purchaser of such assets, provided that such Person or any of its Subsidiaries
is no longer liable therefor) in connection with such asset sales for such
period (or if the Capital Stock of any Subsidiary of such Person is sold, the
Consolidated Interest Expense for such period directly attributable to the
Debt of such Subsidiary to the extent such Person and its continuing
Subsidiaries are no longer liable for such Debt after such sale) and (C) if
since the beginning of the period such Person or any Subsidiary of such Person
(by merger or otherwise) shall have made an Investment in any Subsidiary of
such Person (or any Person which becomes a Subsidiary of such Person) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder,
which constitutes all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto, as if such Investment or acquisition occurred on the
first day of such period. For purposes of this definition, pro forma
calculations shall be 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
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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.
"Corporate Trust Office" means the corporate trust office of
the Trustee at which at any particular time its corporate trust business shall
be principally administered, which on the date hereof is located at 101
Barclay Street, Floor 21 West, New York, New York 10286, except that, with
respect to presentation of Securities for payment or registration of transfer
and exchange and the location of the Securities register, such term means the
office or agency of the Trustee at which at any particular time its corporate
agency business shall be conducted, which is, on the date hereof, located at
101 Barclay Street, Corporate Trust Services Window, New York, New York 10286.
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"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.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
"Debt" of any Person means, without duplication, (i) the
principal in respect of (A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable
(other than those payable to government agencies to defer the payment of
workers' compensation liabilities, taxes, assessments or other obligations,
and provided in the ordinary course of business of such Person); (ii) all
Capital Lease Obligations of such Person; (iii) all obligations of such Person
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable and other
accrued current liabilities arising in the ordinary course of business); (iv)
all obligations of such Person for the reimbursement of any obligor on any
letter of credit, bankers' acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in (i) through (iii) above) entered into in the
ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by such
Person of a demand for reimbursement following payment on the letter of
credit); (v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Preferred Stock (but
excluding any accrued dividends); (vi) all obligations of the type referred to
in clauses (i) through (v) of other Persons and all dividends of other Persons
for the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including
guarantees of such obligations and dividends; and (vii) all obligations of the
type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation
is assumed by such Person), the amount of such obligation being deemed to be
the lesser of the value of such property or assets or the amount of the
obligation so secured. For purposes of Section 4.15, Debt of the Company or
any of its Subsidiaries shall include the provision for existing or future
asbestos-related bodily injury claims, as set forth in the then most recent
consolidated financial statement of the Company.
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
"Deferred Coupon Notes" means the Company's Series B 11 3/4%
Senior Deferred Coupon Notes due 2004.
"Depository" means, with respect to the Securities issued in
the form of one or more Book-Entry Securities, The Depository Trust Company or
another person designated as
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Depository by the Company, which must be a clearing agency registered under
the Exchange Act.
"EBITDA" with respect to any Person for any period means the
Consolidated Net Income of such Person for such period, adjusted to the extent
deducted in calculating such Consolidated Net Income by adding back (without
duplication): (i) income tax expense of such Person and its Subsidiaries
accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary items or other items excluded from the
definition of Consolidated Net Income), (ii) Consolidated Interest Expense of
such Person for such period, (iii) depreciation expense of such Person for
such period, (iv) amortization expense of such Person for such period, and (v)
minority interest in any non Wholly-Owned Recourse Subsidiary that is
otherwise consolidated in the financial statements of such Person, but only so
long as such Subsidiary is consolidated with such Person for such period for
U.S. federal income tax purposes.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Events of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the registration by the Company under
the Securities Act pursuant to a registration statement of the offer by the
Company to each Holder of the Initial Securities to exchange all the Initial
Securities held by such Holder for the Exchange Securities in an aggregate
principal amount equal to the aggregate principal amount of the Initial
Securities held by such Holder, all in accordance with the terms and
conditions of the Registration Rights Agreement.
"Exchange Securities" has the meaning assigned to that term in
the preambles to this Indenture.
"GAF" means GAF Corporation, a Delaware corporation, and its
successors.
"Generally Accepted Accounting Principles" or "GAAP" means
generally acceptable accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board as of the date of the Indenture.
"GFC" means GAF Fiberglass Corporation, a Delaware
corporation, and its successors.
"G-I Holdings" means G-I Holdings Inc., a Delaware
corporation, and its successors.
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"Glass Fiber Contract" means the supply agreement effective
as of January 1, 1997 between GFC and the Company.
"Global Security" means a Security evidencing all or a part
of the Securities to be issued as Book-Entry Securities, including a
Regulation S Global Security, issued to the Depository in accordance with
Section 2.02 and bearing the legend prescribed in Exhibit C.
"Granules Contracts" means (i) the supply agreement, dated as
of January 1, 1995, between ISP Technologies, Inc. and the Company, as amended
by amendment dated as of December 31, 1995 and (ii) the letter dated November 9,
1995 from ISP Mineral Products Inc. to USI.
"Guarantee" by any Person means any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation, contingent or otherwise, of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation of
such other Person (whether arising by virtue of participation arrangements, by
agreement to keep well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring the obligee of such Debt or
other obligation in any other manner of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that
the term "guarantee" shall not include endorsements for collection or deposit
in the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name
a Security is registered on the Registrar's books.
"Incur" means incur, create, assume, Guarantee or otherwise
become liable; and the terms "incurred" and "incurrence" having meanings
correlative to the foregoing.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Initial Purchasers" means Bear, Stearns & Co. Inc. and BNY
Capital Markets, Inc.
"Initial Securities" has the meaning assigned to that term
in the preambles to this Indenture.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Investment" means any direct or indirect advance, loan
(other than advances or loans to customers in the ordinary course of business,
which are recorded, in accordance with GAAP, at the time made as accounts
receivable on the balance sheet of the Person making such
9
<PAGE>
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.
"Legal Holiday" has the meaning set forth in Section 10.10.
"Lien" means any lien, mortgage, charge, pledge, security
interest, or other encumbrance of any kind (including any conditional sale or
other title retention agreement and any lease in the nature thereof).
"Management Agreement" means the amended and restated
management agreement, dated as of March 3, 1992, between the Company and ISP,
as amended through the Issue Date.
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Assets" means assets, singly or in the aggregate,
the book or fair market value of which equals 5% or more of the consolidated
tangible assets of the Company, as set forth on its most recently publicly
available balance sheet.
"Moody's" means Moody's Investors Service, Inc. or its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale,
the proceeds in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents received by the Company or any of its Subsidiaries from such
Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be
actually payable as a result of any disposition of property within two years
of the date of disposition, including under any tax sharing arrangements, and
(2) after taking into account any reduction in tax liability due to available
tax credits or deductions applicable to the transaction), (c) a reasonable
reserve for the after-tax cost of any indemnification obligations (fixed
and/or contingent) attributable to seller's indemnities to the
10
<PAGE>
purchaser undertaken by the Company or any of its Subsidiaries in connection
with such Asset Sale and (d) repayment of Debt that is required to be repaid
in connection with such Asset Sale, under the agreements governing such Debt
or Asset Sale.
"Net Proceeds Offer" shall have the meaning provided in
Section 4.15.
"Non-Recourse Debt" of any Person means Debt or the portion
of Debt (i) as to which neither Parent nor any of its Subsidiaries (other than
a Non-Recourse Subsidiary) (A) provides credit support (including any
undertaking, agreement or instrument which would constitute Debt), (B) is
directly or indirectly liable or (C) constitutes the lender and (ii) no
default with respect to which (including any rights which the holders thereof
may have to take enforcement action against the assets of a Non-Recourse
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Debt of such Person or its Subsidiaries (other than Non-Recourse
Subsidiaries) to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" of any Person means a Subsidiary
(A) which has been designated as such by such Person, (B) which has not
acquired any assets directly or indirectly from Parent or any of its
Subsidiaries other than at fair market value, including by the receipt of
Capital Stock of such Non-Recourse Subsidiary, provided that, if any such
acquisition or series of related acquisitions involves assets having a value
in excess of $2,000,000, such acquisition or series of related acquisitions
shall be approved by a majority of the members of the Board of Directors of
the Company in a Board Resolution which shall set forth that such acquisitions
are being, or have been, made at fair market value, and (C) which has no Debt
other than Non-Recourse Debt.
"Obligations" means (a) the full and punctual payment of the
principal and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations
of the Company under this Indenture and the Securities and (b) the full and
punctual performance of all other obligations of the Company under this
Indenture and the Securities.
"Offering" means the Company's offering of the Initial
Securities.
"Offering Memorandum" means the Offering Memorandum dated
July 14, 1998, pursuant to which the Initial Securities were offered.
"Officer" of any corporation means the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary, the Controller or the Assistant Secretary of such
corporation.
"Officers' Certificate" of any corporation means a
certificate signed by two Officers or by an Officer and an Assistant Treasurer
or Assistant Secretary of such corporation and delivered to the Trustee and
which complies with Section 10.05.
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"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee and which complies with
Section 10.05. Such legal counsel may be an employee of or counsel to the
Company or its Affiliates.
"Parent" means GAF so long as it owns, and any other Person
which acquires or owns, directly or indirectly, 80% or more of the Voting
Stock of the Company.
"Participant" means with respect to the Depositary,
Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear
or Cedel, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedel).
"Paying Agent" has the meaning set forth in Section 2.03,
except that, for the purposes of Article VIII and Sections 4.14 and 4.15, the
Paying Agent shall not be the Company or a Subsidiary of the Company or an
Affiliate of any thereof.
"Permitted Holders" means (i) Samuel J. Heyman, his heirs,
administrators, executors and entities of which a majority of the Voting Stock
is owned by Samuel J. Heyman, his heirs, administrators or executors and (ii)
any Person controlled, directly or indirectly, by Samuel J. Heyman or his
heirs, administrators or executors.
"Permitted Lien" means:
(1) Liens for taxes, assessments and governmental charges
to the extent not required to be paid under this Indenture;
(2) statutory Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other
like Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in good
faith by an appropriate process of law, and for which a reserve or
other appropriate provision, if any, as shall be required by GAAP
shall have been made;
(3) pledges or deposits in the ordinary course of business
to secure lease obligations or non-delinquent obligations under
workers' compensation, unemployment insurance or similar legislation;
(4) Liens to secure the performance of public statutory
obligations that are not delinquent, appeal bonds, performance bonds
or other obligations of a like nature (other than for borrowed
money);
(5) easements, rights-of-way, restrictions, minor defects
or irregularities in title and other similar charges or encumbrances
not interfering in any material respect with the business of the
Company and its Subsidiaries, taken as a whole;
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(6) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of nondelinquent customs
duties in connection with the importation of goods;
(7) judgment and attachment Liens not giving rise to a
Default or Event of Default;
(8) leases or subleases granted to others not interfering
in any material respect with the business of the Company and its
Subsidiaries, taken as a whole;
(9) Liens encumbering deposits made in the ordinary course
of business to secure non-delinquent obligations arising from
statutory, regulatory, contractual or warranty requirements of the
Company or any of its Subsidiaries for which a reserve or other
appropriate provision, if any, as shall be required by GAAP shall
have been made;
(10) any interest or title of a lessor in the property
subject to any lease, whether characterized as capitalized or
operating other than any such interest or title resulting from or
arising out of default by the Company or any of its Subsidiaries of
its obligations under any such lease which is material;
(11) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases or conditional
sales of personal property that are otherwise permitted under this
Indenture and under which the Company or any of its Subsidiaries is
lessee;
(12) broker's Liens securing the payment of commissions and
management fees in the ordinary course of business;
(13) Liens on cash and Cash Equivalents posted as margin
pursuant to the requirements of any bona fide hedge agreement
relating to interest rates, foreign exchange or commodities listed on
public exchanges, but only to the extent such Liens are required from
customers generally (regardless of creditworthiness) in accordance
with customary market practice;
(14) Liens on cash collateralizing reimbursement
obligations in respect of letters of credit issued for the account of
the Company or any of its Subsidiaries in the ordinary course of
business (other than letters of credit issued as credit support for
any Debt);
(15) Liens arising in respect of accounts receivable
arising as a result of non-recourse sales thereof; and
(16) Liens on stock or assets of any Non-Recourse
Subsidiary securing Debt owing by such Non-Recourse Subsidiary.
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"Person" means any individual, corporation, partnership,
joint venture, incorporated or unincorporated association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof or other entity of any kind.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution
of assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation. Preferred Stock of any Person shall include Redeemable Stock of
such Person.
"Principal" of a debt security, including the Securities,
means the principal of such security plus, when appropriate, the premium, if
any, on such security.
"Private Exchange Notes" has the meaning assigned to such
term in the Registration Rights Agreement.
"Proceeds Purchase Date" shall have the meaning provided in
Section 4.15.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Receivables" means accounts receivables, and related
documentation, contract rights, related proceeds and general intangibles.
"Receivables Financing Agreement" means the Pooling and
Servicing Agreement, dated as of November 1, 1996, among the Company, BMCA
Receivables Corporation and The Bank of New York, as Trustee, and related
agreements, as amended or supplemented.
"Recourse Subsidiaries" of any Person means all Subsidiaries
of such Person other than Non-Recourse Subsidiaries of such Person.
"Redeemable Stock" means, with respect to any Person,
Capital Stock of such Person that by its terms or otherwise (x) is required,
directly or indirectly, to be redeemed on or prior to the ninetieth day after
the Stated Maturity of the Securities, (y) is redeemable or puttable, directly
or indirectly, at the option of the holder thereof at any time on or prior to
the ninetieth day after the Stated Maturity of the Securities, or (z) is
exchangeable or convertible into another security (other than a security that
is not itself Redeemable Stock).
"Refinance" means, in respect of any Debt, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
Debt in exchange or replacement for, such Debt. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Registrar" has the meaning set forth in Section 2.03.
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"Registration Rights Agreement" means the registration
rights agreement dated July 17, 1998, between the Company and the Initial
Purchasers.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Security" means a global security
substantially in the form of Exhibit A hereto bearing the legend prescribed in
Exhibit C and deposited with or on behalf of the Depository and registered in
the name of the Depository or its nominee and issued in a denomination equal
to the outstanding principal amount of the Securities initially resold by the
Initial Purchasers in reliance on Rule 903 of Regulation S.
"Restricted Investment" means, with respect to the Company
or any of its Subsidiaries, an Investment by such Person in an Affiliate of
the Company; provided that the following shall not be Restricted Investments:
(i) Investments in the Company or any of its Recourse Subsidiaries; (ii)
Investments in Unrestricted Affiliates; and (iii) Investments in Affiliates
that become, as a result of such Investment, Recourse Subsidiaries.
"Restricted Payment" means (i) the declaration or making of
any dividend or of any other payment or distribution (other than dividends,
payments or distributions payable solely in shares of the Company's Capital
Stock other than Redeemable Stock) on or with respect to the Company's Capital
Stock (other than Redeemable Stock) and (ii) any payment on account of the
purchase, redemption, retirement or other acquisition for value of the
Company's Capital Stock (other than Redeemable Stock).
"Restricted Period" means the 40-day restricted period
referred to in Regulation S.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act.
"S&P" means Standard & Poor's Rating Services or its
successors.
"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Notes treated as a single class of
securities.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules and regulations of the Commission
thereunder.
"Shelf Registration Statements" means the shelf registration
statement, which the Company will use its best efforts to cause to become
effective with respect to the resale of the Initial Securities in the event
that the Exchange Offer is not completed, pursuant to the terms of the
Registration Rights Agreement.
"Significant Subsidiary" means (i) any Subsidiary (other
than a Non-Recourse Subsidiary) of the Company which at the time of
determination either (A) had assets which, as of the date of the Company's
most recent quarterly consolidated balance sheet, constituted at least
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5% of the Company's total assets on a consolidated basis as of such date, in
each case determined in accordance with GAAP, or (B) had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which constituted at least 5% of the
Company's total revenues on a consolidated basis for such period, or (ii) any
Subsidiary of the Company (other than a Non-Recourse Subsidiary) which, if
merged with all Defaulting Subsidiaries (as defined below) of the Company,
would at the time of determination either (A) have had assets which, as of the
date of the Company's most recent quarterly consolidated balance sheet, would
have constituted at least 10% of the Company's total assets on a consolidated
basis as of such date or (B) have had revenues for the 12-month period ending
on the date of the Company's most recent quarterly consolidated statement of
income which would have constituted at least 10% of the Company's total
revenues on a consolidated basis for such period (each such determination
being made in accordance with GAAP). "Defaulting Subsidiary" means any
Subsidiary of the Company (other than a Non-Recourse Subsidiary) with respect
to which an event described under clause (6), (7) or (8) of Section 6.01 has
occurred and is continuing.
"Stated Maturity" when used with respect to any Security or
any installment of interest thereon, means the dates specified in such
Security as the fixed date on which the principal of such Security or such
installment of interest is due and payable, and when used with respect to any
other Debt, means the date specified in the instrument governing such Debt as
the fixed date on which the principal of such Debt or any installment of
interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose Capital Stock with voting power, under
ordinary circumstances, to elect directors is at the time, directly or
indirectly, owned by such Person, by one or more Subsidiaries of such Person
or by such Person and one or more Subsidiaries thereof or (ii) any other
Person (other than a corporation) in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof has at least
majority ownership interest and the power to direct the policies, management
and affairs thereof. For purposes of this definition, any director's
qualifying shares or investments by foreign nationals mandated by applicable
law shall be disregarded in determining the ownership of a Subsidiary.
"Tax Sharing Agreement" means the tax sharing agreement,
dated as of January 31, 1994, among the Company, G-I Holdings and GAF.
"TIA" means, except as otherwise provided in Section 9.07,
the Trust Indenture Act of 1939, as amended, as in effect on the date hereof.
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days
prior to the applicable redemption date (or, if such Statistical Release is no
longer published, any publicly available source of similar data) most nearly
equal to the then remaining
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Average Life of the Securities; provided that, if the Average Life of the
Securities is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Yield shall
be obtained by linear interpolation (calculated to the nearest one-twelfth of
a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that, if the average life of the
Securities is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trustee" means the party named as such in this Indenture
until a successor replaces such party in accordance with the provisions of
this Indenture, and thereafter means such successor.
"Trust Officer" means, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of such Person's knowledge of and familiarity
with the particular subject and who shall have direct responsibility for the
administration of this Indenture.
"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 Company's 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.
"U.S. Person" means a U.S. Person as defined in Rule 902
under the Securities Act.
"USI" means U.S. Intec, Inc., a Texas corporation, and its
successors.
"Voting Stock" means, with respect to any Person, Capital
Stock of any class or kind normally entitled to vote in the election of the
board of directors or other governing body of such Person.
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"Wholly-Owned Recourse Subsidiary" means a Subsidiary of a
Person (other than a Non-Recourse Subsidiary) all the Capital Stock of which
(other than directors qualifying shares) is owned by such Person or another
Wholly-Owned Recourse Subsidiary of such Person.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the
applicable corporation or another Wholly-Owned Subsidiary of the applicable
corporation.
Section 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company and
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by
Commission rule and not otherwise defined herein have the meanings assigned to
them therein.
Section 1.03. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and
words in the plural include the singular;
(4) provisions apply to successive events and
transactions;
(5) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any particular
Article, Section or other Subdivision; and
(6) all calculations made for the purpose of
determining compliance with the terms of the covenants set forth in
Article IV and other provisions of this Indenture
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shall utilize GAAP in effect at the time of preparation of, and in
conformity with those used to prepare, the historical consolidated
financial statements of the Company at and for the fiscal year ended
December 31, 1997.
ARTICLE II.
THE SECURITIES
Section 2.01. Form and Dating. The Initial Securities and
the Trustee's certificate of authentication thereon shall be substantially in
the form of Exhibit A hereto. The Exchange Securities and the Private Exchange
Notes and the Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit B. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or agreements to
which the Company is subject, if any, or usage. The Company shall approve the
form of the Securities and any notation, legend or endorsement on them, and
such approval shall be evidenced by the execution of such Securities by two
Officers of the Company. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the form of the
Securities, annexed hereto as Exhibits A and B, shall constitute, and are
hereby expressly made, a part of this Indenture.
Section 2.02. Execution and Authentication; Aggregate
Principal Amount. Two Officers shall sign the Securities for the Company by
facsimile or manual signature. The Company's seal may be reproduced or
imprinted on the Securities, by facsimile or otherwise.
If a Person whose signature is on a Security as an Officer
no longer holds that office or position at the time the Trustee authenticates
the Security, the Security shall be valid nevertheless.
A Security shall not be valid until the Trustee manually
signs the certificate of authentication on the Security. The signature shall
be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for
delivery (i) Initial Securities for original issue in an aggregate principal
amount of $150,000,000, and (ii) Exchange Securities or Private Exchange Notes
from time to time for issue only in exchange for a like principal amount of
Initial Securities in accordance with the Registration Rights Agreement, in
each case upon a written order of the Company signed by an Officer of the
Company to a Trust Officer. The order shall specify the amount of Securities
to be authenticated, the date on which the Securities are to be authenticated
and whether the Securities are to be Initial Securities, Exchange Securities
or Private Exchange Notes. The aggregate principal amount of Securities
outstanding at any time may not exceed $150,000,000, except as provided in
Section 2.07.
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The Securities shall be issuable only in registered form and
only in denominations of $1,000 and any integral multiple thereof.
The Trustee may appoint an authenticating agent acceptable
to the Company to authenticate the Securities, which authenticating agent
shall be compensated by the Company. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so, except with regard to the original issuance of the
Securities and pursuant to Section 2.06. Except as provided in the preceding
sentence, each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as any Agent.
If the Securities are to be issued in the form of one or
more Global Securities, then the Company shall execute and the Trustee shall
authenticate and deliver one or more Global Securities that (i) shall
represent and shall be in minimum denominations of $1,000 or in the
approximate equivalent amount, (ii) shall be registered in the name of the
Depository for such Global Security or Securities or the nominee of such
Depository, (iii) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instructions and (iv) shall bear the legend set
forth in Exhibit C.
Section 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Securities may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may have one or more co-Registrars and one or more additional
Paying Agents. The term "Paying Agent" includes any additional Paying Agent.
The Company shall enter into an appropriate written agency
agreement with any Agent not a party to this Indenture. Each such agreement
shall implement the provisions of this Indenture that relate to such Agent.
The Company shall give prompt written notice to the Trustee of the name and
address of any such Agent and any change in the address of such Agent. The
Company may change an Agent without prior notice to the Holders. In the event
that there is a change in the address of an Agent or if the Company changes an
Agent, the Company shall promptly notify the Holders in writing. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
Section 2.04. Paying Agent To Hold Money in Trust. The
Company shall require each Paying Agent other than the Trustee to agree in
writing that such Paying Agent shall hold in trust for the benefit of
Securityholders all money held by the Paying Agent for the payment of
principal of or interest on the Securities, and such Paying Agent shall notify
the Trustee of any default by the Company in making any such payment. If the
Company or any of its Subsidiaries acts as Paying Agent, it shall segregate
the money and hold it as a separate trust
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fund. The Company at any time may require a Paying Agent to pay all money held
by it to the Trustee and account for any funds disbursed, and the Trustee may
at any time during the continuance of any payment default, upon written
request to a Paying Agent, require such Paying Agent to pay all money held by
it to the Trustee and to account for any funds disbursed. Upon doing so, the
Paying Agent shall have no further liability for the money so paid over to the
Trustee.
Section 2.05. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Securityholders and shall
otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the
Company shall furnish to the Trustee at least ten Business Days before each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders, and the Company shall
otherwise comply with TIA ss. 312(a).
The Trustee shall be entitled to rely upon a certificate of
the Registrar, the Company or such other Paying Agent, as the case may be, as
to the names and addresses of the Securityholders and the principal amounts
and serial numbers of the Securities.
Section 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of
such Securities for registration or transfer. When Securities are presented to
the Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations, the Registrar shall register the transfer or make the exchange
as requested if its requirements for such transactions are met; provided that
every Security presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument or
transfer in a form satisfactory to the Company and the Registrar duly executed
by the Holder thereof or his attorney duly authorized in writing; and provided
further that prior to the expiration of the Restricted Period, transfers of
book-entry interests in the Regulation S Global Security may not be made to a
U.S. Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). To permit registrations of transfer and exchanges, the
Company shall execute the Securities, and the Trustee shall authenticate the
Securities at the Registrar's request. No service charge to the Securityholder
shall be made for any registration of transfer or exchange, but the Company or
the Trustee may require from the transferring or exchanging Securityholder
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges pursuant to Sections 2.10,
4.14, 4.15 or 9.05). The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of any Security (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Securities and ending at the close of business on the day of
such mailing and (ii) selected for redemption in whole or in part pursuant to
Article III, except the unredeemed portion of any Security being redeemed in
part.
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If a Security is a Restricted Security in certificated form,
then as provided in this Indenture and subject to the limitations herein set
forth, the Holder, provided it is a Qualified Institutional Buyer, an
Accredited Investor or a Holder pursuant to Regulation S, may exchange such
Security for a Book-Entry Security by instructing the Trustee to arrange for
such Security to be represented by a beneficial interest in a Global Security
in accordance with the customary procedures of the Depository.
In accordance with the provisions of this Indenture and
subject to certain limitations herein set forth, an owner of a beneficial
interest in a Global Security which has not been exchanged for an Exchange
Security may request a Security in certificated form, in exchange in whole or
in part, as the case may be, for such beneficial owner's interest in the
Global Security.
Upon any exchange provided for in the preceding paragraph,
the Company shall execute and the Trustee shall authenticate and deliver to
the person specified by the Depository a new Security or Securities registered
in such names and in such authorized denominations as the Depository, pursuant
to the instructions of the beneficial owner of the Securities requesting the
exchange, shall instruct the Trustee. Thereupon, the beneficial ownership of
such Global Security shown on the records maintained by the Depository or its
nominee shall be reduced by the amounts so exchanged and an appropriate
endorsement shall be made by or on behalf of the Trustee on the Global
Security. Any such exchange shall be effected through the Depository in
accordance with the procedures of the Depository therefor.
Notwithstanding the foregoing, no Global Security shall be
registered for transfer or exchange, or authenticated and delivered, whether
pursuant to this Section, Section 2.07, 2.10 or 3.06 or otherwise, in the name
of a person other than the Depository for such Global Security or its nominee
until (i) the Company notifies the Trustee that the Depository is unwilling or
unable to continue as Depository for such Global Security or if at any time
the Depository ceases to be a clearing agency registered under the Exchange
Act, and a successor depository is not appointed by the Company within 90
days, (ii) the Company executes and delivers to the Trustee a Company order
that all such Global Securities shall be exchangeable or (iii) there shall
have occurred and be continuing an Event of Default. Upon the occurrence in
respect of any Global Security representing the Securities of any one or more
of the conditions specified in clause (i), (ii) or (iii) of the preceding
sentence, such Global Security may be registered for transfer or exchange for
Securities registered in the names of, authenticated and delivered to, such
persons as the Trustee or the Depository, as the case may be, shall direct.
Except as provided above, any Security authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
any Global Security, whether pursuant to this Section, Section 2.07, 2.10 or
3.06 or otherwise, shall also be a Global Security and bear the legend
specified in Exhibit C.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of
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Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to
transfers of book-entry interests in the Regulation S Global Securities that
are held by Participants through Euroclear or Cedel Bank.
The Company shall not have any liability to any Person
relating to (i) the performance by the Depositary, Euroclear, Cedel or any of
their respective direct or indirect Participants under the rules and
procedures governing, the Depository, Euroclear or Cedel including with
respect to transferring book-entry interests in the Securities, or (ii)
maintaining, supervising or reviewing any records of such entities relating to
the Securities.
Section 2.07. Replacement Securities. If a mutilated
Security is surrendered to the Trustee or if the Holder of a Security claims
that such Security has been lost, destroyed or wrongfully taken, the Company
shall issue a replacement Security, and the Trustee shall authenticate such
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be provided by the
Securityholder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company or the Trustee
may charge such Holder for its expenses in replacing a Security.
Every replacement Security is an additional obligation of
the Company.
Section 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities that have been authenticated by the Trustee,
except for those canceled by it, those delivered to it for cancellation and
those described in this Section 2.08 as not outstanding. A Security does not
cease to be outstanding because the Company or one of its Affiliates holds the
Security.
If a Security is replaced pursuant to Section 2.07, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Security is held by a bona fide purchaser.
If the Paying Agent holds (or, if the Company or a
Subsidiary is the Paying Agent, segregates and holds in trust), in accordance
with this Indenture, on the maturity or redemption date, money sufficient to
pay Securities payable on that date, then on and after that date such
Securities shall be deemed to be no longer outstanding and interest on them
shall cease to accrue.
Section 2.09. Treasury Securities. In determining whether
the Holders of the required principal amount of Securities have concurred in
any direction, waiver or consent, Securities owned by the Company or any of
its Affiliates shall be disregarded, except that for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which a Trust Officer of the
Trustee actually knows are so owned shall be so disregarded.
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Section 2.10. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare, and the Trustee
shall authenticate upon written order of the Company signed by an Officer
thereof, temporary Securities. Temporary Securities shall be substantially in
the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay,
the Company shall prepare, and the Trustee shall authenticate, definitive
Securities in exchange for temporary Securities.
Until such exchange, such temporary Securities shall be
entitled to the same rights, benefits and privileges as the definitive
Securities.
Section 2.11. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee and no one else
shall cancel all Securities surrendered for registration of transfer,
exchange, payment or cancellation. The Company may not issue new Securities to
replace Securities it has paid or delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest. If the Company defaults in
a payment of interest on the Securities, it shall pay the defaulted interest,
plus, to the extent permitted by law, any interest payable on the defaulted
interest, to the Persons who are Securityholders on a subsequent special
record date. Such special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest,
whether or not such day is a Business Day. At least 15 days before the special
record date, the Company shall mail or cause to be mailed to each
Securityholder and the Trustee a notice that states the special record date,
the payment date and the amount of defaulted interest to be paid.
Section 2.13. CUSIP Number. The Company in issuing the
Securities may use one or more "CUSIP" numbers. If so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Securityholders;
provided that any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only
on the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in a CUSIP number.
Section 2.14. Deposit of Moneys. On or before 11:00 A.M.,
New York City time, on each payment date, the Company shall deposit with the
Trustee or Paying Agent in immediately available funds money sufficient to
make cash payments, if any, due on such payment date. The principal amount and
interest due on Book-Entry Securities shall be payable to the Depository or
its nominee, as the case may be, as the sole registered owner and the sole
holder of the Book-Entry Securities represented thereby. The principal amount
and interest on Securities in certificated form shall be payable at the office
of the Paying Agent; provided
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however that the Company, at its option, may pay interest by check by mailing
such check to the Holder's registered address.
ARTICLE III.
REDEMPTION
Section 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5(a) of the Securities, it shall
notify the Trustee in writing of the redemption date and the principal amount
of Securities to be redeemed.
The Company shall give the notice to the Trustee provided
for in this Section at least 45 days before the redemption date, unless the
Trustee consents in writing to a shorter notice period. Such notice shall be
accompanied by an Officers' Certificate and an Opinion of Counsel to the
effect that such redemption will comply with the conditions contained in this
Indenture and will set forth the redemption price.
Section 3.02. [Reserved]
Section 3.03. Notice of Redemption. At such time as is
provided by paragraph 5(a) of the Securities, the Company shall mail a notice
of redemption by first-class mail to each Holder of Securities to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(A) the redemption date;
(B) the redemption price;
(C) the name and address of the Paying Agent;
(D) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(E) that, unless the Company defaults in making such
redemption payment, interest on Securities called for redemption ceases to
accrue on and after such redemption date; and
(F) the CUSIP number, if any, and that no representation is
made as to the correctness or accuracy of the CUSIP number, if any, listed in
such notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at the Company's expense. In such
event, the Company shall provide the
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Trustee with the information required by clauses (A), (B) and (C) at least 45
days before the redemption date.
Section 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, subject to the Company's compliance with
Section 3.05 herein, such Securities shall be paid at the redemption price
stated in the notice, plus accrued and unpaid interest, if any, to the
redemption date.
Section 3.05. Deposit of Redemption Price. On or prior to
the redemption date, the Company shall deposit with the Paying Agent in
immediately available funds (or, if the Company or a Subsidiary is the Paying
Agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued and unpaid interest, if any, on all Securities
to be redeemed on that date other than Securities or portions of Securities
called for redemption which have been delivered by the Company to the Trustee
for cancellation.
Section 3.06. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV.
COVENANTS
Section 4.01. Payment of Securities. The Company shall pay,
or cause to be paid, the principal of and interest on the Securities on the
dates and in the manner provided herein and in the Securities. Principal or
interest shall be considered paid on the date due if the Trustee or Paying
Agent holds on that date money designated for and sufficient to pay all
principal and interest payable in cash in each case as then due. The Company
shall pay interest on overdue principal, as the case may be, at the rate
specified therefor in the Securities.
Section 4.02. Maintenance of Office or Agency. The Company
shall maintain in the Borough of Manhattan, The City of New York, an office or
agency where Securities may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company fails to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee as set forth in Section 10.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and
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may from time to time rescind such designations; provided that no such
designation or rescission shall in any matter relieve the Company of its
obligation to maintain an office or agency pursuant to this Section 4.02. The
Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the office of the
Trustee or its agent located in the Borough of Manhattan, The City of New
York, as such office of the Company in accordance with Section 2.03.
Section 4.03. Corporate Existence. The Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its (i) corporate existence and the corporate existence of each of its
Subsidiaries (other than Non-Recourse Subsidiaries) in accordance with their
respective organizational documents and (ii) the material rights (charter and
statutory), licenses and franchises of the Company and each of its
Subsidiaries; provided that (i) neither the Company nor any of its
Subsidiaries shall be required to preserve any such right or franchise, or
corporate existence, if the Board of Directors of the Company or such
Subsidiary shall determine that the loss thereof is not, and will not be,
adverse in any material respect to the Company or the Holders and (ii) nothing
in this Section 4.03 shall prevent the Company from taking any action that
complies with the provisions of Section 5.01.
Section 4.04. Payment of Taxes and Other Claims. The Company
shall, and shall cause each of its Subsidiaries (other than Non-Recourse
Subsidiaries) to, pay or discharge or cause to be paid or discharged, before
any penalty accrues from the failure to so pay or discharge, (1) all material
taxes, assessments and governmental charges levied or imposed upon it or any
of such Subsidiaries or upon the income, profits or property of it or any of
such Subsidiaries, and (2) all material, lawful claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon its property or
the property of any Subsidiary; provided that there shall not be required to
be paid or discharged any such tax, assessment, charge or claim if the amount,
applicability or validity thereof is being contested in good faith by
appropriate proceedings and adequate provision therefor has been made.
Section 4.05. Compliance Certificates. (a) The Company shall
deliver to the Trustee within 60 days after the end of each of the Company's
fiscal quarters (120 days after the end of the Company's last fiscal quarter
of its fiscal year) an Officers' Certificate, stating whether or not the
signers, after due inquiry, know of any Default or Event of Default which
occurred during such fiscal quarter. An Officers' Certificate delivered within
120 days after the end of the Company's fiscal year shall also contain a
certification from the principal executive officer, principal financial
officer or principal accounting officer of the Company as to such officer's
knowledge of the Company's compliance with all conditions and covenants under
this Indenture. For purposes of this Section 4.05(a), such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If the officer does know of such a Default or
Event of Default, the certificate shall describe any such Default or Event of
Default, and its status. The first certificate to be delivered pursuant to
this Section 4.05(a) shall be for the first fiscal quarter beginning after the
execution of this Indenture.
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(b) The Company shall deliver to the Trustee, as soon as
possible and in any event within 10 days after the Company becomes aware of
the occurrence of each Default or Event of Default which is continuing, an
Officers' Certificate setting forth the details of such Default or Event of
Default, and the action which the Company has taken and proposes to take with
respect thereto. Following receipt of such Officers' Certificate, the Trustee
shall send the notice called for by Section 7.05, except as provided therein.
Section 4.06. Securities and Exchange Commission Reports.
(a) The Company shall file with the Trustee and provide Holders of record,
within 15 days after it files them with the Commission, copies of its annual
report and the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company is required to file with the
Commission pursuant to Sections 13 or 15(d) of the Exchange Act, without
exhibits in the case of each Holder, unless the Company is requested in
writing by such Holder. Notwithstanding that the Company may not be required
to remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will continue to file with the Commission and
provide the Trustee and Holders with such annual reports and information,
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may by rules and regulations prescribe) which are
specified in Sections 13 and 15(d) of the Exchange Act, without exhibits in
the case of Holders, unless the Company is requested in writing by the
Holders. The Company also will comply with the other provisions of TIA Section
314(a).
(b) So long as any of the Securities remain outstanding, the
Company shall cause each annual, quarterly and other financial report mailed
or otherwise furnished by it generally to public securityholders to be filed
with the Trustee and mailed to the Holders of record at their addresses
appearing in the register of Securities maintained by the Registrar, in each
case at the time of such mailing or furnishing to stockholders. The Company
shall provide to any Holder or any beneficial owner of Notes any information
reasonably requested by such holder or such beneficial owner concerning the
Company and its Subsidiaries (including financial statements) necessary in
order to permit such holder or such beneficial owner to sell or transfer Notes
in compliance with Rule 144A under the Securities Act or any similar rule or
regulation adopted by the Commission.
(c) Delivery of such reports to the Trustee is for
informational purposes only and the Trustee's receipt of such reports shall
not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely conclusively and exclusively on Officers' Certificates).
Section 4.07. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the full extent permitted by applicable law) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, and will actively resist any attempts to
claim the benefit of any stay or extension law or any usury law or other law
which would prohibit or forgive the Company from paying all or any portion of
the principal of
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or interest on the Securities as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the full extent permitted by applicable
law) the Company hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 4.08. Maintenance of Properties. Subject to this
Article IV, the Company shall cause all material properties owned by or leased
to it or any of its Subsidiaries (other than Non-Recourse Subsidiaries) and
used or useful in the conduct of its business or the business of such
Subsidiaries to be maintained and kept in normal condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company or such Subsidiary may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.08 shall prevent the Company or any of its Subsidiaries from
discontinuing the use, operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is not, in the
judgment of the Board of Directors of the Company or such Subsidiary, adverse
in any material respect, to the Company or the Holders.
Section 4.09. Limitation on Debt and Preferred Stock of the
Company and its Subsidiaries. (a) The Company shall not, and shall not permit
any of its Subsidiaries to, Issue, directly or indirectly, any Debt unless, at
the time of such Issuance and after giving effect thereto, (i) no Default or
Event of Default shall have occurred and be continuing and (ii) the
Consolidated EBITDA Coverage Ratio of the Company for the period of its most
recently completed four consecutive fiscal quarters ending at least 45 days
prior to the date such Debt is Issued is at least 2.00 to 1.00.
(b) Notwithstanding the foregoing, there may be issued the
following Debt:
(1) The Securities;
(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;
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(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) and (3) of this Section 4.09(b);
provided that, in the case of a Refinancing, (i) the amount of the
Debt so Issued shall not exceed the principal amount or the accreted
value (in the case of Debt Issued at a discount) of the Debt so
Refinanced plus, in each case, the reasonable costs incurred by the
issuer in connection with such Refinancing, (ii) the Average Life and
Stated Maturity of the Debt so Issued shall equal or exceed that of
the Debt so Refinanced, (iii) the Debt so Issued shall not rank
senior in right of payment to the Debt being Refinanced, (iv) if the
Debt being Refinanced does not bear interest in cash prior to a
specified date, the Refinancing Debt shall not bear interest in cash
prior to such specified date, (v) if the Debt being Refinanced is
Debt permitted by clause (3), such Refinancing Debt is not secured by
any assets not securing the Debt so Refinanced or improvements or
additions thereto, or replacements thereof, and (vi) the obligors
with respect to the Refinancing Debt shall not include any Persons
who were not obligors (including predecessors thereof) with respect
to the Debt being Refinanced;
(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;
(8) Debt secured by Receivables, including to
Refinance the Receivables Financing Agreement, provided that the
amount of such Debt does not exceed 85 % of the face amount of the
Receivables; and
(9) Debt (other than Debt identified in clauses (1)
through (8) above) in an aggregate principal amount outstanding at
any one time not to exceed $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;
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(2) Preferred Stock (other than Preferred Stock
described in clause (1) but including the Preferred Stock referred to
in the proviso to clause (1) above); provided that the liquidation
value of any Preferred Stock issued pursuant to this clause (2) shall
constitute Debt for purposes of this Section 4.09 and dividends on
such Preferred Stock shall be included in determining Consolidated
Interest Expense of the Company for purposes of calculating the
Consolidated EBITDA Coverage Ratio of the Company under paragraph (a)
of this Section 4.09; and
(3) Preferred Stock (other than Redeemable Stock) of
the Company.
(d) To the extent the Company or any of its Subsidiaries
Guarantees any Debt of the Company or any other Subsidiary, such Guarantee and
such Debt will be deemed to be the same Debt and only the amount of the Debt
will be deemed to be outstanding. If the Company or any of its Subsidiaries
Guarantees any Debt of a Person that, subsequent to the Issuance of such
Guarantee, becomes a Subsidiary of the Company, such Guarantee and the Debt so
Guaranteed shall be deemed to be the same Debt, which shall be deemed to have
been Issued when the Guarantee was Issued and shall be deemed to be permitted
to the extent the Guarantee was permitted when Issued.
Section 4.10. Limitation on Restricted Payments and
Restricted Investments. (a) So long as no Default or an Event of Default shall
have occurred and be continuing, the Company may make, and may permit any of
its Subsidiaries to make, directly or indirectly, a Restricted Payment or
Restricted Investment so long as, at the time of such Restricted Payment or
Restricted Investment and immediately after giving effect thereto, the
aggregate amount of Restricted Payments made since the Issue Date and the
aggregate amount of Restricted Investments made since the Issue Date and then
outstanding (the amount expended for such purposes, if other than in cash,
shall be the fair market value of such property as determined by the Board of
Directors of the Company in good faith as of the date of payment or
investment) shall not exceed the sum of:
(i) 75% of the cumulative Consolidated Net Income (or minus
100% of the cumulative Consolidated Net Loss) of the Company accrued
during the period beginning on the Commencement Date and ending on
the last day of the fiscal quarter for which financial information
has been made publicly available by the Company but ending no more
than 135 days prior to the date of such Restricted Payment or
Restricted Investment (treating such period as a single accounting
period);
(ii) 100% of the net cash proceeds, including the fair
market value of property other than cash as determined by the Board
of Directors of the Company in good faith, as evidenced by a Board
Resolution, received by the Company from any Person (other than a
Subsidiary of the Company) from the Issuance and sale subsequent to
the Commencement Date of Capital Stock of the Company (other than
Redeemable Stock) or as a capital contribution; provided that, if the
value of the non-cash contribution is in excess of $10,000,000 the
Company shall have received the written opinion of a
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nationally recognized investment banking firm that the terms thereof,
from a financial point of view, are fair to the shareholders of the
Company or such Subsidiary, in their capacity as such (the
determination as to the value of any non-cash consideration referred
to in this clause (ii) to be made by such investment banking firm),
and such opinion shall have been delivered to the Trustee;
(iii) 100% of the net cash proceeds received by the Company
from the exercise of options or warrants on Capital Stock of the
Company (other than Redeemable Stock) since the Commencement Date;
(iv) 100% of the net cash proceeds received by the Company
from the conversion into Capital Stock (other than Redeemable Stock)
of convertible Debt or convertible Preferred Stock issued and sold
(other than to a Subsidiary of the Company) since the Commencement
Date; and
(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) Section 4.10(a) shall not prevent the following, as long
as no Default or Event of Default shall have occurred and be continuing (or
would result therefrom other than pursuant to Section 4.10(a)):
(1) the making of any Restricted Payment or
Restricted Investment within 60 days after (x) the date of
declaration thereof or (y) the making of a binding commitment in
respect thereof; provided that at such date of declaration or
commitment such Restricted Payment or Restricted Investment complied
with Section 4.10(a);
(2) any Restricted Payment or Restricted Investment
made out of the net cash proceeds received by the Company from the
substantially concurrent sale of its Common Stock (other than to a
Subsidiary of the Company); provided that such net cash proceeds so
utilized shall not be included in paragraph (a) in determining the
amount of Restricted Payments or Restricted Investments the Company
could make under Section 4.10(a);
(3) cumulative Investments in Non-Recourse
Subsidiaries not in excess of $50,000,000 in the aggregate determined
as of the date of Investment (the amount so expended, if other than
cash, to be determined by the Company's Board of Directors, as
evidenced by a Board Resolution); and
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(4) repurchases of Capital Stock of the Company, in
each case from employees of the Company or any of its Subsidiaries
(other than any Permitted Holder); provided, however, that the
aggregate amount of Restricted payments made under this clause shall
not exceed $1,500,000 in any fiscal year.
Restricted Payments or Restricted Investments made pursuant to clauses (2),
(3) or (4) shall not be deducted in determining the amount of Restricted
Payments or Restricted Investments made or then outstanding under Section
4.10(a).
Section 4.11. Limitation on Liens. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, incur
or suffer to exist any Liens upon their respective property or assets whether
owned on the Issue Date or acquired after such date, or on any income or
profits therefrom, other than the following:
(1) Liens existing on the Issue Date;
(2) Permitted Liens;
(3) Purchase money Liens on assets of the Company and
its Subsidiaries or improvements or additions thereto existing or
created within 180 days after the time of acquisition of or
improvements or additions to such assets, or replacements thereof;
provided that (i) such acquisition, improvement or addition is
otherwise permitted by this Indenture, (ii) the principal amount of
Debt (including Debt in respect of Capitalized Lease Obligations)
secured by each such Lien in each asset shall not exceed the cost
(including all such Debt secured thereby, whether or not assumed) of
the item subject thereto, and such Liens shall attach solely to the
particular item of property so acquired, improved or added and any
additions or accessions thereto, or replacements thereof, and (iii)
the aggregate amount of Debt secured by Liens permitted by this
clause (3) shall not at any time exceed $40,000,000;
(4) Liens to secure Refinancing of any Debt secured
by Liens described in clauses (l)-(3) above and (5) below; provided
that (i) Refinancing does not increase the principal amount of Debt
being so Refinanced and (ii) the Lien of the Refinancing Debt does
not extend to any asset not securing the Debt being Refinanced or
improvements or additions thereto, or replacements thereof;
(5) Liens securing Acquired Debt; provided that (i)
any such Lien secured the Acquired Debt at the time of the incurrence
of such Acquired Debt by the Company or by one of its Subsidiaries
and such Lien and Acquired Debt were not incurred by the Company or
any of its Subsidiaries or by the Person being acquired or from whom
the assets were acquired in connection with, or in anticipation of,
the incurrence of such Acquired Debt by the Company or by one of its
Subsidiaries and (ii) any such Lien does not extend to or cover any
property or assets of the Company or of any of its Subsidiaries
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other than the property or assets that secured the Acquired Debt
prior to the time such Debt became Acquired Debt of the Company or of
one of its Subsidiaries;
(6) Liens on Receivables securing Debt permitted by
Section 4.09(b)(8);
(7) Liens securing intercompany Debt permitted by
Section 4.09(b)(2); and
(8) Liens on assets of the Company and its
Subsidiaries in addition to those referred to in clauses (1)-(7),
provided that such Liens only secure Debt of the Company and its
Subsidiaries in an aggregate amount not to exceed at any one time
outstanding $60,000,000.
Section 4.12. Limitation on Transactions with Affiliates.
(a) The Company shall not enter, and shall not permit any of its Subsidiaries
to enter, directly or indirectly, into any transaction or series of related
transactions with any Affiliate of the Company (other than (x) the making of a
Restricted Payment or Restricted Investment otherwise permitted by Section
4.10 or those transactions specifically permitted by Section 4.10(b), (y)
transactions between or among Non-Recourse Subsidiaries of the Company or (z)
transactions between or among the Company and its Subsidiaries (other than
Non-Recourse Subsidiaries)) including, without limitation, any loan, advance
or investment or any purchase, sale, lease or exchange of property or the
rendering of any service, unless the terms of such transaction or series of
transactions are set forth in writing and at least as favorable as those
available in a comparable transaction in arms-length dealings from an
unrelated Person; provided that (i) if any such transaction or series of
related transactions (other than any purchase or sale of inventory in the
ordinary course of business, but including entering into any long-term
arrangement involving the purchase of granules or glass fiber from, or the
provision of management services of 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 non-cash 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
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transaction or series of related transactions described in the preceding
proviso has a personal stake in such business, transaction or transactions,
the Company or such Subsidiary may enter into such transaction or series of
transactions if the Company or such Subsidiary, as the case may be, shall have
received the written opinion of a nationally recognized investment banking
firm that the terms thereof, from a financial point of view, are fair to the
shareholders of the Company or such Subsidiary, in their capacity as such (the
determination as to the value of any non-cash consideration referred to in the
preceding proviso to be made by such investment banking firm), and such
opinion shall have been delivered to the Trustee.
(b) Section 4.12(a) shall not prevent the following:
(1) the purchase of granules from an Affiliate of the
Company, including ISP or a Subsidiary of ISP, provided that (a)
subject to Section 4.12(c), the price and other terms shall not be
less favorable to the Company than those set forth in the Granules
Contracts or (b) a nationally recognized investment banking firm or
accounting firm has delivered a written opinion to the Company to the
effect that either the terms thereof are fair to the Company from a
financial point of view or are on terms at least as favorable to the
Company as those available in comparable transactions in arms-length
dealings from an unrelated third party;
(2) the continuance of the Management Agreement
(including with an Affiliate of the Company other than ISP) (a) in
accordance with its terms or on terms no less favorable to the
Company than those contained in the Management Agreement or (b) on
other terms provided that the Company shall have received the written
opinion of a nationally recognized investment banking firm or
accounting firm that either the terms thereof, from a financial point
of view, are fair to the Company or are on terms at least as
favorable to the Company as those available in comparable
transactions in arms-length dealings from an unrelated Person;
(3) any transaction between the Company or a
Subsidiary thereof and its own employee stock ownership or benefit
plan;
(4) any transaction with an officer or director of
the Company or any Subsidiary of the Company entered into in the
ordinary course of business (including compensation or employee
benefit arrangements with any such officer or director);
(5) any business or transactions with an Unrestricted
Affiliate;
(6) borrowings by the Company or its Subsidiaries
from Affiliates of the Company; provided that such loans are
unsecured, are prepayable at any time without penalty, contain no
restrictive covenants and the effective cost of borrowings thereunder
do not exceed the interest rate then in effect from time to time
under the Credit Agreement or any Refinancings thereof (or, if such
agreement is not outstanding, under the unsecured bank debt of the
Company);
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(7) payments made pursuant to the Tax Sharing
Agreement; or
(8) purchases made pursuant to the Glass Fiber
Contract; provided that the terms of such contract are set forth in
writing and are at least as favorable to the Company as those
available in a comparable transaction in arms-length dealings with an
unrelated Person.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, amend, modify or waive any provision of the Tax Sharing
Agreement, the Granules Contracts or the Glass Fiber Contract in any manner
which is significantly adverse to the Company or the holders of the Notes (it
being understood that an extension or modification of any of the Granules
Contracts (or any similar granules purchase contract) or the Glass Fiber
Contract on terms at least as favorable to the Company as those available at
the time of the extension or modification (or any such new agreement) in a
comparable transaction in arms-length dealings with an unrelated Person shall
not be deemed significantly adverse to the Company or the Holders).
Section 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries. The Company shall not, and shall not
permit any of its Subsidiaries (other than Non-Recourse Subsidiaries) to,
directly or indirectly, create or otherwise cause to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (a) pay
dividends or make any other distributions on its Capital Stock or pay any Debt
owed to the Company or any of its Subsidiaries, (b) make loans or advances to
the Company or any of its Subsidiaries, (c) transfer any of its properties or
assets to the Company or (d) incur or suffer to exist Liens in favor of the
Holders, except for such encumbrances or restrictions existing under or by
reason of any of the following:
(1) applicable law;
(2) this Indenture and the indentures governing the
Deferred Coupon Notes, the 2006 Notes and the 2007 Notes;
(3) customary provisions restricting subletting or
assignment of any lease or license or other commercial agreement;
(4) any instrument governing Acquired Debt of any
Person, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than such
Person and its Subsidiaries, or the property or assets of such Person
and its Subsidiaries, so acquired;
(5) the Liens specifically permitted by Section 4.11;
provided that such Liens and the terms governing such Liens do not,
directly or indirectly, restrict the Company or its Subsidiaries from
granting other Liens, except as to the assets subject to such Liens;
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(6) the Credit Agreement, the Receivables Financing
Agreement or other Debt existing on the Issue Date; and
(7) any Refinancing of the Credit Agreement, the
Receivables Financing Agreement or any such other Debt existing on
the Issue Date; provided that the terms and conditions of any such
Refinancing agreements relating to the terms described under clauses
(a)-(d) above are no less favorable to the Company than those
contained in the agreements governing the Debt being Refinanced.
Section 4.14. Change of Control. (a) In the event of any
Change of Control, each Holder shall have the right, at such Holder's option,
to require the Company to purchase all or any portion (in integral multiples
of $1,000) of such Holder's Securities on the date (the "Change of Control
Payment Date") which is 25 Business Days after the date the Change of Control
Notice (as defined below) is mailed or is required to be mailed (or such later
date as is required by applicable law) at 101% of the principal amount
thereof, plus accrued interest to the Change of Control Payment Date (the "Put
Amount").
(b) The Company or, at the request of the Company, the
Trustee shall send, by first-class mail, postage prepaid, to all Holders,
within ten Business Days after the occurrence of each Change of Control, a
notice of the occurrence of such Change of Control (the "Change of Control
Notice"), specifying a date by which a Holder must notify the Company of such
Holder's intention to exercise the repurchase right and describing the
procedure that such Holder must follow to exercise such right. The Company is
required to deliver a copy of such notice to the Trustee and to cause a copy
of such notice to be published in a daily newspaper of national circulation.
Each Change of Control Notice shall state:
(1) that a Change of Control has occurred, that each
Holder has the right to require the Company to repurchase all or any
part of such Holder's Security at a purchase price in cash equal to
their Put Amount, that the change of control offer is being made
pursuant to this Section 4.14 and that all Securities tendered will
be accepted for payment;
(2) the purchase price and the Change of Control
Payment Date;
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making
payment therefor, any Security accepted for payment pursuant to the
change of control offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have a Security
purchased pursuant to a change of control offer will be required to
surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the
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Paying Agent at the address specified in the notice prior to the
close of business on the Business Day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than five Business
Days prior to the Change of Control Payment Date, a facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Securities the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have
such Security purchased;
(7) that Holders whose Securities are purchased only
in part will be issued new Securities in a principal amount equal to
the unpurchased portion of the Securities surrendered;
(8) the circumstances and relevant facts regarding
such Change of Control, including but not limited to the identity of
the purchaser and pro forma financial information; and
(9) that the Company has the right, pursuant to the
provision described in paragraph 5(a) of the Securities, to purchase
any securities not tendered as provided therein.
No failure of the Company to give the foregoing notice shall
limit any Holder's right to exercise a repurchase right. The Company shall
comply with all applicable Federal and state securities laws in connection
with each Change of Control Notice.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant
to the change of control offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders new Securities equal in
principal amount to any unpurchased portion of the Securities surrendered. Any
Securities not so purchased shall be promptly mailed by the Company to the
Holder thereof. For purposes of this Section 4.14, the Trustee shall act as
the Paying Agent.
Section 4.15. Limitation on Asset Sales. (a) The Company
shall not, and shall not permit any of its Subsidiaries, directly or
indirectly, to, consummate an Asset Sale unless:
(1) the Company or such Subsidiary, as the case may
be, receives consideration (including non-cash consideration, whose
fair market value shall be determined in good faith by the Board of
Directors of the Company or such Subsidiary, as evidenced by a Board
Resolution) at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as
determined in good faith by its Board of Directors, as evidenced by a
Board Resolution);
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(2) at least 75% of the consideration received by the
Company or such Subsidiary, as the case may be, shall be cash or Cash
Equivalents; provided that this clause (2) shall not prohibit any
Asset Sale for which the Company or such Subsidiary, as the case may
be, receives 100% of the consideration, directly or through the
acquisition of Capital Stock of a Person, in operating assets; and
(3) in the case of an Asset Sale by the Company or
any of its Subsidiaries, the Company shall commit to apply the Net
Cash Proceeds of such Asset Sale within 300 days of the consummation
of such Asset Sale, and shall apply such Net Cash Proceeds within 360
days of receipt thereof (i) to invest in the businesses that the
Company and its Recourse Subsidiaries are engaged in at the time of
such Asset Sale or any like or related business, (ii) to pay or
satisfy any Debt of the Company or any of its Subsidiaries (other
than Debt which is subordinated by its terms to the Securities) or
Preferred Stock of a Subsidiary, including the Debt referred to in
the last sentence of the definition thereof or make provision for the
payment thereof, through an escrow or other fund, and/or (iii) to
offer to purchase the Securities in a tender offer (a "Net Proceeds
Offer") at a redemption price equal to 100% of the principal amount
thereof plus accrued interest thereon to the date of purchase;
provided, however, that the Company shall, to the extent required
under the indentures governing the Deferred Coupon Notes, 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 redemption, and
then offer to purchase any outstanding 2006 Notes, in a tender offer
at a redemption price equal to 100% of the principal amount thereof
plus accrued interest thereon to the date of purchase, 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 repurchase, 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 Section 4.15 but shall be
governed by the provisions described under Section 4.14 and paragraph 5(a) of
the Securities.
(b) Notice of a Net Proceeds Offer shall be mailed or caused
to be mailed, by first class mail, by the Company, within 300 days after the
relevant Asset Sale to all Holders at their last registered addresses as of a
date within 15 days prior to the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Net Proceeds Offer
and shall state the following terms:
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(1) that the Net Proceeds Offer is being made
pursuant to this Section 4.15 and that all Securities tendered will
be accepted for payment; provided that, if the aggregate principal
amount of Securities tendered in a Net Proceeds Offer exceeds the
aggregate amount available for the Net Proceeds Offer, the Company
shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company, so that
only Securities in denominations of $1,000 or multiples thereof shall
be purchased);
(2) the purchase price and the purchase date (which
shall be determined in accordance with Section 4.15(a)) (the
"Proceeds Purchase Date );
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless there is a default in making payment
therefor, any Security accepted for payment pursuant to the Net
Proceeds Offer shall cease to accrue interest after the Proceeds
Purchase Date;
(5) that Holders electing to have a Security
purchased pursuant to a Net Proceeds Offer will be required to
surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the
Paying Agent at the address specified in the notice prior to the
close of business on the Business Day prior to the Proceeds Purchase
Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than two Business
Days prior to the Proceeds Purchase Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Securities the Holder delivered for purchase and a statement that
such Holder is withdrawing his or her election to have such
Securities purchased; and
(7) that Holders whose Securities are purchased only
in part will be issued new Securities in a principal amount equal to
the unpurchased portion of the Securities surrendered.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of Securities pursuant to a Net Proceeds Offer.
On or before the Proceeds Purchase Date, the Company or such
Subsidiary of the Company, as the case may be, shall (i) accept for payment
Securities or portions thereof tendered pursuant to the Net Proceeds Offer
which are to be purchased in accordance with item (b)(l) above, (ii) deposit
with the Paying Agent money sufficient to pay the purchase price of all
Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an
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amount equal to the purchase price. For purposes of this Section 4.15, the
Trustee shall act as the Paying Agent.
Section 4.16. Restriction on Transfer of Certain Assets to
Subsidiaries. If the Company transfers or causes to be transferred, in one or
a series of related transactions, Material Assets to any one or more
Non-Recourse Subsidiaries of the Company, the Company shall cause such
transferee Subsidiary to (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which
such transferee Subsidiary shall unconditionally Guarantee, on a senior basis,
all of the Company's obligations under the Securities and (ii) deliver to the
Trustee an Opinion of Counsel that such supplemental indenture has been duly
executed and delivered by such transferee Subsidiary.
Section 4.17. Investment Company Act. The Company shall not
take any action that would require it or any of its Subsidiaries to register
as an investment company under the Investment Company Act of 1940.
Section 4.18. Consents, etc. The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, pay or
cause to be paid any fee, interest or other amount to any Holders in
connection with any consent, waiver or amendment to this Indenture or the
Securities, unless such fee, interest or other amount is offered or agreed to
be paid to all Holders who are given the same opportunity to so consent, waive
or agree to amend and who, in fact, so consent, waive or agree to amend.
ARTICLE V.
SUCCESSOR CORPORATION
Section 5.01. When the Company May Merge, etc. The Company
shall not consolidate with or merge with or into or sell, assign, transfer or
lease all or substantially all of its properties and assets (either in one
transaction or in a series of related transactions) to any Person, unless:
(1) the Company shall be the continuing Person, or
the resulting, surviving or transferee Person (if other than the
Company) shall be a corporation organized and existing under the laws
of the United States or any State thereof or the District of Columbia
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture, and this Indenture shall remain in
full force and effect;
(2) immediately before and immediately after giving
effect to such transaction (and treating any Debt which becomes an
obligation of the resulting, surviving or transferee Person or any of
its Subsidiaries as a result of such transaction as
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having been issued by such Person or such Subsidiary at the time of
such transaction), no Default or Event of Default shall have occurred
and be continuing;
(3) immediately before and after giving effect to
such transaction, the resulting, surviving or transferee Person could
incur at least $1.00 of additional Debt under Section 4.09(a); and
(4) immediately after giving effect to such
transaction, the resulting, surviving or transferee Person shall have
a Consolidated Net Worth in an amount which is not less than the
Consolidated Net Worth of the Company immediately prior to such
transaction.
In connection with any consolidation, merger, sale,
assignment, transfer or lease contemplated by this Section 5.01, the Company
shall deliver, or cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer or lease and the supplemental indenture in respect
thereto comply with this Article V and that all conditions precedent herein
provided for relating to such transaction have been complied with.
Section 5.02. Successor Corporation Substituted. Upon any
consolidation or merger or any sale, assignment, transfer or lease of all or
substantially all of the assets of the Company in accordance with Section
5.01, the successor corporation formed by such consolidation or into which the
Company is merged or to which such sale, assignment, transfer or lease is
made, shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture, with the same effect as if
such successor corporation had been named as the Company herein, and, except
in the case of a lease, the Company will be discharged from all obligations
and covenants under this Indenture and the Securities.
ARTICLE VI.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in the payment of interest
on any Security when the same becomes due and payable and the default
continues for a period of 30 days;
(2) (i) the Company defaults in the payment of the
principal of any Security when the same becomes due and payable at
maturity or otherwise or (ii) the Company fails to redeem or
repurchase Securities when required pursuant to this Indenture or the
Securities;
(3) the Company fails to comply with the provisions
of Article V;
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(4) the Company fails to comply for 30 days after
notice with any of its obligations under Sections 4.03, 4.06 and 4.09
through 4.14, inclusive;
(5) the Company fails to comply for 60 days after
notice with its other agreements contained in this Indenture or the
Securities (other than those referred to in clauses (1)-(4) above);
(6) principal of or interest on Debt of the Company
or any of its Significant Subsidiaries is not paid within any
applicable grace period or is accelerated by the holders thereof
because of a default and the total amount that is unpaid or
accelerated exceeds $15,000,000 or its foreign currency equivalent
and such default continues for five days after notice;
(7) the Company or any of its Significant
Subsidiaries (A) admits in writing its inability to pay its debts
generally as they become due, (B) commences a voluntary case or
proceeding under any Bankruptcy Law with respect to itself, (C)
consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy
Law, (D) consents to the appointment of a Custodian of it or for
substantially all of its property, (E) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against
it, (F) makes a general assignment for the benefit of its creditors,
or (G) takes any corporate action to authorize or effect any of the
foregoing; and
(8) any judgment or order for the payment of money in
excess of $15,000,000 in the aggregate is rendered against the
Company or any of its Significant Subsidiaries and (i) there is a
period of 60 days following the entry of such judgment or order
during which such judgment or order is not discharged, waived or the
execution thereof stayed and such default continues for 10 days after
the notice specified below or (ii) foreclosure proceedings therefor
have begun and have not been stayed within five days of the
commencement of such foreclosure proceeding.
A Default under clauses (4), (5), (6) or (8) is not an Event
of Default until the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities notify the Company in writing
of the Default, and the Company does not cure the Default within the time
specified in such clause after receipt of such notice. Such notice shall be
given by the Trustee if so requested in writing by the Holders of at least 25%
in aggregate principal amount of the outstanding Securities. When a Default
under clause (4), (5), (6) or (8) is cured or remedied within the specified
period, it ceases to exist.
Section 6.02. Acceleration. If an Event of Default (other
than an Event of Default with respect to the Company specified in Section
6.01(7)) occurs and is continuing, the Trustee, by written notice to the
Company, or the Holders of at least 25% in aggregate principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
declare all unpaid principal of and accrued interest on the Securities then
outstanding to be due
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and payable (the "Default Amount"). Upon a declaration of acceleration, such
amount shall be due and payable immediately.
If an Event of Default with respect to the Company specified
in Section 6.01(7) occurs, the Default Amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholder.
The Holders of a majority in aggregate principal amount of
the Securities then outstanding, by written notice to the Trustee and the
Company, may rescind an acceleration with respect to the Securities and its
consequences if (i) all existing Defaults and Events of Default, other than
the non-payment of the principal of the Securities which has become due solely
by such declaration of acceleration, have been cured or waived, (ii) to the
extent the payment of such interest is lawful, interest on overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid and (iii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction.
Section 6.03. Other Remedies. Notwithstanding any other
provision of this Indenture, if an Event of Default occurs and is continuing
and the Holders are entitled to payment as a result of acceleration, the
Trustee may pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of and/or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
Section 6.04. Waiver of Past Defaults. Subject only to the
provisions of Sections 6.07 and 9.02, the Holders of a majority in aggregate
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default in payment of principal or interest on any
Security as specified in clauses (1) and (2) of Section 6.01. When a Default
or Event of Default is waived, it is cured and ceases to exist.
Section 6.05. Control by Majority. The Holders of a majority
in aggregate principal amount of the outstanding Securities may direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture or that the Trustee determines may be unduly prejudicial
to the rights of another Securityholder as such, or that may subject the
Trustee to personal liability. The Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction.
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Section 6.06. Limitation on Remedies. Except as provided in
Section 6.07, a Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(2) Holders of at least 25% in aggregate principal
amount of the outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and provide to the
Trustee reasonable indemnity or security satisfactory to the Trustee
against any loss, liability or expense;
(4) the Trustee does not comply with such request
within 60 days after receipt of the request and the offer of security
or indemnity; and
(5) during such 60-day period, the Holders of a
majority in aggregate principal amount of the outstanding Securities
do not give the Trustee a direction which, in the opinion of the
Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
Section 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of the principal amount of and interest on
the Security, on or after the respective due dates expressed in the Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of
such Holder.
Section 6.08. Collection Suit by Trustee. If an Event of
Default specified in clause (1) or (2) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Securities
for the whole amount of the principal amount, together with, to the extent
that payment of such interest is lawful, interest on overdue principal, at the
rate per annum specified in the Securities, and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company (or any other
obligor upon the Securities), its creditors or its property. The Trustee shall
be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceedings is hereby authorized by each Securityholder to
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make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due to the Trustee for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 7.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceeding.
Section 6.10. Priorities. If the Trustee collects any money
pursuant to this Article VI, it shall pay out the money in the following
order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Securityholders for amounts due and unpaid on the
Securities ratably, without preference or priority of any kind, according to
the amounts due and payable on the Securities for the principal amount and
interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and
good faith of the claims or defenses made by the party litigant. This Section
6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07, or a suit by any Holder or a group of Holders of more than 10%
in principal amount of the outstanding Securities.
Section 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then, and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as
though no such proceeding had been instituted.
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ARTICLE VII.
TRUSTEE
Section 7.01. Rights of Trustee. Subject to TIA ss. 315(a)
through (d):
(A) The Trustee may conclusively rely on any document
whether in its original or facsimile form believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(B) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which shall
conform to Section 10.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers' Certificate
and/or Opinion of Counsel.
(C) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(D) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers; provided that the Trustee's conduct does not constitute
negligence.
(E) The Trustee may consult with counsel of its own choosing
and the advice or opinion of such counsel as to matters of law shall be full
and complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(F) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity satisfactory
to it against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
Section 7.02. Individual Rights of Trustee. The Trustee in
its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or any of its Affiliates
with the same rights it would have if it were not Trustee. Any Agent or
Affiliate (including without limitation BNY Capital Markets, Inc., one of the
Initial Purchasers) may do the same with like rights. However, the Trustee is
subject to TIA ss. 310(b) and 311.
Section 7.03. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may
agree in writing with the Company. Money held in trust by the Trustee need not
be segregated from other funds except to the extent required by law.
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Section 7.04. Trustee's Disclaimer. The Trustee makes no
representation as to the legality or validity or adequacy of this Indenture or
the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee
and it shall not be responsible for any statement in the Securities other than
its certificate of authentication.
Section 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is actually known to a Trust Officer of the Trustee, the
Trustee shall mail to each Securityholder notice of the Default within 90 days
after it occurs. Except in the case of a Default in the payment of the
principal of or interest on any Security, the Trustee may withhold notice if
and so long as a committee of its Trust Officers in good faith determines that
withholding notice is in the interests of the Holders.
Section 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15 beginning with the May 15 following the Issue Date, the
Trustee shall mail to each Securityholder a report dated as of May 15 as to
the matters set forth in TIA ss. 313(a) if required by TIA ss. 313(a). The
Trustee also shall comply with TIA ss. 313(b) and 313(c).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the Commission and each stock exchange, if
any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any national securities exchange or of any
delisting thereof.
Section 7.07. Compensation and Indemnity. The Company agrees
that it shall pay to the Trustee from time to time such compensation as the
Company and the Trustee shall agree in writing for its services. The Trustee's
compensation shall not be limited by any law on compensation relating to the
trustee of an express trust. The Company agrees that it shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
Such expenses shall also include any taxes or other reasonable costs incurred
by the trust created under Section 8.01.
The Company shall indemnify each of the Trustee and any
predecessor Trustee for, and hold it harmless against, any and all loss,
damage, claim or liability or expense, including taxes (other than taxes based
on the income of the Trustee) incurred by it in connection with the
administration of this trust and its duties hereunder, including the costs and
expenses of defending itself against any claim or liability in connection with
the acceptance, exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder unless the Company is actually prejudiced thereby. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not reimburse
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the Trustee for any expense or indemnify the Trustee against any loss or
liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Securities on all money or
property held or collected by the Trustee except money or property held in
trust to pay principal or interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 6.01(7), the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any
Lien arising hereunder shall survive the resignation or removal of any
Trustee, the discharge of the Company's obligations pursuant to Article VIII
and/or the termination of this Indenture.
Section 7.08. Replacement of Trustee. A resignation or
removal of the Trustee and the appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.08. The Trustee may resign by so notifying the
Company in writing at least 30 days prior to the date of the proposed
resignation. The Holders of a majority in aggregate principal amount of the
outstanding Securities may remove the Trustee by so notifying a Trust Officer
of the Trustee in writing and may appoint a successor Trustee with the
Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to the
Trustee under any Bankruptcy Law;
(3) a receiver or other public officer takes
charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. The Trustee shall be entitled to payment of its fees and
reimbursement of its expenses while acting as Trustee, and to the extent such
amounts remain unpaid, the Trustee that has resigned or has been removed shall
retain the Lien afforded by Section 7.07. Within one year after the successor
Trustee takes office, the Holders of a majority in aggregate principal amount
at maturity of the outstanding Securities may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Immediately
thereafter, subject to the Lien provided in Section 7.07, the retiring Trustee
shall transfer all property held by it as Trustee to the successor
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Trustee, the resignation or removal of the retiring Trustee shall become
effective and the successor Trustee shall have all the rights, powers and
duties of the retiring Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the
outstanding Securities may petition, at the expense of the Company, any court
of competent jurisdiction for the appointment of a successor Trustee.
If any Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. Any
successor Trustee shall comply with TIA ss. 310(a)(5).
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act shall be
the successor Trustee, if such corporation or association complies with
Section 7.10.
Section 7.10. Eligibility: Disqualification. This Indenture
shall always have a Trustee who satisfies the requirements of TIA ss.
310(a)(l). The Trustee shall have (or, in the case of a corporation included
in a bank holding company system, the related bank holding company subsidiary
shall have) a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. The Trustee
also shall comply with TIA ss. 310(b).
Section 7.11. Preferential Collection of Claims Against the
Company. The Trustee is subject to TIA ss. 311(a), excluding from the
operation of TIA ss. 311(a) any creditor relationship listed in TIA ss.
311(b). A Trustee who has resigned or been removed shall be subject to TIA ss.
311(a) to the extent indicated therein.
Section 7.12. Duties of Trustee. (A) If a Default or an
Event of Default has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture and use the same
degree of care and skill in their exercise as a prudent person would exercise
or use under the circumstances in the conduct of his own affairs.
(B) Except during the continuance of a Default or an Event
of Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no others and no implied
covenants or obligation shall be read into this Indenture against the
Trustee; and
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(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and which conform to the
requirements of this Indenture; however, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(C) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit, the effect of
paragraph (B) of this Section 7.12;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05.
(D) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(E) Every provision of this Indenture that in any way
relates to the Trustee is subject to Sections 7.12(A), (B), (C) and (D).
Section 7.13. Trustee's Application for Instructions from
the Company. Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the
date on and/or after which such action shall be taken or such omission shall
be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date
shall not be less than three Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such
action (or the effective date in the case of an omission), the Trustee shall
have received written instructions in response to such application specifying
the action to be taken or omitted.
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ARTICLE VIII.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01. Discharge of Liability on Securities
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable,
and the Company irrevocably deposits with the Trustee money sufficient to pay
at maturity all outstanding Securities, including interest thereon, if any,
(other than Securities replaced pursuant to Section 2.07) and if in either
case the Company pays all other sums payable hereunder by the Company, then
this Indenture shall, subject to Sections 8.01(c) and 8.06, cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of
this Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as to the satisfaction of all conditions
to such satisfaction and discharge of this Indenture and at the cost and
expense of the Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company
may at any time terminate (i) all its obligations under the Securities and
this Indenture ("legal defeasance"), or (ii) its obligations under Sections
4.03, 4.04, 4.06, 4.08 through 4.17, inclusive, and the operation of Section
6.01(3), 6.01(4), 6.01(5), 6.01(6), 6.01(7) (with respect only to Significant
Subsidiaries) and 6.01(8) and the limitations contained in Section 5.01(3) and
(4) ("covenant defeasance").
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. If the
Company exercises its legal defeasance option, payment of the Securities may
not be accelerated because of an Event of Default with respect thereto.
Upon satisfaction of the conditions set forth herein and
upon request of the Company, the Trustee shall acknowledge in writing the
discharge of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05
and 8.06 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
Section 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only
if:
(1) the Company irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations for the payment of
principal on the Securities and interest, if any, to maturity or
redemption, as the case may be;
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(2) the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest
when due and without reinvestment on the deposited U.S. Government
Obligations plus any deposited money without investment will provide
cash at such times and in such amounts as will be sufficient to pay
principal and interest, if any, when due on all the Securities to
maturity or redemption, as the case may be;
(3) no Default has occurred and is continuing on the
date of such deposit and after giving effect thereto;
(4) the deposit does not constitute a default under
any other agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940;
(6) the Company delivers to the Trustee an Opinion of
Counsel stating that the Securityholders will not recognize income,
gain or loss for federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on
the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred,
and, in the case of legal defeasance only, such Opinion of Counsel
shall be based on a ruling received from or published by the Internal
Revenue Service or a change, since the date of this Indenture, in the
applicable federal income tax law, and
(7) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the
Securities as contemplated by this Article VIII have been complied
with.
Notwithstanding the foregoing provisions of this Section,
the conditions set forth in the foregoing paragraphs (2), (3), (4), (5), (6)
and (7) need not be satisfied so long as, at the time the Company makes the
deposit described in paragraph (1), (i) no Default under Section 6.01(1),
6.01(2), 6.01(7) or 6.01(8) has occurred and is continuing on the date of such
deposit and after giving effect thereto and (ii) either (x) a notice of
redemption has been mailed pursuant to Section 3.03 providing for redemption
of all the Securities 30 days after such mailing and the provisions of Section
3.01 with respect to such redemption shall have been complied with or (y) the
Stated Maturity of all of the Securities will occur within 30 days. If the
conditions of the preceding sentence are satisfied the Company shall be deemed
to have exercised its covenant defeasance option.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article III and paragraph 5(a) of the Securities (including
by utilizing amounts under deposit).
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Section 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article VIII. It shall apply the deposited money and the money from
U.S. Government Obligations through the Paying Agent and in accordance with
this Indenture to the payment of principal of and interest, if any, on the
Securities.
Section 8.04. Repayment to Company. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any excess
money or securities held by them at any time.
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon written request any
money held by them for the payment of principal and interest, if any, that
remains unclaimed for two years, and, thereafter, Securityholders entitled to
the money must look to the Company for payment as general creditors.
Section 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or
other charges imposed on or assessed against U.S. Government Obligations
deposited with the Trustee hereunder or the principal and interest received on
such U.S. Government Obligations.
Section 8.06. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article VIII by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with this Article VIII; provided that, if
the Company has made any payment of interest, if any, on or principal of any
Securities because of the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may
amend or supplement this Indenture or the Securities without notice to or
consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article V;
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(3) to provide for uncertificated Securities in
addition to certificated Securities;
(4) to comply with any requirements of the Commission
in order to effect or maintain the qualification of this Indenture
under the TIA;
(5) to make any change that would provide any
additional benefit or rights to the Securityholders or that does not
adversely affect the rights of any Securityholder; or
(6) to provide for issuance of the Exchange
Securities or Private Exchange Notes, if applicable, which will have
terms substantially identical in all material respects to the Initial
Securities (except that, with respect to the Exchange Securities, the
transfer restrictions contained in the Initial Securities will be
modified or eliminated, as appropriate), and which will be treated
together with any outstanding Initial Securities, as a single issue
of securities.
Notwithstanding the above, the Trustee and the Company may
not make any change that adversely affects the rights of any Securityholders
hereunder.
Section 9.02. With Consent of Holders. Subject to Section
6.07, the Company, when authorized by resolution of its Board of Directors,
and the Trustee may amend this Indenture or the Securities with the written
consent of the Holders of a majority in aggregate principal amount of the
Securities then outstanding, and the Holders of a majority in aggregate
principal amount of the Securities then outstanding by written notice to the
Trustee may waive future compliance by the Company with any provision of this
Indenture or the Securities.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Securityholder affected, an amendment or waiver, including
a waiver pursuant to Section 6.04, may not:
(A) change the stated maturity of the principal of, or any
installment of interest on, any Security or reduce the principal amount
thereof, the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which any Security or
any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the stated
maturity thereof;
(B) reduce the percentage in principal amount of the
outstanding Securities, the consent of the Holders of which is required for
any supplemental indenture or the consent of the Holders of which is required
for any waiver of compliance with provisions of this Indenture or Defaults
hereunder and their consequences provided for in this Indenture;
(C) modify any of the provisions relating to supplemental
indentures requiring the consent of Holders or relating to the waiver of past
defaults or relating to the waiver of covenants, except to increase any such
percentage of outstanding Securities required for such
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actions or to provide that certain other provisions of this Indenture cannot
be modified or waived without the consent of each Securityholder affected
thereby;
(D) waive a default in the payment of the principal of or
interest on any Security or modify or waive the Company's obligation to
repurchase Securities under Section 4.14 or 4.15;
(E) except as otherwise permitted by the covenants contained
in Article V, consent to the assignment or transfer by the Company of any of
its rights and obligations under this Indenture;
(F) make any change in this Section 9.02 or Section 6.04 or
6.07; or
(G) change the time at which any Security must be redeemed
or repaid in accordance with the terms of this Indenture and the Securities.
It shall not be necessary for the consent of the Holders
under this Section 9.02 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof. Any amendment, waiver or consent shall be
deemed effective upon receipt by the Trustee of the necessary consents and
shall not require execution of any supplemental indenture to be effective.
After an amendment or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such amendment, waiver or consent. Except as otherwise provided in this
Section 9.02, the Holders of a majority in aggregate principal amount of the
Securities then outstanding may waive compliance in a particular instance by
the Company with any provisions of this Indenture or the Securities.
Section 9.03. Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
is a continuing consent by such Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective.
After an amendment, supplement or waiver becomes effective,
it shall bind every Securityholder; provided that if such amendment,
supplement or waiver makes a change described in any of clauses (A) through
(G) of Section 9.02, such amendment, supplement or waiver shall
bind each Holder of a Security who has consented to it; and provided, further,
that if notice of such amendment, supplement or waiver is reflected on a
Security that evidences the same debt as the consenting Holder's Security,
such amendment, supplement or waiver shall
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bind every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
Section 9.04. Record Date. The Company shall be permitted to
set a record date for purposes of determining the identity of Securityholders
entitled to vote or consent on any matter arising under this Indenture. In the
Company's sole discretion, the record date shall be either (i) the record date
as determined pursuant to ss. 316(c) of the TIA or (ii) such other record date
as the Company shall select.
Section 9.05. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee
may (and, at the request of the Company, shall) require the Holder of the
Security to deliver it to the Trustee. The Trustee may (and, at the request of
the Company, shall) place an appropriate notation on the Security about the
changed terms and return it to the Holder and the Trustee may (and, at the
request of the Company, shall) place an appropriate notation on any Security
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Section 9.06. Trustee May Sign Amendments, etc. The Trustee
shall sign any amendment, supplement or waiver authorized pursuant to this
Article IX if the amendment, supplement or waiver does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment, supplement or waiver, the Trustee shall be entitled to receive and,
subject to TIA ss. 315(a) through (d), shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment, supplement or waiver is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms.
Section 9.07. Compliance with TIA. Every amendment or
supplement to this Indenture or Securities shall comply with the TIA as then
in effect.
ARTICLE X.
MISCELLANEOUS
Section 10.01. Trust Indenture Act of 1939. This Indenture
is subject to the provisions of the TIA that are required to be a part of this
Indenture, and shall, to the extent applicable, be governed by such
provisions.
Section 10.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, postage prepaid, addressed as follows:
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If to the Company, to:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Attention: General Counsel
If to the Trustee, to:
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
The parties hereto by notice to the other parties may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed, postage prepaid, to a
Securityholder shall be mailed by first class mail to him at his address as it
appears on the Securities register maintained by the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed. Copies of
any such communication or notice to a Holder shall also be mailed to the
Trustee.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its sufficiency with
respect to other Securityholders. Except for a notice to the Trustee or the
Company, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 10.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA ss. 312(c).
Section 10.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
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Section 10.05. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 4.05(b)) shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statement or opinions
contained in such certificate or opinion are based;
(3) a brief statement that, in the opinion of such
Person, he has made such examination or investigation as is necessary
to enable him to express an opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been complied with;
provided that with respect to matters of fact an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public
officials.
Section 10.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
Section 10.07. Governing Law. The laws of the State of New
York shall govern this Indenture and the Securities without regard to
principles of conflicts of law. The Trustee, the Company and the
Securityholders agree to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to this
Indenture or the Securities.
Section 10.08. No Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries. No such indenture, loan
or debt agreement may be used to interpret this Indenture.
Section 10.09. No Recourse Against Others. No director,
officer, employee, stockholder or Affiliate, as such, of the Company shall
have any liability for any obligations of the Company under the Securities or
this Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability.
Section 10.10. Legal Holidays. A "Legal Holiday" is a
Saturday, Sunday or a day on which banking institutions in New York, New York
are not required to be open. If a payment date is a Legal Holiday at a place
of payment, payment may be made at that place on the next succeeding day that
is not a Legal Holiday and interest shall not accrue for the intervening
period.
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Section 10.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
Section 10.12. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all such executed copies together represent the same agreement.
Section 10.13. Separability. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and a Holder shall have no claim
therefor against any party hereto.
Section 10.14. Table of Contents, Headings, etc. The Table
of Contents, Cross-Reference Table and headings of the Articles and Sections
of this Indenture have been inserted for convenience of reference only, are
not to be considered a part hereof, and shall in no way modify or restrict any
of the terms or provisions hereof.
Section 10.15. Benefits of Indenture. Nothing in this
Indenture or in the Securities, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, and the Holders,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
BUILDING MATERIALS CORPORATION OF AMERICA
By:
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------------
Name:
Title:
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EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE 'SECURITIES ACT'), AND THE
SECURITY EVIDENCED HEREBY OR ANY INTEREST OR PARTICIPATION HEREIN MAY NOT BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY
ITS ACCEPTANCE HEREOF AGREES (A) TO OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER
THIS SECURITY ONLY (1) TO THE COMPANY, (2) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (3) TO A
PERSON IT REASONABLY BELIEVES IS A 'QUALIFIED INSTITUTIONAL BUYER' AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (4) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL
'ACCREDITED INVESTOR' (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT OR (6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (AND IN THE CASE OF A
TRANSFER PURSUANT TO CLAUSE (4), (5) OR (6), BASED ON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), SUBJECT IN EACH OF THE FOREGOING CASES TO APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THAT IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
A-1
<PAGE>
No. $_______________
CUSIP No. _______
BUILDING MATERIALS CORPORATION OF AMERICA
7 3/4% SENIOR NOTES DUE 2005
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), promises to pay to
, or registered assigns, the principal sum of
Dollars on July 15, 2005.
Interest Payment Dates: January 15 and July 15, commencing
January 15, 1999.
Record Dates: January 1 and July 1.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to
be signed manually or by facsimile by its duly authorized officers.
BUILDING MATERIALS CORPORATION
OF AMERICA
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Dated: July 17, 1998
Trustee's Certificate of Authentication
This is one of the 7 3/4% Senior
Notes due 2005 described in the
within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE SIDE INITIAL SECURITY]
BUILDING MATERIALS CORPORATION OF AMERICA
7 3/4% Senior Notes due 2005
1. Interest. BUILDING MATERIALS CORPORATION OF AMERICA, a
Delaware corporation (the "Company"), promises to pay cash interest on the
principal amount of this Security at a rate of 7 3/4% per annum, payable on
January 15 and July 15 of each year (the "Interest Payment Date"), commencing
January 15, 1999. The Company shall pay interest on overdue principal at the
rate of 7 3/4% per annum. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. The Holder must
surrender this Security to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
The Company, however, may pay principal and interest by a check payable in
such money. The Company may mail an interest check to the Holder's registered
address. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar. Initially, The Bank of New
York (the "Trustee") or its agent will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without prior
notice to any Holder. The Company or any of its Subsidiaries or Affiliates may
act in any such capacity, except in certain circumstances.
4. Indenture. The Company issued the Securities under an
Indenture dated as of July 17, 1998 (the "Indenture") between the Company and
the Trustee. Capitalized terms used in this Security and not defined in this
Security shall have the meaning set forth in the Indenture. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 as in effect on the
date of the Indenture. The Securities are subject to all such terms, and
Holders of Securities are referred to the Indenture and said Act for a
statement of such terms.
The Securities are senior unsecured obligations of the
Company limited to $150,000,000 aggregate principal amount. This Security is
one of the Initial Securities referred to in the Indenture. The Securities
include the Initial Securities, any Exchange Securities, as defined below,
issued in exchange for the Initial Securities pursuant to the Indenture, and
the Private Exchange Notes. The Initial Securities, the Exchange Securities,
and the Private Exchange Notes are treated as a single class of securities
under the Indenture.
A-4
<PAGE>
5. Redemption.
(a) Optional Redemption.
In the event a Change of Control occurs, the Company shall
have the option to redeem all, but not less than all, of the Securities, at a
redemption price equal to the sum of (x) 100% of the principal amount thereof
plus accrued and unpaid interest thereon to the redemption date and (y) the
Applicable Premium with respect to each $1,000 principal amount of Securities
so redeemed. Notice of any redemption to be made pursuant to this paragraph
must be given no later than 10 days after the Change of Control Payment Date,
and redemption must be made within 30 days of the date of such notice.
(b) Mandatory Redemption. The Securities will not have the
benefit of any sinking fund.
6. Put Provisions. Upon a Change of Control, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities (in integral multiples of $1,000) of such Holder at a
repurchase price equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase as provided in, and subject to the terms
of, the Indenture.
7. Notice of Redemption. Notice of redemptions pursuant to
paragraph 5 will be mailed at such time as is provided by paragraph 5(a) to
each Holder of Securities to be redeemed at the Holder's registered address.
If money sufficient to pay the redemption price and accrued interest on all
Securities to be redeemed on the redemption date is deposited with the Paying
Agent on the redemption date, on and after such date interest will cease to
accrue on such Securities.
8. Proceeds on Disposition of Assets. As described in
Section 4.15 of the Indenture, the Company is required under certain
circumstances to apply the Net Cash Proceeds (or a portion thereof) from Asset
Sales to offer to purchase Securities at a price equal to 100% of the
principal amount thereof plus accrued interest thereon to the date of
purchase.
9. Denominations, Transfer, Exchange. The Securities are in
registered form in denominations of $1,000 and integral multiples of $1,000. A
Holder may register the transfer or exchange of Securities as provided in the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, provide certain
certifications and legal opinions as described herein and to pay any taxes and
fees required by law or permitted by the Indenture.
10. Persons Deemed Owners. The Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name the
Security is registered with the Registrar as the owner for all purposes.
A-5
<PAGE>
11. Unclaimed Money. If money for the payment of interest or
principal remains unclaimed for two years, the Trustee and the Paying Agent
will pay the money back to the Company at its written request. After such
time, Holders entitled to the money must look to the Company for payment
unless an abandoned property law designates another Person, and all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Maturity. Subject to certain
conditions described in Article VIII of the Indenture, if the Company deposits
with the Trustee money or U.S. Government Obligations sufficient to pay the
principal of and interest on the Securities to maturity, the Company will be
discharged (to the extent provided in the Indenture) from the Indenture and
the Securities.
13. Amendments, Supplements and Waivers. Subject to certain
exceptions requiring the consent of each Holder affected as described in
Article IX of the Indenture, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Securities, and any existing Default
may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Securities. Without notice to or the consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or
inconsistency, provide for the assumption of the obligations of the Company to
Holders or make any change that does not adversely affect the rights of any
Holder.
14. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to merge or
consolidate with any other Person or sell, lease or otherwise transfer all or
substantially all of its properties or assets, the ability of the Company or
certain of its Subsidiaries to make Restricted Payments and Restricted
Investments and the ability of the Company and certain of its Subsidiaries to
incur Debt, create Liens or engage in transactions with Affiliates or issue
Preferred Stock, all subject to certain limitations and qualifications
described in the Indenture.
15. Successor Corporation. When a successor Person or other
entity assumes all the obligations of its predecessor under the Securities and
the Indenture, the predecessor Person will be released from those obligations.
16. Defaults and Remedies. The Securities have the Events of
Default as set forth in Section 6.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy, insolvency or reorganization relating to the
Company, all outstanding Securities shall become due and payable immediately
without further action or notice. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Securities
A-6
<PAGE>
may direct the Trustee in its exercise of any trust or power. The Company must
furnish quarterly compliance certificates to the Trustee.
17. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any of its Affiliates,
and may otherwise deal with the Company or any of its Affiliates, as if it
were not the Trustee.
18. No Recourse Against Others. A director, officer,
employee, stockholder or Affiliate, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
19. Authentication. This Security shall not be valid
until authenticated by the manual signature of the Trustee or any
authenticating agent.
20. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.
22. Registration Rights. Pursuant to the Registration Rights
Agreement among the Company and the Initial Purchasers of the Initial
Securities, the Company has certain obligations regarding an Exchange Offer
pursuant to which the Holder of this Security shall have the right to exchange
this Security for the Company's Series B 7 3/4% Senior Notes Due 2005 (the
"Exchange Securities"), which have been registered under the Securities Act,
in like principal amount and having identical terms as the Initial Securities.
The Holders of the Initial Securities shall be entitled to receive certain
additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement. Within five
days after the occurrence of an event so resulting in such additional interest
payments, the Company shall provide the Trustee with an Officers' Certificate
describing such event and providing the Trustee with all necessary details
relating to the payment of such interest, including, without limitation, the
interest rate, the effective date of such interest rate and the method of
calculating interest.
A-7
<PAGE>
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Attention: Secretary
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- ------------------------------------------------------------------------------
(insert assignee's social security or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: Your signature:
----------------- -------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
-----------------------------
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the date that is two years after the later of
the date of original issuance of such Securities and the last date, if any, on
which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being transferred:
A-9
<PAGE>
CHECK ONE BOX BELOW
(1) /_/ to the Company or a subsidiary thereof; or
(2) /_/ inside the United States to a qualified
institutional buyer in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
(3) /_/ to an institutional "accredited investor"
(as defined in Rule 50l(a)(1), (2), (3) or (7)
under the Securities Act of 1933, as amended) that,
prior to such transfer, furnishes to the Trustee a
signed letter containing certain representations
and agreements relating to the restrictions on
transfer of the note evidenced thereby (the form of
which letter can be obtained from the Trustee); or
(4) /_/ outside the United States to a non-U.S. Person in
compliance with Rule 904 of Regulation S under the
Securities Act of 1933, as amended; or
(5) /_/ pursuant to the exemption from registration under
the Securities Act of 1933, as amended, (if
available); or
(6) /_/ pursuant to a registration statement which has been
declared effective under the Securities Act of
1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse
to register any of the Securities evidenced by this certificate in the name of
any person other than the registered Holder thereof; provided that if box (3),
(4) or (5) is checked, the holder must, prior to such transfer, furnish to the
Trustee such certifications, legal opinions, or other information as the
Company may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, as amended.
----------------------------
Signature Guarantee: Signature
- ------------------------------- -----------------------------
Signature
- ------------------------------------------------------------------------------
A-10
<PAGE>
OPTIONS OF HOLDER TO ELECT PURCHASE
If you want to elect to have all of this Security purchased
by the Company pursuant to Section 4.14 or 4.15 of the Indenture, check the
box:
/__/
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.14 or 4.15 of the Indenture,
state the Principal Amount: $
Date: Your Signature:
----------------------- ---------------------------
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:
------------------------------------------------------
(Signature must be guaranteed)
A-11
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE*]
No. $_______________
CUSIP No. _______
BUILDING MATERIALS CORPORATION OF AMERICA
SERIES B 7 3/4% SENIOR NOTES DUE 2005
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware
corporation (the "Company"), promises to pay to
, or registered assigns, the principal sum of
Dollars on July 15, 2005.
Interest Payment Dates: January 15 and July 15, commencing
January 15, 1999.
Record Dates: January 1 and July 1.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
- --------
* If the certificate is a Private Exchange Note issued pursuant to the
Registration Rights Agreement in a Private Exchange (as defined
therein), add the restricted securities legend from Exhibit A to this
Indenture and replace the Assignment Form included in this Exhibit B
with the Assignment Form included in Exhibit A.
B-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to
be signed manually or by facsimile by its duly authorized officers.
BUILDING MATERIALS CORPORATION
OF AMERICA
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Dated:
Trustee's Certificate of Authentication
This is one of the Series B 7 3/4%
Senior Notes due 2005 [Private Exchange
7 3/4% Senior Notes due 2005] described
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------
Authorized Signatory
B-2
<PAGE>
[FORM OF REVERSE SIDE EXCHANGE SECURITY AND PRIVATE EXCHANGE NOTE]
BUILDING MATERIALS CORPORATION OF AMERICA
Series B 7 3/4% Senior Notes due 2005
Private Exchange 7 3/4% Senior Notes due 2005
1. Interest. BUILDING MATERIALS CORPORATION OF AMERICA, a
Delaware corporation (the "Company"), promises to pay cash interest on the
principal amount of this Security at a rate of 7 3/4% per annum, payable on
January 15 and July 15 of each year (the "Interest Payment Date"), commencing
January 15, 1999. The Company shall pay interest on overdue principal at the
rate of 7 3/4% per annum. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. The Holder must
surrender this Security to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
The Company, however, may pay principal and interest by a check payable in
such money. The Company may mail an interest check to the Holder's registered
address. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar. Initially, The Bank of New
York (the "Trustee") or its agent will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without prior
notice to any Holder. The Company or any of its Subsidiaries or Affiliates may
act in any such capacity, except in certain circumstances.
4. Indenture. The Company issued the Securities under an
Indenture dated as of July 17, 1998 (the "Indenture") between the Company and
the Trustee. Capitalized terms used in this Security and not defined in this
Security shall have the meaning set forth in the Indenture. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 as in effect on the
date of the Indenture. The Securities are subject to all such terms, and
Holders of Securities are referred to the Indenture and said Act for a
statement of such terms.
The Securities are senior unsecured obligations of the Company limited to
$150,000,000 aggregate principal amount. This Security is one of the [Exchange
Securities] [Private Exchange Notes] referred to in the Indenture. The
Securities include the Initial Securities, any Exchange Securities issued in
exchange for the Initial Securities pursuant to the Indenture, and the Private
Exchange Notes. The Initial Securities, the Exchange Securities, and the
Private Exchange Notes
B-3
<PAGE>
are treated as a single class of securities under the Indenture.
5. Redemption.
(a) Optional Redemption. In the event a Change of Control
occurs, the Company shall have the option to redeem all, but not less than
all, of the Securities, at a redemption price equal to the sum of (x) 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
redemption date and (y) the Applicable Premium with respect to each $1,000
principal amount of Securities so redeemed. Notice of any redemption to be
made pursuant to this paragraph must be given no later than 10 days after the
Change of Control Payment Date, and redemption must be made within 30 days of
the date of such notice.
(b) Mandatory Redemption. The Securities will not have the
benefit of any sinking fund.
6. Put Provisions. Upon a Change of Control, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities (in integral multiples of $1,000) of such Holder at a
repurchase price equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase as provided in, and subject to the terms
of, the Indenture.
7. Notice of Redemption. Notice of redemptions pursuant to
paragraph 5 will be mailed at such time as is provided by paragraph 5(a) to
each Holder of Securities to be redeemed at the Holder's registered address.
If money sufficient to pay the redemption price and accrued interest on all
Securities to be redeemed on the redemption date is deposited with the Paying
Agent on the redemption date, on and after such date interest will cease to
accrue on such Securities.
8. Proceeds on Disposition of Assets. As described in
Section 4.15 of the Indenture, the Company is required under certain
circumstances to apply the Net Cash Proceeds (or a portion thereof) from Asset
Sales to offer to purchase Securities at a price equal to 100% of the
principal amount thereof plus accrued interest thereon to the date of
purchase.
9. Denominations, Transfer, Exchange. The Securities are in
registered form in denominations of $1,000 and integral multiples of $1,000. A
Holder may register the transfer or exchange of Securities as provided in the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, provide certain
certifications and legal opinions as described herein and to pay any taxes and
fees required by law or permitted by the Indenture.
10. Persons Deemed Owners. The Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name the
Security is registered with the Registrar as the owner for all purposes.
11. Unclaimed Money. If money for the payment of interest or
principal remains unclaimed for two years, the Trustee and the Paying Agent
will pay the money back to
B-4
<PAGE>
the Company at its written request. After such time, Holders entitled to the
money must look to the Company for payment unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
12. Discharge Prior to Maturity. Subject to certain
conditions described in Article VIII of the Indenture, if the Company deposits
with the Trustee money or U.S. Government Obligations sufficient to pay the
principal of and interest on the Securities to maturity, the Company will be
discharged (to the extent provided in the Indenture) from the Indenture and
the Securities.
13. Amendments, Supplements and Waivers. Subject to certain
exceptions requiring the consent of each Holder affected as described in
Article IX of the Indenture, the Indenture or the Securities may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Securities, and any existing Default
may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Securities. Without notice to or the consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or
inconsistency, provide for the assumption of the obligations of the Company to
Holders or make any change that does not adversely affect the rights of any
Holder.
14. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to merge or
consolidate with any other Person or sell, lease or otherwise transfer all or
substantially all of its properties or assets, the ability of the Company or
certain of its Subsidiaries to make Restricted Payments and Restricted
Investments and the ability of the Company and certain of its Subsidiaries to
incur Debt, create Liens or engage in transactions with Affiliates or issue
Preferred Stock, all subject to certain limitations and qualifications
described in the Indenture.
15. Successor Corporation. When a successor Person or other
entity assumes all the obligations of its predecessor under the Securities and
the Indenture, the predecessor Person will be released from those obligations.
16. Defaults and Remedies. The Securities have the Events of
Default as set forth in Section 6.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy, insolvency or reorganization relating to the
Company, all outstanding Securities shall become due and payable immediately
without further action or notice. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Securities may direct the Trustee in its
exercise of any trust or power. The Company must furnish quarterly compliance
certificates to the Trustee.
B-5
<PAGE>
17. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any of its Affiliates,
and may otherwise deal with the Company or any of its Affiliates, as if it
were not the Trustee.
18. No Recourse Against Others. A director, officer,
employee, stockholder or Affiliate, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
19. Authentication. This Security shall not be valid
until authenticated by the manual signature of the Trustee or any
authenticating agent.
20. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Attention: Secretary
B-6
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- ------------------------------------------------------------------------------
(insert assignee's social security or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: Your signature:
--------------------- -------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
-------------------------
B-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all of this Security purchased
by the Company pursuant to Section 4.14 or 4.15 of the Indenture, check the
box:
/___/
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.14 or 4.15 of the Indenture,
state the Principal Amount: $
Date: Your Signature:
---------------------- --------------------------
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:
-------------------------------
(Signature must be guaranteed)
B-8
<PAGE>
EXHIBIT C
[FORM OF LEGEND FOR BOOK-ENTRY SECURITIES]
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required
in the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF
THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY
A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
C-1
<PAGE>
EXHIBIT D
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS
The undersigned is delivering this letter in connection with
an offering of 7 3/4% Senior Notes Due 2005 (the "Notes") of Building
Materials Corporation of America (the "Company"), all as described in the
Offering Memorandum (the "Offering Memorandum") relating to the offering.
The undersigned hereby confirms that:
(i) the undersigned is an "accredited investor" within the
meaning of Rule 50l(a)(1), (2) or (3) under the Securities Act of
1933, as amended (the "Securities Act"), or an entity in which all of
the equity owners are accredited investors within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act (an "Institutional
Accredited Investor");
(ii) (A) any purchase of Notes by the undersigned will be
for the undersigned's own account or for the account of one or more
other Institutional Accredited Investors or as fiduciary for the
account of one or more trusts, each of which is an "Accredited
investor" within the meaning of Rule 501(a)(7) under the Securities
Act and for each of which we exercise sole investment discretion or
(B) we are a "bank," within the meaning of Section 3(a)(2) of the
Securities Act, or a "savings and loan association or other
institution described in Section 3(a)(5)(A) of the Securities Act
that is acquiring Notes as fiduciary for the account of one or more
institutions for which we exercise sole investment discretion;
(iii) in the event that the undersigned purchases any notes,
it will acquire Notes having a minimum principal amount of not less
than $250,000 for the undersigned's own account or for any separate
account for which the undersigned is acting;
(iv) the undersigned has such knowledge and experience in
financial and business matters that the undersigned is capable of
evaluating the merits and risks of purchasing Notes;
(v) the undersigned is not acquiring Notes with a view to
distribution thereof or with any present intention of offering or
selling Notes, except as permitted below; provided that the
disposition of the undersigned's property and property of any
accounts for which the undersigned is acting as fiduciary shall
remain at all times within the undersigned's control; and
(vi) the undersigned has received a copy of the Offering
Memorandum and acknowledges that the undersigned has had access to
such financial and other information, and has been afforded the
opportunity to ask such questions of
D-1
<PAGE>
representatives of the Company and receive answers thereto, as the
undersigned deems necessary in connection with the undersigned's
decision to purchase Notes.
The undersigned understands that the Notes were offered in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Notes have not been registered
under the Securities Act or any applicable state securities laws, and the
undersigned agrees, on the undersigned's own behalf and on behalf of each
account for which the undersigned acquires any Notes, that if in the future
the undersigned decides to resell or otherwise transfer any Notes (A) such
resale or transfer will be only (1) to the Company, (2) pursuant to a
registration statement which has been declared effective under the Securities
Act, (3) to a person it reasonably believes is a 'Qualified Institutional
Buyer' as defined in Rule 144A under the Securities Act ("Rule 144A") in a
transaction meeting the requirements of Rule 144A, (4) pursuant to offers and
sales to Non-U.S. Persons that occur outside the United States in a
transaction meeting the requirements of Rule 904 under the Securities Act, (5)
to an institutional 'Accredited Investor' (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) in a transaction meeting the requirements
of Rule 144A under the Securities Act or (6) pursuant to any other available
exemption from the registration requirements under the Securities Act (and in
the case of a transfer pursuant to clause (4), (5) or (6), based on an opinion
of counsel if the Company so requests), subject in each of the foregoing cases
to applicable securities laws of any state of the United States or any other
applicable jurisdiction and (B) that it will, and each subsequent holder is
required to, notify any purchaser from it of any Notes of the resale
restrictions set forth in (A) above. The undersigned agrees that any such
transfer of Notes referred to in this paragraph shall be in accordance with
applicable securities laws of any State of the United States or any other
applicable jurisdiction and in accordance with the legends set forth on the
Notes. The undersigned understands that the register and transfer agent for
the Notes will not be required to accept for registration or transfer any
Notes, except upon presentation of evidence satisfactory the Company that the
foregoing restrictions on transfer have been complied with. The undersigned
further understands that any Notes will be in the form of definitive physical
certificates and that such certificates will bear a legend (unless the sale of
the Notes has been registered under the Securities Act) reflecting the
substance of this paragraph.
The undersigned acknowledges that the Company, others and
you will rely upon the undersigned's confirmations, acknowledgments and
agreements set forth herein, and the undersigned agrees to notify you promptly
in writing if any of the undersigned's representations or warranties herein
ceases to be accurate and complete.
D-2
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
------------------------------------
(Name of Purchaser)
By:
----------------------------------
Name:
Title:
Address:
D-3
<PAGE>
Page 1
EXECUTION COPY
BUILDING MATERIALS CORPORATION OF AMERICA
$150,000,000
7 3/4% Senior Notes Due 2005
REGISTRATION RIGHTS AGREEMENT
-----------------------------
July 17, 1998
Bear, Stearns & Co. Inc.
BNY Capital Markets, Inc.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York
10167
Ladies and
Gentlemen:
Building Materials Corporation of America, a Delaware
corporation (the "Company"), proposes to issue and sell to you (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement dated July 14,
1998 (the "Purchase Agreement"), $150,000,000 aggregate principal amount of
its 7 3/4% Senior Notes due 2005 (the "Notes"). The Notes will be issued
pursuant to an indenture (the "Indenture") between the Company and The Bank of
New York, as trustee (the "Trustee") dated July 17, 1998, substantially in the
form previously furnished to the Initial Purchasers. As an inducement to the
Initial Purchasers, the Company agrees with the Initial Purchasers, for the
benefit of the holders of the Notes (including, without limitation, the
Initial Purchasers, herein referred to as the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall prepare and,
by the earlier of 60 days after the date of original issuance of the Notes
(the "Issue Date") and the date of filing of a registration statement in
respect of an initial public offering of common stock of the Company (other
than a registration statement on Form S-8), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to a proposed offer
(the "Registered Exchange Offer") to the Holders of the Notes to issue and
deliver to such Holders, in exchange for the Notes, a like principal amount of
debt
<PAGE>
Page 2
securities of the Company identical in all material respects to the Notes (the
"Exchange Notes"), except for the transfer restrictions relating to the Notes.
The Company shall use its best efforts to cause such Exchange Offer
Registration Statement to become effective under the Securities Act within 120
days of the Issue Date. Following the declaration of the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly commence the
Registered Exchange Offer, it being the objective of such Registered Exchange
Offer to enable each Holder of the Notes electing to exchange the Notes for
Exchange Notes and (assuming that such Holder is not an affiliate of the
Company within the meaning of the Securities Act, acquires the Exchange Notes
in the ordinary course of such Holder's business and has no arrangements with
any person to participate in the distribution of the Exchange Notes) to trade
such Exchange Notes from and after their receipt without any limitations or
restrictions under the Securities Act and the securities laws of the several
states of the United States. In connection with such Registered Exchange
Offer, the Company shall take such further action, including, without
limitation, appropriate filings under state securities laws, as may be
necessary to realize the foregoing objective subject to the proviso of Section
3(h).
The Company shall include within the prospectus contained in
the Exchange Offer Registration Statement a section entitled "Plan of
Distribution", reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the
staff of the Commission with respect to the potential "underwriter" status of
any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
Exchange Notes received by such broker-dealer in the Registered Exchange Offer
(a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the staff of the Commission or such positions or
policies, in the reasonable judgment of the Initial Purchasers, represent the
prevailing views of the staff of the Commission. Such "Plan of Distribution"
section shall also allow the use of the prospectus by all persons subject to
the prospectus delivery requirements of the Securities Act, including
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be
lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons
must comply with such requirements in order to resell the Exchange Notes;
provided that such period shall not exceed 180 days (or such longer period if
extended pursuant to Section 3(j) below).
If, upon consummation of the Exchange Offer, an Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company upon the request of such Initial Purchaser shall simultaneously with
the delivery of the Exchange Notes pursuant to the Registered Exchange Offer
issue and deliver to such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like
<PAGE>
Page 3
principal amount of debt securities of the Company identical in all material
respects to the Notes (the "Private Exchange Notes"). The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes.
In connection with the Registered Exchange Offer, the
Company shall:
(a) mail to each Holder a copy of the prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less
than 20 business days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law);
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York;
(d) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all applicable
laws.
As soon as practicable after the close of the Registered
Exchange Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes tendered and not
validly withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(ii) deliver to the Trustee for cancellation all the Notes
so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of
such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially similar to
the Indenture, which in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and
that the Exchange Notes, the Private Exchange Notes and the Notes will vote
and consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Notes will have the right to vote or
consent as a separate class on any matter.
2. Shelf Registration. If, (i) because of any change in law
or in currently prevailing interpretations of the staff of the Commission, the
Company is not permitted to effect a Registered Exchange Offer, as
contemplated by Section 1 hereof,
<PAGE>
Page 4
(ii) for any reason the Registered Exchange Offer is not completed within 180
days of the Issue Date (the "Completion Deadline"), (iii) the Initial
Purchasers so request with respect to the Notes or the Private Exchange Notes
held by them following consummation of the Registered Exchange Offer or (iv)
any Holder is not eligible to participate in the Registered Exchange Offer or,
in the case of any Holder that participates in the Registered Exchange Offer
or the Private Exchange, such Holder does not receive freely tradeable
Exchange Notes on the date of the exchange, the Company shall, at its cost,
take the following actions:
(a) as promptly as reasonably practicable file with the
Commission and thereafter shall use its best efforts to cause to be
declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration
Statement, a "Registration Statement") on an appropriate form under
the Securities Act relating to the offer and sale of the Notes or, if
applicable, the Private Exchange Notes by the Holders thereof from
time to time in accordance with the methods of distribution set forth
in the Shelf Registration Statement and Rule 415 under the Securities
Act (hereafter, the "Shelf Registration").
(b) use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the Notes
or, if applicable, the Private Exchange Notes for a period of two
years (or for such longer period if extended pursuant to Section 3(j)
below) from the Issue Date or such shorter period that will terminate
when all the Notes or, if applicable, the Private Exchange Notes
covered by the Shelf Registration Statement have been sold pursuant
thereto; provided, that the Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that
would result in Holders of the Notes or, if applicable, the Private
Exchange Notes covered thereby not being able to offer and sell the
Notes or, if applicable, the Private Exchange Notes during that
period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement
to the contrary, the Company shall cause the Shelf Registration
Statement and the related prospectus and any amendment or supplement
thereto, as of the effective date of the Shelf Registration
Statement, amendment or supplement, (i) to comply in all material
respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission and (ii) not to contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. .
3. Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable,
any Registered
<PAGE>
Page 5
Exchange Offer contemplated by Section 1 hereof, the following provisions
shall apply:
(a) The Company shall furnish to the Initial Purchasers,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each
supplement, if any, to the prospectus included therein and shall
obtain the consent of the Initial Purchasers to any such filing,
which shall not be unreasonably withheld.
(b) The Company shall give written notice to the Initial
Purchasers, the Holders of the Notes and any Participating
Broker-Dealer from whom the Company has received prior written notice
that it will be a Participating Broker-Dealer in the Registered
Exchange Offer:
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission and
when the Registration Statement or any posteffective
amendment thereto has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or
the prospectus included therein or for additional
information, provided that the request and the contents of
the request need only be disclosed to the Initial Purchasers
and one counsel appointed by and on behalf of the Holders of
the Notes as described in Section 4;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension
of the qualification of the Notes or, if applicable, the
Private Exchange Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order to make the statements therein not
misleading (which notice shall be accompanied by an
instruction to suspend the use of the prospectus until the
requisite changes have been made).
(c) The Company shall use its best efforts to prevent the
issuance or obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible
time.
(d) The Company shall furnish to each Holder of the Notes
or, if applicable, the Private Exchange Notes included within the
coverage of the Shelf Registration, without charge, at least one copy
of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits (including those,
<PAGE>
Page 6
if any, incorporated by reference).
(e) The Company shall deliver to the Initial Purchasers and
to any other Holder who so requests, without charge, at least one
copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Initial Purchasers or any such Holder
requests, all exhibits (including those incorporated by reference).
(f) The Company shall deliver to each Holder of the Notes
or, if applicable, the Private Exchange Notes included within the
coverage of the Shelf Registration, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in
the Shelf Registration Statement and any amendment or supplement
thereto as such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the
selling Holders of the Notes or, if applicable, the Private Exchange
Notes in connection with the offering and sale of the Notes or, if
applicable, the Private Exchange Notes covered by the prospectus, or
any amendment or supplement thereto, included in the Shelf
Registration Statement.
(g) The Company shall deliver to the Initial Purchasers, any
Participating Broker-Dealer and such other persons required to
deliver a prospectus following the Registered Exchange Offer, without
charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by the Initial
Purchasers, if necessary, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following the
Registered Exchange Offer in connection with the offering and sale of
the Exchange Notes covered by the prospectus, or any amendment or
supplement thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Notes or, if
applicable, the Private Exchange Notes, pursuant to the Shelf
Registration, the Company shall register or qualify or cooperate with
the Holders of the Notes or, if applicable, the Private Exchange
Notes, included therein and their respective counsel in connection
with the registration or qualification of the Notes or, if
applicable, the Private Exchange Notes, for offer and sale under the
securities or blue sky laws of such jurisdictions as any Holder of
the Notes or the Private Exchange Notes reasonably requests in
writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the
Notes covered by the Shelf Registration; provided that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any
action which would subject it to general service of process or to
taxation in any jurisdiction where it is not then so subject.
<PAGE>
Page 7
(i) The Company shall cooperate with the Holders of the
Notes or, if applicable, the Private Exchange Notes to facilitate the
timely preparation and delivery of certificates representing the
Notes or, if applicable, the Private Exchange Notes to be sold in the
Shelf Registration free of any restrictive legends and in such
denominations and registered in such names as the Holders may request
a reasonable period of time prior to sales of the Notes or, if
applicable, the Private Exchange Notes pursuant to the Shelf
Registration.
(j) Upon the occurrence of any event contemplated by Section
3(b)(v) above, the Company shall promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the
related prospectus or file any other required document so that, as
thereafter delivered to Holders of the Notes, the Exchange Notes or,
if applicable, the Private Exchange Notes, as the case may be, the
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Initial Purchasers, the
Holders of the Notes and any known Participating Broker-Dealer in
accordance with Section 3(b)(v) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been
made, then the Initial Purchasers, the Holders of the Notes and any
such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration
Statement provided for in Section 2(b) above and the Exchange Offer
Registration Statement provided for in Section 1 above shall each be
extended by the number of days from and including the date of the
giving of such notice to Holders of the Notes and any known
Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for
the Notes or Exchange Notes, as the case may be, and provide the
applicable trustee with printed certificates for the Notes or
Exchange Notes, as the case may be, in a form eligible for deposit
with The Depository Trust Company.
(l) The Company will comply with all rules and regulations
of the Commission to the extent and so long as they are applicable to
the Registered Exchange Offer or the Shelf Registration and will make
generally available to its securities holders (or otherwise provide
in accordance with Section II(a) of the Securities Act) an earnings
statement satisfying the provisions of Section II(a) of the
Securities Act, no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with
the first month of the Company's first fiscal quarter commencing
after the effective date of the Shelf Registration, which statement
shall cover such 12-month period.
(m) The Company shall cause the Indenture (or an indenture
substantially identical to the Indenture in the case of a Registered
Exchange
<PAGE>
Page 8
Offer) to be qualified under the Trust Indenture Act of 1939, as
amended.
(n) The Company may require each Holder of the Notes to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Notes as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement.
(o) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Notes
shall reasonably request in order to facilitate the disposition of
the Notes pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall
(i) make reasonably available for inspection by the Holders of the
Notes, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Notes or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors and employees to supply all relevant
information reasonably requested by the Holders of the Notes or any
such underwriter, attorney, accountant or agent in connection with
the Shelf Registration Statement; provided that the foregoing
inspection and information gathering shall be coordinated on behalf
of the Initial Purchasers by the Initial Purchasers and on behalf of
the other parties, by one counsel designated by and on behalf of such
other parties as described in Section 4.
(q) In the case of the Registered Exchange Offer, the
Company shall (i) make reasonably available for inspection by the
Initial Purchasers, any known Participating Broker-Dealer and any
attorney, accountant or other agent retained by the Initial
Purchasers or such Participating Broker-Dealer all relevant financial
and other records, pertinent corporate documents and properties of
the Company and (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by
the Initial Purchasers, such Participating Broker-Dealer or any such
attorney, accountant or agent in connection with the Exchange Offer
Registration Statement; provided that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by the Initial Purchasers and on behalf of the other
parties, by one counsel designated by and on behalf of such other
parties as described in Section 4.
(r) In the case of any Shelf Registration, the Company, if
requested by any Holder of the Notes or, if applicable, the Private
Exchange Notes, shall cause its counsel to deliver an opinion
relating to the Notes or, if applicable, the Private Exchange Notes
in customary form, cause its officers to execute and deliver all
customary documents and certificates requested by any underwriters
<PAGE>
Page 9
of the Notes or, if applicable, the Private Exchange Notes and cause
its independent public accountants to provide to the selling Holders
of the Notes or, if applicable, the Private Exchange Notes and any
underwriter therefor a comfort letter in customary form.
(s) In the case of the Registered Exchange Offer, if
requested by the Initial Purchasers or any known Participating
Broker-Dealer, the Company shall cause its outside counsel to deliver
to the Initial Purchasers or such Participating Broker-Dealer a
signed opinion in the form set forth in Section 5(c)(A) of the
Purchase Agreement with such changes as are customary in connection
with the preparation of a Registration Statement and shall cause its
independent public accountants to deliver to the Initial Purchasers
or such Participating Broker-Dealer a comfort letter, in customary
form, meeting the requirements as to the substance thereof as set
forth in Section 5(f) of the Purchase Agreement, with appropriate
date changes.
4. Registration Expenses. The Company shall bear all
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses of
Latham & Watkins, counsel to the Initial Purchasers, incurred in connection
with the Registered Exchange Offer) and, in the event of a Shelf Registration,
shall bear or reimburse the Holders of the Notes or, if applicable, the
Private Exchange Notes for the reasonable fees and disbursements of one firm
of counsel designated by the Holders of a majority in principal amount of the
Notes and, if applicable, the Private Exchange Notes to act as counsel for the
Holders of the Notes, and, if applicable, the Private Exchange Notes in
connection therewith, which counsel shall be reasonably satisfactory to the
Company.
5. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Holder of the Notes or, if applicable, the Private Exchange
Notes and each person, if any, who controls such Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and each
director, officer, employee or agent of such Holder and each director,
officer, employee or agent of each such controlling person (each Holder, such
controlling persons and each such director, officer, employee and agent are
referred to collectively as the "Indemnified Parties") from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Notes or, if
applicable, the Private Exchange Notes), to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and shall reimburse,
as incurred, the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending or
preparing to defend against or
<PAGE>
Page 10
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action in respect thereof; provided, however, that the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; provided,
further, that (A) the Company shall not be obligated to indemnify or hold
harmless any Indemnified Party in respect of any loss, claim, damage,
liability or action to the extent that any such loss, claim, damage, liability
or action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in a preliminary Registration
Statement or preliminary prospectus if the applicable Holder or Initial
Purchaser failed to deliver a copy of a final prospectus or an amended or
supplemented Registration Statement or prospectus that was made available by
the Company to such Indemnified Party prior to the applicable sale to the
person or persons asserting the claim which is the basis of indemnification
and such final prospectus or amended or supplemented Registration Statement or
prospectus cured such defect and (B) this indemnity agreement will be in
addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company will not settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder
(whether or not such Indemnified Party or any person who controls such
Indemnified Party within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding) without the prior written consent of such Indemnified Party, which
consent shall not be unreasonably withheld, unless such settlement, compromise
or consent includes an unconditional release of such Indemnified Party and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding. No Indemnified Party will settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
without the prior written consent of the Company (which consent will not be
unreasonably withheld). The Company shall also indemnify underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution (as described in such Registration
Statement), their officers and directors and each person who controls such
persons (within the meaning of Section 15 of the Securibes Act or Section 20
of the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders of the Notes if requested by such Holders.
(b) The Company agrees to indemnify and hold harmless each
Initial Purchaser, any Participating Broker-Dealer and each person, if any,
who controls an Initial Purchaser or a Participating Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and each director, officer, employee or agent of an Initial Purchaser or a
Participating Broker-Dealer and each director, officer, employee or agent of
each such controlling person (the Initial Purchasers, any Participating
Broker-Dealer, such controlling persons and each such director, officer,
employee and agent of the Initial Purchasers, such Participating Broker-Dealer
or such controlling person are referred to collectively as the "Exchange Offer
Indemnified Parties") from and against any losses, claims, damages or
liabilities,
<PAGE>
Page 11
joint or several, or any actions in respect thereof (including, but not
limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of Exchange Notes), to which each Exchange Offer
Indemnified Party may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Exchange Offer Registration
Statement or prospectus contained therein or in any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and shall reimburse, as incurred, the Exchange
Offer Indemnified Parties for any legal or other expenses reasonably incurred
by them in connection with investigating or defending or preparing to defend
against or appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action in respect thereof; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in any Exchange Offer Registration Statement or prospectus contained
therein or in any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of such Initial Purchaser or Participating Broker-Dealer specifically for
inclusion therein; provided, further, that (A) the Company shall not be
obligated to indemnify or hold harmless any Exchange Offer Indemnified Party
in respect of any loss, claim, damage, liability or action to the extent that
any such loss, claim, damages, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in a preliminary Registration Statement or preliminary
prospectus if the applicable Initial Purchaser or Participating Broker-Dealer
failed to deliver a copy of a final prospectus or an amended or supplemented
Registration Statement or prospectus that was made available by the Company to
such Exchange Offer Indemnified Party prior to the applicable sale to the
person or persons asserting the claim which is the basis of indemnification
and such final prospectus or amended or supplemented Registration Statement or
prospectus cured such defect and (B) this indemnity agreement will be in
addition to any liability which the Company may otherwise have to such
Exchange Offer Indemnified Party. The Company will not settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not such Exchange Offer Indemnified Party or any person
who controls such Exchange Offer Indemnified Party within the meaning of
Section 15 of the Securiities Act or Section 20 of the Exchange Act is a party
to such claim, action, suit or proceeding) without the prior written consent
of such Exchange Offer Indemnified Party, which consent shall not be
unreasonably withheld, unless such settlement, compromise or consent includes
an unconditional release of such Exchange Offer Indemnified Party and each
such controlling person from all liability arising out of such claim, action,
suit or proceeding. No Exchange Offer Indemnified Party will settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought without the prior written consent of the Company
(which consent will not be unreasonably withheld).
(c) Each Holder of the Notes or, if applicable, the Private
Exchange Notes, severally and not jointly, will indemnify and hold harmless
the Company, each director, officer, employee or agent of the Company
<PAGE>
Page 12
and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and each
director, officer, employee or agent of such controlling person from and
against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such director, officer, employee, agent
or controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, such
indemnified persons for any legal or other expenses reasonably incurred by the
Company or any such director, officer, employee, agent or controlling person
in connection with the investigating or defending or preparing to defend
against or appearing as a third-party witness in connection with any loss,
claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability which such Holder may otherwise
have to the Company or any such directors, officers, employees, agents or
controlling persons.
(d) Promptly after receipt by an indemnified party under
this Section 5 of notice of the commencement of any action or proceeding
(including a governmental investigation), such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 5, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party (i) will not relieve it from
any liability under paragraph (a), (b) or (c) above unless and to the extent
it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights or defenses and
(ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a), (b) or (c) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnifying
party shall not have the right to direct the defense of such action on behalf
of such indemnified party or parties and such indemnified party or parties
shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, which approval shall not be unreasonably withheld, the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate
<PAGE>
Page 13
counsel (in addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the same
general allegations or circumstances) or (ii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party.
(e) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 5 is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) (other than by
reason of exceptions provided in such Section 5), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof), in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Notes or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or such Holder
or such other indemnified person, as the case may be, on the other, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company and each
indemnified party agrees that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (e).
Notwithstanding any other provision of this Section 5(e), the Holders of the
Notes or, if applicable, the Private Exchange Notes shall not be required to
contribute any amount in excess of the amount by which the net proceeds
received by such Holders from the sale of the Notes or, if applicable, the
Private Exchange Notes pursuant to a Registration Statement exceeds the amount
of damages which such Holders have otherwise been required to pay in respect
of the same or a similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (e), each
director, officer, employee and agent of any indemnified party and each
person, if any, who controls such indemnified party within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such indemnified party and each director
and officer of the Company, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Company.
(f) The agreements contained in this Section 5 shall survive
the sale
<PAGE>
Page 14
of the Notes, the Exchange Notes or, if applicable, the Private Exchange Notes
pursuant to a Registration Statement and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances.
(a) Additional interest at a rate of 0.5% per annum of the
principal amount of the Notes (the "Additional Interest") shall be assessed as
follows:
(i) if the Exchange Offer Registration Statement is not
filed with the Commission by the earlier of (x) 60 days after the
Issue Date and (y) the date of filing of a registration statement in
respect of an initial public offering of common stock of the Company
(other than a registration statement on Form S-8), then, commencing
from and including the earlier of such dates, Additional Interest
shall be assessed on the Notes;
(ii) if the Registered Exchange Offer is not completed and a
Shelf Registration is not declared effective by the Commission by the
Completion Deadline, then, commencing on the Completion Deadline,
Additional Interest shall be assessed on the Notes; and
(iii) if (A) the Company has not exchanged Exchange Notes
for all the Notes validly tendered in accordance with the terms of
the Registered Exchange Offer on or prior to 30 business days after
the date on which the Exchange Offer Registration Statement was
declared effective, or (B) if applicable, the Shelf Registration
Statement has been declared effective and it ceases to be effective
prior to two years (or such later date if such two-year period is
extended pursuant to Section 3(j) above or such shorter period as is
provided in Section 2(b)) from the Issue Date, then, Additional
Interest shall be assessed on the Notes, commencing on (x) the 31st
business day after such effective date in the case of (A) above, or
(y) the day such Shelf Registration Statement ceases to be effective
in the case of (B) above;
provided, however, that (1) upon the filing of the Exchange Offer Registration
Statement or the Completion Deadline in the case of (i) above, (2) upon
completion of the Registered Exchange Offer or the effectiveness of the Shelf
Registration Statement in the case (ii) above, or (3) upon the exchange of
Exchange Notes for all the Notes validly tendered in accordance with the terms
of the Registered Exchange Offer, or upon the effectiveness of the Shelf
Registration Statement which has ceased to remain effective prior to two years
(or such later date if extended pursuant to Section 3(j) above or such shorter
period as is provided in Section 2(b)) from the date of original issuance of
the Notes in the case of (iii) above, Additional Interest on the Notes as a
result of such clause (i), (ii) or (iii) shall immediately cease to accrue.
(b) Any amount of Additional Interest due pursuant to
clauses (i), (ii) or (iii) of Section 6(a) above will be payable in cash
semiannually in arrears on each
<PAGE>
Page 15
Interest Payment Date (as defined in the Notes), commencing with the first
such Interest Payment Date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest will be determined by
multiplying the Additional Interest by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period, determined on the basis of a 360-day year comprised of twelve 30-day
months, and the denominator of which is 360.
(c) If the Company effects the Registered Exchange Offer,
the Company will be entitled to close the Registered Exchange Offer provided
that the Company has accepted all the Notes theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer.
7. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, except by the Company
and the written consent of Holders of a majority in aggregate principal amount
of the Notes, determined in accordance with the terms of the Indenture.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, telex, telecopy, or air courier which guarantees overnight
delivery:
(1) if to a Holder of the Notes, in accordance with Section
10.02 of the Indenture, with a copy to the Initial Purchasers as
follows:
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Attention: Michael L. Offen
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Roger H. Kimmel, Esq.
(2) if to the Initial Purchasers, at the addresses specified
in Section 7(b)(1);
(3) if to the Company, at its address as follows:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
<PAGE>
Page 16
Attention: General Counsel
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged by recipient's
telecopy operator, if telecopied; and on the day delivered, if sent by
overnight air courier guaranteeing next day delivery. All such notices and
communications to the Holders shall be deemed to have been duly given if given
as provided in Section 10.02 of the Indenture.
(c) Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
(g) Severabilily. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability
of any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
<PAGE>
Page 17
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers and the Company in accordance with
its terms.
Very truly yours,
BUILDING MATERIALS CORPORATION OF AMERICA
By:
Name:
Title:
Confirmed and accepted as of the
date first above written:
BEAR, STEARNS & CO. INC.
By:
Name:
Title:
BNY CAPITAL MARKETS, INC.
By:
Name:
Title:
