<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1999
REGISTRATION NO. 333-69749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BUILDING MATERIALS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2952 22-3276290
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
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)
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
------------------------
With a copy to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
Series B 8% Senior Notes due 2008....... $155,000,000 99.457% $154,158,350 $42,856(1)
Guarantee of Series B 8% Senior Notes
due 2008.............................. $155,000,000 N/A N/A $0(2)
</TABLE>
(1) Previously paid.
(2) Building Materials Manufacturing Corporation and Building Materials
Investment Corporation, each a direct subsidiary of Building Materials
Corporation of America, will guarantee the payment of the Series B 8% Senior
Notes due 2008. Pursuant to Rule 457(n) under the Securities Act of 1933, no
filing fee is required.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY ADDRESS, INCLUDING ZIP CODE
JURISDICTION OF STANDARD AND TELEPHONE NUMBER,
INCORPORATION INDUSTRIAL I.R.S. EMPLOYER INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT OR CLASSIFICATION IDENTIFICATION OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER EXECUTIVE OFFICE
- ------------------------------------------------ --------------- ----------- --------------- ---------------------------
<S> <C> <C> <C> <C>
Building Materials Manufacturing Corporation.... Delaware 2952 22-3626208 1361 Alps Road
Wayne, New Jersey 07470
(973) 628-3000
Building Materials Investment
Corporation................................... Delaware 6749 22-3626206 1361 Alps Road
Wayne, New Jersey 07470
(973) 628-3000
</TABLE>
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 5, 1999
PROSPECTUS
EXCHANGE OFFER FOR
$155,000,000 8% SENIOR NOTES DUE 2008
OF
BUILDING MATERIALS CORPORATION OF AMERICA
ISSUER
BUILDING MATERIALS MANUFACTURING CORPORATION
BUILDING MATERIALS INVESTMENT CORPORATION
GUARANTORS
------------------------
MATERIAL TERMS OF THE EXCHANGE OFFER
o Expires at 5:00 p.m., New York City time, on , 1999, unless
extended.
o The only conditions to completing the Exchange Offer are that the
Exchange Offer not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange Commission and
no injunction, order or decree has been issued which would prohibit,
prevent or materially impair our ability to proceed with the Exchange
Offer.
o All old notes that are validly tendered and not validly withdrawn will be
exchanged.
o Tenders of old notes may be withdrawn at any time prior to the expiration
of the Exchange Offer.
o The terms of the registered notes to be issued in the Exchange Offer are
substantially identical to the old notes that we issued on December 3,
1998, except for certain transfer restrictions, registration rights and
liquidated damages.
o The old notes and the registered notes will be fully and unconditionally
guaranteed, jointly and severally, on a senior, unsecured basis by
Building Materials Manufacturing Corporation and Building Materials
Investment Corporation.
------------------------
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS
PROSPECTUS.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................... 1
Summary of the Terms of the Exchange Offer............................................................... 3
Summary of the Terms of the Registered Notes............................................................. 7
Summary Financial Data................................................................................... 9
Risk Factors............................................................................................... 12
Where You Can Find More Information........................................................................ 17
Forward-Looking Statements................................................................................. 17
Capitalization............................................................................................. 18
Selected Financial Data.................................................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 22
Business................................................................................................... 28
Management................................................................................................. 38
Executive Compensation..................................................................................... 40
Security Ownership of Certain Beneficial Owners and Management............................................. 43
Certain Relationships...................................................................................... 44
The Exchange Offer......................................................................................... 46
Description of the Registered Notes........................................................................ 53
Certain Federal Income Tax Considerations.................................................................. 78
Plan of Distribution....................................................................................... 78
Legal Matters.............................................................................................. 79
Experts.................................................................................................... 79
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and may
not contain all information that may be important to you. This prospectus
includes specific terms of the Exchange Offer, as well as information regarding
our business and detailed financial data. We encourage you to read the detailed
information and financial statements appearing elsewhere in this prospectus.
Building Materials Corporation of America ("BMCA") was incorporated in 1994. Any
information regarding us in this prospectus that relates to information prior to
this date has been prepared as if BMCA existed during this period.
THE EXCHANGE OFFER
On December 3, 1998, we issued in a private placement $155 million in
aggregate principal amount of our 8% Senior Notes due 2008. We entered into a
Registration Rights Agreement with the initial purchasers of these notes in
which we agreed, among other things, to deliver to you this prospectus and to
complete the Exchange Offer on or prior to June 1, 1999. You are entitled to
exchange your old notes in the Exchange Offer for registered notes with
substantially identical terms. We believe that the registered notes to be issued
in the Exchange Offer may be resold by you without compliance with the
registration and prospectus delivery requirements of the Securities Act of 1933,
subject to certain limited conditions. You should read the discussion under the
headings "Summary of the Terms of the Exchange Offer" and "Summary of the Terms
of the Registered Notes" for further information regarding the registered notes.
WHO WE ARE
We are a leading national manufacturer of a broad line of asphalt roofing
products and accessories for the residential and commercial roofing markets. Our
products are produced at 25 manufacturing facilities. We believe that we hold
the number one or two market position in each of the asphalt roofing product
lines in which we compete (based on unit sales), including leadership of the
fast growing, premium laminated residential shingle market.
Our two principal lines of roofing shingles for the residential roofing
market are the Timberline(Registered) series of premium laminated shingles and
the Sovereign(Registered) series of strip shingles. We also produce certain
specialty shingles principally for regional markets. Residential roofing product
sales represented approximately 65% of our net sales in 1997. We believe that we
are the largest manufacturer of laminated residential roofing shingles and the
second largest manufacturer of strip shingles in the United States. Our
Timberline(Registered) product is the leading brand in the residential roofing
market. Our 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 us to offer a
complete system of residential roofing components.
We also manufacture a full line of modified bitumen products, asphalt
built-up roofing, liquid-applied membrane systems and roofing accessories.
Commercial roofing products represented approximately 35% of our 1997 net sales.
We believe that we are the second largest manufacturer of asphalt built-up
roofing and the largest manufacturer of modified bitumen products in the United
States. Our Ruberoid(Registered) product is the leading brand in the modified
bitumen market, which is the fastest growing segment in the commercial roofing
industry. We also market perlite roofing insulation products; isocyanurate foam
as roofing insulation; packaged asphalt; and accessories, such as vent stacks,
roof insulation fasteners, cements and coatings.
In June 1998, we acquired substantially all of the assets of Leslie-Locke,
Inc., which manufactures and markets specialty building products and accessories
for the professional and do-it-yourself remodeling and residential construction
industries. With this acquisition, residential and commercial roofing products
represented 65% and 30%, respectively, of our net sales in 1998 and specialty
building products and accessories represented 5% of our 1998 net sales.
We have registered, through 1997, ten consecutive years of increases in
operating income. During the five-year period ended December 31, 1997, our net
sales and operating income have increased at average
<PAGE>
annual compound rates of approximately 13.2% and 15.2%, respectively, and our
operating income margin has increased from 6.8% to 7.4%. We believe that our
growth is primarily attributable to:
(1) improvement in our product mix, driven by a business strategy
which emphasizes our higher-margin products;
(2) our low cost manufacturing operations;
(3) substantial capital spending programs for new property, plant and
equipment that have enabled us to expand capacity and reduce
manufacturing costs;
(4) the strength of our national distribution system; and
(5) broadening our product lines through niche-type acquisitions, such
as the recent acquisitions of substantially all of the assets of
Leslie-Locke, the Leatherback Industries division of Hollinee
Corporation, Major Group, Incorporated (the manufacturer of the
TOPCOAT(Registered) Roofing System) and U.S. Intec, Inc.
RECENT DEVELOPMENTS
Effective December 1, 1998, we sold our perlite insulation manufacturing
assets to Johns Manville Corporation. The net cash proceeds of this sale were
approximately $29.0 million, and the net gain on this sale was not significant
to our results of operations. As part of the transaction, we entered into a
long-term agreement with Johns Manville pursuant to which Johns Manville agreed
to supply us with perlite insulation products. This agreement will enable us to
continue to serve our commercial roofing customers that purchase those products
from us.
On December 3, 1998, we issued the old notes. We used substantially all of
the net proceeds from this issuance to purchase and subsequently cancel $147.1
million in aggregate principal amount at maturity of our 11 3/4% Senior Deferred
Coupon Notes due 2004 (the "Deferred Coupon Notes"). In connection with this
purchase, we recorded in December 1998 an extraordinary loss of $8.8 million,
net of related income tax benefits.
Effective January 1, 1999, BMCA transferred all of its investment assets
and intellectual property assets to Building Materials Investment Corporation, a
newly-formed, wholly-owned subsidiary of BMCA. In connection with this transfer,
Building Materials Investment Corporation agreed to guarantee all of BMCA's
obligations under the old notes, the registered notes and our other senior
notes. BMCA also transferred all of its manufacturing assets, other than those
located in Texas, to Building Materials Manufacturing Corporation, another
newly-formed, wholly-owned subsidiary of BMCA. In connection with this transfer,
Building Materials Manufacturing Corporation agreed to become a co-obligor on
one series of BMCA's other senior notes and to guarantee BMCA's obligations on
all of BMCA's other senior notes, including the old notes and the registered
notes.
* * *
On January 1, 1997, GAF Corporation, our indirect parent, completed a
series of transactions involving its subsidiaries pursuant to which, among other
things, (1) we transferred our glass fiber manufacturing facility located in
Nashville, Tennessee and certain related assets and liabilities to GAF
Fiberglass Corporation, a subsidiary of GAF Corporation, and (2) U.S. Intec, an
indirect subsidiary of GAF Corporation, became one of our subsidiaries. In
connection with these transactions, GAF Fiberglass entered into a long-term
supply agreement with us pursuant to which GAF Fiberglass agreed to supply us
with glass fiber. See "Certain Relationships." Unless stated otherwise, our
financial and statistical data presented in this prospectus reflect the results
of U.S. Intec from and after October 20, 1995, the date on which a subsidiary of
GAF Corporation acquired U.S. Intec.
* * *
Our executive offices are located at 1361 Alps Road, Wayne, New Jersey
07470 and our telephone number is (973) 628-3000. Industry information is based
upon our estimates and data from the Asphalt Roofing Manufacturers Association.
2
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $155 million aggregate
principal amount of old notes for an equal aggregate principal amount of
registered notes. On December 3, 1998, we issued and sold $155 million in
aggregate principal amount of the old notes in a private placement. The form and
terms of the registered notes are substantially the same as the form and terms
of the old notes, except that the registered notes have been registered under
the Securities Act of 1933 and will not bear legends restricting their transfer.
We issued the old notes under an indenture which, among other things, grants you
certain rights. The registered notes also will be issued under that indenture
and you will have the same rights under the indenture as the holders of the old
notes. See "Description of the Registered Notes."
<TABLE>
<S> <C>
Registration Rights Agreement............. You are entitled under the Registration Rights Agreement to exchange
your old notes for registered notes with substantially identical
terms. The Exchange Offer is intended to satisfy these rights. After
the Exchange Offer is complete, except as set forth in the next
paragraph, you will no longer be entitled to any exchange or
registration rights with respect to your old notes.
The Registration Rights Agreement requires us to file a registration
statement for a continuous offering pursuant to Rule 415 under the
Securities Act for your benefit if you would not receive freely
tradeable registered notes in the Exchange Offer or you are
ineligible to participate in the Exchange Offer and indicate that you
wish to have your old notes registered under the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
The Exchange Offer........................ We are offering to exchange $1,000 principal amount of Series B 8%
Senior Notes due 2008 which have been registered under the Securities
Act for each $1,000 principal amount of 8% Senior Notes due 2008
which were issued on December 3, 1998 in a private placement. In
order to be exchanged, an old note must be properly tendered and
accepted. All old notes that are validly tendered and not validly
withdrawn will be exchanged.
As of this date, there are $155 million aggregate principal amount of
old notes outstanding.
We will issue the registered notes promptly after the expiration of
the Exchange Offer.
Resales of the Registered Notes........... We believe that registered notes to be issued in the Exchange Offer
may be offered for resale, resold and otherwise transferred by you
without compliance with the registration and prospectus delivery
provisions of the Securities Act if you meet the following
conditions:
(1) the registered notes are acquired by you in the ordinary
course of your business;
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes;
(3) you do not have an arrangement or understanding with any
person to participate in the distribution of the registered
notes; and
(4) you are not an "affiliate" of ours, as that term is defined
in Rule 405 under the Securities Act.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
If you do not meet the above conditions, you may incur liability
under the Securities Act if you transfer any registered note without
delivering a prospectus meeting the requirements of the Securities
Act. We do not assume or indemnify you against that liability.
Each broker-dealer that is issued registered notes in the Exchange
Offer for its own account in exchange for old notes which were
acquired by that 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 the registered notes. A
broker-dealer may use this prospectus for an offer to resell or to
otherwise transfer these registered notes.
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we decide to extend the Exchange Offer. We
do not intend to extend the Exchange Offer, although we reserve the
right to do so.
Conditions to the Exchange Offer.......... The only conditions to completing the Exchange Offer are that the
Exchange Offer not violate applicable law or any applicable
interpretation of the staff of the Commission and no injunction,
order or decree has been issued which would prohibit, prevent or
materially impair our ability to proceed with the Exchange Offer. See
"The Exchange Offer--Conditions."
Procedures for Tendering Old Notes Held in
the Form of Book-Entry Interests........ The old notes were issued as global securities in fully registered
form without coupons. Beneficial interests in the old notes which are
held by direct or indirect participants in The Depository Trust
Company ("DTC") through certificateless depositary interests are
shown on, and transfers of the notes can be made only through,
records maintained in book-entry form by DTC with respect to its
participants.
If you are a holder of an old note held in the form of a book-entry
interest and you wish to tender your old note for exchange pursuant
to the Exchange Offer, you must transmit to The Bank of New York, as
exchange agent, on or prior to the expiration of the Exchange Offer
either:
o a written or facsimile copy of a properly completed and duly
executed letter of transmittal and all other documents
required by the letter of transmittal to the address set forth
on the cover page of the letter of transmittal; or
o a computer-generated message transmitted by means of DTC's
Automated Tender Offer Program system and forming a part of a
confirmation of book-entry transfer in which you acknowledge
and agree to be bound by the terms of the letter of
transmittal.
The Exchange Agent must also receive on or prior to the expiration of
the Exchange Offer either:
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
o a timely confirmation of book-entry transfer of your old notes
into the Exchange Agent's account at DTC, pursuant to the
procedure for book-entry transfers described in this
prospectus under the heading "The Exchange Offer--Book-Entry
Transfer," or
o the documents necessary for compliance with the guaranteed
delivery procedures described below.
A letter of transmittal accompanies this prospectus. By executing the
letter of transmittal or delivering a computer-generated message
through DTC's Automated Tender Offer Program system, you will
represent to us that, among other things:
(1) the registered notes to be acquired by you in the Exchange
Offer are being acquired in the ordinary course of your
business;
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes;
(3) you do not have an arrangement or understanding with any
person to participate in the distribution of the registered
notes; and
(4) you are not our "affiliate."
Procedures for Tendering Certificated Old
Notes................................... Subject to certain conditions, if you are a holder of book-entry
interests in the old notes, you are entitled to receive, in exchange
for your book-entry interests, certificated notes which are in equal
principal amounts to your book-entry interests. No certificated notes
are issued and outstanding as of the date of this prospectus. If you
acquire certificated old notes prior to the expiration of the
Exchange Offer, you must tender your certificated old notes in
accordance with the procedures described in this prospectus under the
heading "The Exchange Offer--Procedures for Tendering--Certificated
Notes."
Special Procedures for
Beneficial Owner........................ If you are the beneficial owner of old notes and they are registered
in the name of a broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender your old notes, you should
promptly contact the person in whose name your old notes are
registered and instruct that person to tender on your behalf. If you
wish to tender on your own behalf, you must, prior to completing and
executing the letter of transmittal and delivering your old notes,
either make appropriate arrangements to register ownership of the old
notes in your name or obtain a properly completed bond power from the
person in whose name your old notes are registered. The transfer of
registered ownership may take considerable time. See "The Exchange
Offer--Procedures for Tendering--Procedures Applicable to All
Holders."
Guaranteed Delivery Procedures............ If you wish to tender your old notes and:
(1) they are not immediately available,
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(2) time will not permit your old notes or other required
documents to reach the Exchange Agent before the expiration
of the Exchange Offer or
(3) you cannot complete the procedure for book-entry transfer on
a timely basis,
you may tender your old notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Procedures for
Tendering--Guaranteed Delivery Procedures."
Acceptance of Old Notes and Delivery of
Registered Notes........................ Subject to the limited conditions described above under "Conditions
to the Exchange Offer," we will accept for exchange any and all old
notes which are properly tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the expiration date. The registered
notes to be issued to you in the Exchange Offer will be delivered
promptly following the expiration date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal................................ You may withdraw the tender of your old notes at any time prior to
5:00 p.m., New York City time, on the expiration date. We will return
to you any old notes not accepted for exchange for any reason without
expense to you as promptly as we can after the expiration or
termination 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................................ If you do not participate in the Exchange Offer, upon completion of
the Exchange Offer, the liquidity of the market for your old notes
could be adversely affected. See "The Exchange Offer--Consequences of
Failure to Exchange."
Federal Income Tax
Consequences............................ The exchange of the old notes will not be a taxable event for federal
income tax purposes. See "Certain Federal Income Tax Considerations."
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
SUMMARY OF THE TERMS OF THE REGISTERED NOTES
Issuer.................................... Building Materials Corporation of America.
Issue..................................... $155 million aggregate principal amount of Series B 8% Senior Notes
due 2008.
Maturity.................................. December 1, 2008.
Interest Payment Dates.................... The registered notes to be issued in the Exchange Offer will pay
interest in cash at a rate of 8% per annum, payable on June 1 and
December 1, commencing June 1, 1999.
Change of Control Put and Call............ Upon a Change of Control, you will have the right to require us to
repurchase your notes at a purchase price equal to 101% of their
aggregate principal amount on the date of repurchase, plus any
accrued interest. If a Change of Control were to occur, however, we
may not have sufficient funds to repurchase your notes at the time we
are required to do so. After the expiration of your right to require
us to repurchase your notes, we will have the option to purchase all
of the outstanding notes at a purchase price equal to 100% of their
aggregate principal amount, plus the Applicable Premium, together
with any accrued and unpaid interest to the purchase date. We cannot
otherwise redeem the notes. See "Description of the Registered
Notes--Certain Definitions" for the definitions of Change of Control
and Applicable Premium.
Guarantees................................ The registered notes to be issued in the Exchange Offer are fully and
unconditionally guaranteed, jointly and severally, on a senior,
unsecured basis by Building Materials Manufacturing Corporation and
Building Materials Investment Corporation. The obligations with
respect to these guarantees will rank equally with all existing and
future unsecured and unsubordinated obligations of each of the
guarantors. See "Description of the Registered Notes--Guarantees."
Ranking................................... The notes are BMCA's senior, unsecured obligations. The notes will
rank equally with all of BMCA's other unsecured and unsubordinated
obligations, including:
o its Deferred Coupon Notes,
o its 7 3/4% Senior Notes due 2005 (the "2005 Notes"),
o its 8 5/8% Senior Notes due 2006 (the "2006 Notes"),
o its 8% Senior Notes due 2007 (the "2007 Notes") and
o its revolving credit facility.
We refer to the Deferred Coupon Notes, the 2005 Notes, the 2006 Notes
and the 2007 Notes in this prospectus as the "Other Senior Notes." As
of December 31, 1998, our outstanding indebtedness from borrowings
was $592.7 million (of which $530.8 million was senior debt) and our
other outstanding liabilities, as reflected on our consolidated
balance sheet, including trade payables and accrued expenses, were
$209.9 million. Subject to certain restrictions contained in our
revolving credit facility, the indenture governing the old notes and
the registered notes (the "Indenture")
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
and the indentures governing the Other Senior Notes, we may incur
additional senior debt.
Certain Covenants......................... The Indenture contains covenants which, among other things and
subject to certain exceptions, restrict our ability to:
o incur indebtedness;
o make certain payments and dividends;
o issue capital stock of certain of our subsidiaries;
o issue guarantees;
o enter into transactions with stockholders and affiliates;
o create liens;
o sell assets;
o consolidate, merge with or sell all or substantially all of
our assets to another person.
Registration Rights....................... We have agreed to use our best efforts to cause to become effective
by May 2, 1999, a registration statement with respect to the Exchange
Offer. In the event that the Exchange Offer is not completed by
June 1, 1999, we will use our 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 June 1, 1999,
(1) the Exchange Offer is not completed and
(2) no shelf registration statement with respect to the resale of the
old notes is declared effective,
additional interest will accrue on the old notes from and including
June 1, 1999 but excluding the earlier of (A) the completion of the
Exchange Offer and (B) the effective date of that shelf registration
statement. This additional interest will be payable in cash
semiannually in arrears on June 1 and December 1 at a rate per annum
equal to 0.50% of the principal amount of the old notes. See
"Description of the Registered Notes--Principal, Maturity and
Interest" and "The Exchange Offer--Purpose and Effect."
Form of Registered Notes.................. The registered notes to be issued in the Exchange Offer will be
represented by one or more global securities deposited with The Bank
of New York for the benefit of DTC. You will not receive registered
notes in certificated form unless one of the events set forth under
the heading "Description of the Registered Notes--Form of Registered
Notes" occurs. Instead, beneficial interests in the registered notes
to be issued in the Exchange Offer will be shown on, and transfers of
these will be effected only through, records maintained in book-entry
form by DTC with respect to its participants.
Use of Proceeds........................... We will not receive any cash proceeds from the exchange pursuant to
the Exchange Offer.
</TABLE>
8
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents our summary consolidated financial data which
are derived from our Consolidated Financial Statements beginning on page F-1.
The results of any interim period do not necessarily show the results for the
full year. As of January 1, 1997, G-I Holdings Inc. contributed all of the
capital stock of U.S. Intec to BMCA, and U.S. Intec became BMCA's subsidiary.
Accordingly, our historical consolidated financial statements include U.S.
Intec'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. See Note 1 to Consolidated
Financial Statements. The results for the year ended December 31, 1997 include
the results of the Leatherback Industries business from its date of acquisition
(March 14, 1997), including sales of $30.2 million. The results for the nine
months ended September 27, 1998 include the results of the business of
Leslie-Locke, Inc. from its date of acquisition (June 1, 1998), including sales
of $36.3 million.
The As Adjusted balance sheet data give effect to the issuance of the old
notes and the purchase and subsequent cancellation of $147.1 million in
aggregate principal amount at maturity of the Deferred Coupon Notes as if these
transactions had been completed as of September 27, 1998.
The pro forma operating data is intended to give you a better picture of
what our business would have looked like if the following transactions had each
occurred on January 1, 1997:
o the issuance of the old notes;
o the issuances of the 2005 Notes and the 2007 Notes;
o the purchases of $279.7 million in aggregate principal amount of the
Deferred Coupon Notes; and
o the acquisitions of substantially all of the assets of Leslie-Locke,
Inc., Major Group, Incorporated and the Leatherback Industries division
of Hollinee Corporation.
The pro forma financial information does not project the financial position or
the results of operations for any future period or represent what the financial
position or results of operations would have been if the transactions described
above had been completed at the dates indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 28, SEPTEMBER 27,
YEAR ENDED DECEMBER 31, 1997 1998
--------------------------------- (UNAUDITED) (UNAUDITED)
1995 1996 1997
------ ------ ------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales....................................... $687.2 $852.0 $ 944.6 $ 723.6 $ 812.3
Operating income(1)............................. 45.9 61.4 70.1 59.8 31.5
Interest expense................................ 24.8 32.0 42.8 30.5 37.7
Income before income taxes and extraordinary
item......................................... 16.5 27.9 42.8 38.2 14.7
Income before extraordinary item................ 10.1 17.1 26.1 23.3 9.1
Net income (loss)............................... 10.1 17.1 26.1 23.3 (0.3)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1998
-------------------------------
DECEMBER 31, ACTUAL AS ADJUSTED(2)
1997 (UNAUDITED) (UNAUDITED)
------------ ------------ ---------------
(IN MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments.................................... $256.3 $205.7 $ 205.5
Total working capital.............................................. 284.8 234.7 235.6
Total assets....................................................... 807.3 849.4 857.1
Long-term debt less current maturities(3).......................... 555.4 569.6 588.6
Total stockholders' equity......................................... 83.0 62.0 51.7
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
---------------------------- 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 $ 16.8 $ 19.3
Goodwill amortization............................... 1.2 1.7 1.9 1.4 1.6
Capital expenditures and acquisitions............... 54.1 25.6 77.7 56.7 95.4
Cash flows from:
Operating activities............................. 50.6 53.1 (10.3) (15.9) 69.7
Investing activities............................. (93.5) (64.5) (121.2) (28.7) (33.6)
Financing activities............................. 59.8 90.0 19.9 (35.9) 2.1
EBITDA(4)........................................... 62.8 85.4 110.4 86.9 73.3
EBITDA excluding non-recurring charges.............. 62.8 85.4 110.4 86.9 100.9
Ratio of earnings to fixed charges(5)............... 1.6x 1.8x 1.9x 2.1x 1.3x
Ratio of EBITDA to interest expense(4).............. 2.5x 2.7x 2.6x 2.8x 1.9x
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED -------------------------------
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
1997 1997 1998
------------ ------------- --------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING DATA(6):
Adjusted EBITDA(7)............................................... $115.5 $ 91.2 $ 75.4
Interest expense................................................. 48.6 36.2 36.1
Income before extraordinary item................................. 25.7 22.4 11.3
Ratio of earnings to fixed charges(5)............................ 1.8x 1.9x 1.4x
Ratio of Adjusted EBITDA to interest expense(7).................. 2.4x 2.5x 2.1x
</TABLE>
- ------------------
(1) Operating income for the nine-month period ended September 27, 1998 includes
$27.6 million of nonrecurring charges. See Note 5 to Consolidated Financial
Statements.
(2) Total stockholders' equity, As Adjusted, reflects an extraordinary loss of
$10.2 million, net of related income tax benefits, assuming the purchase of
the Deferred Coupon Notes had been completed on September 27, 1998, based on
an accreted value of the Deferred Coupon Notes at that date of 91.8%. We
completed this purchase on December 3, 1998. The accreted value of the
Deferred Coupon Notes on that date was 93.8%. As a result, an extraordinary
loss of $8.8 million, net of related income tax benefits, was recorded in
December 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Financial Condition."
(3) See "Capitalization" and Note 10 to Consolidated Financial Statements.
(4) EBITDA is calculated as income before income taxes and extraordinary items,
increased by interest expense, depreciation and goodwill amortization. As an
indicator of our operating performance, EBITDA should not be considered as
an alternative to net income or any other measure of performance under
generally accepted accounting principles.
(5) 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.
(6) The net effect of the pro forma adjustments was to increase (decrease) our
pro forma income before income taxes by $(0.7), $(1.4) and $3.7 million for
the year 1997 and the first nine months of 1997 and 1998, respectively. As a
result, our pro forma provision for income taxes increased (decreased) by
$(0.3), $(0.5) and $1.4 million for the year 1997 and the first nine months
of 1997 and 1998, respectively, based on an effective marginal income tax
rate of 38.5%.
(Footnotes continued on next page)
10
<PAGE>
(Footnotes continued from previous page)
(7) The Adjusted EBITDA data are being presented because this data relate to
debt covenants under the indentures governing our indebtedness. You should
refer to these indentures for further information. Excluded from the
Adjusted EBITDA calculation is $19.5 million in extraordinary charges, net
of related income tax benefits, related to the purchase of the Deferred
Coupon Notes in July and December 1998. The ratio of Adjusted EBITDA to
interest expense for the nine months ended September 28, 1997 and
September 27, 1998 has been calculated based on operating data for such
nine-month periods rather than for the most recently completed four fiscal
quarters ended on such date as contemplated in these indentures.
The details of the calculations of Adjusted EBITDA are set forth below:
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------------
NINE MONTHS ENDED NINE MONTHS NINE MONTHS
------------------------------ YEAR ENDED ENDED ENDED
YEAR ENDED SEPTEMBER 28, SEPTEMBER 27, DEC. 31, SEPTEMBER 28, SEPTEMBER 27,
DECEMBER 31, 1997 1998 1997 1997 1998
1997 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------- ------------- ------------ ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income before income
taxes and
extraordinary item... $ 42,771 $38,172 $14,739 $ 38,576 $33,880 $17,607
Add:
EBITDA adjustment
related to the
acquisitions......... -- -- -- 3,479 2,917 838
Interest expense....... 42,784 30,494 37,675 48,568 36,155 36,063
Goodwill
amortization......... 1,891 1,421 1,573 1,891 1,421 1,573
Depreciation........... 22,936 16,796 19,347 22,936 16,796 19,347
-------- ------- ------- -------- ------- -------
Adjusted EBITDA........ $110,382 $86,883 $73,334 $115,450 $91,169 $75,428
-------- ------- ------- -------- ------- -------
-------- ------- ------- -------- ------- -------
</TABLE>
11
<PAGE>
RISK FACTORS
An investment in the registered notes is subject to a number of risks. You
should carefully consider the following factors, as well as the more detailed
descriptions elsewhere in this prospectus in evaluating the Exchange Offer. The
factors set forth below, however, are generally applicable to the old notes as
well as the registered notes. Any reference to "notes" in this prospectus refers
to both old notes and registered notes, unless the context otherwise requires.
WE ARE SUBSTANTIALLY LEVERAGED WHICH COULD AFFECT OUR ABILITY TO FULFILL OUR
OBLIGATIONS UNDER THE NOTES.
Our substantial outstanding debt has important consequences to you,
including the risk that we may not generate sufficient cash flow from operations
to pay principal and interest on our indebtedness or to invest in our
businesses. While we believe, based upon our historical and anticipated
performance, that we will be able to satisfy our obligations (including under
the notes) from, among other things, our cash flow from operations and
refinancings, we cannot assure you of this ability.
At December 31, 1998, we had total outstanding consolidated long-term debt
of $592.7 million and stockholders' equity of $44.9 million. In addition,
subject to certain restrictions contained in our $75 million, three-year
revolving credit facility (the "Credit Agreement"), the Indenture and the
indentures relating to the Other Senior Notes, we may incur additional
indebtedness. While we can raise cash to satisfy our obligations through
potential sales of assets or equity, our ability to raise funds by selling
either assets or equity depends on results of operations, market conditions,
restrictions contained in the Credit Agreement, the Indenture and the indentures
relating to the Other Senior Notes, and other factors. In the event that we are
unable to refinance indebtedness or raise funds through sales of assets or
equity or otherwise, we may be unable to pay principal of and interest on the
notes.
IF A CHANGE OF CONTROL OCCURS, WE MAY BE UNABLE TO REPURCHASE YOUR NOTES. THIS
FAILURE WOULD CONSTITUTE AN EVENT OF DEFAULT UNDER THE INDENTURE AND OUR OTHER
DEBT INSTRUMENTS.
If a Change of Control occurs, you will have the right to require us to
repurchase your notes at 101% of their principal amount, plus any accrued and
unpaid interest to the repurchase date. We cannot assure you that we will have
available, or be able to obtain, sufficient funds, or will be permitted by our
debt instruments, to repurchase your notes upon the occurrence of a Change of
Control. Specifically, our Credit Agreement currently prohibits us from
repurchasing any notes. Our failure to repurchase your notes would constitute an
event of default under the Indenture, which would in turn constitute a default
under the Credit Agreement and the indentures governing the Other Senior Notes.
See "Description of the Registered Notes--Repurchase at Your Option." If these
events of default were to occur, we may be unable to pay principal of and
interest on the notes.
If a change of control as defined in the Credit Agreement occurs, the
Credit Agreement could be terminated and outstanding loans accelerated. This
event could also cause the notes and the Other Senior Notes to be accelerated
(see "Capitalization"), in which event we may be unable to pay the accelerated
amounts.
THE LIQUIDITY OF ANY MARKET FOR THE OLD NOTES COULD BE ADVERSELY AFFECTED AFTER
COMPLETION OF THE EXCHANGE OFFER. IN ADDITION, THERE MAY BE NO ACTIVE TRADING
MARKET FOR THE REGISTERED NOTES TO BE ISSUED IN THE EXCHANGE OFFER.
There has been no public market for the old notes. If most holders of the
old notes tender their notes in the Exchange Offer, the liquidity for the old
notes not tendered in the Exchange Offer could be adversely affected upon
completion of the Exchange Offer. In addition, we cannot assure you with respect
to (1) the liquidity of any market for the registered notes that may develop,
(2) your ability to sell registered notes or (3) the price at which you will be
able to sell those registered notes. If a public market were to exist, the
registered 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 our financial
performance. We do not intend to list the registered notes to be issued to you
in the Exchange Offer on any securities exchange or to seek approval for
quotations through any automated
12
<PAGE>
quotation system. No active market for the registered notes is currently
anticipated. Bear, Stearns & Co. Inc. and Chase Securities Inc., the initial
purchasers of the old notes, have advised us that they currently anticipate
making a secondary market for the registered notes, but they are not obligated
to do so. We cannot assure you that an active or liquid public trading market
will develop for the registered notes.
OUR PARENT CORPORATIONS ARE DEPENDENT UPON OUR CASH FLOW TO SATISFY CERTAIN OF
THEIR RESPECTIVE OBLIGATIONS AND COULD CAUSE US TO MAKE DISTRIBUTIONS TO THEM
WHICH WOULD REDUCE CASH FLOW AVAILABLE TO US.
GAF Corporation, G-I Holdings, G Industries Corp. and GAF Building
Materials Corporation, our parent corporations, are dependent upon the cash flow
of their subsidiaries in order to satisfy their obligations, including
asbestos-related claims and certain tax liabilities. The only significant assets
of our parent corporations are the stock of our company and the stock of GAF
Fiberglass. GAF Corporation has advised us that it expects to obtain funds to
satisfy its obligations from, among other things, dividends and loans
principally from us and from payments pursuant to a tax sharing agreement we
entered into with it. If our parent corporations should become unable to meet
their cash requirements from alternative sources, subject to the terms of the
Indenture, they might take various actions, including, among other things,
o causing us to make distributions to our stockholders by means of dividends or
otherwise,
o causing us to make loans to them, or
o causing GAF Building Materials Corporation to sell our common stock.
We cannot assure you that that any of these actions could be effected on
satisfactory terms or that they would be sufficient to enable our parent
corporations to satisfy their obligations. In addition, creditors of those
corporations could also seek to cause GAF Building Materials Corporation to sell
our common stock or take similar action in order to satisfy liabilities owed to
their creditors. See the risk factor on page 14 regarding asbestos-related
claims filed against our parent corporations, the risk factor on page 14
regarding GAF Group federal income tax liability and Notes to Consolidated
Financial Statements.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE YOU TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, the guarantees could be voided, or claims in respect
of the guarantees could be subordinated to all other debts of that guarantor if,
among other things, the guarantor, at the time it incurred the indebtedness
evidenced by its guarantee:
o received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee;
o was insolvent or rendered insolvent by reason of such incurrence;
o was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
o intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
o the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets;
13
<PAGE>
o if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute
and mature; or
o it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of these notes, was not insolvent, does not have unreasonably small
capital for the business in which it is engaged and has not incurred debts
beyond its ability to pay such debts as they mature.
ASBESTOS-RELATED CLAIMS FILED AGAINST CERTAIN OF OUR PARENT CORPORATIONS COULD
RESULT IN A CHANGE IN CONTROL OF OUR COMPANY.
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, GAF Building Materials Corporation. As
of March 30, 1997, BMCA had paid all of its assumed asbestos-related
liabilities. G-I Holdings and GAF Building Materials Corporation have jointly
and severally agreed to indemnify BMCA against any other existing or future
claims related to asbestos-related liabilities if asserted against BMCA.
GAF Corporation has advised us that, as of December 28, 1998, it is
defending approximately 113,800 pending alleged Asbestos Claims (having received
notice of approximately 93,500 new Asbestos Claims during 1998) and has resolved
approximately 293,500 Asbestos Claims (including approximately 59,000 in 1998).
GAF Corporation has advised us that it believes that a significant portion of
the claims filed in 1998 were already pending against other defendants for some
period of time, with GAF Corporation being added as a defendant upon the lifting
in 1997 of the injunction relating to the Georgine class action settlement. This
injunction prevented plaintiffs from filing or proceeding with their Asbestos
Claims other than in accordance with the Georgine class action settlement, which
was rendered inoperable in 1997 by a United States Supreme Court ruling. GAF
Corporation's current estimated average cost for Asbestos Claims resolved in
1998 (including Asbestos Claims disposed of at no cost to GAF Corporation) is
approximately $3,500 per claim. Substantially all the costs in respect of these
Asbestos Claims will be paid over several years. We cannot assure you that the
actual costs of resolving pending and future Asbestos Claims will approximate
GAF Corporation's estimated average costs for the Asbestos Claims settled in
1998.
GAF Corporation has stated that it is committed to effecting a
comprehensive resolution of Asbestos Claims, and that it is exploring a number
of options to accomplish such resolution. We cannot assure you that this effort
will be successful.
We believe that we will not sustain any additional liability in connection
with asbestos-related claims. While we cannot predict whether any
asbestos-related claims will be asserted against us or our assets, or the
outcome of any litigation relating to such claims, we believe that we have
meritorious defenses to such claims. Moreover, we have been jointly and
severally indemnified by G-I Holdings and GAF Building Materials Corporation
with respect to such claims. Should GAF Corporation or GAF Building Materials
Corporation 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 Corporation or GAF Building Materials Corporation, including
its holdings of our common stock, and such enforcement could result in a change
of control with respect to our company.
For additional information regarding asbestos-related matters, see
"Business--Legal Proceedings" and Note 3 to Consolidated Financial Statements.
IF GAF CORPORATION IS UNSUCCESSFUL IN CHALLENGING ITS TAX DEFICIENCY NOTICE, IT
COULD BE DEPENDENT, AS NOTED ABOVE, UPON OUR CASH FLOWS AND THE CASH FLOWS OF
GAF FIBERGLASS TO SATISFY ITS TAX OBLIGATIONS.
As a member of the GAF Corporation consolidated group for federal income
tax purposes, we are jointly and severally liable for federal income tax
liabilities of the GAF consolidated group (including with respect to tax
liability relating to Rhone-Poulenc Surfactants and Specialties, L.P., a
partnership in which
14
<PAGE>
GAF Fiberglass holds an interest). We are indemnified under certain
circumstances for those tax liabilities principally by GAF Corporation and G-I
Holdings. On September 15, 1997, GAF Corporation received a tax deficiency
notice for the 1990 fiscal year relating to the surfactants partnership which
could result in it incurring liabilities significantly in excess of its deferred
tax liability. GAF Corporation has advised us that it believes it will prevail
in this matter although there can be no assurance in this regard. However, if
GAF Corporation is unsuccessful in challenging its tax deficiency notice, the
ability of GAF Corporation to satisfy its tax obligation, could, as noted above,
be dependent on our cash flow and that of GAF Fiberglass. We believe that the
ultimate disposition of this matter will not have a material adverse effect on
our financial position or results of operations. See "Business--Tax Claim
Against GAF Corporation," "Certain Relationships--Tax Sharing Agreement" and
Note 6 to Consolidated Financial Statements.
OUR CONTROLLING STOCKHOLDER HAS THE ABILITY TO ELECT OUR ENTIRE BOARD OF
DIRECTORS AND CAN CONTROL THE OUTCOME OF ANY MATTER SUBMITTED TO OUR
STOCKHOLDERS.
We are an indirect subsidiary of GAF Corporation, which is approximately
97% beneficially owned (as defined in Rule 13d-3 of the Securities Exchange Act
of 1934) by Samuel J. Heyman, Chairman of the Board of Directors and Chief
Executive Officer of GAF Corporation and G-I Holdings, our Chairman of the Board
of Directors and Chief Executive Officer of GAF Building Materials Corporation.
Accordingly, Mr. Heyman has the ability to elect our entire Board of Directors
and to determine the outcome of any other matter submitted to our stockholders
for approval, including, subject to the terms of the Indenture, mergers,
consolidations and the sale of all, or substantially all, of our assets. See
"Security Ownership of Certain Beneficial Owners and Management."
CERTAIN OF OUR SUPPLY AGREEMENTS MAY EXPIRE SHORTLY AND WE MAY NOT BE ABLE TO
SECURE ALTERNATIVE SOURCES ON SATISFACTORY TERMS.
We purchase from International Specialty Products Inc. ("ISP") all of our
colored mineral granules requirements (except for the requirements of our
California roofing plant and a portion of the requirements of our Indiana
roofing plant which are supplied by a third party) under a requirements
contract. U.S. Intec 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 1999 and
is subject to annual renewal unless terminated by either party to such
agreement. In 1997 and the first nine months of 1998, BMCA and U.S. Intec
purchased in the aggregate approximately $51.1 million and $47.9 million,
respectively, of mineral products from ISP. Although we believe that, if
necessary, we would be able to secure colored granules from alternate sources on
satisfactory terms, we cannot assure you that we 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, we transferred to GAF Fiberglass
our Nashville, Tennessee facility. This facility manufactures a significant
portion of our glass fiber requirements. In addition, in connection with the
separation transactions, we entered into a supply contract with GAF Fiberglass
under which GAF Fiberglass produces glass fiber for us. In 1997 and the first
nine months of 1998, we purchased approximately $24.5 million and
$19.3 million, respectively, of glass fiber from GAF Fiberglass. See "Certain
Relationships--Certain Purchases."
See "Description of the Registered Notes--Certain Operating Restrictions--
Limitations on Transactions with Affiliates" for limitations that are imposed by
the Indenture on transactions with our affiliates.
THE YEAR 2000 TECHNOLOGY ISSUES MAY HAVE AN ADVERSE EFFECT ON OUR COMPUTER
SYSTEMS AND THOSE OF THIRD PARTIES IMPORTANT TO US.
We have implemented a formal Year 2000 program:
o to address our Year 2000 issues, i.e., the inability by some information
technology (IT) and non-IT equipment, including embedded technology, to
accurately read and process certain dates in the Year 2000 and afterwards,
15
<PAGE>
o to investigate any Year 2000 issues of third parties significant to our
business, and
o to establish contingency plans where appropriate.
We do not believe that the costs of our Year 2000 program will be material
to our financial position or results of operations. We cannot assure you that
this will be the case. The ability of third parties with whom we transact
business, or companies that we may acquire, to adequately address their Year
2000 issues is outside of our control. We have requested compliance information
in the form of direct questionnaires from vendors significant to our business
and are planning to solicit compliance information from our significant
customers. We expect to complete this solicitation by June 1999. We have
received compliance information from substantially all of our key vendors. We
are evaluating these responses and are requesting more information where
appropriate to help us formulate contingency plans, including the identification
of secondary suppliers, to minimize the impact of any Year 2000 related issues
that may develop. Notwithstanding these actions, we cannot assure you that all
of our Year 2000 issues or those of our key suppliers, service providers or
customers will be resolved or addressed satisfactorily before the year 2000
commences. In addition, we cannot assure you that the failure to satisfactorily
resolve or address these issues will not have a material adverse impact on our
business, results of operations or financial position. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Compliance."
16
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and, accordingly, file annual, quarterly and other information with
the Securities and Exchange Commission. You may read and copy the reports and
other information that we file with the Commission at the Commission's public
reference facilities at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the public reference
facilities by calling the Commission at 1-800-SEC-0330. You may also obtain
information about us from the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601-2511.
Copies of these materials also can be obtained from the Public Reference Section
of the Commission at prescribed rates. Our filings with the Commission are also
available to the public on the Commission's home page on the Internet at
http://www.sec.gov.
We have filed with the Commission a Registration Statement on Form S-4 with
respect to the registered notes. This prospectus, which is a part of the
Registration Statement, omits certain information included in the Registration
Statement. 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, we refer you to such exhibit for a more complete
description of the matter involved, and each such statement is deemed qualified
in its entirety to such reference.
FORWARD-LOOKING STATEMENTS
This prospectus contains both historical and forward-looking statements.
All statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements within the meaning of section 27A of the
Securities Act and section 21E of the Exchange Act. These forward-looking
statements are only predictions and generally can be identified by use of
statements that include phrases such as "believe," "expect," "anticipate,"
"intend," "plan," "foresee" or other words or phrases of similar import.
Similarly, statements that describe our objectives, plans or goals also are
forward-looking statements. Our operations are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. You are urged to
consider these factors carefully in evaluating the forward-looking statements,
including the factors described under "Risk Factors." The forward-looking
statements included in this prospectus are made only as of the date of this
prospectus and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances. We
cannot assure you that projected results or events will be achieved.
17
<PAGE>
CAPITALIZATION
The following table presents our short-term debt and current maturities of
long-term debt and consolidated capitalization as of September 27, 1998 and as
adjusted to give effect to the issuance of the old notes and the purchase and
subsequent cancellation of $147.1 million in aggregate principal amount at
maturity of the Deferred Coupon Notes. This table should be read in conjunction
with our Consolidated Financial Statements and related notes included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 27,
1998
(UNAUDITED)
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(THOUSANDS)
<S> <C> <C>
Short-term Debt and current maturities of Long-term Debt:
Short-term debt....................................................................... $ 2,388 $ 2,388
Current maturities of long-term debt.................................................. 4,024 4,024
-------- ---------
Total............................................................................ $ 6,412 $ 6,412
-------- ---------
-------- ---------
Long-term Debt (excluding current maturities)(1):
11 3/4% Senior Deferred Coupon Notes due 2004......................................... $162,887 $ 27,810
7 3/4% Senior Notes due 2005.......................................................... 149,379 149,379
8 5/8% Senior Notes due 2006.......................................................... 99,592 99,592
8% Senior Notes due 2007.............................................................. 99,324 99,324
8% Senior Notes due 2008.............................................................. -- 154,158
Borrowings under the Credit Agreement(2).............................................. -- --
Industrial revenue bonds.............................................................. 11,125 11,125
Obligations on mortgaged properties................................................... 2,668 2,668
Obligations under capital leases...................................................... 44,577 44,577
-------- ---------
Total Long-term Debt (excluding current maturities).............................. $569,552 $ 588,633
-------- ---------
-------- ---------
Stockholders' 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........................................... 89,401 89,401
Accumulated deficit(3)................................................................ (14,355) (24,594)
Accumulated other comprehensive income (loss)......................................... (13,092) (13,092)
-------- ---------
Total Stockholders' Equity....................................................... $ 61,954 $ 51,715
-------- ---------
-------- ---------
Total Capitalization............................................................. $631,506 $ 640,347
-------- ---------
-------- ---------
</TABLE>
- ------------------
(1) For a description of long-term debt, see Note 10 to Consolidated Financial
Statements.
(2) No borrowings were outstanding under the Credit Agreement as of December 31,
1998.
(3) On a pro forma basis, accumulated deficit reflects an extraordinary loss of
$10.2 million, net of related income tax benefits, assuming the purchase of
the Deferred Coupon Notes had been completed on September 27, 1998, based on
an accreted value of the Deferred Coupon Notes at that date of 91.8%. We
completed this purchase on December 3, 1998. The accreted value of the
Deferred Coupon Notes on that date was 93.8%. We recorded in December 1998
an extraordinary loss of $8.8 million, net of related income tax benefits.
18
<PAGE>
SELECTED FINANCIAL DATA
The following table presents our selected consolidated financial data which
have been derived from the Consolidated Financial Statements beginning on page
F-1. The results of any interim period do not necessarily show the results for
the full year. The historical financial information gives effect to our
formation as if it had occurred on January 1, 1993 and our financial statements
have been prepared on a basis which retroactively reflects our formation at the
beginning of the periods presented, except that our 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 our formation as of January 31, 1994. As of January 1, 1997, G-I
Holdings contributed all of the capital stock of U.S. Intec to BMCA, and U.S.
Intec became BMCA's subsidiary. Accordingly, our historical consolidated
financial statements include U.S. Intec'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 Industries business
from its date of acquisition (March 14, 1997), including sales of
$30.2 million. The results for the nine months ended September 27, 1998 include
the results of the business of Leslie-Locke, Inc. from its date of acquisition
(June 1, 1998), including sales of $36.3 million.
The As Adjusted balance sheet data give effect to the issuance of the old
notes and the purchase and subsequent cancellation of $147.1 million in
aggregate principal amount at maturity of Deferred Coupon Notes as if these
transactions had been completed as of September 27, 1998.
The pro forma operating data is intended to give you a better picture of
what our business would have looked like if the following transactions had each
occurred on January 1, 1997:
o the issuance of the old notes;
o the issuances of the 2005 Notes and the 2007 Notes;
o the purchase of $279.7 million in aggregate principal amount of the
Deferred Coupon Notes; and
o the acquisitions of substantially all of the assets of Leslie-Locke,
Inc., Major Group, Incorporated and the Leatherback Industries division
of Hollinee Corporation.
The pro forma financial information does not project the financial position
or the results of operations for any future period or represent what the
financial position or results of operations would have been if the transactions
described above had been completed at the dates indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
-------------------------------------------------- 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 $ 723.6 $ 812.3
Operating income(1).... 41.5 44.7 45.9 61.4 70.1 59.8 31.5
Interest expense....... 2.0 13.1 24.8 32.0 42.8 30.5 37.7
Income before income
taxes and
extraordinary
item................ 33.0 27.8 16.5 27.9 42.8 38.2 14.7
Income before
extraordinary
item................ 20.4 16.7 10.1 17.1 26.1 23.3 9.1
Net income (loss)...... 20.4 16.7 10.1 17.1 26.1 23.3 (0.3)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1998
DECEMBER 31, -------------------------------------
-------------------------------------------------- ACTUAL AS ADJUSTED(2)
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 $234.7 $235.6
Total assets........... 259.4 452.3 559.3 701.6 807.3 849.4 857.1
Long-term debt less
current
maturities(3)....... 38.7 229.2 310.3 405.7 555.4 569.6 588.6
Total stockholders'
equity (deficit).... 85.9 (28.9) 15.8 143.2 83.0 62.0 51.7
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
-------------------------------------------------- 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 $16.8 $ 19.3
Goodwill
amortization........ 0.6 1.1 1.2 1.7 1.9 1.4 1.6
Capital expenditures
and
acquisitions........ 19.0 54.3 54.1 25.6 77.7 56.7 95.4
Cash flows from:
Operating
activities........ 25.4 28.5 50.6 53.1 (10.3) (15.9) 69.7
Investing
activities........ (19.0) (54.3) (93.5) (64.5) (121.2) (28.7) (33.6)
Financing
activities........ (10.2) 53.9 59.8 90.0 19.9 (35.9) 2.1
EBITDA(4).............. 50.1 58.8 62.8 85.4 110.4 86.9 73.3
EBITDA excluding
non-recurring
charges............. 50.1 58.8 62.8 85.4 110.4 86.9 100.9
Ratio of earnings to
fixed
charges(5).......... 8.6x 2.7x 1.6x 1.8x 1.9x 2.1x 1.3x
Ratio of EBITDA to
interest
expense(4).......... 24.5x 4.5x 2.5x 2.7x 2.6x 2.8x 1.9x
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED ------------------------------------
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
1997 1997 1998
---------------- ---------------- ----------------
(IN MILLIONS, EXCEPT RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C>
PRO FORMA OPERATING
DATA(6):
Adjusted EBITDA(7)..... $115.5 $ 91.2 $ 75.4
Interest expense....... 48.6 36.2 36.1
Income before
extraordinary
item................ 25.7 22.4 11.3
Ratio of earnings to
fixed charges(5).... 1.8x 1.9x 1.4x
Ratio of Adjusted
EBITDA to interest
expense(7).......... 2.4x 2.5x 2.1x
</TABLE>
- ------------------
(1) Operating income for the nine-month period ended September 27, 1998 includes
$27.6 million of nonrecurring charges. See Note 5 to Consolidated Financial
Statements.
(2) Total stockholders' equity, As Adjusted, reflects an extraordinary loss of
$10.2 million, net of related income tax benefits, assuming the purchase of
the Deferred Coupon Notes had been completed on September 27, 1998, based on
an accreted value of the Deferred Coupon Notes at that date of 91.8%. We
completed this purchase on December 3, 1998. The accreted value of the
Deferred Coupon Notes on such date was 93.8%. As a result, an extraordinary
loss of $8.8 million, net of related income tax benefits, was recorded in
December 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Financial Condition."
(3) See "Capitalization" and Note 10 to Consolidated Financial Statements.
(Footnotes continued on next page)
20
<PAGE>
(Footnotes continued from previous page)
(4) EBITDA is calculated as income before income taxes and extraordinary items,
increased by interest expense, depreciation and goodwill amortization. As an
indicator of our operating performance, EBITDA should not be considered as
an alternative to net income or any other measure of performance under
generally accepted accounting principles.
(5) 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.
(6) The net effect of the pro forma adjustments was to increase (decrease) our
pro forma income before income taxes by $(0.7), $(1.4) and $3.7 million for
the year 1997 and the first nine months of 1997 and 1998, respectively. As a
result, our pro forma provision for income taxes increased (decreased) by
$(0.3), $(0.5) and $1.4 million for the year 1997 and the first nine months
of 1997 and 1998, respectively, based on an effective marginal income tax
rate of 38.5%.
(7) The Adjusted EBITDA data are being presented because this data relates to
debt covenants under the indentures governing our indebtedness. You should
refer to these indentures for further information. Excluded from the
Adjusted EBITDA calculation is $19.5 million in extraordinary charges, net
of related income tax benefits, related to the purchase of the Deferred
Coupon Notes in July and December 1998. The ratio of Adjusted EBITDA to
interest expense for the nine months ended September 28, 1997, and
September 27, 1998 has been calculated based on operating data for such
nine-month periods rather than for the most recently completed four fiscal
quarters ended on those dates as contemplated in the indentures. See
"Summary Financial Data" for the details of the calculations of Adjusted
EBITDA.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BMCA was formed in January 1994 to acquire the operating assets and certain
liabilities of GAF Building Materials Corporation. As a result of the separation
transactions consummated on January 1, 1997, G-I Holdings contributed all of the
capital stock of U.S. Intec to BMCA, and U.S. Intec became BMCA's subsidiary.
See Note 1 to Consolidated Financial Statements. Accordingly, our historical
consolidated financial statements include U.S. Intec'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. In the separation transactions, we also transferred
our glass fiber manufacturing facility in Nashville, Tennessee and certain
related assets and liabilities, to GAF Fiberglass, and G-I Holdings contributed
$82.5 million in cash and short-term investments to us in December 1996. In that
connection, we entered into a long-term supply agreement with GAF Fiberglass
under which GAF Fiberglass has agreed to produce glass fiber for us. See
"Certain Relationships."
RESULTS OF OPERATIONS
First Nine Months of 1998 Compared With First Nine Months of 1997
For the first nine months of 1998, we recorded a net loss of $0.3 million
compared with net income of $23.3 million for the first nine months of 1997. The
net loss for the first nine months of 1998 reflected the impact of
$27.6 million of pre-tax nonrecurring charges and an after-tax extraordinary
charge of $9.3 million. Excluding the effect of these charges, our results
reflected higher other income, partially offset by increased interest expense
and lower operating income.
Net sales for the first nine months of 1998 were $812.3 million, a 12.3%
increase over net sales for the first nine months of 1997 of $723.6 million,
principally due to net sales gains in the residential product lines and the
acquisition of the Leslie-Locke business in June 1998. See Note 4 to
Consolidated Financial Statements. The increase in net sales of residential
products resulted from higher unit volumes and selling prices.
We recorded pre-tax nonrecurring charges in the third quarter of 1998
aggregating $27.6 million, of which $20.0 million related to the settlement of a
national class action lawsuit involving asphalt shingles manufactured between
January 1, 1973 and December 31, 1997. Under the terms of the September 1998
settlement, which has been granted preliminary approval by the court pending a
fairness hearing, we will provide property owners whose GAF shingles were
manufactured during this period and which suffer certain damages during the term
of their original warranty period, and who file a qualifying claim, with an
opportunity to receive certain limited benefits beyond those already provided in
their existing warranty. We agreed to the settlement, payments against which
will be made over a number of years, to avoid the expense required to defend
such litigation. In July 1998, we recorded a nonrecurring charge of
$7.6 million related to a grant to our President of 30,000 shares of our
restricted common stock and certain cash payments to be made over a specified
period of time to such officer in connection with the termination by an
affiliate of preferred stock options and stock appreciation rights held by such
officer.
Operating income, before the impact of the nonrecurring charges, was
$59.1 million for the first nine months of 1998 compared with $59.8 million in
the first nine months of 1997. The decline in operating income was attributable
to higher distribution costs due to rail service problems and higher selling,
general and administrative expenses resulting from broader marketing efforts,
partially offset by an increase in sales volume and lower manufacturing costs.
Interest expense increased from $30.5 million for the first nine months of
1997 to $37.7 million in the first nine months of 1998, primarily due to higher
debt levels, partially offset by lower average interest rates resulting from the
refinancing of $132.6 million in aggregate principal amount at maturity of the
Deferred Coupon Notes with a portion of the proceeds from the issuance of the
2005 Notes in July 1998. Other income, net, for the first nine months of 1998
was $20.9 million compared with $8.9 million in the first nine
22
<PAGE>
months of 1997, with the improvement principally due to higher investment income
and lower other expenses.
On July 17, 1998, we issued $150 million in aggregate principal amount at
maturity of the 2005 Notes and used a portion of the net proceeds from such
issuance to purchase and subsequently cancel $132.6 million in aggregate
principal amount at maturity of the Deferred Coupon Notes. In connection with
this purchase, we recorded an after-tax extraordinary charge of $9.3 million.
1997 Compared With 1996
We 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 we acquired in March
1997.
Gross profit margin increased to 27.3% in 1997 from 27.0% in 1996,
resulting primarily from lower manufacturing costs and improved product mix.
Selling, general and administrative expenses increased 11% to $185.7 million in
1997 from $166.7 million in 1996, primarily reflecting increased costs of
distribution. Selling, general and administrative expenses as a percentage of
net sales increased slightly from 19.6% in 1996 to 19.7% in 1997.
Operating income in 1997 was $70.1 million, an increase of $8.7 million
(14%) compared with $61.4 million in 1996. We attribute the increase in
operating income 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. This improvement was due principally to
$20.0 million higher investment income, partially offset by a $3.0 million
provision for estimated obligations related to product warranty claims for a
discontinued product.
1996 Compared With 1995
We recorded net income in 1996 of $17.1 million compared with net income of
$10.1 million in 1995. We attribute the 69% increase in net income 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 our sales, excluding the effect of U.S. Intec's sales, due to increased unit
volumes of both residential and commercial roofing products and higher average
residential selling prices, and also reflected U.S. Intec's 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 U.S. Intec 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.
23
<PAGE>
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 U.S. Intec.
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 $4.8 million higher investment income partially offset by
$0.6 million higher expenses related to the sale of our receivables and certain
litigation costs.
LIQUIDITY AND FINANCIAL CONDITION
Net cash inflow during the first nine months of 1998 was $36.1 million
before financing activities, and included $69.7 million of cash generated from
operations, the reinvestment of $36.3 million for capital programs, acquisitions
of $59.2 million, including the acquisition of the Leslie-Locke business for
$43.5 million and the generation of $61.8 million from net sales of
available-for-sale and held-to-maturity securities.
Cash invested in additional working capital totaled $29.3 million during
the first nine months of 1998, primarily reflecting a seasonal increase in
inventories of $17.8 million and a $55.8 million increase in receivables,
partially offset by a $44.7 million increase in accounts payable and accrued
liabilities. Accrued liabilities, including the reserve for product warranty
claims, increased by $41.1 million to $80.5 million as a result of additional
accrued interest payable, seasonal increases in accrued distribution costs and
other plant operating accruals and due to the $8.6 million short-term portion of
the $27.6 million of nonrecurring charges. Cash from operating activities also
reflected a $40.6 million cash inflow from related party transactions as a
result of repayments of advances by GAF Corporation, G-I Holdings and their
subsidiaries which were made by us in 1997, an $18.9 million cash outflow for
net purchases of trading securities and $21.7 million of cash inflow from other
operating activities, mainly reflecting $19.0 million of the nonrecurring
charges.
Net cash provided by financing activities totaled $2.1 million during the
first nine months of 1998, mainly reflecting the net proceeds of $149.4 million
from the issuance in July 1998 of the 2005 Notes, $43.6 million of net proceeds
from the sale of receivables, and $6.2 million of cash inflow from the repayment
of a loan by a related party. Offsetting such cash inflows was $135.4 million of
repayments of long-term debt, principally the purchase of $132.6 million in
aggregate principal amount at maturity of the Deferred Coupon Notes, a $34.0
million paydown of borrowings under the Credit Agreement, and a $24.6 million
decrease in short-term borrowings.
As a result of the foregoing factors, cash and cash equivalents increased
by $38.2 million during the first nine months of 1998 to $51.1 million,
excluding $154.6 million of trading, available-for-sale and held-to-maturity
securities and other short-term investments.
In June 1998, we terminated interest rate swap agreements related to our
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, we issued $150 million in aggregate principal amount at
maturity of the 2005 Notes and used a portion of the net proceeds from that
issuance to purchase and subsequently cancel $132.6 million in aggregate
principal amount at maturity of the Deferred Coupon Notes.
On December 3, 1998, we issued $155 million in aggregate principal amount
at maturity of the old notes and used substantially all of the net proceeds from
that issuance to purchase and subsequently cancel $147.1 million in aggregate
principal amount at maturity of the Deferred Coupon Notes.
We 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
24
<PAGE>
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 12 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.
We generated $19.9 million from financing activities in 1997. On
October 20, 1997, we issued $100 million in aggregate principal amount at
maturity of the 2007 Notes. Financing activities in 1997 also included
$34.0 million of borrowings under our 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 our parent, $35.3 million of repayments
related to our receivables financing program, a $6.2 million loan to our 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.
Our investment strategy is to seek returns in excess of money market rates
on our available cash while minimizing market risks. We cannot assure you that
we will be successful in implementing such a strategy. We invest 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 our equity positions, we are exposed to the
risk of market loss. See Note 2 to Consolidated Financial Statements.
We use capital resources to maintain existing facilities, expand our
operations and make acquisitions. In 1999, we expect to build a new fiberglass
roofing mat manufacturing facility in Shafter, California and a new residential
roofing shingle manufacturing facility in Michigan City, Indiana. Funding for
our capital program is expected to be generated from results of operations,
additional borrowings and leasing transactions.
Our bank credit facilities were replaced on August 29, 1997 with the Credit
Agreement, which provides us with a $75 million unsecured revolving credit
facility. The full amount of the credit facility is available for letters of
credit, provided that total borrowings and outstanding letters of credit may not
exceed $75 million in the aggregate. As of September 27, 1998, no borrowings
were outstanding under the Credit Agreement, and $29.5 million of letters of
credit were outstanding. Under the terms of the Credit Agreement, we are subject
to certain financial covenants, including interest coverage and leverage ratios,
and dividends and other restricted payments are limited. We were in compliance
with such covenants as of September 27, 1998.
Additional borrowings by us are subject to certain covenants contained in
the Indenture, the indentures relating to the Other Senior Notes and the Credit
Agreement. We currently are limited by certain of these covenants from incurring
additional debt, except under certain limited circumstances including under the
Credit Agreement and the refinancing of existing debt.
Our objectives in utilizing interest rate swap agreements are to lower
funding costs, diversify sources of funding and manage interest rate exposure.
In the second quarter of 1998, all of our outstanding swaps were terminated. By
utilizing swaps, we reduced our interest expense by $1.5, $2.2, $2.0, $1.5 and
$1.5 million in 1995, 1996 and 1997 and the first nine months of 1997 and 1998,
respectively. See Note 10 to Consolidated Financial Statements.
See Note 10 to Consolidated Financial Statements for further information
regarding our debt instruments.
Upon its formation on January 31, 1994, BMCA assumed the first
$204.4 million of GAF Building Materials Corporation'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
December 31, 1998, we had total outstanding consolidated long-term indebtedness
of $592.7 million, of which $4.3 million matures prior to December 31, 1999, and
stockholders' equity of $44.9 million. See the risk factor on page 12 regarding
substantial leverage.
25
<PAGE>
We anticipate funding these obligations from our cash and investments,
operations and/or borrowings, which may include borrowings from affiliates.
In March 1993, we sold our trade accounts receivable to a trust, without
recourse, pursuant to an agreement which provided for a maximum of $75 million
in cash to be made available to us based on eligible receivables outstanding
from time to time. In November 1996, we repurchased the receivables sold
pursuant to the 1993 agreement and sold them to a special purpose subsidiary,
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 us based on
eligible receivables outstanding from time to time. This facility expires in
December 2001.
BMCA makes loans to, and borrows from, G-I Holdings and its subsidiaries at
prevailing market rates. As of September 27, 1998, G-I Holdings owed no loans to
BMCA and BMCA owed no loans to affiliates. In addition, BMCA makes non-interest
bearing advances to affiliates, of which $5.4 million were outstanding at
September 27, 1998.
Our parent corporations are essentially holding companies without
independent businesses or operations. As a result, they are presently dependent
upon the cash flow of their subsidiaries (principally our company) in order to
satisfy their obligations, including asbestos-related claims and certain
potential tax liabilities. These potential tax liabilities include tax
liabilities relating to the surfactants partnership, which operates, among other
businesses, GAF Fiberglass' former surfactants chemicals business. Our parent
corporations are GAF Corporation, G-I Holdings, G Industries Corp. and GAF
Building Materials Corporation, and, except for our company, the only
significant asset of our parent corporations is GAF Fiberglass. GAF Corporation
has advised us that it expects to obtain funds to satisfy its obligations from,
among other things, dividends and loans from subsidiaries (principally our
company) and from payments pursuant to the tax sharing agreement between GAF
Corporation and our company. The Indenture and the indentures relating to the
Other Senior Notes and the Credit Agreement contain restrictions on the amount
of dividends, loans and other restricted payments described in those agreements,
which may be paid by us. As of September 27, 1998, after giving effect to the
most restrictive of the aforementioned restrictions, we could have paid
dividends and other Restricted Payments (as defined in the Indenture) of up to
$75.1 million. We do not believe that the dependence of our parent corporations
on the cash flows of their subsidiaries should have a material adverse effect on
our operations, liquidity or capital resources. For further information, see
Notes 3, 6, 10, 12 and 13 to Consolidated Financial Statements and the risk
factor on page 13 regarding our parent corporations' dependence on our cash
flows.
We believe that we will have access to working capital or other assets
sufficient to meet our capital and operating needs for the foreseeable future.
We have used a substantial amount of the net proceeds from the 2007 Notes to
fund the cost of our capital expenditures and acquisitions.
For further information with regard to income taxes, see Note 6 to
Consolidated Financial Statements.
We do not believe that inflation has had a material effect on our results
of operations during the past three years. However, we can not assure you that
our business will not be affected by inflation in the future.
Effective December 1, 1998, we sold our perlite insulation manufacturing
assets to Johns Manville. The net cash proceeds of such sale were approximately
$29.0 million, and the net gain from this sale was not significant to our
results of operations. As part of the transaction, we entered into a long-term
agreement with Johns Manville under which Johns Manville will supply us with
perlite insulation products, which will enable us to continue to serve our
commercial roofing customers that purchase those products from us.
For a discussion of seasonality, see "Business--Seasonal Variations and
Working Capital."
YEAR 2000 COMPLIANCE
We have implemented a Year 2000 program (i) to address our Year 2000
issues, i.e., the inability by some IT and non-IT equipment, including embedded
technology, to accurately read and process certain dates in the Year 2000 and
afterwards, (ii) to investigate the Year 2000 issues of third parties
significant to our business, and (iii) to establish contingency plans where
appropriate.
26
<PAGE>
We have completed an internal study and believe we have remediated
substantially all of our core IT systems. We also have evaluated and believe we
have remediated substantially all of our personal computers, mainframe computers
and our computer network. We believe that the core IT systems remediation has
corrected Year 2000 programming issues in all critical areas of our business.
In addition, we are working with outside consultants to certify the
compliance of our core IT systems with externally developed and published
certification standards. We expect to complete this certification process by the
third quarter of 1999. Our independent third party consultants have inventoried
and evaluated substantially all of our non-IT equipment (i.e., voice mail,
telephone, fire and security systems and numerically controlled production
machinery and computer-based production equipment), and we are in the process of
remediating and testing this equipment. We expect to complete these activities
by the second quarter of 1999.
We have requested compliance information in the form of direct
questionnaires from vendors significant to our business and are planning to
solicit compliance information from our significant customers. We expect to
complete this solicitation by June 1999. When appropriate, a lack of a response
to our questionnaire is being followed by additional correspondence and finally
direct contact. We have received compliance information from substantially all
of our key vendors. Each of these vendors has advised us that they are or expect
to be ready for the year 2000 by the end of 1999. We are evaluating these
responses and are requesting more information where appropriate to help us
formulate contingency plans, including the identification of secondary
suppliers, to minimize the impact of any Year 2000 related issues that may
develop. We expect this phase of evaluation to be completed by June 1999.
We do not believe the costs of our Year 2000 program will be material to
our financial position or results of operations. We have incurred outside costs
of approximately $650,000 to date, and we anticipate that additional outside
costs should approximate no more than $1 million in the aggregate. We will
charge these costs, as incurred, against results of operations.
We believe we have taken reasonable steps in developing our Year 2000
program. Notwithstanding these actions, we cannot assure you that all of our
Year 2000 issues or those of our key suppliers, service providers or customers
will be resolved or addressed satisfactorily before the year 2000 commences. We
believe that the most reasonably likely "worst case scenario" resulting from
Year 2000 issues could be the failure by our key suppliers, service providers,
customers and other third parties to address their Year 2000 issues. If this
were to occur, our usual channels of supply and distribution could be disrupted
and we could experience a material adverse impact on our business, results of
operations or financial position. See the risk factor on page 15 regarding Year
2000 issues.
27
<PAGE>
BUSINESS
BMCA, incorporated under the laws of Delaware in 1994, is a 97%-owned
subsidiary of GAF Building Materials Corporation. BMCA acquired the operating
assets and certain liabilities of GAF Building Materials Corporation in 1994.
GAF Building Materials Corporation is a wholly-owned subsidiary of G Industries
Corp., which is a holding company that also owns all of the capital stock of GAF
Fiberglass. G Industries is a wholly-owned subsidiary of G-I Holdings Inc., a
wholly-owned subsidiary of GAF Corporation. Samuel J. Heyman, Chairman of the
Board of Directors and Chief Executive Officer of GAF Corporation, G-I Holdings
and GAF Fiberglass, Chairman of the Board of Directors of BMCA and Chief
Executive Officer of G Industries and GAF Building Materials Corporation,
beneficially owns (as defined in Rule 13d-3 of the Exchange Act) approximately
97% of GAF Corporation. BMCA does business under the name "GAF Materials
Corporation."
We are a leading national manufacturer of a broad line of asphalt roofing
products and accessories for the residential and commercial roofing markets. Our
products are produced at 25 manufacturing facilities. We believe that we hold
the number one or two market position in each of the asphalt product lines in
which we compete (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, our Timberline(Registered)
product is the leading brand in residential roofing, and our
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. In June 1998, we acquired substantially all of the
assets of Leslie-Locke, Inc., which manufactures and markets a variety of
specialty building products and accessories for the professional and
do-it-yourself remodeling and residential construction industries.
Our 25 manufacturing facilities consist of 15 roofing manufacturing
facilities, five roofing accessory plants, one glass mat manufacturing plant,
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. We have registered, through 1997,
ten consecutive years of increases in operating income. During the five-year
period ended December 31, 1997, our net sales and operating income have
increased at average annual compound rates of approximately 13.2% and 15.2%,
respectively, and our operating income margin has increased from 6.8% to 7.4%.
We believe that our growth is primarily attributable to (i) improvement in our
product mix, driven by a business strategy which emphasizes our higher-margin
products; (ii) our low cost manufacturing operations; (iii) substantial capital
spending programs for new property, plant and equipment that have enabled us to
expand capacity and reduce manufacturing costs; (iv) the strength of its
national distribution system; and (v) broadening our product lines through
niche-type acquisitions.
Effective as of January 31, 1994, GAF Building Materials Corporation
transferred to BMCA all of its business and assets (other than three closed
manufacturing facilities, certain deferred tax assets and receivables from
affiliates). BMCA contractually assumed all of GAF Building Materials
Corporation's liabilities, except (i) all of GAF Building Materials
Corporation's environmental liabilities, other than environmental liabilities
relating to existing plant sites and the business of BMCA as then conducted,
(ii) all of GAF Building Materials Corporation's tax liabilities, other than tax
liabilities arising from our operations or business, and (iii) all of GAF
Building Materials Corporation'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 BMCA contractually assumed
and agreed to pay. All of BMCA's assumed asbestos-related liabilities had been
satisfied as of March 30, 1997. G-I Holdings and GAF Building Materials
Corporation have agreed, jointly and severally, to indemnify BMCA from
liabilities not assumed by the BMCA, including asbestos-related and
environmental liabilities not expressly assumed by BMCA and for all tax
liabilities of the GAF consolidated tax group other than tax liabilities arising
from the operations or business of BMCA. See Note 3 to Consolidated Financial
Statements, the risk factor relating to our parent corporations' dependence on
our cash flows on page 13 and "Certain Relationships--Tax Sharing Agreement."
G-I Holdings acquired U.S. Intec in October 1995, and U.S. Intec became a
subsidiary of BMCA on January 1, 1997 as part of the separation transactions.
Our financial and statistical data contained in this prospectus reflect the
results of U.S. Intec from and after October 20, 1995, the date on which G-I
Holdings
28
<PAGE>
acquired U.S. Intec, except as we identify otherwise. For pro forma information,
see "Selected Financial Data."
INDUSTRY OVERVIEW
The United States residential roofing industry comprises manufacturers of
asphalt, tile, wood, slate and metal roofing materials, with asphalt roofing
representing approximately 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 we
believe that growth of laminated shingle sales will continue to exceed the
growth of the overall residential asphalt roofing market, we have 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 we
manufacture and market. 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
our sales, of both residential and commercial roofing products were for
re-roofing, as opposed to new construction. As a result, our exposure and the
industry's exposure 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. We expect 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
We are a leading manufacturer of a complete line of premium residential
roofing products. Residential roofing product sales represented approximately
65% of our net sales in 1997. We have improved our sales mix of residential
roofing products in recent years by increasing our emphasis on laminated
products which generally are sold at higher prices with more attractive profit
margins than our standard strip shingle products. We believe that we are the
largest manufacturer of laminated residential roofing shingles and the second
largest manufacturer of strip shingles in the United States.
Our two principal lines of roofing shingles are the Timberline(Registered)
series and the Sovereign(Registered) series. We also produce certain specialty
shingles principally 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. Our 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
29
<PAGE>
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 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, we
supply all the components necessary to install a complete roofing system. Our
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. Our 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
We manufacture 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 our 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 we manufacture. We believe that we are the second
largest manufacturer of asphalt built-up roofing products and the largest
manufacturer of modified bitumen products in the United States.
We manufacture 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 our
GAFGLAS(Registered)and Permaglas 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. We also manufacture base sheets, flashings and other roofing
accessories for use in these systems, the TOPCOAT(Registered) roofing system, a
liquid-applied membrane system designed to protect and waterproof existing metal
roofing, and roof maintenance products. In addition, we sell perlite roofing
insulation products, which consist of low thermal insulation that is installed
as part of a commercial roofing application below the roofing membrane,
isocyanurate foam as roofing insulation, packaged asphalt and accessories such
as vent stacks, roof insulation fasteners, cements and coating.
We sell modified bitumen products under the Ruberoid(Registered)
trademarks, and U.S. Intec sells these products under the Brai(Registered)
trademark. Modified bitumen products 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
We believe that our plants are among the most modern in the industry. Since
1985 and through December 31, 1997, we have 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 our roofing plants, as well as the modernization of our glass mat
facilities. We have reduced our manufacturing costs as a result of this capital
program, along with the rigorous application of our process and quality control
standards.
NEW PRODUCT DEVELOPMENT
We believe that we have 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. Our new
products introduced 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
30
<PAGE>
heavyweight three-tab shingle designed for Northern markets which offers greater
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, we 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, we 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
Our acquisition strategy is focused on niche-type acquisitions, designed to
either complement existing product lines, further the geographic reach of our
business or increase our market share. We are primarily interested in acquiring
businesses which can benefit from our strong national distribution network,
manufacturing technology and marketing expertise. Effective June 1, 1998, we
purchased for approximately $43.5 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
U.S. Intec, a leading national manufacturer of commercial roofing products.
MARKETING AND SALES
We have one of the industry's largest sales forces. A staff of technical
professionals who work directly with architects, consultants, contractors and
building owners provide support to the sales force. We market our roofing
products through our own sales force of approximately 180 experienced, full-time
employees and independent sales representatives operating from five regional
sales offices located across the United States. U.S. Intec markets its roofing
products through approximately 70 full-time employees and independent sales
representatives. A major portion of our roofing product sales are to wholesale
distributors who resell our products to roofing contractors and retailers. We
believe 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. We
believe that our nationwide coverage has contributed to our roofing products
being among the most recognized and requested brands in the industry.
In September 1997, we launched our 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. We view the Master Elite(Trademark) contractors
and Authorized Installers as an effective extension of our sales force which
takes our products directly to the homeowner.
American Builders and Contractors Supply Co., Inc. accounted for
approximately 10% of our 1997 sales. No other customer accounted for as much as
10% of our 1997 sales.
RAW MATERIALS
The major raw materials required for the manufacture of our 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. We currently have contracts with several of these
suppliers and others are 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 our roofing plants have easy access to deep water ports thereby
permitting delivery of asphalt by ship, the most economical means of transport.
Our Chester, South Carolina plant manufactures glass fiber mat substrate. We
purchase substantially all our requirements for colored roofing granules from
ISP (except for
31
<PAGE>
the requirements of our California roofing plant and a portion of the
requirements of our Indiana roofing plant which are supplied by a third party)
under a requirements contract. U.S. Intec 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 1999 and is subject to annual renewal unless terminated by either party to
such agreement. As part of the separation transactions, we transferred our
Nashville, Tennessee facility to GAF Fiberglass, which facility manufactures a
significant portion of our glass fiber requirements, and we entered into a
supply contract with GAF Fiberglass under which GAF Fiberglass produces glass
fiber for us.
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, our 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
We provide certain limited warranties covering most of our residential
roofing products for periods generally ranging from 20 to 40 years. Although
terms of warranties vary, we believe that our warranties generally are
consistent with those offered by our competitors. We also offer limited
warranties and guarantees of varying duration on its commercial roofing
products. From time to time, we review the reserves established for estimated
probable future warranty claims.
COMPETITION
The roofing products industry is highly competitive and includes a number
of national competitors. These competitors 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. We believe that we are well
positioned in the marketplace as a result of our 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 our company, have increased their laminated shingle production
capacity in recent years. We have experienced increased competition in this area
due to these factors.
RESEARCH AND DEVELOPMENT
We primarily focus our research and development activities on the
development of new products, process improvements and the testing of alternative
raw materials and supplies. Our 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. Our
research and development expenditures were approximately $3.1 million,
$4.5 million and $5.4 million in 1995, 1996 and 1997, respectively.
PROPERTIES
Our corporate headquarters and principal research and development
laboratories 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. We
occupy our headquarters pursuant to our management agreement with ISP. See
"Certain Relationships--Management Agreements."
We own or lease the principal real properties described below. Unless
otherwise indicated, the properties are owned in fee. In addition to the
principal facilities listed below, we maintain sales offices and warehouses,
substantially all of which are in leased premises under relatively short-term
leases.
32
<PAGE>
<TABLE>
<CAPTION>
LOCATION FACILITY
- ------------------------------------------------ ------------------------------------------------------
<S> <C>
Alabama
Mobile........................................ Plant, Warehouses*
California
Compton....................................... Plant*, Warehouse*
Fontana....................................... Plant, Sales Office
Hollister..................................... Plant, Plant*
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
Romeoville.................................... Sales Office*
Maryland
Baltimore..................................... Plant
Massachusetts
Millis........................................ Plant, Sales Office, Warehouse*
Walpole....................................... Plant*
Minnesota
Minneapolis................................... Plant, Sales Office, Warehouse*
New Jersey
Branchburg.................................... Warehouse*
North Branch.................................. Plant
North Brunswick............................... Sales Office*, Warehouse*
Wayne......................................... Headquarters*, Corporate Administrative Offices*,
Research Center*
New Mexico
Albuquerque................................... Plant
North Carolina
Burgaw........................................ Plant
Goldsboro..................................... Plant
Ohio
Wadsworth..................................... Plant*, Warehouse*
Oregon
Corvallis..................................... Plant
Pennsylvania
Erie.......................................... Plant, Sales Office, Warehouse*
Wind Gap...................................... Plant
South Carolina
Chester....................................... Plant
Tennessee
Nashville..................................... Research Center*
Texas
Dallas........................................ Plant, Sales Office, Warehouse*
Fannett....................................... Warehouse
Port Arthur................................... Plant, Plant, Warehouse, Sales Office,
Research Center
</TABLE>
- ------------------
* Leased Property
We believe that our 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
33
<PAGE>
and generally provide sufficient capacity to meet production requirements. Each
plant has adequate transportation facilities for both raw materials and finished
products. In 1997, we made capital expenditures of more than $46.8 million
relating to plant, property and equipment.
PATENTS AND TRADEMARKS
We own or license approximately 87 domestic and 100 foreign patents or
patent applications. In addition, we own or license approximately 197 domestic
and 63 foreign trademark registrations or applications. While we believe the
patent protection covering certain of our products to be material to those
products, we do not believe that any single patent, patent application or
trademark is material to our business or operations.
We believe that the duration of the existing patents and patent licenses is
satisfactory.
ENVIRONMENTAL COMPLIANCE
Since 1970, federal, state and local authorities have adopted and amended a
wide variety of federal, state and local environmental laws and regulations
relating to environmental matters. These regulations affect us because of the
nature of our operations and that of our predecessor and certain of the
substances that are, or have been used, produced or discharged at our respective
plants or at other locations. We have made capital expenditures of less than
$600,000 in each of the last three years in order to comply with these
regulations (which expenditures are included in additions to property, plant and
equipment) and anticipate that aggregate capital expenditures relating to
environmental compliance in 1999 and 2000 will be approximately $800,000 and
$2,000,000, respectively. We expect to incur additional capital expenditures of
approximately $2,000,000 in the aggregate relating to environmental compliance
in connection with our two new manufacturing facilities that we expect to build
in 1999 in Shafter, California and Michigan City, Indiana.
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. We believe that our
manufacturing facilities comply in all material respects with applicable
regulations. Although we cannot predict whether more burdensome requirements
will be adopted in the future, we believe that any potential liability for
compliance with the regulations will not materially affect our business,
liquidity or financial position.
See "--Environmental Litigation."
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, GAF Building Materials Corporation. As
of March 30, 1997, BMCA had paid all of its assumed asbestos-related
liabilities. G-I Holdings and GAF Building Materials Corporation have jointly
and severally agreed to indemnify BMCA against any other existing or future
claims related to asbestos-related liabilities if asserted against BMCA.
GAF Corporation has advised us that, as of December 28, 1998, it is
defending approximately 113,800 pending alleged Asbestos Claims (having received
notice of approximately 93,500 new Asbestos Claims during 1998) and has resolved
approximately 293,500 Asbestos Claims (including approximately 59,000 in 1998).
GAF Corporation has advised us that it believes that a significant portion of
the claims filed in 1998 were already pending against other defendants for some
period of time, with GAF Corporation being added as a defendant upon the lifting
in 1997 of the injunction relating to the Georgine class action settlement. This
injunction prevented plaintiffs from filing or proceeding with their Asbestos
Claims other than in accordance with the Georgine class action settlement, which
was rendered inoperable in 1997 by a United States Supreme Court ruling. GAF
Corporation's current estimated average cost for Asbestos Claims resolved in
1998 (including Asbestos Claims disposed of at no cost to GAF Corporation) is
approximately $3,500 per claim. Substantially all of the costs in respect of
these Asbestos Claims will be paid over several years. There can be no assurance
that the actual costs of resolving pending and future Asbestos Claims will
approximate GAF Corporation's estimated average costs for the Asbestos Claims
settled in 1998.
GAF Corporation has stated that it is committed to effecting a
comprehensive resolution of Asbestos Claims. It also has stated that it is
exploring a number of options to accomplish such resolution, but there can be
no assurance that this effort will be successful.
We believe that we will not sustain any additional liability in connection
with asbestos-related claims. While we cannot predict whether any
asbestos-related claims will be asserted against us or our assets, or the
34
<PAGE>
outcome of any litigation relating to such claims, we believe that we have
meritorious defenses to such claims. In addition, G-I Holdings and GAF Building
Materials Corporation have jointly and severally indemnified us with respect to
such claims, and G-I Holdings has advised us that it believes it has and will
have sufficient resources to enable it to satisfy these indemnification
obligations, if any. Should GAF Corporation or GAF Building Materials
Corporation, however, 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 Corporation or GAF Building Materials
Corporation, including its holdings of our common stock. This enforcement could
result in a change of control with respect to our company.
Asbestos-in-Building Claims. GAF Corporation 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 17 years ago, GAF
Corporation has not only successfully disposed of approximately 145 such cases
at an average disposition cost (including cases disposed of at no cost to GAF
Corporation) 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 three
remaining lawsuits. See "--Insurance Matters." BMCA has not assumed any
liabilities with respect to Building Claims, and G-I Holdings and GAF Building
Materials Corporation 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 Corporation and G-I Holdings had available, as of
December 31, 1998, to pay asbestos-related bodily injury claims aggregate
insurance coverage of $138.0 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
Corporation 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, a
non-profit organization of asbestos defendant companies, including GAF
Corporation, 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 Center members, including GAF Corporation, against various
third-party defendant product liability insurers to the effect that those
insurers are obligated to provide coverage for Asbestos Claims. The insurers who
are defendants in GAF Corporation'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 Corporation 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 Corporation 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 Corporation's defense costs have been paid
by one of its primary carriers. While GAF Corporation expects that such primary
carrier will continue to defend and indemnify GAF Corporation, such primary
carrier has reserved its rights to later refuse to defend and indemnify GAF
Corporation and to seek reimbursement for some or all of the fees paid to defend
and resolve the Building Claims. GAF Corporation believes that it will be able
to resolve such cases for amounts within the total indemnity obligations
available from such primary carrier.
ENVIRONMENTAL LITIGATION
We, together with other companies, are 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 GAF Building Materials Corporation relating to
existing plant sites and the business of BMCA as then conducted.
35
<PAGE>
The estimates referred to below reflect those environmental liabilities assumed
by BMCA and other environmental liabilities of our company. The environmental
liabilities of GAF Building Materials Corporation which were not assumed by
BMCA, for which G-I Holdings and GAF Building Materials Corporation have agreed
to indemnify BMCA, relate primarily to closed manufacturing facilities. G-I
Holdings estimates that, as of December 31, 1998, its liability in respect of
the environmental liabilities of GAF Building Materials Corporation not assumed
by BMCA was approximately $14.1 million, before insurance recoveries reflected
on its balance sheet of $8.1 million, as compared to BMCA's estimate of its
liability as of December 31, 1998 in respect of assumed and other environmental
liabilities of $0.8 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 Corporation 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 court dismissed this
action in December 1997 for lack of federal jurisdiction, and defendant insurers
have appealed the dismissal, which appeal is pending before the Third Circuit
Court of Appeals. On June 16, 1997, GAF Corporation 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 assurance that BMCA will prevail in its efforts to obtain amounts
equal to, or in excess of, the estimated recoveries.
We believe that we will not sustain any liability for environmental
liabilities of GAF Building Materials Corporation other than those that we have
contractually assumed or that relate to the operations of our business. While we
cannot predict whether any claims for non-assumed environmental liabilities will
be asserted against us or our assets, or the outcome of any litigation relative
to such claims, we believe that we have meritorious defenses to such claims. In
addition, G-I Holdings and GAF Building Materials Corporation have jointly and
severally indemnified us with respect to such claims. G-I Holdings has advised
us that it believes it has and will have sufficient resources to enable it to
satisfy these indemnification obligations, if any. The possible consequences to
us of the failure of G-I Holdings and GAF Building Materials Corporation 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 us and Elk Corporation of Dallas ("Elk") in
the United States District Court for the Northern District of Texas relating to
certain aspects of our laminated shingles, which Elk claims infringe design and
utility patents issued to it. Elk also asserts that we have appropriated the
trade dress of Elk's product. Elk seeks injunctive relief, damages and
attorneys' fees. We have sued for a declaration that Elk's patents are invalid
and unenforceable and that our shingles do not infringe any of Elk's rights, and
have sought money damages for Elk's unfair competition. On October 10, 1997, the
court issued an opinion holding that Elk's design patent is unenforceable
because it was obtained through inequitable conduct. On February 11, 1999, the
United States Court of Appeals for the Federal Circuit affirmed the lower
court's ruling of enforceability. Elk filed a petition for rehearing on February
25, 1999. We believe that the petition will be denied and that we will prevail
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 GAF Building Materials Corporation on behalf of a
purported nationwide class of purchasers of, or
36
<PAGE>
current owners of, buildings with certain asphalt shingles manufactured by GAF
Building Materials Corporation. The action alleges, among other things, that
such shingles were defective and seeks unspecified damages on behalf of the
purported class. On September 25, 1998, we agreed to settle this litigation on a
national, class-wide basis for asphalt shingles manufactured between January 1,
1973 and December 31, 1997. The court has granted preliminary approval of the
class-wide settlement pending a fairness hearing. Under the terms of the
settlement, we will provide property owners whose shingles were manufactured
during this period and which suffer certain damages during the term of their
original warranty period, and who file a qualifying claim, with an opportunity
to receive certain limited benefits beyond those already provided in their
existing warranty. In October and December 1998, the separate actions commenced
in 1997 in the Superior Court of New Jersey, Middlesex County, the Superior
Court of New Jersey, Passaic County and the Supreme Court of the State of New
York, County of Nassau, and in 1996 in Pointe Coupee Parish, Louisiana, on
behalf of purported classes alleging that our shingles were defective and
seeking unspecified damages, were stayed pending the outcome of the fairness
hearing on the settlement agreement in the Mobile County, Alabama action.
* * *
We believe 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
our liquidity, financial position or results of operations.
TAX CLAIM AGAINST GAF CORPORATION
On September 15, 1997, GAF Corporation received a notice from the Internal
Revenue 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., a partnership in which GAF
Fiberglass holds an interest. The claim of the IRS for interest and penalties,
after taking into account the effect on the use of net operating losses and
foreign tax credits, could result in GAF Corporation incurring liabilities
significantly in excess of the deferred tax liability of $131.4 million that it
recorded in 1990 in connection with this matter. GAF Corporation has advised us
that it believes that it will prevail in this matter, although we cannot assure
you that will be the result. We believe that the ultimate disposition of this
matter will not have a material adverse effect on our business, financial
position or results of operations. GAF, G-I Holdings and certain subsidiaries of
GAF Corporation have agreed to jointly and severally indemnify us against any
tax liability associated with the surfactants partnership, for which we would be
severally liable, together with GAF Corporation and several current and former
subsidiaries of GAF Corporation, should GAF Corporation be unable to satisfy
such liability.
EMPLOYEES
At September 27, 1998, we employed approximately 3,500 people worldwide,
approximately 1,200 of which were subject to 16 union contracts. The contracts
are effective for three- to four-year periods. During 1998, four labor contracts
expired and were renegotiated. We believe that our relations with our employees
and their unions are satisfactory.
We have in effect various benefit plans. These plans include a
non-qualified retirement plan for a group of executives, a capital accumulation
plan for our salaried and certain hourly employees, a flexible benefit plan for
our salaried employees, a retirement plan for certain of our hourly employees,
and group insurance agreements providing life, accidental death, disability,
hospital, surgical, medical and dental coverage. In addition, we have contracted
with various health maintenance organizations to provide medical benefits. We
and, in many cases, our employees contribute to the cost of these plans.
37
<PAGE>
MANAGEMENT
The following table sets forth the name, age, position and other
information with respect to the directors and executive officers of BMCA. 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. On July 15, 1998, ISP merged with and into its parent, ISP
Holdings Inc., and ISP Holdings changed its name to International Specialty
Products Inc. As used in this section, "ISP" refers to both companies.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD(1)(2) AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------------- --- -----------------------------------------------------------------------
<S> <C> <C>
Samuel J. Heyman ............... 60 Mr. Heyman has been a director and Chairman of BMCA since its
Director and Chairman formation. He was Chief Executive Officer of BMCA from June 1996 to
January 1999 and has been Chief Executive Officer of GAF Building
Materials Corporation since May 1994. He has served as a director and
Chairman and Chief Executive Officer of ISP since its formation and
has held the same offices with GAF Corporation, G-I Holdings and
certain of its subsidiaries for more than five years. Mr. Heyman 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 Executive Officer and a
Director, President and Chief director of BMCA and certain of its subsidiaries since July 1996,
Executive Officer January 1999 and May 1995, respectively. He was Chief Operating
Officer of BMCA from March 1996 to January 1999 and President,
Commercial Roofing Products Division, and Vice President of BMCA from
February 1995 to March 1996. Mr. Kumar has also served as a director
of GAF Corporation since January 1999. 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.
James P. Rogers ................ 47 Mr. Rogers has been a director of BMCA since its formation and
Director and Executive Executive Vice President of BMCA and certain of its subsidiaries
Vice President since December 1996. Mr. Rogers has been Executive Vice President and
Chief Financial Officer of GAF Corporation, G-I Holdings and certain
of its subsidiaries and Executive Vice President--Finance of ISP
since December 1996. He was Senior Vice President of BMCA from its
formation to December 1996 and of ISP from November 1993 to December
1996. Mr. Rogers was Treasurer of BMCA from its formation until
December 1994. Mr. Rogers has served as Treasurer of G-I Holdings,
GAF Corporation and certain of its subsidiaries since March 1992.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
Richard A. Weinberg ............ 39 Mr. Weinberg has been Executive Vice President and General Counsel of
Executive Vice President, BMCA and certain of its subsidiaries since May 1998 and was Senior
Secretary and General Vice President and General Counsel from May 1996 to May 1998. He was
Counsel Senior Vice President and General Counsel of GAF Corporation, G-I
Holdings, ISP and certain of their subsidiaries from May 1996 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
GAF Building Materials Corporation from April 1993 to May 1994.
Donald W. LaPalme .............. 61 Dr. LaPalme has been Senior Vice President--Operations of BMCA and
Senior Vice President-- certain of its subsidiaries since April 1996. He was Vice
Operations President--Operations of BMCA and certain of its subsidiaries from
January 1994 to April 1996 and held the same position with GAF
Building Materials Corporation from 1987 to May 1994. Dr. LaPalme has
announced his intention to retire effective March 31, 1999.
William C. Lang ................ 55 Mr. Lang has been Senior Vice President and Chief Financial Officer of
Senior Vice President and BMCA and certain of its subsidiaries since April 1997. He was Senior
Chief Financial Officer Vice President and Chief Financial Officer of Duane Reade, a regional
drug store chain, from 1993 to 1996. From 1990 to 1992, Mr. Lang was
President and Chief Financial Officer of Furr's, Inc., a large
supermarket chain.
Kem Scott ...................... 50 Mr. Scott has been President and Chief Operating Officer of U.S. Intec
Senior Vice President and and Senior Vice President and General Manager, Commercial Roofing
General Manager, Commercial Products of BMCA since October 1998. From 1973 to October 1998,
Roofing Products, BMCA; Mr. Scott held various executive positions with the Carlisle group of
President and Chief Operating companies, a manufacturer of elastomeric roofing systems, including
Officer, U.S. Intec President, Carlisle Syntec Systems and most recently from July 1997
to October 1998, President of Carlisle Europe.
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 and Sales, Commercial Roofing Products of BMCA
Residential Roofing from March 1996 to November 1997, Vice President--Sales, Commercial
Products 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.
</TABLE>
39
<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, 1998. The salaries and other compensation of Messrs. Heyman,
Rogers and Weinberg for services provided by them to our company are paid by ISP
in accordance with a management agreement between ISP and our company.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
-------------------------------- STOCK SARS (S)/ ALL OTHER
NAME AND PRINCIPAL POSITION(6) YEAR SALARY BONUS(1) AWARDS OPTIONS(O)(1) COMPENSATION
- ---------------------------------------- ------ -------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Heyman ....................... 1998 (6) (6) (6) (6)
Chairman and Chief 1997 (6) (6) (6) (6)
Executive Officer 1996 (6) (6) (6) (6)
Sunil Kumar ............................ 1998 $305,325 $250,000 $2,490,000(2) -- $1,444,887(2)
President and Chief 1997 293,550 256,238 7,609(O) 16,737(2)
Operating Officer 1996 274,500 165,000 2,190(O)/ 13,561(2)
8,609(S)(7)
William C. Lang ........................ 1998 $207,083 $ 94,145 4,200(O) $ 17,465(3)
Senior Vice President and Chief 1997 133,888(3) 87,094(3) 3,837(O)(3) 5,682(3)
Financial Officer 1996 (3) (3) (3) (3)
Donald W. LaPalme ...................... 1998 $169,575 $ 53,199 2,285(O) $ 15,812(4)
Senior Vice President-- 1997 162,481 55,601 3,612(O) 17,756(4)
Operations 1996 154,750 59,774 1,200(O) 14,519(4)
William W. Collins ..................... 1998 $168,000 $ 69,871 3,000(O) $ 14,899(5)
Senior Vice President--Marketing & 1997 148,242 57,497 8,218(O) 14,509(5)
Sales, 1996 128,333 42,588 900(O) 12,092(5)
Residential Roofing Products
</TABLE>
- ------------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
Compensation Program, except that a portion of the bonus amounts paid to Mr.
Lang in 1997 and 1998 and to Dr. LaPalme in 1998 represented special bonus
awards to those executive officers. The stock appreciation rights
(S) relate to shares of GAF Corporation common stock. The options
(O) relate to shares of redeemable convertible preferred stock of BMCA. See
"--Options/SARs".
(2) Included in "All Other Compensation" for Mr. Kumar are $11,450, $11,450 and
$10,750 representing BMCA's contribution under the GAF Capital Accumulation
Plan in 1998, 1997 and 1996, respectively; $3,316, $3,324 and $1,636 for the
premiums paid by BMCA for a life insurance policy in 1998, 1997 and 1996,
respectively; and $1,963, $1,963 and $1,175 for the premiums paid by BMCA
for a long-term disability policy in 1998, 1997 and 1996, respectively. In
connection with the July 1998 merger of ISP Holdings and ISP, 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. In consideration for this cancellation, Mr. Kumar was granted
15,000 shares of Class A Common Stock of BMCA and 15,000 shares of Class B
Common Stock of BMCA and, subject to satisfaction of certain future vesting
requirements through December 2003 and to his remaining our employee at such
vesting periods, Mr. Kumar is entitled to receive cash payments of
$5,073,212 in the aggregate. Mr. Kumar received $1,428,158 of these cash
payments in 1998. Included in "Restricted Stock Awards" is the current value
of the common stock granted to Mr. Kumar. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Mr. Kumar was
elected Chief Executive Officer of BMCA as of January 1999.
(Footnotes continued on next page)
40
<PAGE>
(Footnotes continued from previous page)
(3) Included in "All Other Compensation" for Mr. Lang are $11,200 and $2,010,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1998 and 1997, respectively; $4,459 and $2,583 for the premiums paid by BMCA
for a life insurance policy in 1998 and 1997, respectively; and $1,806 and
$1,089 for the premiums paid on a long-term disability policy in 1998 and
1997, respectively. Mr. Lang commenced employment with us in April 1997.
(4) Included in "All Other Compensation" for Dr. LaPalme are: $9,442, $11,700,
and $11,000, representing BMCA's contribution under the GAF Capital
Accumulation Plan in 1998, 1997 and 1996, respectively; $5,022, $4,781 and
$2,754 for the premiums paid by BMCA for a life insurance policy in 1998,
1997 and 1996, respectively; and $1,348, $1,275 and $765 for the premiums
paid by BMCA for a long-term disability policy in 1998, 1997, and 1996,
respectively.
(5) Included in these amounts for Mr. Collins are: $11,450, $11,513 and $10,633,
representing BMCA's contribution under the GAF Capital Accumulation Plan in
1998, 1997 and 1996, respectively; $2,122, $1,884 and $849 for the premiums
paid by BMCA for a life insurance policy in 1998, 1997 and 1996,
respectively; and $1,327, $1,112 and $610 for the premiums paid by BMCA for
a long-term disability policy in 1998, 1997 and 1996, respectively.
(6) The salary and other compensation of Mr. Heyman are paid by ISP pursuant to
our management agreement with ISP. No allocation of compensation for
services to BMCA is made pursuant to the 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 that year. In addition, BMCA reimburses ISP, through payment of
the management fees payable under the management agreement, for the
estimated costs ISP incurs for providing the services of these officers. See
"Certain Relationships--Management."
(7) Excluded are options to purchase redeemable preferred stock of ISP Holdings.
As described in Note 2 above, these options were cancelled in connection
with the July 1998 merger of ISP Holdings and ISP.
OPTIONS/SARS
The following table summarizes options ("BMCA Preferred Options") to
acquire BMCA's redeemable convertible preferred stock granted during 1998 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 1998.
BMCA PREFERRED STOCK OPTION GRANTS IN 1998(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 1998 5% 10%
-------------------- -------------------- -------- --------
<S> <C> <C> <C> <C>
Sunil Kumar................................... -- -- -- --
William C. Lang............................... 4,200 7.5% $100,902 $222,967
Donald W. LaPalme............................. 2,285 4.0 54,895 121,305
William W. Collins............................ 3,000 5.3 72,073 159,262
</TABLE>
- ------------------
(1) The BMCA Preferred Options represent options to purchase shares of
redeemable convertible preferred stock of BMCA. 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
(Footnotes continued on next page)
41
<PAGE>
(Footnotes continued from previous page)
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
BMCA'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 BMCA
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.
BMCA PREFERRED STOCK OPTIONS/GAF CORPORATION STOCK APPRECIATION RIGHTS AND
OPTIONS/SAR VALUES
AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED BMCA PREFERRED IN-THE-MONEY BMCA PREFERRED
OPTIONS(O)/GAF CORPORATION OPTIONS (O)/GAF CORPORATION
SARS(S)(1) AT 12/31/98 SARS(S) AT 12/31/98
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------------------ -------------------------- ---------------------------
<S> <C> <C>
Sunil Kumar........................................... 5,521/12,289(S) $ 0/$ 0
2,836/6,963(O) 55,110/82,127(2)
William C. Lang....................................... 767/7,270(O) 6,799/27,545(2)
Donald W. LaPalme..................................... 1,442/5,655(O) 28,565/37,948(2)
William W. Collins.................................... 2,184/9,934(O) 23,568/36,319(2)
</TABLE>
- ------------------
(1) The stock appreciation rights relating to GAF Corporation common stock
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 Corporation
over the determined initial book value per share of common stock of GAF
Corportion (adjusted for the separation transactions) and interest on such
book value at a specified rate. The GAF Corporation stock appreciation
rights 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) Options for 9,799, 3,837, 4,812 and 9,118 shares of preferred stock were
in-the-money for Messrs. Kumar, Lang, LaPalme and Collins, respectively, at
December 31, 1998.
COMPENSATION OF DIRECTORS
The directors of BMCA do not receive any compensation for their services as
such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
Compensation decisions are determined by our Board of Directors, each
member of which is also one of our executive officers. Messrs. Rogers and Heyman
are also executive officers of ISP, and Mr. Heyman is a member of the Board of
Directors of ISP. See "Certain Relationships."
42
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Approximately 98.5% of our outstanding Class A Common Stock is owned of
record by GAF Building Materials Corporation. All of the outstanding common
stock of GAF Building Materials Corporation is owned of record by G Industries
which is 100% owned by G-I Holdings, which in turn is 100% owned by GAF
Corporation. All of our outstanding Class B Common Stock is owned of record by
trusts for the benefit of the children of Mr. Kumar.
The following table sets forth information with respect to the ownership of
Common Stock, as of February 9, 1999, by each other person known to us to own
beneficially more than 5% of either class of the Common Stock outstanding on
that date, by each of our directors and by all of our executive officers and
directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF TOTAL VOTING
TITLE OF CLASS BENEFICIAL OWNER(1) OWNERSHIP CLASS POWER
- --------------------------------------- ---------------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Class A Common Stock................... Samuel J. Heyman 1,000,010 98.5%(2) 97.0%(2)
Sunil Kumar 15,000 1.5% 1.5%
All directors and executive
officers of BMCA as a
group (9 persons) 1,015,010 100.0%(2) 98.5%(2)
Class B Common Stock................... Sunil Kumar 15,000(3) 100.0% 1.5%
All directors and executive
officers of BMCA as a
group (9 persons) 15,000(3) 100.0% 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 (as defined in
Rule 13d-3 of the Exchange Act) by Mr. Heyman and by all directors and
executive officers of the Company as a group attributes ownership of GAF
Building Materials Corporation's shares to Mr. Heyman. As of February 9,
1999, Mr. Heyman beneficially owned (as defined in Rule 13d-3 of the
Exchange Act) approximately 97% of the capital stock of GAF Corporation.
(3) The shares of Class B Common Stock are owned of record by trusts for the
benefit of Mr. Kumar's children. Mr. Kumar disclaims beneficial ownership of
all of these shares.
43
<PAGE>
CERTAIN RELATIONSHIPS
MANAGEMENT AGREEMENTS
Pursuant to a management agreement which expires December 31, 1999, ISP (of
which our Chairman, Samuel J. Heyman beneficially owns (as defined in Rule 13d-3
of the Exchange Act) approximately 76%) provides certain general management,
administrative, legal, telecommunications, information and facilities services
to us (including the use of our headquarters in Wayne, New Jersey). ISP charged
us $4.3 million in 1998 for providing these services. These charges consist of
management fees and other reimbursable expenses attributable to us, or incurred
by ISP for our benefit. They are based on an estimate of the costs ISP incurs to
provide such services. Effective January 1, 1999, the term of the management
agreement was extended through the end of 1999. In connection with the
extension, the management fees payable under such agreement were increased. We
also allocate a portion of the management fees payable by us under the
management agreement to separate lease payments for the use of our headquarters.
Based on the services provided by ISP in 1998 under the management agreement,
the aggregate amount payable by us to ISP under the management agreement for
1999 is expected to be approximately $5.3 million. Certain of our executive
officers receive their compensation from ISP. ISP is indirectly reimbursed for
this compensation through payment of the management fee and other reimbursable
expenses payable under the agreement.
As of January 1, 1997, we entered into a separate management agreement with
GAF Fiberglass under which we provide certain general management, administrative
and financial services to GAF Fiberglass. Under the management agreement which
was renewed for 1999 and expires December 31, 1999, GAF Fiberglass is obligated
to pay us 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, we
believe that the terms of each of the management agreements taken as a whole are
no less favorable to us than could be obtained from an unaffiliated third party.
CERTAIN PURCHASES
We purchase all of our colored roofing granules requirements from ISP
(except for the requirements of our California roofing plant and a portion of
the requirements of our Indiana roofing plant which are supplied by a third
party) under a requirements contract. U.S. Intec 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 contract
was renewed in 1999 and is subject to annual renewal unless terminated by either
party to such agreement. In 1997 and the first nine months of 1998, BMCA and
U.S. Intec purchased in the aggregate approximately $51.1 million and
$47.9 million, respectively, of mineral products from ISP.
As part of the separation transactions, we transferred to GAF Fiberglass
our Nashville, Tennessee facility. This facility manufactures a significant
portion of our glass fiber requirements. In addition, in connection with the
separation transations, we entered into a supply contract with GAF Fiberglass
under which GAF Fiberglass produces glass fiber for us on terms which we believe
are at least as favorable to us as could be obtained from an unaffiliated third
party. In 1997 and the first nine months of 1998, we purchased approximately
$24.5 million and $19.3 million, respectively, of glass fiber from GAF
Fiberglass.
TAX SHARING AGREEMENT
We have entered into a tax sharing agreement dated January 31, 1994 with
GAF Corporation and G-I Holdings with respect to the payment of federal income
taxes and certain related matters. During the term of the tax sharing agreement,
which is effective for the period during which we or any of our domestic
subsidiaries is included in a consolidated federal income tax return filed by
GAF Corporation, we are obligated to pay G-I Holdings an amount equal to those
federal income taxes we would have incurred if we (on behalf of ourselves and
our domestic subsidiaries) filed our own federal income tax return. Unused tax
attributes will carry forward for use in reducing amounts payable by us to G-I
Holdings in future years, but cannot be carried back. If we ever were to leave
the GAF Corporation consolidated tax group (the "GAF Group"), we would be
required to pay to G-I Holdings the value of any tax attributes to which we
would
44
<PAGE>
succeed under the consolidated return regulations to the extent such attributes
reduced the amounts otherwise payable by us under the tax sharing agreement.
Under certain circumstances, the provisions of the tax sharing agreement could
result in us having a greater liability under the agreement than we would have
had if we (and our domestic subsidiaries) had filed our own separate federal
income tax return. Under the tax sharing agreement, we and each of our domestic
subsidiaries are responsible for any taxes that would be payable by reason of
any adjustment to the tax returns of GAF Corporation or its subsidiaries for
years prior to the adoption of the tax sharing agreement that relate to our
business or assets or the business or assets of any of our domestic
subsidiaries. Although, as a member of the GAF Group, we are severally liable
for all federal income tax liabilities of the GAF Group, including tax
liabilities not related to our business, G-I Holdings and GAF Corporation have
agreed to indemnify us and our subsidiaries for all tax liabilities of the GAF
Group other than tax liabilities (1) arising from our operations and the
operations of our domestic subsidiaries and (2) for tax years pre-dating the tax
sharing agreement that relate to our business or assets and the business or
assets of any of our 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 Corporation
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 we would have incurred if we filed our own separate federal
income tax return and the fact that we are 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 5.82% and 5.96% per annum
during 1997 and the first nine months of 1998). The highest amount of loans made
by BMCA to G-I Holdings during 1997 and the first nine months of 1998 was
$6.2 million and no loans were made to BMCA by G-I Holdings and its subsidiaries
during 1997 and the first nine months of 1998. As of September 27, 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 $5.4 million were outstanding at September 27, 1998.
45
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
We issued the old notes on December 3, 1998 in a private placement. In
connection with this issuance, we entered into the Indenture and the
Registration Rights Agreement. These agreements require that we file a
registration statement under the Securities Act with respect to the registered
notes to be issued in the Exchange Offer and, upon the effectiveness of the
registration statement, offer to you the opportunity to exchange your notes for
a like principal amount of registered notes. These registered notes will be
issued without a restrictive legend and, except as set forth below, may be
reoffered and resold by you without registration under the Securities Act. After
we complete the Exchange Offer, our obligations with respect to the registration
of the old notes and the registered notes will terminate, except as provided in
the last paragraph of this section. A copy of the Indenture and the Registration
Rights 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, assuming we complete the Exchange Offer by June
1, 1999, certain prospective increases in the interest rate on the old notes
provided for in the Registration Rights Agreement will not occur.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, we believe that registered notes to
be issued to you in the Exchange Offer may be offered for resale, resold and
otherwise transferred by you (unless you are our "affiliate" within the meaning
of Rule 405 under the Securities Act or a broker-dealer referred to in the next
paragraph) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that you represent to us that:
(1) the registered notes to be issued to you in the Exchange Offer are
acquired in the ordinary course of your business;
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes to be issued to you in the
Exchange Offer; and
(3) you have no arrangement or understanding with any person to
participate in the distribution of the registered notes to be
issued to you in the Exchange Offer.
If you tender in the Exchange Offer for the purpose of participating in a
distribution of the registered notes to be issued to you in the Exchange Offer,
you cannot rely on this interpretation by the staff of the Commission. Under
those circumstances, you 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 registered notes in the
Exchange Offer for its own account in exchange for old notes that were acquired
by the 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 those
registered notes. See "Plan of Distribution."
If you will not receive freely tradeable registered notes in the Exchange
Offer or are not eligible to participate in the Exchange Offer, you can elect,
by so indicating on the letter of transmittal and providing certain additional
necessary information, to have your old notes registered in a "shelf"
registration statement on an appropriate form pursuant to Rule 415 under the
Securities Act. In the event that we are obligated to file a "shelf"
registration statement, we 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 to the registration statement. Other than as set forth in
this paragraph, you will not have the right to require us to register your old
notes under the Securities Act. See "--Procedures for Tendering."
CONSEQUENCES OF FAILURE TO EXCHANGE
After we complete the Exchange Offer, if you have not tendered your old
notes, you will not have any further registration rights, except as set forth
above. Your old notes will continue to be subject to certain restrictions on
transfer. Therefore, the liquidity of the market for your old notes could be
adversely affected upon completion of the Exchange Offer if you do not
participate in the Exchange Offer.
46
<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. We will issue $1,000 principal amount of registered notes in
exchange for each $1,000 principal amount of old notes accepted in the Exchange
Offer. You may tender some or all of your 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 registered notes are substantially the same as
the form and terms of the old notes, except that the registered notes to be
issued in the Exchange Offer have been registered under the Securities Act and
will not bear legends restricting their transfer. The registered notes will be
issued pursuant to, and entitled to the benefits of, the Indenture. The
Indenture also governs the old notes. The registered notes and the old notes
will be deemed one issue of notes under the Indenture.
As of the date of this prospectus, $155 million aggregate principal amount
of the old notes were outstanding. This prospectus, together with the letter of
transmittal, is being sent to all registered holders and to others believed to
have beneficial interests in the old notes. You 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. We intend to conduct
the Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission promulgated under
the Exchange Act.
We will be deemed to have accepted validly tendered outstanding notes when,
as, and if we have given oral or written notice of such acceptance to the
Exchange Agent. The Exchange Agent will act as our agent for the tendering
holders for the purpose of receiving the registered notes from us. If we do not
accept any tendered notes because of an invalid tender, the occurrence of
certain other events set forth in this prospectus or otherwise, we will return
certificates for any such unaccepted old notes without expense, to the tendering
holder thereof as promptly as practicable after the expiration date.
You 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 your old notes in the Exchange Offer. We 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 Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we determine, in our sole discretion, to extend the
Exchange Offer (in which case the Exchange Offer will expire at the later date
and time to which the Exchange Offer is extended). We do not intend to extend
the Exchange Offer, although we reserve the right to do so. If we extend the
Exchange Offer, we will give oral or written notice of such extension to the
Exchange Agent and give 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.
We also reserve the right, in our sole discretion,
(1) to delay accepting any old notes or, if any of the conditions set
forth below under "--Conditions" shall not have been satisfied or
waived,
(2) to terminate the Exchange Offer or
(3) 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) under the
Exchange Act to the extent such rule applies.
We acknowledge and undertake to comply with the provisions of
Rule 14e-l(c) under the Exchange Act, which requires us to pay the consideration
offered, or return the old notes surrendered for exchange, promptly after the
termination or withdrawal of the Exchange Offer. We will notify you as promptly
as we can of any extension, termination or amendment.
47
<PAGE>
PROCEDURES FOR TENDERING
Book-Entry Interests
The old notes were issued as global securities in fully registered form
without interest coupons. Beneficial interests in the global securities, held by
direct or indirect participants in DTC, are shown on, and transfers of these
interests are effected only through, records maintained in book-entry form by
DTC with respect to its participants.
If you hold your old notes in the form of book-entry interests and you wish
to tender your old notes for exchange pursuant to the Exchange Offer, you must
transmit to the Exchange Agent on or prior to the expiration date either:
(1) a written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other documents
required by such letter of transmittal, to the Exchange Agent at
the address set forth on the cover page of the letter of
transmittal; or
(2) a computer-generated message (an "Agent's Message") transmitted by
means of DTC's Automated Tender Offer Program system and received
by the Exchange Agent and forming a part of a confirmation of
book-entry transfer, in which you acknowledge and agree to be
bound by the terms of the letter of transmittal.
In addition, in order to deliver old notes held in the form of book-entry
interests:
(A) a timely confirmation of book-entry transfer of such notes into
the Exchange Agent's account at DTC pursuant to the procedure
for book-entry transfers described below under "--Book-Entry
Transfer" must be received by the Exchange Agent prior to the
expiration date; or
(B) you must comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU 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 US. YOU MAY REQUEST YOUR BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY, OR NOMINEE TO EFFECT THE ABOVE
TRANSACTIONS FOR YOU.
Certificated Old Notes
Only registered holders of certificated old notes may tender such notes in
the Exchange Offer. If your old notes are certificated notes and you wish to
tender such notes for exchange pursuant to the Exchange Offer, you must transmit
to the Exchange Agent on or prior to the expiration date, a properly completed
and duly executed letter of transmittal or a facsimile of such letter, including
all other documents required by such letter, to the Exchange Agent at the
address set forth below under "--Exchange Agent." In addition, in order to
validly tender your certificated old notes:
(1) the certificates representing such old notes must be received by
the Exchange Agent prior to the expiration date or
(2) you must comply with the guaranteed delivery procedures described
below.
Procedures Applicable to All Holders
If you tender an old note and you do not withdraw the tender prior to the
expiration date, you will have made an agreement with us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
If your old notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender such
notes, you should contact the registered holder promptly and instruct such
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your old notes, either make appropriate arrangements to register
ownership of the old notes in your name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
48
<PAGE>
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution unless:
(A) old notes tendered in the Exchange Offer are tendered (1) by a
registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on
the letter of transmittal or (2) 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 of which is an eligible institution.
If the letter of transmittal is signed by a person other than you, your old
notes must be endorsed or accompanied by a properly completed bond power and
signed by you as your name appears on those 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, those
persons should so indicate when signing. Unless we waive this requirement, in
such an instance you must submit with the letter of transmittal proper evidence
satisfactory to us of their authority to so act.
We will determine, in our sole discretion, all questions as to the
validity, form, eligibility (including time of receipt), acceptance and
withdrawal of tendered old notes. This determination will be final and binding.
We reserve the absolute right to reject any and all old notes not properly
tendered or any old notes our acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the letter of transmittal) will be final and binding on all
parties.
You must cure any defects or irregularities in connection with tenders of
your old notes within such time as we shall determine unless we waive any such
defect or irregularity. Although we intend to notify you of defects or
irregularities with respect to your tender of old notes, neither we, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Your tender will not be deemed to have been made and
your notes will be returned to you if:
(1) you improperly tender your old notes;
(2) you have not cured any defects or irregularities in your tender;
and
(3) we have not waived such defects, irregularities or improper
tender.
In such an instance, the Exchange Agent will return your notes, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration of the Exchange Offer.
In addition, we reserve the right in our sole discretion to:
(1) purchase or make offers for, or offer registered notes for, any
old notes that remain outstanding subsequent to the expiration of
the Exchange Offer;
(2) terminate the Exchange Offer; and
(3) to the extent permitted by applicable law, purchase 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, you will represent to us that, among other things:
(1) the registered notes to be acquired by you in the Exchange Offer
are being acquired in the ordinary course of your business,
49
<PAGE>
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes to be acquired by you in the Exchange
Offer,
(3) you do not have an arrangement or understanding with any person to
participate in the distribution of the registered notes to be acquired by
you in the Exchange Offer and
(4)
you are not our "affiliate," as defined under Rule 405 of the Securities Act.
In all cases, issuance of registered notes for old notes that are accepted
for exchange in 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 DTC, 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 you desire to exchange, the unaccepted or non-exchanged old notes (or old
notes in substitution therefor) will be returned without expense to you (or, in
the case of old notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described below,
the non-exchanged old notes will be credited to your account maintained with
DTC) as promptly as practicable after the expiration or termination of the
Exchange Offer.
Guaranteed Delivery Procedures
If you desire to tender your old notes and your old notes are not
immediately available or one of the situations described in the immediately
preceding paragraph occurs, you may tender if:
(1) you tender through an eligible institution;
(2) on or prior to 5:00 p.m., New York City time, on the expiration
date, the Exchange Agent receives from such eligible institution a
properly completed and duly executed letter of transmittal (or a
facsimile of such letter or a book-entry confirmation in lieu of
such letter) and notice of guaranteed delivery, substantially in
the form provided by us; and
(3) the certificates for all certificated 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.
The notice of guaranteed delivery may be sent by facsimile transmission,
mail or hand delivery. The notice of guaranteed delivery must set forth:
(1) your name and address;
(2) the amount of old notes you are tendering; and
50
<PAGE>
(3) a statement that your tender is being made by such notice and that
you guarantee that within three New York Stock Exchange trading
days after the execution of such notice of guaranteed delivery,
the eligible institution will deliver the following documents to
the Exchange Agent:
(A) the certificates for all certificated old notes being tendered,
in proper form for transfer or a book-entry confirmation of
such tender;
(B) a written or facsimile copy of the letter of transmittal (or a
book-entry confirmation in lieu of such letter); and
(C) any other documents required by the letter of transmittal.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the book-entry
interests at DTC for purposes of the Exchange Offer promptly after the date of
this prospectus. You must deliver your book-entry interest by book-entry
transfer to the account maintained by the Exchange Agent at DTC. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of book-entry interests by causing DTC to transfer such interests into the
Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer.
If one of the following situations occur:
(1) you cannot deliver a book-entry confirmation of book-entry
delivery of your book-entry interests into the Exchange Agent's
account at DTC; or
(2) you cannot deliver all other documents required by the letter of
transmittal to the Exchange Agent prior to the expiration date,
then you must tender your book-entry interests according to the guaranteed
delivery procedures discussed above.
WITHDRAWAL RIGHTS
You may withdraw tenders of your old notes at any time prior to 5:00 p.m.,
New York City time, on the expiration date.
For your withdrawal to be effective, the Exchange Agent must receive a
written or facsimile transmission notice of withdrawal at its address set forth
below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date.
The notice of withdrawal must:
(1) state your name;
(2) identify the specific old notes to be withdrawn, including the
certificate number or numbers and the principal amount of such
notes;
(3) be signed by you in the same manner as you signed the letter of
transmittal when you tendered your old notes, including any
required signature guarantees or be accompanied by documents of
transfer sufficient for The Bank of New York to register the
transfer of such old notes into your name; and
(4) specify the name in which such old notes are to be registered, if
different from you.
We will determine all questions as to the validity, form, and eligibility
(including time of receipt) of such notices and our determination will 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 you without cost as soon as practicable after
withdrawal, rejection of tender, or termination of the Exchange Offer. Properly
withdrawn old notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
5:00 p.m., New York City time, on the expiration date.
CONDITIONS
Notwithstanding any other provision of the Exchange Offer and subject to
our obligations pursuant to the Registration Rights Agreement, we will not be
required to accept for exchange, or to issue registered notes in exchange for,
any old notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such old notes for exchange any of the following events
shall occur:
(1) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or
otherwise materially impair our ability to proceed with the
Exchange Offer; or
(2) the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
These conditions are for our sole benefit and we may assert them regardless
of the circumstances giving rise to any such condition, subject to applicable
law. We also may waive in whole or in part at any time and from time to time any
such condition in our sole discretion. If we waive a condition, we may be
required, in certain instances, to extend the expiration date of the Exchange
Offer. Our failure at any time to exercise any
51
<PAGE>
of the foregoing rights will 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, we will not accept for exchange any old notes tendered, and no
registered notes will be issued in exchange for any such old notes, if at such
time any stop order shall be threatened by the Commission or be in effect with
respect to the Registration Statement of which this prospectus is a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
The Exchange Offer is not conditioned on any minimum principal amount of
old notes being tendered for exchange.
EXCHANGE AGENT
We have appointed The Bank of New York 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
We will not pay brokers, dealers, or others soliciting acceptances of the
Exchange Offer. The principal solicitation is being made by mail. Additional
solicitations, however, may be made in person or by telephone by our officers
and employees.
We will pay the estimated cash expenses to be incurred in connection with
the Exchange Offer. These are estimated in the aggregate to be approximately
$250,000 which includes fees and expenses of the Exchange Agent, accounting,
legal, printing and related fees and expenses.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with a
tender of your old notes for exchange unless you instruct us to register
registered 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, in which event the registered tendering holder will
be responsible for the payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the Exchange Offer. We will amortize the expense of the Exchange
Offer over the term of the registered notes under generally accepted accounting
principles.
52
<PAGE>
DESCRIPTION OF THE REGISTERED NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this section, the words "we,"
"our" and "us" refer only to Building Materials Corporation of America, as a
separate entity, and do not include any of its subsidiaries.
We will issue the registered notes under the Indenture we entered into with
The Bank of New York, as trustee in connection with the issuance of the old
notes. The terms of the registered notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939. You may obtain a copy of the Indenture by sending us a request to our
address identified under "Where You Can Find More Information."
The following description is a summary of the material provisions of the
Indenture. It does not restate those agreements in their entirety. We urge you
to read the Indenture because it, and not this description, defines your rights
as holders of registered notes. We have filed the Indenture as an exhibit to the
Registration Statement which includes this prospectus.
BRIEF DESCRIPTION OF THE REGISTERED NOTES
The registered notes:
o are our general unsecured obligations;
o are senior in right of payment to all our subordinated debt;
o rank equally in right of payment to our Other Senior Notes and the Credit
Agreement and to all of our other unsubordinated indebtedness;
o are subordinated in right of payment to all of our secured indebtedness
to the extent of the assets securing such indebtedness; and
o are unconditionally guaranteed by the guarantors.
GUARANTEES
The notes are guaranteed by two of our subsidiaries:
o Building Materials Manufacturing Corporation; and
o Building Materials Investment Corporation.
The guarantees:
o are joint and several obligations of each guarantor;
o are senior indebtedness of each guarantor; and
o are equal in right of payment to all existing and future unsecured and
unsubordinated indebtedness of each guarantor.
Upon the sale or disposition (by merger or otherwise) of all of the capital
stock of a guarantor to an entity which is not one of our subsidiaries, that
guarantor will be deemed released from all obligations under its guarantee. The
other guarantor will remain liable for the full amount of principal and interest
on the notes as provided in its guarantee.
In the event that a guarantee would constitute or result in a violation of
any applicable fraudulent conveyance or similar law of any relevant
jurisdiction, the liability of the guarantor under its guarantee will be reduced
to the maximum amount permissible under the applicable fraudulent conveyance or
similar law.
53
<PAGE>
PRINCIPAL, MATURITY AND INTEREST
We will issue registered notes with a maximum aggregate principal amount of
$155 million. We will issue registered notes in denominations of $1,000 and
integral multiples of $1,000. The notes will mature on December 1, 2008.
Interest on the registered notes will accrue at the rate of 8% per annum
and will be payable semi-annually on June 1 and December 1, commencing on
June 1, 1999. We will make each interest payment to holders of record of the
registered notes on the immediately preceding May 15 and November 15.
If we fail to pay interest on the notes, we will pay the unpaid interest,
plus, to the extent permitted by law, any interest payable on the unpaid
interest, to the persons who are registered holders of the notes on a subsequent
special record date. This special record date will be the fifteenth day before
the date fixed by us for the payment of unpaid interest, whether or not such day
is a business day. At least 15 days before the special record date, we will mail
or cause to be mailed to each registered holder and the Trustee a notice that
states the special record date, the payment date and the amount of unpaid
interest to be paid.
Interest on the registered notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. If you tender your old notes and they are accepted for exchange,
you will receive accrued interest on your old notes to, but not including, the
date of issuance of the registered notes. This interest will be payable with the
first interest payment on the registered notes and you will not receive any
payment in respect of interest on your old notes accrued after the issuance of
such registered notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
We are not obligated to set aside funds or to establish a separate account
for your benefit to make the required interest and principal payments on the
registered notes.
METHODS OF RECEIVING PAYMENTS ON THE REGISTERED NOTES
If a registered holder of the notes gives us wire transfer instructions, we
will make all principal, premium, if any, and interest payments on those notes
in accordance with those instructions. All other payments on the registered
notes will be made at the office or agency of the paying agent and registrar
within the City and State of New York unless we elect to make interest payments
by check mailed to the holders at their address set forth in the register of
holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to you.
TRANSFER AND EXCHANGE
You may transfer or exchange your notes in accordance with the Indenture.
The registrar and the Trustee may require you to furnish, among other things,
appropriate endorsements and transfer documents and we may require you to pay
any taxes and fees required by law or permitted by the Indenture. We are not
required to transfer or exchange any note selected for redemption. We also are
not required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed.
The registered holder of a registered note will be treated as the owner of
the registered note for all purposes.
REPURCHASE AT YOUR OPTION
Change of Control
If a Change of Control occurs, you will have the right to require us to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
your notes on the date which is 25 business days after the date the Change of
Control notice is mailed or required to be mailed. In the Change of Control
offer, we will
54
<PAGE>
offer cash equal to 101% of the aggregate principal amount of notes repurchased
plus accrued and unpaid interest on such notes, if any, to the payment date.
Within ten business days following any Change of Control, we will mail a notice
to you describing the transaction or transactions that constitute the Change of
Control and offering to repurchase notes on the payment date specified in the
Change of Control notice. The procedures for this purchase will be described in
the notice. We will comply with all applicable federal and state securities laws
in connection with the repurchase of the notes as a result of a Change of
Control.
Each Change of Control notice will 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 payment date;
(3) that any note not tendered will continue to accrue interest;
(4) that, unless we fail to pay for a note in the Change of Control offer,
any note accepted for payment shall cease to accrue interest after the
payment date;
(5) that, if you elect to have a note purchased pursuant to a Change of
Control offer, you will be required to surrender the note in accordance
with the instructions set forth in such notice;
(6) that we have 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.
If a Change of Control occurs, we may purchase all, but not less than all,
of the outstanding notes at the following price:
(1) 100% of the principal amount of the notes then outstanding; plus
(2) accrued interest to the date of purchase; plus
(3) the Applicable Premium.
We must give you notice of any purchase to be made as described in this
paragraph no later than 10 days after the payment date applicable to the Change
of Control giving rise to such repurchase. We must repurchase the notes within
30 days of the date of this notice.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. We urge you to read the Indenture for the full definition of all such
terms.
"Acquired Debt", with respect to any Person, means:
(1) 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;
(2) 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
(3) Refinancings of Debt described in clause (1) or (2), provided that
the recourse with respect to such Refinancing Debt is limited to the same
extent as the Debt so Refinanced.
55
<PAGE>
"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 us) shall be deemed to be our Affiliates.
"Applicable Premium" means, with respect to any note, the greater of:
(1) 1.0% of the principal amount of such note; and
(2) the excess, if any, of:
(a) the present value of the remaining interest payments, principal
and future optional redemption premium (if applicable) of such note,
discounted on a semi-annual bond equivalent basis from the maturity date
of the note to the applicable date of purchase at a per annum interest
rate equal to the Treasury Yield for such redemption date plus 100 basis
points, over
(b) the sum of the principal amount of such note plus accrued and
unpaid interest to the purchase date.
"Asset Sale" means, with respect to any Person, the sale, lease, assignment
or other disposition (including, without limitation, dispositions pursuant to
any consolidation, merger or sale and leaseback transaction) by such Person or
any of its subsidiaries in any single transaction or series of related
transactions which consists of the disposition of:
(1) any Capital Stock of any subsidiary; or
(2) 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 other
than our company or one of our subsidiaries.
For the purposes of this definition, the term "Asset Sale" shall not
include:
(1) any sale, lease, assignment or other disposition of properties or
assets that is governed by the provisions described under "--Limitation on
Merger or Sale of Assets" or
(2) any sale, lease, assignment or other disposition by a Person that
has outstanding senior debt securities all of which (a) are rated BBB- or
higher by S&P and have not been placed on credit watch by S&P for a
possible downgrade or (b) 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
(1) 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
(2) the sum of all such principal payments.
"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 of such obligation 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.
56
<PAGE>
"Cash Equivalents" means:
(1) marketable direct obligations Issued by, or unconditionally
Guaranteed by, the United States government or Issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) 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 of such state maturing within one year from the date
of acquisition of such obligation and, at the time of acquisition, having
one of the two highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the date of
its creation and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of their acquisition issued by any 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 of such certificates of deposit or
bankers' acceptances combined capital surplus of not less than
$500,000,000;
(5) Eurodollar time deposits maturing within one year from the date of
acquisition of such deposits and issued or accepted by any commercial bank
having at the date of acquisition of such deposits combined capital and
surplus of not less than $500,000,000;
(6) repurchase obligations with a term of not more than thirty days
for underlying securities of the types described in clause (1) above
entered into with any bank meeting the qualifications specified in clause
(4) above; and
(7) 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 (1) through (6) above.
"Change of Control" means the occurrence of any of the following events:
(1) prior to the time that at least 15% of our then outstanding Voting
Stock or the then outstanding Voting Stock of Parent or any subsidiary of
Parent of which we are 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 our Voting Stock, whether as a result of issuance
of our securities or securities of any of our Affiliates, any merger,
consolidation, liquidation or dissolution of our company or any of our
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 (1) and clause (2) 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, directly
or indirectly, a majority of the Voting Stock of the parent corporation);
(2) 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 (1) 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 our Voting Stock or the Voting Stock of Parent; provided
that the Permitted Holders beneficially own (as defined in clause
(1) above), directly or indirectly, in the aggregate a lesser percentage of
our Voting Stock or the Voting Stock of Parent 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 our Board of Directors or the
Board of Directors of Parent; or
(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted our Board of Directors (together with
any new directors whose election by such Board or whose nomination for
election by our shareholders including predecessors, was approved by a vote
of a
57
<PAGE>
majority of our directors 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 our Board of Directors, then in office.
"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.
"Consolidated EBITDA Coverage Ratio" with respect to any Person for any
period means the ratio of:
(1) the aggregate amount of EBITDA of such Person for such period to
(2) 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 to such assets 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 for such Debt or Capital Stock)
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 under this clause (c), 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:
(1) 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
(2) 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).
58
<PAGE>
"Consolidated Net Income (Loss)" means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its
consolidated subsidiaries for such period as determined in accordance with GAAP,
adjusted to the extent included in calculating such net income (or loss), by
excluding:
(1) all extraordinary gains or losses in such period;
(2) 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;
(3) 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;
(4) 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;
(5) 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 (4) above);
(6) any interest income resulting from loans or investments in
Affiliates, other than cash interest income actually received;
(7) any reserve established at the time our Affiliates first acquired
U.S. Intec; and
(8) 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 us, 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:
(1) 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);
(2) all Capital Lease Obligations of such Person;
(3) 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
59
<PAGE>
agreement (but excluding trade accounts payable and other accrued current
liabilities arising in the ordinary course of business);
(4) 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 (1) through
(3) 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);
(5) 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);
(6) all obligations of the type referred to in clauses (1) through
(5) 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
(7) all obligations of the type referred to in clauses (1) through
(6) 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" covenant our Debt or Debt
of any of our subsidiaries shall include the provision for existing or future
asbestos-related bodily injury claims, as set forth in our then most recent
consolidated financial statement.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"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):
(1) 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);
(2) Consolidated Interest Expense of such Person for such period;
(3) depreciation expense of such Person for such period;
(4) amortization expense of such Person for such period; and
(5) 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.
"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.
"Glass Fiber Contract" means the supply agreement effective as of
January 1, 1997 between us and GAF Fiberglass.
"Granules Contracts" means (1) the supply agreement, dated as of
January 1, 1995 between us and ISP Technologies, Inc., as amended by amendment
dated as of December 31, 1995 and (2) the letter dated November 9, 1995 from ISP
Mineral Products Inc. to U.S. Intec.
"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,
60
<PAGE>
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person:
(1) 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
(2) entered into for the purpose of assuring the obligee of such Debt
or other obligation in any other manner of the payment of such obligation
or to protect such obligee against loss in respect of such obligation (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.
"Issue" means issue, assume, Guarantee, incur or otherwise become liable
for; provided that any Debt or Capital Stock of a Person existing at the time
such Person becomes a subsidiary of another Person (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
subsidiary at the time it becomes a subsidiary of such other Person.
"Issue Date" means December 3, 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 us 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 our consolidated tangible
assets, as set forth on our most recently publicly available balance sheet.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by us or any of our subsidiaries from such Asset Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions);
(2) taxes paid or payable ((A) 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 (B) after taking into
account any reduction in tax liability due to available tax credits or
deductions applicable to the transaction);
(3) 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 us or any of our subsidiaries in connection
with such Asset Sale; and
(4) repayment of Debt that is required to be repaid in connection with
such Asset Sale, under the agreements governing such Debt or Asset Sale.
61
<PAGE>
"Non-Recourse Debt" of any Person means Debt or the portion of Debt:
(1) 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
(2) 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:
(1) which has been designated as such by such Person;
(2) 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 our Board
of Directors in a board resolution which shall set forth that such
acquisitions are being, or have been, made at fair market value; and
(3) which has no Debt other than Non-Recourse Debt.
"Parent" means GAF Corporation so long as it owns, and any other Person
which acquires or owns, directly or indirectly, 80% or more of our Voting Stock.
"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 our business and the businesses of
our 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;
62
<PAGE>
(8) leases or subleases granted to others not interfering in any
material respect with our business and the business of our 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 us or any of our 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 us or
any of our subsidiaries of our 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 we or any of our 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 our account of the Company or the
account of any of our 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 our debt
securities identical in all material respects to the notes that may be issued to
the initial purchasers under the circumstances set forth in the Registration
Rights 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 us, 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
63
<PAGE>
(1) is required, directly or indirectly, to be redeemed on or prior to
the ninetieth day after the Stated Maturity of the notes,
(2) 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
(3) 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 us or any of our
subsidiaries, an Investment by such Person in one of our Affiliates; provided,
that the following shall not be Restricted Investments:
(1) Investments in our company or any of our Recourse Subsidiaries;
(2) Investments in Unrestricted Affiliates; and
(3) Investments in Affiliates that become, as a result of such
Investment, Recourse Subsidiaries.
"Restricted Payment" means
(1) 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 our Capital Stock other than Redeemable Stock) on or
with respect to our Capital Stock (other than Redeemable Stock); and
(2) any payment on account of the purchase, redemption, retirement or
other acquisition for value of our Capital Stock (other than Redeemable
Stock).
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under the
Securities Act.
"Significant Subsidiary" means
(1) any of our subsidiaries (other than a Non-Recourse Subsidiary)
which at the time of determination either:
(a) had assets which, as of the date of our most recent quarterly
consolidated balance sheet, constituted at least 5% of our 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 our
most recent quarterly consolidated statement of income which constituted
at least 5% of our total revenues on a consolidated basis for such
period; or
(2) any of our subsidiaries (other than a Non-Recourse Subsidiary)
which, if merged with all of our Defaulting Subsidiaries, would at the time
of determination either:
(a) have had assets which, as of the date of our most recent
quarterly consolidated balance sheet, would have constituted at least
10% of our 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
our most recent quarterly consolidated statement of income which would
have constituted at least 10% of our total revenues on a consolidated
basis for such period (each such determination being made in accordance
with GAAP).
"Defaulting Subsidiary" means any of our subsidiaries (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.
64
<PAGE>
"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.
"Tax Sharing Agreement" means the tax sharing agreement, dated as of
January 31, 1994, among us, G-I Holdings and GAF Corporation.
"Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
applicable redemption date (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining Average Life of the Notes; provided that, if the Average Life
of the notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Yield shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of the notes is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Affiliate" means a Person (other than one of our subsidiaries
except a Non-Recourse Subsidiary) controlled by, or under common control with,
us in which no Affiliate of ours (other than (1) our company or a Wholly-Owned
Recourse Subsidiary, (2) any of our directors or officers or director or officer
of any of our subsidiaries, whose primary employment is by us or any of our
subsidiaries other than a Non-Recourse Subsidiary, except for Permitted Holders
or members of their immediate family and (3) 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.
"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 OPERATING RESTRICTIONS
Summary
In general, subject to several exceptions, the Indenture will limit, among
other things:
o the incurrence of additional debt by us and certain of our subsidiaries
unless certain leverage ratios are met;
o the issuance of preferred stock by us and our subsidiaries;
o the payment of dividends on our capital stock and investments in other
persons in excess of certain maximum aggregate dollar amounts;
o the creation of liens;
o certain transactions with affiliates, other than transactions permitted
by other sections of the Indenture, unless such transactions are on arms'
length terms and approved by our Board of Directors and, in
65
<PAGE>
certain situations, a nationally recognized investment banking firm has
given a written opinion regarding the fairness of such transaction;
o the ability of any of our subsidiaries to create restrictions on such
subsidiary's ability to pay dividends or debt owed to us or any of our
other subsidiaries;
o sales of assets, unless such sales are for fair market value,
substantially for cash, and, in certain circumstances, the proceeds from
such sales are used to prepay debt (including the notes) or to invest in
additional assets; and
o consolidations, mergers and transfers of all or substantially all of our
assets, unless the successor entity expressly agrees to assume our
obligations under the Indenture, no event of default has occurred or is
continuing, additional debt could be incurred and the surviving person
has a net worth not less than ours.
This bullet-point summary discusses only certain material provisions of
some of the covenants applicable to the notes. We urge you to read the Indenture
and the more detailed description of these terms set forth below.
The Indenture contains, among others, the following covenants:
Limitation on Debt. (a) The Indenture provides that we shall not, and
shall not permit any of our subsidiaries to Issue, directly or indirectly, any
Debt unless, at the time of such Issuance and after giving effect to such
Issuance:
(1) no Default or Event of Default shall have occurred and be
continuing; and
(2) our Consolidated EBITDA Coverage Ratio for our 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) Even if we do not meet the above conditions, the Indenture provides
that we may Issue the following Debt:
(1) The old notes, the registered notes and the Private Exchange
Notes;
(2) (A) Debt Issued by us to, and held by, one of our Wholly-Owned
Recourse Subsidiaries and (B) Debt of one of our Recourse Subsidiaries
Issued to, and held by, us or one of our Wholly-Owned Recourse
Subsidiaries; provided that any subsequent transfer of such Debt (other
than to us or to one of our Wholly-Owned Recourse Subsidiaries) shall be
deemed, in each case, to constitute the Issuance of such Debt by us or such
Subsidiary;
(3) Debt the proceeds of which are used by us to acquire assets;
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 of such debt then outstanding, shall not at any time exceed
$80,000,000;
(4) Acquired Debt;
(5) (A) Debt outstanding on the Issue Date (including the Deferred
Coupon Notes, the 2005 Notes, the 2006 Notes and the 2007 Notes) and
(B) 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:
(a) 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;
(b) the Average Life and Stated Maturity of the Debt so Issued
shall equal or exceed that of the Debt so Refinanced;
(c) the Debt so Issued shall not rank senior in right of payment to
the Debt being Refinanced;
(d) 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;
66
<PAGE>
(e) if the Debt being Refinanced is Debt permitted by clause (3)
above, such Refinancing Debt is not secured by any assets not securing
the Debt so Refinanced or securing any improvements, additions or
replacements of such assets; and
(f) the obligors with respect to the Refinancing Debt shall not
include any Persons who were not obligors (including predecessors of
such Person) with respect to the Debt being Refinanced;
(6) Non-Recourse Debt of one of our Non-Recourse Subsidiaries 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 of such
agreement; provided, that the aggregate outstanding amount under the Credit
Agreement does not at any time exceed $150,000,000;
(8) Debt secured by Receivables, including to Refinance the
Receivables Financing Agreement, provided that such Debt does not exceed
85% of the face amount of the Receivables; and
(9) Debt (other than Debt identified in clauses (1) through
(8) above) in an aggregate principal amount outstanding at any one time not
to exceed $100,000,000.
Limitation on Preferred Stock. The Indenture provides that we may, and our
subsidiaries may, issue the following Preferred Stock:
(1) Preferred Stock of our company or Preferred Stock of any of our
subsidiaries issued to and held by us or one of our Wholly-Owned Recourse
Subsidiaries; provided that any subsequent transfer of such Preferred Stock
(other than to us or to one of our Wholly-Owned Recourse Subsidiaries) or
if such Wholly-Owned Recourse Subsidiary ceases to be one of our
Wholly-Owned Recourse Subsidiaries shall be deemed, in each case, to
constitute the Issuance of such Preferred Stock by us 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 our Consolidated Interest Expense for purposes of calculating
our Consolidated EBITDA Coverage Ratio under paragraph (a) of "Limitation
on Debt;" and
(3) Preferred Stock of our company (other than Redeemable Stock).
Guarantees. To the extent we or any of our subsidiaries Guarantee any of
our Debt or Debt of 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 we or any of our subsidiaries Guarantee any Debt of a Person
that, subsequent to the Issuance of such Guarantee, becomes one of our
subsidiaries, 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, we
may make, and our subsidiaries may 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 to such
Restricted Payment or Restricted Investment, 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 our Board of Directors in good faith as of the date of
payment or investment) shall not exceed the sum of:
(1) 75% of our cumulative Consolidated Net Income (or minus 100% of
our cumulative Consolidated Net Loss) 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
67
<PAGE>
available by us 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);
(2) 100% of the net cash proceeds, including the fair market value of
property other than cash as determined by our Board of Directors in good
faith, as evidenced by a board resolution, received by us from any Person
(other than one of our subsidiaries) from the Issuance and sale subsequent
to the Commencement Date of our Capital Stock (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, we 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 our shareholders
or the shareholders of such subsidiary, in their capacity as such (the
determination as to the value of any non-cash consideration referred to in
this clause (2) to be made by such investment banking firm), and such
opinion shall have been delivered to the Trustee;
(3) 100% of the net cash proceeds received by us from the exercise of
options or warrants on our Capital Stock (other than Redeemable Stock)
since the Commencement Date;
(4) 100% of the net cash proceeds received by us 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
ours) since the Commencement Date; and
(5) $60,000,000.
Our designation, or the designation by any of our subsidiaries, of a
subsidiary as a Non-Recourse Subsidiary shall be deemed to be the making of a
Restricted Investment by us in an amount equal to the outstanding Investments
made by us and our subsidiaries in such Person being designated a Non-Recourse
Subsidiary at the time of such designation.
(b) As long as no Default or Event of Default shall have occurred and be
continuing, the Indenture provides that, notwithstanding the limitations in
clause (a) above, we can make the following payments and investments:
(1) the making of any Restricted Payment or Restricted Investment
within 60 days after (A) the date of declaration of such Restricted Payment
or Restricted Investment or (B) the making of a binding commitment in
respect of such Restricted Payment or Restricted Investment; 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 we received from the substantially concurrent sale of our
Common Stock (other than to a subsidiary of ours); 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 we
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 our Board
of Directors, as evidenced by a board resolution); and
(4) repurchases of our Capital Stock, in each case, from our employees
or employees of any of our 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 we shall not, and our
subsidiaries shall not, directly or indirectly, incur or suffer to exist the
following Liens upon their respective property or assets whether owned
68
<PAGE>
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 our assets or improvements or additions to
such assets existing or created within 180 days after the time of
acquisition of or improvements or additions to such assets, or replacements
of such assets; provided that (A) such acquisition, improvement or addition
is otherwise permitted by the Indenture, (B) 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 to such assets,
or replacements of such assets, and (C) 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) through (3) above and (5) below; provided that
(A) Refinancing does not increase the principal amount of Debt being so
Refinanced and (B) the Lien of the Refinancing Debt does not extend to any
asset not securing the Debt being Refinanced or improvements or additions
to such assets, or replacements of such assets;
(5) Liens securing Acquired Debt; provided that (A) any such Lien
secured the Acquired Debt at the time of the incurrence of such Acquired
Debt and such Lien and Acquired Debt were not incurred by us or any of our
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 us or by one of our subsidiaries and (B) any such Lien
does not extend to or cover any property or assets of ours or of any of our
subsidiaries other than the property or assets that secured the Acquired
Debt prior to the time such Debt became Acquired Debt of ours or of one of
our subsidiaries;
(6) Liens on Receivables securing Debt permitted by clause
(b)(8) under the "Limitation on Debt" covenant;
(7) Liens securing intercompany Debt permitted by paragraph
(b)(2) under the "Limitation on Debt" covenant; and
(8) Liens on our assets and assets of our subsidiaries in addition to
those referred to in clauses (1) through (7), provided that such Liens only
secure our Debt and Debt of our 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 we shall not enter, and our subsidiaries
shall not enter, directly or indirectly, into any transaction or series of
related transactions with any of our Affiliates, other than
(1) the making of a Restricted Payment or Restricted Investment
otherwise permitted by the "Limitation on Restricted Payments and
Restricted Investments" covenant or those transactions specifically
permitted by paragraph (b) thereunder,
(2) transactions between or among our Non-Recourse Subsidiaries or
(3) transactions between or among us and our 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 are 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 ours, including
69
<PAGE>
International Specialty Products Inc. or one of its Subsidiaries)
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 our Board of Directors or
the Board of Directors of 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 ours, including International Specialty
Products Inc. or one of its Subsidiaries) 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
our Board of Directors or the Board of Directors of such subsidiary, as
the case may be, having no personal stake in such business, transaction
or transactions), we 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 our shareholders or the shareholders of 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 our Board of Directors or
the Board of Directors of 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, we or such Subsidiary may enter into such transaction or series of
transactions if we 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 our shareholders or
the shareholders of 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) The Indenture provides that notwithstanding the limitations in
clause (a) above, the following transactions are permitted:
(1) the purchase of granules from an Affiliate of ours, including
International Specialty Products Inc. or a subsidiary of International
Specialty Products Inc.; provided that
(a) subject to paragraph (c) of this covenant, the price and other
terms shall not be less favorable to us 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 us to the effect that either the
terms thereof are fair to us from a financial point of view or are on
terms at least as favorable to us 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 ours other than International Specialty Products Inc.)
(a) in accordance with its terms or on terms no less favorable to
us than those contained in the Management Agreement or
(b) on other terms provided that we 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 us or are on terms at least as favorable to us as those
available in comparable transactions in arms'-length dealings from an
unrelated Person;
(3) any transaction between us or one of our subsidiaries and its own
employee stock ownership or benefit plan;
(4) any transaction with an officer or director of ours or of any
subsidiary of ours 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;
70
<PAGE>
(6) borrowings by us or our subsidiaries from Affiliates of ours;
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 our unsecured bank debt);
(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 us as those available in a comparable transaction in
arms-length dealings with an unrelated Person.
(c) We shall not, and our subsidiaries shall not, 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 us or to you (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 us 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 us or you).
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that we shall not, and our subsidiaries
(other than Non-Recourse Subsidiaries) shall not, 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 us or any of our subsidiaries,
(b) make loans or advances to us or any of our subsidiaries,
(c) transfer any of its properties or assets to us or
(d) incur or suffer to exist Liens in favor of the Holders.
The preceding restrictions will not apply to 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, 2005 Notes, 2006 Notes and 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 the provisions described under
"--Limitation on Liens;" provided that such Liens and the terms governing
such Liens do not, directly or indirectly, restrict us or our 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) through (d) above are no less favorable
to us than those contained in the agreements governing the Debt being
Refinanced.
71
<PAGE>
Limitation on Asset Sales. The Indenture provides that we shall not, and
our subsidiaries shall not, directly or indirectly, consummate an Asset Sale
unless:
(1) we 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 our Board of Directors or the Board of
Directors of 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 us 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 we 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 us or any of our subsidiaries, we
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 of such proceeds:
(A) to invest in the businesses that we and our Recourse
Subsidiaries are engaged in at the time of such Asset Sale or any like
or related business;
(B) to pay or satisfy any of our Debt or any Debt of our
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
(C) 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 of such notes plus accrued interest on such notes to the date of
purchase; provided, however, that we shall, to the extent required under
the indentures governing the Deferred Coupon Notes, the 2005 Notes, the
2006 Notes and 2007 Notes,
(a) first offer to purchase any outstanding Deferred Coupon
Notes in a tender offer at a redemption price equal to 100% of the
accreted value of such notes to the date of purchase,
(b) then offer to purchase any outstanding 2006 Notes, in a
tender offer at a redemption price equal to 100% of the principal
amount of such notes plus accrued interest on such notes to the date
of purchase,
(c) then offer to purchase any outstanding 2007 Notes in a
tender offer at a redemption price equal to 100% of the principal
amount of such notes plus accrued interest on such notes to the date
of purchase, and
(d) then offer to purchase any outstanding 2005 Notes in a
tender offer at a redemption price equal to 100% of the principal
amount of such notes plus accrued interest on such notes to the date
of purchase;
provided further, however, that we may defer making a Net Proceeds
Offer until the aggregate Net Cash Proceeds from Asset Sales to be
applied pursuant to this clause (3)(C) equal or exceed $25,000,000;
provided that (1) we 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 (2) 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
"Repurchase at Your Option--Change of Control."
We will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations under the Exchange Act 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 we transfer or cause to be transferred, in one
transaction or a series of related transactions, Material Assets to any one
or more of our Non-Recourse Subsidiaries, we shall cause such transferee
subsidiary to
72
<PAGE>
(1) 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 our obligations under the notes and
(2) 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 we will not take any
action that would require us or any of our subsidiaries to register as an
investment company under the Investment Company Act of 1940.
Reports to the Securities and Exchange Commission and You. We shall file
with the Trustee and provide to you, within 15 days after we file them with the
Commission, copies of our 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 we are required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, without exhibits
in your case, unless you make such request in writing. Notwithstanding that we
may not be required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, we will continue to file with the
Commission and provide the Trustee and you 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
your case, unless you make such request in writing. We also will comply with the
other provisions of Section 314(a) of the Trust Indenture Act of 1939.
So long as any of the notes remain outstanding, we shall cause each annual,
quarterly and other financial report mailed or otherwise furnished by us
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.
We shall provide to you or any beneficial owner of notes any information
reasonably requested by you or such beneficial owner concerning us and our
subsidiaries (including financial statements) necessary in order to permit you
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.
LIMITATION ON MERGER OR SALE OF ASSETS
The Indenture provides that we shall not consolidate with or merge with or
into or sell, assign, transfer or lease all or substantially all of our
properties and assets (either in one transaction or in a series of related
transactions) to any person, unless:
(1) we are the continuing Person, or the resulting, surviving or
transferee Person (if other than us) shall be a corporation organized and
existing under the laws of the United States or any State or the District
of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form reasonably satisfactory to
the Trustee, all of our obligations under the notes and the Indenture, and
the Indenture shall remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee Person or any of its subsidiaries as a
result of such transaction as having been issued by such Person or such
subsidiary at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing;
(3) immediately before and after giving effect to such transaction,
the resulting, surviving or transferee Person could incur at least $1.00 of
additional Debt under paragraph (a) of the "Limitation on Debt" covenant;
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 our Consolidated Net Worth
immediately prior to such transaction.
In connection with any consolidation, merger, sale, assignment, transfer or
lease contemplated by this covenant, we will deliver, or cause to be delivered,
to the Trustee, in form and substance reasonably
73
<PAGE>
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 accompanying supplemental indenture comply with this covenant and
the Trust Indenture Act and that all conditions precedent provided for in the
Indenture 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 our assets in accordance with the preceding two
paragraphs, the successor corporation formed by such consolidation or into which
we are 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, our company under the Indenture, with the same effect as if such successor
corporation had been named as the company under the Indenture, and, except in
the case of a lease, we 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) we fail to pay interest on any note when the same becomes due and
payable and the failure continues for a period of 30 days;
(2) (A) we fail to pay the principal of any note when the same becomes
due and payable at maturity or otherwise or (B) we fail to redeem or
repurchase notes when required pursuant to the Indenture or the notes;
(3) we fail to comply with provisions described under "--Limitation on
Merger or Sale of Assets;"
(4) we fail to comply for 30 days after notice with any of our
obligations described under "Repurchase at Your Option--Change of Control"
and "--Certain Operating Restrictions;"
(5) we fail to comply for 60 days after notice with our other
agreements contained in the Indenture or the notes (other than those
referred to in clauses (1) through (4) above);
(6) principal of or interest on our Debt or Debt of any of our
Significant Subsidiaries is not paid within any applicable grace period or
is accelerated by the holders of such Debt 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 our
company or any of our 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 us or any of our
Significant Subsidiaries and (A) 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 of such judgment stayed and such
default continues for 10 days after the notice specified below or
(B) foreclosure proceedings 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 us in writing of the Default, and we do not cure
the Default within the time specified in such clause after receipt of such
notice.
Such notice shall be given by the Trustee if so requested in writing by the
holders of at least 25% in aggregate principal amount of the outstanding notes.
When a Default under clause (4), (5), (6) or (8) is cured or remedied within the
specified period, it ceases to exist.
If an Event of Default (other than an Event of Default with respect to our
company specified in clause (7) above) occurs and is continuing, the Trustee, by
written notice to us, or the holders of at least 25% in aggregate principal
amount of the outstanding notes, by written notice to us and the Trustee, may
declare all unpaid principal of and accrued interest on the notes then
outstanding to be due and payable. Upon a declaration of acceleration, such
amount shall be due and payable immediately.
74
<PAGE>
If an Event of Default with respect to our company specified in clause
(7) above occurs, all unpaid principal of and interest on the notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of you or the Trustee.
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:
(1) such holder has previously given the Trustee notice that an event
of default is continuing;
(2) holders of at least 25% in principal amount at maturity of the
outstanding notes have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt of such request and the offer of security or indemnity;
and
(5) 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, we are
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers of the certificate know of
any Default that occurred during the previous year. We are also 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 we are taking or propose to take in respect thereof.
ABILITY TO TERMINATE OUR OBLIGATIONS
We may terminate at any time all our 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. At any time we
may terminate our obligations under the covenants described under "--Certain
Covenants" and "Repurchase at Your Option--Change of Control," above and the
operation of clauses (3), (4), (5), (6), (7) (with respect only to Significant
Subsidiaries) or (8) described under "--Events of Default" above and the
limitations contained in clause (3) or (4) described under "--Limitation on
Merger or Sale of Assets" above ("covenant defeasance").
We may exercise our legal defeasance option notwithstanding the prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our 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) described under "--Events of Default" above, or
75
<PAGE>
because of our failure to comply with clause (3) or (4) described under
"--Limitation on Merger or Sale of Assets" above.
In order to exercise either defeasance option, we must irrevocably deposit
in 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.
PROCEDURES TO MODIFY OR AMEND THE INDENTURE
Modifications and amendments of the Indenture may be made by us and by 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:
(1) change the stated maturity of the principal of, or any installment
of interest on, any note or reduce the principal amount of any note, the
rate of interest on any note or any premium payable upon the redemption of
any note, or change the coin or currency in which any note or any premium
or the interest on any note is payable, or impair the right to institute
suit for the enforcement of any such payment after the stated maturity of
any note;
(2) 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;
(3) 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
(4) except as otherwise permitted by the covenants described under
"--Limitation on Merger or Sale of Assets" consent to the assignment or
transfer by us of any of our 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 of such amendment, supplement
or waiver. Any amendment, supplement or waiver 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 we nor any of our subsidiaries shall, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any 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.
76
<PAGE>
GOVERNING LAW
The Indenture and the notes will be governed by, and construed in
accordance with, the laws of the state of New York.
FORM OF REGISTERED NOTES
The certificates representing the registered notes will be issued in fully
registered form, without coupons. Except as described in the next paragraph, the
registered notes will be deposited with, or on behalf of, DTC, and registered in
the name of Cede & Co., as DTC's nominee in the form of a global note. Holders
of the registered notes will own book-entry interests in the global note
evidenced by records maintained by DTC.
Book-entry interests may be exchanged for certificated notes of like tenor
and equal aggregate principal amount, if
(1) DTC notifies us that it is unwilling or unable to continue as
depositary or we determine that DTC is unable to continue as
depositary and we fail to appoint a successor depositary within 90
days,
(2) we provide for such exchange pursuant to the terms of the
Indenture or
(3) we determine that such book-entry interests will no longer be
represented by global notes and we execute and deliver to the
Trustee instructions to such effect.
As of the date of this prospectus, no certificated notes are issued and
outstanding.
77
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences to you of the exchange of your old notes for registered notes.
This summary is based upon provisions of the Internal Revenue Code of 1986,
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 you in
light of your individual investment circumstances or if you are subject to
special treatment under the federal income tax laws (for example, if you are a
dealer in securities or foreign currency, a bank, a life insurance company,
another financial institution, tax-exempt organization or person who holds (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
a person that has 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 registered notes are (and will be)
held by you as "capital assets" within the meaning of Section 1221 of the Code.
THE FOLLOWING SUMMARY IS INCLUDED IN THIS PROSPECTUS FOR GENERAL
INFORMATIONAL PURPOSES ONLY. ACCORDINGLY, YOU SHOULD CONSULT WITH YOUR OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF PARTICIPATION IN THE
EXCHANGE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS OR OF UNITED STATES GIFT OR ESTATE TAXATION.
FEDERAL INCOME TAX CONSEQUENCES OF TENDERING NOTES
The exchange of your old notes for registered notes in the Exchange Offer
will not constitute an exchange for federal income tax purposes. Accordingly,
not only should the Exchange Offer have no federal income tax consequences to
you if you exchange your old notes for registered notes (i.e., there should be
no change in your tax basis and your holding period should carry over to the
registered notes), but the federal income tax consequences of holding and
disposing of the registered notes should also be the same as those applicable to
your old notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes in the Exchange Offer for
its own account must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such notes.
We reserve the right in our sole discretion to purchase or make offers for, or
to offer registered notes for, any notes that remain outstanding subsequent to
the expiration of the Exchange Offer pursuant to this prospectus or otherwise
and, to the extent permitted by applicable law, purchase notes in the open
market, in privately negotiated transactions or otherwise. 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 registered notes received in the
Exchange Offer, where such notes were acquired as a result of market-making
activities or other trading activities and may be used by us to purchase any
notes outstanding after expiration of the Exchange Offer. We have agreed that,
for a period of 180 days after the expiration of the Exchange Offer, it will
make this prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
We will not receive any proceeds from any sale of registered notes by
broker-dealers. Notes received by broker-dealers in the Exchange Offer for their
own account 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 registered 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 registered notes. Any broker-
dealer that resells notes that were received by it in the Exchange Offer for its
own account and any broker or dealer that participates in a distribution of such
notes may be deemed to be an "underwriter" within the
78
<PAGE>
meaning of the Securities Act and any profit on any such resale of such notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the expiration of the Exchange Offer, we
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. We have 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
registered notes will be passed upon for us 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 Corporation and certain of its affiliates (including G-I
Holdings, International Specialty Products Inc. and Building Materials
Corporation of America) in connection with certain legal matters.
EXPERTS
The audited consolidated financial statements and schedule of Building
Materials Corporation of America included herein have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included in this prospectus in reliance upon the
authority of said firm as experts in giving said reports.
79
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Statements of Income for the three years ended December 31, 1997 and the first nine months
ended September 28, 1997 and September 27, 1998 (Unaudited).............................................. F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
as of September 27, 1998 (Unaudited)..................................................................... F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1997 and the first nine months
ended September 28, 1997 and September 27, 1998 (Unaudited).............................................. F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the three years ended December 31, 1997 and
the first nine months ended September 27, 1998 (Unaudited)............................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)..................................................................... F-26
</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 (deficit) and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, appearing on
pages F-3 to F-24 of this Prospectus, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 20, 1998
F-2
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
--------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
-------- -------- ----------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales........................................ $687,184 $851,967 $ 944,629 $ 723,614 $ 812,273
-------- -------- --------- --------- ---------
Costs and expenses:
Cost of products sold.......................... 506,012 622,234 686,992 521,291 578,776
Selling, general and administrative............ 134,145 166,706 185,653 141,100 172,864
Goodwill amortization.......................... 1,170 1,664 1,891 1,421 1,573
Nonrecurring charges........................... -- -- -- -- 27,563
-------- -------- --------- --------- ---------
Total costs and expenses.................... 641,327 790,604 874,536 663,812 780,776
-------- -------- --------- --------- ---------
Operating income................................. 45,857 61,363 70,093 59,802 31,497
Interest expense................................. (24,822) (32,044) (42,784) (30,494) (37,675)
Other income (expense), net...................... (4,486) (1,455) 15,462 8,864 20,917
-------- -------- --------- --------- ---------
Income before income taxes and extraordinary
item........................................... 16,549 27,864 42,771 38,172 14,739
Income taxes..................................... (6,450) (10,809) (16,680) (14,887) (5,675)
-------- -------- --------- --------- ---------
Income before extraordinary item................. 10,099 17,055 26,091 23,285 9,064
Extraordinary item, net of income tax benefit of
$5,845......................................... -- -- -- -- (9,336)
-------- -------- --------- --------- ---------
Net income (loss)................................ $ 10,099 $ 17,055 $ 26,091 $ 23,285 $ (272)
-------- -------- --------- --------- ---------
-------- -------- --------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-3
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
----------------------- 1998
1996 1997 (UNAUDITED)
-------- ----------- -------------
(THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................... $124,560 $ 12,921 $ 51,114
Investments in trading securities....................................... 1,065 62,059 32,162
Investments in available-for-sale securities............................ 82,016 161,290 95,486
Investments in held-to-maturity securities.............................. 7,169 499 6,344
Other short-term investments............................................ 15,944 19,488 20,587
Accounts receivable, trade, less reserve of $1,974, $2,752 and $3,925,
respectively.......................................................... 9,870 13,643 11,698
Accounts receivable, other.............................................. 23,235 50,839 71,471
Receivable from related parties, net.................................... -- 5,151 --
Loan receivable from related party...................................... -- 6,152 --
Inventories............................................................. 77,196 72,254 103,444
Other current assets.................................................... 3,751 6,243 7,200
-------- --------- ---------
Total Current Assets.................................................. 344,806 410,539 399,506
Property, plant and equipment, net........................................ 220,500 241,946 300,611
Excess of cost over net assets of businesses acquired, net of accumulated
amortization of $6,889, $8,780 and $10,353, respectively................ 60,469 70,046 80,431
Deferred income tax benefits.............................................. 59,053 35,981 51,050
Receivable from related parties........................................... -- 31,661 --
Other assets.............................................................. 16,755 17,113 17,785
-------- --------- ---------
Total Assets.............................................................. $701,583 $ 807,286 $ 849,383
-------- --------- ---------
-------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt......................................................... $ -- $ 26,944 $ 2,388
Current maturities of long-term debt.................................... 3,412 3,801 4,024
Accounts payable........................................................ 47,879 55,642 74,072
Payable to related parties, net......................................... 2,287 -- 3,780
Accrued liabilities..................................................... 27,938 26,298 58,817
Reserve for asbestos claims............................................. 3,062 -- --
Reserve for product warranty claims..................................... 12,914 13,100 21,725
-------- --------- ---------
Total Current Liabilities............................................. 97,492 125,785 164,806
-------- --------- ---------
Long-term debt less current maturities.................................... 405,690 555,446 569,552
-------- --------- ---------
Reserve for product warranty claims....................................... 30,755 23,881 30,719
-------- --------- ---------
Other liabilities......................................................... 24,409 19,175 22,352
-------- --------- ---------
Commitments and Contingencies.............................................
Stockholders' Equity:
Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par
value per share; 100,000 shares authorized; no shares issued.......... -- -- --
Class A Common Stock, $.001 par value per share; 1,300,000 shares
authorized; 1,000,010, 1,000,010 and 1,015,010 shares issued and
outstanding, respectively............................................. 1 1 1
Class B Common Stock, $.001 par value per share; 100,000 shares
authorized; 0, 0 and 15,000 shares issued and
outstanding, respectively............................................. -- -- --
Additional paid-in capital.............................................. 182,699 86,910 89,400
Accumulated deficit..................................................... (40,174) (14,083) (14,355)
Accumulated other comprehensive income (loss)........................... 711 10,171 (13,092)
-------- --------- ---------
Stockholders' Equity...................................................... 143,237 82,999 61,954
-------- --------- ---------
Total Liabilities and Stockholders' Equity................................ $701,583 $ 807,286 $ 849,383
-------- --------- ---------
-------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-4
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
------------------------------- 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 (loss)................................. 10,099 17,055 26,091 23,285 (272)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary item............................ -- -- -- -- 9,336
Depreciation.................................. 20,252 23,857 22,936 16,796 19,347
Goodwill amortization......................... 1,170 1,664 1,891 1,421 1,573
Deferred income taxes......................... 6,250 10,609 16,481 14,736 5,487
Noncash interest charges...................... 21,432 23,718 27,222 20,125 20,203
(Increase) decrease in working capital items...... (8,050) (14,905) 17,859 (52,316) (29,301)
Purchases of trading securities................... -- (33,824) (123,483) (60,470) (117,914)
Proceeds from sales of trading securities......... -- 30,394 55,378 46,217 98,987
(Increase) decrease in other assets............... 1,924 (1,711) 1,773 1,621 384
Increase (decrease) in other liabilities.......... (4,502) (4,158) (9,356) (6,336) 10,219
Change in net receivable from/payable to related
parties......................................... 1,939 (341) (39,099) (22,282) 40,592
Other, net........................................ 112 787 (8,001) 1,351 11,088
------- -------- -------- --------- ---------
Net cash provided by (used in) operating
activities........................................ 50,626 53,145 (10,308) (15,852) 69,729
------- -------- -------- --------- ---------
Cash provided by (used in) investing activities:
Capital expenditures.............................. (24,992) (25,629) (46,844) (26,182) (36,251)
Acquisitions...................................... (29,119) -- (30,861) (30,531) (59,187)
Purchases of available-for-sale securities........ (45,706) (139,355) (223,804) (103,427) (54,524)
Purchases of held-to-maturity securities.......... -- -- (4,591) (4,591) (6,344)
Purchases of other short-term investments......... (2,069) (660) -- -- --
Proceeds from sales of available-for-sale
securities...................................... 8,416 101,095 173,547 125,445 122,187
Proceeds from held-to-maturity securities......... -- -- 11,361 10,558 499
------- -------- -------- --------- ---------
Net cash used in investing activities............... (93,470) (64,549) (121,192) (28,728) (33,620)
------- -------- -------- --------- ---------
Cash provided by (used in) financing activities:
Proceeds (repayments) from sale of accounts
receivable...................................... 7,919 8,015 (35,332) 15,574 43,620
Increase (decrease) in short-term debt............ -- -- 26,944 -- (24,556)
(Increase) decrease in loans receivable from
related party................................... 23,633 -- (6,152) -- 6,152
Proceeds from issuance of debt.................... 40,002 99,502 99,916 662 149,361
Increase (decrease) in borrowings under revolving
credit facility................................. -- -- 34,000 -- (34,000)
Repayments of long-term debt...................... (10,440) (34,856) (3,521) (2,610) (135,443)
Decrease in restricted cash....................... 24,484 -- -- -- --
Capital contribution from (distribution to) parent
company......................................... 34,312 86,077 (91,000) (46,000) --
Payments of asbestos claims....................... (59,795) (66,224) (3,062) (3,062) --
Financing fees and expenses....................... (297) (2,539) (1,932) (430) (3,050)
------- -------- -------- --------- ---------
Net cash provided by (used in) financing
activities........................................ 59,818 89,975 19,861 (35,866) 2,084
------- -------- -------- --------- ---------
Net change in cash and cash equivalents............. 16,974 78,571 (111,639) (80,446) 38,193
------- -------- -------- --------- ---------
Cash and cash equivalents, end of period............ $45,989 $124,560 $ 12,921 $ 44,114 $ 51,114
------- -------- -------- --------- ---------
------- -------- -------- --------- ---------
</TABLE>
F-5
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
----------------------------- 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 $ (57,587) $ (55,784)
Inventories.................................... (4,557) (8,123) 8,001 (9,094) (17,811)
Other current assets........................... 1,760 756 (3,029) (931) (356)
Accounts payable............................... (6,093) (4,096) 10,210 5,560 12,687
Accrued liabilities............................ 174 1,680 (5,096) 9,736 31,963
-------- -------- ------- --------- ---------
Net effect on cash from (increase) decrease in
working capital items....................... $ (8,050) $(14,905) $17,859 $ (52,316) $ (29,301)
-------- -------- ------- --------- ---------
-------- -------- ------- --------- ---------
Cash paid during the period for:
Interest (net of amount capitalized)........... $ 2,796 $ 6,442 $14,001 $ 8,193 $ 10,894
Income taxes (including taxes paid pursuant to
the Tax Sharing Agreement).................. 213 537 346 130 1,041
Acquisition of U.S. Intec, Inc., net of $180 cash
acquired:
Fair market value of assets acquired........... $105,285
Purchase price of acquisition.................. 27,358
--------
Liabilities assumed............................ $ 77,927
--------
--------
Acquisition of Leatherback Industries business,
net of $8 cash acquired:
Fair market value of assets acquired........... $27,167 $ 27,167
Purchase price of acquisition.................. 25,531 25,531
------- ---------
Liabilities assumed............................ $ 1,636 $ 1,636
------- ---------
------- ---------
Acquisition of Leslie-Locke business:
Fair market value of assets acquired........... $ 59,318
Purchase price of acquisition.................. 43,468
---------
Liabilities assumed............................ $ 15,850
---------
---------
</TABLE>
- ------------------
* Working capital items exclude cash and cash equivalents, short-term
investments, short-term debt and net receivables from/payables to related
parties. Working capital acquired in connection with acquisitions is reflected
in "Acquisitions." The effects of reclassifications between noncurrent and
current assets and liabilities are excluded from the amounts shown above. In
addition, the increase in receivables shown above does not reflect the cash
proceeds from the sale of certain of the Company's receivables (see Note 7);
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 STOCKHOLDERS' 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)
Issuance of 30,000 shares of restricted common stock
(unaudited)........................................ 2,490 -- --
Comprehensive income--nine months ended
September 27, 1998 (unaudited):
Net loss (unaudited)............................... -- -- (272) $ (272)
---------
Other comprehensive income, net of tax:
Unrealized holding losses, net of income tax
benefit of $10,125 (unaudited)................... (16,177) (16,177)
Less: Reclassification adjustment for gains
included in net loss, net of income tax effect of
$4,585 (unaudited)............................... 7,086 7,086
--------- ---------
Change in unrealized losses on available-for-sale
securities (unaudited)........................... -- (23,263) -- (23,263)
---------
Comprehensive income (loss)(unaudited)............... $ (23,535)
-------- --------- --------- ---------
---------
Balance, September 27, 1998 (unaudited)................ $ 89,401 $ (13,092) $ (14,355)
-------- --------- ---------
-------- --------- ---------
</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 97% 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 nine months
ended September 28, 1997 and September 27, 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 and cash flows 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. The Company recorded the assets and
liabilities of USI at G-I Holdings' purchase accounting basis.
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 were no longer
direct or indirect subsidiaries of GAF, while the Company and GFC have remained
subsidiaries of GAF. On July 15, 1998, ISP merged with and into ISP Holdings and
ISP Holdings changed its name to International Specialty Products Inc. The
Company recorded the transfer of the Nashville facility as a distribution to its
indirect parent, G-I Holdings, at its net book value. G-I Holdings then made a
F-8
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. FORMATION OF THE COMPANY--(CONTINUED)
capital contribution to GFC equal to such net book value. The results of
operations, cash flows and assets and liabilities of the Nashville facility are
included in the Company's consolidated financial statements for all periods
prior to the date of transfer of January 1, 1997.
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 certain of ISP's 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 13 (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 stockholders' equity, "Accumulated other
comprehensive income (loss)", and were $0.8, $11.1 and $(12.2) million as of
December 31, 1996 and 1997 and September 27, 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, $14.5 and
$24.9 million of net realized and unrealized gains on securities in 1995, 1996
and 1997 and the first nine months of 1997 and 1998, respectively. The
determination of cost in computing realized gains and losses is based on the
specific identification method.
In connection with the Separation Transactions (see Note 1), in December
1996, G-I Holdings made a capital contribution to the Company of $2.8 million of
available-for-sale securities, $7.1 million of held-to-maturity securities and
$13.2 million of other short-term investments.
During the fourth quarter of 1995, the Company redesignated certain equity
securities held long (which were offsets against short positions in certain
other securities), with a fair market value of $6.3 million, as "trading" and
recorded unrealized gains on such securities, through the date of redesignation,
in the amount of $0.5 million as "Other income".
As of December 31, 1996 and 1997 and September 27, 1998, the market value
of the Company's equity securities held long was $82.5, $223.0 and
$129.9 million, respectively. As of December 31, 1996 and 1997 and
September 27, 1998, the market value of the Company's held-to-maturity
securities was $7.6, $0.5 and $6.3 million, respectively. The Company enters
into equity-related financial instruments and short positions in common stock
with off-balance sheet risk as a means to manage its exposure to market
fluctuations on its short-term investments. As of December 31, 1996 and 1997 and
September 27, 1998, the market value of such positions was $5.6, $18.6 and
$172.9 million, respectively, which are marked-to-market each month, with
unrealized gains and losses included in results of operations. The market values
referred to above are based on
F-9
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
quotations as reported by various stock exchanges and major broker-dealers. With
respect to its investments in securities, the Company is exposed to the risk of
market loss.
"Other short-term investments" are investments in limited partnerships
which are accounted for by the equity method. Gains and losses are reflected in
"Other income (expense), net". Liquidation of partnership interests generally
require a 30 to 45 day notice period.
Cash and cash equivalents include cash on deposit and debt securities
purchased with original maturities of three months or less.
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
Stockholders' 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.
In the event goodwill is not recoverable, the Company would measure impairment
based on an evaluation of undiscounted projected cash flows, before goodwill
amortization, of the underlying businesses to which the goodwill pertains,
calculated through the remaining amortization period, as compared to the net
goodwill balance recorded on the financial statements. If an impairment exists,
the amount of such impairment is calculated based on the estimated fair value of
the asset.
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, $3.8 and $4.2 million for 1995, 1996 and 1997 and the
first nine months of 1997 and 1998, respectively.
Warranty Claims
The Company provides certain limited warranties covering most of its
residential roofing products for periods ranging from 20 to 40 years. The
Company also offers limited warranties and guarantees of varying duration on its
commercial roofing products; income from warranty contracts related to
commercial roofing products is recognized over the life of the agreements. The
Company believes that the reserves established for estimated probable future
warranty claims are adequate.
The Company's 1997 Consolidated Statement of Income includes a provision of
$3.0 million in connection with the Company's estimated obligations related to
product warranty claims for a discontinued product.
Environmental Liability
The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters. The Company estimates
that its liability in respect of such environmental matters, and certain other
environmental compliance expenses, as of December 31, 1997, is $1.1 million,
before reduction for insurance recoveries reflected on its balance sheet of $0.8
million. The Company's liability is reflected on an undiscounted basis. See
"Business--Legal Proceedings--Environmental Litigation", which is incorporated
herein by reference, for further discussion with respect to environmental
liabilities and estimated insurance recoveries.
Accumulated Other Comprehensive Income
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
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 Stockholders' Equity
(Deficit).
Changes in the components of "Accumulated other comprehensive income
(loss)" for the years 1996 and 1997 and the first nine months ended
September 27, 1998 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES) MINIMUM ACCUMULATED
ON 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 nine months ended September 27, 1998
(unaudited).............................................. (23,263) -- (23,263)
-------- ------ ---------
Balance, September 27, 1998 (unaudited).................... $(12,161) $ (931) $ (13,092)
-------- ------ ---------
-------- ------ ---------
</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. 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. The adoption of
SFAS No. 132 will have no impact on the Company's consolidated results of
operations, financial position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement. SFAS No. 133
is effective for fiscal years beginning after June 15, 1999, but may be adopted
earlier. The Company has not yet determined the effect of adoption of SFAS
No. 133 and has not determined the timing or method of adoption of the
statement. Adoption of SFAS No. 133 could increase volatility in earnings and
other comprehensive income.
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
other existing or future claims related to asbestos-related liabilities if
asserted against the Company.
GAF has advised the Company that, as of September 27, 1998, it is defending
approximately 105,000 pending alleged Asbestos Claims (having received notice of
approximately 74,400 new Asbestos Claims during the first nine months of 1998)
and has resolved approximately 283,200 Asbestos Claims (including approximately
48,700 in the first nine months of 1998). GAF has advised the Company that it
believes that a significant portion of the claims filed in the first nine months
of 1998 were already pending against other defendants for some period of time,
with GAF being added as a defendant upon the lifting in 1997 of the injunction
relating to the Georgine class action settlement. This injunction prevented
plaintiffs from filing or proceeding with their Asbestos Claims other than in
accordance with the Georgine class action settlement, which was rendered
inoperable in 1997 by a United States Supreme Court ruling. 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 to accomplish such
resolution, but there can be no assurance that this effort will be successful.
F-12
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS--(CONTINUED)
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 10 for information regarding the Company's
debt instruments and facilities.
For a further discussion with respect to the foregoing, see
"Business--Legal Proceedings", which is incorporated herein by reference.
NOTE 4. ACQUISITIONS
On March 14, 1997, the Company acquired the assets of the Leatherback
Industries division of Hollinee Corporation, which is engaged in the manufacture
and sale of asphalt-saturated felts and other felt and construction paper
products. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the estimated fair
values of the identifiable net assets acquired, and the excess was recorded as
goodwill. The results of the Leatherback business, including sales of $30.2
million for 1997, are included from the date of acquisition; the effects were
not material to 1997 operations.
Effective June 1, 1998, the Company purchased for approximately
$43.5 million substantially all of the assets of Leslie-Locke Inc.
("Leslie-Locke"), a wholly-owned subsidiary of Leslie Building Products, Inc.,
which manufactures and markets a variety of specialty building products and
accessories for the professional and do-it-yourself remodeling and residential
construction industries from manufacturing facilities in Burgaw, North Carolina
and Compton, California. Leslie-Locke had 1997 sales of approximately
$90 million. The acquisition will be accounted for under the purchase method of
accounting. The results of the Leslie-Locke business are included from the date
of acquisition and are not material to the results presented in the foregoing
financial statements. This acquisition, if it had occurred on January 1, 1998,
would not have had a material impact on results of operations for the nine
months ended September 27, 1998.
NOTE 5. NONRECURRING CHARGES (UNAUDITED)
The Company recorded pre-tax nonrecurring charges in the third quarter of
1998 aggregating $27.6 million, of which $20.0 million related to the settlement
of a national class action lawsuit involving asphalt shingles manufactured
between January 1, 1973 and December 31, 1997. Under the terms of the September
1998 settlement, which has been granted preliminary approval by the court
pending a fairness hearing, the Company will provide property owners whose GAF
shingles were manufactured during this period and which suffer certain damages
during the term of their original warranty period, and who file a qualifying
claim, with an opportunity to receive certain limited benefits beyond those
already provided in their existing warranty. The Company agreed to the
settlement, payments against which will be made over a number of years, to avoid
the expense required to defend such litigation.
In July 1998, the Company recorded a nonrecurring charge of $7.6 million
related to a grant to its President of 30,000 shares of restricted common stock
of the Company and certain cash payments to be made over a specified period of
time to such officer in connection with the termination by an affiliate of
preferred stock options and stock appreciation rights held by such officer.
F-13
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES
Income tax provision, which has been computed on a separate return basis,
consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Federal--deferred...................... $(5,424) $ (9,241) $(14,081) $ (12,592) $(5,016)
------- -------- -------- --------- -------
State and local:
Current.............................. (200) (200) (200) (151) (188)
Deferred............................. (826) (1,368) (2,399) (2,144) (471)
------- -------- -------- --------- -------
Total state and local........... (1,026) (1,568) (2,599) (2,295) (659)
------- -------- -------- --------- -------
Income tax provision................... $(6,450) $(10,809) $(16,680) $ (14,887) $(5,675)
------- -------- -------- --------- -------
------- -------- -------- --------- -------
</TABLE>
The differences between the income tax provision computed by applying the
statutory Federal income tax rate to pre-tax income, and the income tax
provision reflected in the Consolidated Statements of Income are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 27,
------------------------------- 1997 1998
1995 1996 1997 (UNAUDITED) (UNAUDITED)
------- -------- -------- ------------- -------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory provision.................... $(5,792) $ (9,752) $(14,970) $ (13,360) $(5,159)
Impact of:
State and local taxes, net of Federal
benefits.......................... (667) (1,019) (1,689) (1,492) (428)
Nondeductible goodwill
amortization...................... (260) (484) (564) (371) (477)
Other, net........................... 269 446 543 336 389
------- -------- -------- --------- -------
Income tax provision................... $(6,450) $(10,809) $(16,680) $ (14,887) $(5,675)
------- -------- -------- --------- -------
------- -------- -------- --------- -------
</TABLE>
The components of the net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities related to property, plant and
equipment...................................................... $(11,782) $(14,742) $ (13,664)
-------- -------- ---------
Deferred tax assets related to:
Expenses not yet deducted for tax purposes:
Reserve for asbestos claims................................. 1,195 -- --
Other....................................................... 38,774 29,294 46,844
Net operating losses not yet utilized under the Tax Sharing
Agreement................................................... 30,866 21,429 17,870
-------- -------- ---------
Total deferred tax assets........................................ 70,835 50,723 64,714
-------- -------- ---------
Net deferred tax assets.......................................... $ 59,053 $ 35,981 $ 51,050
-------- -------- ---------
-------- -------- ---------
</TABLE>
F-14
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES--(CONTINUED)
As of September 27, 1998, the Company had $47.0 million of net operating
loss carryforwards available to offset future taxable income, as follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION
- ------------------------------------------------------------- (THOUSANDS)
<S> <C>
2009......................................................... $ 773
2010......................................................... 4,271
2011......................................................... 41,982
-------
$47,026
-------
-------
</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 GAF
incurring liabilities significantly in excess of the deferred tax liability of
$131.4 million that it recorded in 1990 in connection with this matter. GAF has
advised the Company that it believes that it 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 business,
F-15
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. INCOME TAXES--(CONTINUED)
financial position or results of operations. GAF, G-I Holdings and certain
subsidiaries of GAF have agreed to jointly and severally indemnify the Company
against any tax liability associated with the surfactants partnership, which the
Company would be severally liable for, together with GAF and several current and
former subsidiaries of GAF, should GAF be unable to satisfy such liability.
NOTE 7. 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, $3.5
and $3.6 million in 1995, 1996 and 1997 and the first nine months of 1997 and
1998, respectively.
NOTE 8. INVENTORIES
At December 31, 1996 and 1997 and September 27, 1998, $7.6, $7.8 and
$9.8 million, respectively, of inventories were valued using the LIFO method.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
------------------ 1998
1996 1997 (UNAUDITED)
------- ------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Finished goods..................................................... $41,201 $38,459 $ 65,401
Work in process.................................................... 10,844 10,180 9,070
Raw materials and supplies......................................... 26,206 24,670 30,028
------- ------- ---------
Total......................................................... 78,251 73,309 104,499
Less LIFO reserve.................................................. (1,055) (1,055) (1,055)
------- ------- ---------
Inventories........................................................ $77,196 $72,254 $ 103,444
------- ------- ---------
------- ------- ---------
</TABLE>
F-16
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Land and land improvements...................................... $ 25,722 $ 26,052 $ 26,954
Buildings and building equipment................................ 46,001 48,525 59,172
Machinery and equipment (including equipment under capitalized
leases of $17,660, $15,466 and $13,724--see Note 10).......... 178,190 183,108 223,443
Construction in progress........................................ 19,039 40,775 66,006
-------- -------- ---------
Total...................................................... 268,952 298,460 375,575
Less accumulated depreciation and amortization.................. (48,452) (56,514) (74,964)
-------- -------- ---------
Property, plant and equipment, net.............................. $220,500 $241,946 $ 300,611
-------- -------- ---------
-------- -------- ---------
</TABLE>
NOTE 10. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
-------------------- 1998
1996 1997 (UNAUDITED)
-------- -------- -------------
(THOUSANDS)
<S> <C> <C> <C>
11 3/4% Senior Deferred Coupon Notes due 2004................... $233,018 $261,203 $ 162,887
7 3/4% Senior Notes due 2005.................................... -- -- 149,379
8 5/8% Senior Notes due 2006.................................... 99,504 99,554 99,592
8% Senior Notes due 2007........................................ -- 99,268 99,324
Borrowings under revolving credit facility...................... -- 34,000 --
Industrial revenue bonds with various interest rates and
maturity dates to 2012........................................ 19,625 11,125 11,125
Obligations on mortgaged properties............................. 5,155 4,503 3,738
Obligations under capital leases (Note 13)...................... 51,800 49,594 47,531
-------- -------- ---------
Total...................................................... 409,102 559,247 573,576
Less current maturities......................................... (3,412) (3,801) (4,024)
-------- -------- ---------
Long-term debt less current maturities.......................... $405,690 $555,446 $ 569,552
-------- -------- ---------
-------- -------- ---------
</TABLE>
On July 17, 1998, the Company issued $150 million in aggregate principal
amount at maturity of 7 3/4% Senior Notes due 2005 (the "7 3/4% Notes"). The
Company has used a portion of the net proceeds from this issue to purchase (and
subsequently cancel) $132.6 million in aggregate principal amount at maturity of
the Company's 11 3/4% Senior Deferred Coupon Notes due 2004 (the "Deferred
Coupon Notes"). In connection with this purchase, the Company recorded an
after-tax extraordinary charge of $9.3 million.
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 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 7 3/4% 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 7 3/4% Notes, the 8% Notes and the 8 5/8%
Notes
F-17
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. LONG-TERM DEBT--(CONTINUED)
(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 September 27, 1998, after giving effect to the most restrictive of the
aforementioned restrictions, the Company could have paid dividends of up to
$75.1 million. Under the indentures relating to the Notes and the Deferred
Coupon Notes, the incurrence of additional debt by the Company and the issuance
by the Company of preferred stock would be restricted unless, at the time of
such issuance and after giving effect thereto, the ratio of the Company's
consolidated net income before income taxes, interest, depreciation and
amortization expense to its consolidated interest expense for its most recently
completed four fiscal quarters is at least 2 to 1. For the four quarters ended
September 27, 1998, the Company was in compliance with such covenants.
In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ("swaps") with banks, with an aggregate ending
notional principal amount of $142.0 million and a final maturity of July 1,
1999, all of which were terminated as of June 28, 1998. In 1997, the Company
terminated swaps with an aggregate ending notional principal amount of
$82.0 million, resulting in gains totaling $2.1 million. In June 1998, the
Company terminated swaps with an aggregate ending notional principal amount of
$60.0 million, resulting in gains of $0.7 million. The gains have been deferred
and will be amortized as a reduction of interest expense over the remaining
original life of the swaps. As a result of the swaps, the effective interest
cost to the Company of the portion of the Deferred Coupon Notes covered by the
swaps varied at a fixed spread over LIBOR. Based on the fair value of the swaps
at December 31, 1996 and 1997, the Company would have incurred gains, including
accrued interest, of $8.0 and $3.1 million, respectively, representing the
estimated amount that would have been receivable by the Company if the swaps
were terminated at such dates.
In August 1997, the Company entered into a new three-year bank credit
facility (the "Credit Agreement"). The terms of the Credit Agreement provide for
a $75 million revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $75 million in the aggregate. As of September 27, 1998,
$29.5 million of letters of credit were outstanding and no borrowings were
outstanding under the Credit Agreement. Under the terms of the Credit Agreement,
the Company is subject to certain financial covenants, including interest
coverage and leverage ratios, and dividends and other restricted payments are
limited. Additionally, if a change of control (as defined in the Credit
Agreement) occurs, the credit facility could be terminated and the loans
thereunder accelerated by the lenders party thereto, an event which could also
cause the Deferred Coupon Notes and the Notes to be accelerated. As of
September 27, 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
F-18
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. LONG-TERM DEBT--(CONTINUED)
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 3.80%
and 8.87% as of September 27, 1998. The weighted average interest rate on the
Company's $2.4 million of short-term borrowings as of September 27, 1998 was
6.2%.
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 September 27, 1998 was $268.9, $293.0 and $177.0 million, respectively.
The estimated fair value of the 8 5/8% Notes as of December 31, 1996 and 1997
and September 27, 1998 was $100.0, $103.6 and $100.5 million, respectively. The
estimated fair value of the 8% Notes as of December 31, 1997 and September 27,
1998 was $99.6 and $98.5 million, respectively. The estimated fair value of the
7 3/4% Notes as of September 27, 1998 was $146.3 million.
The aggregate maturities of long-term debt as of September 27, 1998 for the
next five years are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED SEPTEMBER 30, (THOUSANDS)
- ----------------------------------------------------------------------- -----------
<S> <C>
1999................................................................... $ 4,024
2000................................................................... 4,669
2001................................................................... 6,015
2002................................................................... 15,457
2003................................................................... 21,076
</TABLE>
In the above table, maturities for the twelve months ended September 30,
2002 include $12.3 million related to the Baltimore capital lease. Maturities
for the twelve months ended September 30, 2003 include $21.0 million related to
the Chester capital lease.
NOTE 11. 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, $2.7 and $3.2 million for 1995, 1996 and 1997 and the
first nine months of 1997 and 1998, respectively.
USI provides a defined contribution plan for eligible employees. USI may
contribute a discretionary matching contribution equal to 100% of each
participant's eligible contributions each plan year up to a maximum of $500 for
each participant. Such contributions by USI were immaterial for the period of
1995 after the acquisition of USI and were $0.2 million, $0.1 million,
$0.1 million and $0.1 million for 1996 and 1997 and the first nine months of
1997 and 1998, respectively.
F-19
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS--(CONTINUED)
Defined Benefit Plans
The Company provides a noncontributory defined benefit retirement plan for
hourly employees (the "Hourly Retirement Plan"). Benefits under this plan are
based on stated amounts for each year of service. The Company's funding policy
is consistent with the minimum funding requirements of ERISA.
The Company's net periodic pension cost for the Hourly Retirement Plan
included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
----- ----- -------
(THOUSANDS)
<S> <C> <C> <C>
Service cost................................................................ $ 463 $ 631 $ 658
Interest cost............................................................... 598 686 754
Actual income on plan assets................................................ (432) (829) (1,034)
Net deferral and amortization of unrecognized prior service
cost and actuarial losses................................................. 97 35 30
----- ----- -------
Net periodic pension cost................................................... $ 726 $ 523 $ 408
----- ----- -------
----- ----- -------
</TABLE>
Net periodic pension cost for the Hourly Retirement Plan was $0.4 and
$0.2 million for the first nine months of 1997 and 1998, respectively.
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 $0.3 million and a reduction of stockholder's
equity in the amount of $0.9 million. 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.
F-20
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS--(CONTINUED)
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 nine months of 1997 and 1998.
Preferred Stock Option Plan
On January 1, 1996, the Company issued options to certain employees to
purchase 23,290 shares of redeemable convertible preferred stock ("Preferred
Stock") of the Company, exercisable at a price of $100 per share. Options to
purchase 84,953 and 54,073 shares of Preferred Stock were issued in 1997 and the
first nine months of 1998, respectively, exercisable at a price of $100 per
share. As of December 31, 1997 and September 27, 1998, options to purchase
102,595 and 143,356 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.
Book Value Appreciation Unit Plan
A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vest over five years.
Upon exercise, employees are entitled to receive a cash payment based on the
increase in Book Value (as defined in the plan). Expense accrued under this plan
was $0.1, $0.4, $0.4 and $0.8 million for 1996 and 1997 and the first nine
months of 1997 and 1998, respectively.
Postretirement Medical and Life Insurance
The Company generally does not provide postretirement medical and life
insurance benefits, although it subsidizes such benefits for certain employees
and certain retirees. Such subsidies were reduced or ended as of January 1,
1997.
The following table shows the components of the accrued postretirement
health care cost obligation as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees, dependents and beneficiaries eligible for benefits.................... $ 5,108 $ 5,485
Active employees fully eligible for benefits.................................... 1,131 1,139
Active employees not fully eligible for benefits................................ 1,182 1,302
------- -------
Total accumulated postretirement benefit obligation............................... 7,421 7,926
Fair value of plan assets......................................................... -- --
Unrecognized prior service cost and net gain from earlier periods................. 4,039 3,556
------- -------
Accrued postretirement benefit obligation......................................... $11,460 $11,482
------- -------
------- -------
</TABLE>
F-21
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11. BENEFIT PLANS--(CONTINUED)
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 $0.3 million for each of the
first nine months of 1997 and 1998.
For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1997 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $700 to $1,000 per year. For retirees over age
65, this subsidy may be replaced by participation in a managed care program.
With respect to retirees who were formerly hourly employees, most such retirees
are subject to a $5,000 per person lifetime maximum benefit. Subject to such
lifetime maximum, a 12% and 6% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 1998
for such retirees under and over age 65, respectively. To the extent that the
lifetime maximum benefits have not been reached, the foregoing rates were
assumed to decrease gradually to 7% and 6%, respectively, by the year 2003 and
remain at that level thereafter. The weighted 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 12. RELATED PARTY TRANSACTIONS
Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating transactions
between the Company and its affiliates:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
------------------ 1998
1996 1997 (UNAUDITED)
------- ------- -------------
(THOUSANDS)
<S> <C> <C> <C>
Receivable from (payable to):
GAF/G-I Holdings/G Industries/other............................... $ 274 $ 9,684 $ 4,452
GAFBMC............................................................ 115 713 1,043
GFC............................................................... -- (1,559) (2,680)
ISP............................................................... (2,676) (3,687) (6,595)
------- ------- -------
Receivable from (payable to) related parties, net................. $(2,287) $ 5,151 $(3,780)
------- ------- -------
------- ------- -------
</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 nine months of 1998). The
highest amount of loans made by the Company to G-I Holdings during 1996 and 1997
was $45.4 million. No loans were made to the Company by G-I Holdings and its
subsidiaries during 1997 and the first nine months of 1998, and the highest
amount of loans made to the Company by G-I Holdings and its subsidiaries during
1996 was $24.3 million. As of December 31, 1996 and September 27, 1998, no loans
were owed to the
F-22
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. RELATED PARTY TRANSACTIONS--(CONTINUED)
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 September 27, 1998 was
$41.7 and $5.4 million, respectively, of which $10.0 and $5.4 million,
respectively, were classified within the short-term receivable from (payable to)
related parties, net, in the table above, and $31.7 million was classified as a
long-term receivable from related parties in the Consolidated Balance Sheet at
December 31, 1997. Also, during 1997, the Company made distributions of
$91.0 million to its parent company.
Mineral Products: The Company purchases all of its colored roofing
granules requirements (except for the requirements of its California roofing
plant) from ISP under a requirements contract. In addition, in December 1995,
USI commenced purchasing substantially all of its requirements for colored
roofing granules from ISP (except for the requirements of its Stockton,
California and Corvallis, Oregon plants) pursuant to a requirements contract.
Each such requirements contract was renewed for 1998 and is subject to annual
renewal unless terminated by either party to the respective agreement. Such
purchases by BMCA and USI totaled $45.8, $50.5, $51.1, $40.8 and $47.9 million
for 1995, 1996 and 1997 and the first nine months of 1997 and 1998,
respectively. The amount payable to ISP at December 31, 1996 and 1997 and
September 27, 1998 for such purchases was $3.2, $2.7 and $6.9 million,
respectively.
Glass Fiber Supply Agreement: As a result of the Separation Transactions
(see Note 1), the Company's glass fiber manufacturing facility in Nashville,
Tennessee, which manufactures a significant portion of the Company's glass fiber
requirements, was transferred to GFC as of January 1, 1997. In connection with
that transaction, the Company entered into a seven-year supply agreement with
GFC under which GFC produces glass fiber for the Company. Purchases under this
agreement totaled $24.5, $17.8 and $19.3 million for the year 1997 and the first
nine months of 1997 and 1998, respectively.
Management Agreements: The Company is a party to a Management Agreement
with ISP (the "Management Agreement"), which expires December 31, 1998, pursuant
to which ISP provides certain general management, administrative, legal,
telecommunications, information and facilities services to the Company
(including the use of the Company's headquarters in Wayne, New Jersey). Charges
to the Company by ISP for providing such services aggregated $4.4, $5.0, $4.8,
$3.5 and $3.2 million for 1995, 1996 and 1997 and the first nine months of 1997
and 1998, respectively. Such charges consist of management fees and other
reimbursable expenses attributable to, or incurred by ISP for the benefit of,
the Company. Effective January 1, 1998, the term of the Management Agreement was
extended through the end of 1998, and the management fees payable thereunder
were adjusted, including an adjustment to reflect the direct payment by the
Company of the costs for certain services rendered by third parties that were
previously included in the management fees payable to ISP. The Company and ISP
further modified the agreement to allocate a portion of the management fees
payable by the Company under the Management Agreement to separate lease payments
for the use of BMCA's headquarters. Based on the services provided by ISP to the
Company in 1997 under the Management Agreement, after taking into account the
modifications to the agreement described above, the aggregate amount payable by
the Company to ISP under the Management Agreement for 1998 is expected to be
approximately $4.7 million. The Company also expects to pay directly certain
third party costs, which aggregated approximately $0.4 million in 1997, that
were previously included in the management fee. In addition, during 1998 BMCA
required additional space for its headquarters and paid additional rent based on
the square footage 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
F-23
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12. RELATED PARTY TRANSACTIONS--(CONTINUED)
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 6.
Stock Appreciation Rights: The President and Chief Operating 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 nine months of 1997 and 1998.
See also Note 5.
NOTE 13. 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 $227.4 million, including as
of September 27, 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 6). Of
such obligations, $62.2 million (net of estimated insurance recoveries of
$64.5 million) is estimated to be payable during the twelve months ended
September 30, 1999. GAF has advised the Company that it expects to obtain funds
to satisfy such obligations from, among other things, dividends and loans from
subsidiaries (principally the Company), as to which there are restrictions under
the indentures relating to the Deferred Coupon Notes, the Notes and the Credit
Agreement, and from payments pursuant to the Tax Sharing Agreement between GAF
and the Company. The Company does not believe that the dependence of its parent
corporations on the cash flows of their subsidiaries should have a material
adverse effect on the operations, liquidity or capital resources of the Company.
See Notes 3 and 6.
The leases for certain property, plant and equipment at certain of the
Company's roofing facilities are accounted for as capital leases (see Note 10).
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>
F-24
<PAGE>
BUILDING MATERIALS CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 14. SUBSEQUENT EVENTS (UNAUDITED)
Effective December 1, 1998, the Company sold its perlite insulation
manufacturing assets to Johns Manville Corporation. The net cash proceeds of
this sale were approximately $29.0 million. The net gain on this sale was not
significant to the Company's results of operations. As part of the transaction,
Johns Manville and the Company entered into a long-term agreement to supply the
Company with perlite insulation products, which will enable the Company to
continue to serve its commercial roofing customers.
On December 3, 1998, the Company issued $155 million in aggregate principal
amount at maturity of 8% Senior Notes due 2008. The Company used substantially
all of the net proceeds from such issuance to purchase (and subsequently cancel)
$147.1 million in aggregate principal amount at maturity of Deferred Coupon
Notes. In connection with this purchase, the Company recorded an extraordinary
loss of $8.6 million (net of related income tax benefits) in December 1998.
Effective January 1, 1999, BMCA transferred all of its investment assets
and intellectual property assets to Building Materials Investment Corporation, a
newly-formed, wholly-owned subsidiary of BMCA. In connection with this transfer,
Building Materials Investment Corporation agreed to guarantee all of the
Company's obligations under the 8% Senior Notes due 2008 and the Series B 8%
Senior Notes due 2008 and the Company's Notes. BMCA also transferred all of its
manufacturing assets, other than those located in Texas, to Building Materials
Manufacturing Corporation, another newly-formed, wholly-owned subsidiary of
BMCA. In connection with this transfer, Building Materials Manufacturing
Corporation agreed to become a co-obligor on one series of the Company's Notes
and to guarantee the Company's obligations on all of the Company's other Notes,
including the 8% Senior Notes due 2008 and the Series B 8% Senior Notes due
2008.
F-25
<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-26
<PAGE>
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALES REPRESENTATIVE, OR ANY OTHER
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS. THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SECURITIES IN
ANY JURISDICTION WHERE IT IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 1
Risk Factors.................................. 12
Where You Can Find More Information........... 17
Forward-Looking Statements.................... 17
Capitalization................................ 18
Selected Financial Data....................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 22
Business...................................... 28
Management.................................... 38
Executive Compensation........................ 40
Security Ownership of
Certain Beneficial Owners
and Management.............................. 43
Certain Relationships......................... 44
The Exchange Offer............................ 46
Description of the Registered Notes........... 53
Certain Federal Income Tax Considerations..... 78
Plan of Distribution.......................... 78
Legal Matters................................. 79
Experts....................................... 79
Index to Consolidated Financial Statements.... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$155,000,000
BUILDING MATERIALS
CORPORATION OF AMERICA
ISSUER
BUILDING MATERIALS
MANUFACTURING CORPORATION
BUILDING MATERIALS
INVESTMENT
CORPORATION
GUARANTORS
SERIES B
8% SENIOR NOTES DUE 2008
--------------------
PROSPECTUS
--------------------
, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Building Materials Corporation of America is a Delaware corporation.
Subsection (b)(7) of Section 102 of the Delaware General Corporation Law enables
a corporation in its original certificate of incorporation or an amendment to
its certificate of incorporation 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 (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the DGCL (providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (4) 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 BMCA's By-Laws states that BMCA 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 BMCA.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
**2.1 -- Reorganization Agreement, dated as of December 31, 1998, by and among BMCA, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation.
3.1 -- Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 3.1 to BMCA's Form 10-Q
for the quarter ended September 27, 1998).
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 December 3, 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 December 3, 1998, between BMCA, Bear, Stearns & Co. Inc. and
Chase Securities, Inc.
**4.4 -- First Supplemental Indenture dated as of January 1, 1999 to Indenture dated as of December 3, 1998
among BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors and The Bank of New York, as trustee.
**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) (the "2006 Notes Registration Statement")).
10.3 -- Indenture, dated as of October 20, 1997, between BMCA and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.1 to BMCA's Registration Statement on Form S-4 (Registration
No. 333-41531) (the "8% Notes Registration Statement")).
10.4 -- Indenture, dated as of July 17, 1998, 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. 333-60633)
(the "2005 Notes S-4")).
**10.5 -- First Supplemental Indenture, dated as of November 30, 1998, to Indenture dated as of June 30, 1994
between BMCA, as issuer and The Bank of New York, as trustee.
**10.6 -- Second Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of June 30, 1994, as
previously amended, among BMCA, as issuer, Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors and The Bank of New York, as trustee.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
**10.7 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of December 9, 1996
among BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors and The Bank of New York, as trustee.
**10.8 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of October 20, 1997
among BMCA, as issuer, Building Materials Manufacturing Corporation, as co-obligor, Building
Materials Investment Corporation, as guarantor and The Bank of New York, as trustee.
**10.9 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of July 17, 1998 among
BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors and The Bank of New York, as trustee.
10.10 -- 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 Inc. (incorporated by reference
to Exhibit 10.9 to the Registration Statement on Form S-4 of G-I Holdings (Registration
No. 33-72220)).
10.11 -- 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).
10.12 -- 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).
10.13 -- 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).
10.14 -- Amendment No. 4, dated as of December 31, 1995, to the Management Agreement (incorporated by
reference to Exhibit 10.6 to the Registration Statement on Form S-4 of G-I Holdings (Registration
No. 333-2436)).
10.15 -- 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)).
10.16 -- 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.
10.17 -- 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).
10.18 -- 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).
10.19 -- Amendment No. 9, dated as of March 30, 1998, to the Management Agreement (incorporated by reference
to Exhibit 10.10 to ISP Holdings' Registration Statement on Form S-4 (Registration No. 333-53709)).
10.20 -- 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")).
10.21 -- Forms of Amendment to Option Agreement relating to Series A Cumulative Redeemable Convertible
Preferred Stock (incorporated by reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K")).
10.22 -- Form of Option Agreement relating to Series A Cumulative Redeemable Preferred Stock (incorporated by
reference to Exhibit 10.13 to the 1997 Form 10-K).
10.23 -- BMCA Preferred Stock Option Plan (incorporated by reference to Exhibit 4.2 to BMCA's Form S-8).
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C>
10.24 -- 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).
10.25 -- Reorganization Agreement, dated as of January 31, 1994, among GAF Building Materials Corporation,
G-I Holdings and BMCA (incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note
Registration Statement).
10.26 -- 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).
10.27 -- 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).
10.28 -- Letter Agreement, dated July 8, 1998, among BMCA, ISP Holdings and Sunil Kumar (incorporated by
reference to Exhibit 10.18 to the 2005 Notes S-4).
*12 -- Computation of Ratio of Earnings to Fixed Charges.
**21 -- Subsidiaries of BMCA.
**23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
*24 -- Power of Attorney (included on signature pages to Registration Statement).
*25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of
New York, as Trustee under the Indenture.
27 -- Financial Data Schedule for the first nine 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 BMCA's Form 10-Q for the fiscal quarter ended September 27, 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>
- ------------------
* Previously filed.
** Filed herewith.
(b) Schedules
Consolidated Financial Statement Schedules:
<TABLE>
<S> <C>
Report of Independent Public Accountants..................................................... S-1
Schedule II--Valuation and Qualifying Accounts............................................... S-2
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of
II-4
<PAGE>
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.
(d) The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (d)(1)(i) and (d)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the Township of Wayne, State of New
Jersey, on the 5th day of March 1999.
BUILDING MATERIALS CORPORATION OF
AMERICA
By: /s/ James P. Rogers
-------------------------------
Name: James P. Rogers
Title: Executive Vice President
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ ----------------------------------------------------------- -----------------
<S> <C> <C>
* Chairman of the Board and Director
- -----------------------------
Samuel J. Heyman March 5, 1999
* President, Chief Executive Officer
- ----------------------------- and Director (Principal Executive Officer)
Sunil Kumar March 5, 1999
/s/ James P. Rogers Executive Vice President and Director
- -----------------------------
James P. Rogers March 5, 1999
* Senior Vice President and Chief Financial Officer
- ----------------------------- (Principal Financial and Accounting Officer)
William C. Lang March 5, 1999
*By: /s/ James P. Rogers
-------------------------
James P. Rogers
Attorney-in-fact
</TABLE>
II-6
<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 7 to Consolidated Financial
Statements).
(c) Represents balance acquired in an acquisition.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
**2.1 -- Reorganization Agreement, dated as of December 31, 1998, by and among BMCA, Building Materials
Manufacturing Corporation and Building Materials Investment Corporation.
3.1 -- Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 3.1 to BMCA's Form 10-Q
for the quarter ended September 27, 1998).
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 December 3, 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 December 3, 1998, between BMCA, Bear, Stearns & Co. Inc. and
Chase Securities, Inc.
**4.4 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of December 3, 1998
among BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors and The Bank of New York, as trustee.
**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) (the "2006 Notes Registration Statement")).
10.3 -- Indenture, dated as of October 20, 1997, between BMCA and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.1 to BMCA's Registration Statement on Form S-4 (Registration
No. 333-41531) (the "8% Notes Registration Statement")).
10.4 -- Indenture, dated as of July 17, 1998, 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. 333-60633)
(the "2005 Notes S-4")).
**10.5 -- First Supplemental Indenture, dated as of November 30, 1998, to Indenture dated as of June 30, 1994
between BMCA, as Issuer and The Bank of New York, as Trustee.
**10.6 -- Second Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of June 30, 1994, as
previously amended, among BMCA, as issuer, Building Materials Manufacturing Corporation and Building
Materials Investment Corporation, as guarantors, and The Bank of New York, as trustee.
**10.7 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of December 9, 1996
among BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors and The Bank of New York, as trustee.
**10.8 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of October 20, 1997
among BMCA, as issuer, Building Materials Manufacturing Corporation, as co-Obligor, Building
Materials Investment Corporation, as guarantor and The Bank of New York, as trustee.
**10.9 -- First Supplemental Indenture, dated as of January 1, 1999, to Indenture dated as of July 17, 1998 among
BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors and The Bank of New York, as trustee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.10 -- 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 Inc. (incorporated by reference
to Exhibit 10.9 to the Registration Statement on Form S-4 of G-I Holdings (Registration
No. 33-72220)).
10.11 -- 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).
10.12 -- 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).
10.13 -- 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).
10.14 -- Amendment No. 4, dated as of December 31, 1995, to the Management Agreement (incorporated by
reference to Exhibit 10.6 to the Registration Statement on Form S-4 of G-I Holdings (Registration
No. 333-2436)).
10.15 -- 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)).
10.16 -- 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.
10.17 -- 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).
10.18 -- 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).
10.19 -- Amendment No. 9, dated as of March 30, 1998, to the Management Agreement (incorporated by reference
to Exhibit 10.10 to ISP Holdings' Registration Statement on Form S-4 (Registration No. 333-53709)).
10.20 -- 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")).
10.21 -- Forms of Amendment to Option Agreement relating to Series A Cumulative Redeemable Convertible
Preferred Stock (incorporated by reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K")).
10.22 -- Form of Option Agreement relating to Series A Cumulative Redeemable Preferred Stock (incorporated by
reference to Exhibit 10.13 to the 1997 Form 10-K).
10.23 -- BMCA Preferred Stock Option Plan (incorporated by reference to Exhibit 4.2 to BMCA's Form S-8).
10.24 -- 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).
10.25 -- Reorganization Agreement, dated as of January 31, 1994, among GAF Building Materials Corporation,
G-I Holdings and BMCA (incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note
Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.26 -- 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).
10.27 -- 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).
10.28 -- Letter Agreement, dated July 8, 1998, among BMCA, ISP Holdings and Sunil Kumar (incorporated by
reference to Exhibit 10.18 to the 2005 Notes S-4).
*12 -- Computation of Ratio of Earnings to Fixed Charges.
**21 -- Subsidiaries of BMCA.
*23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibits 5 and 8).
*24 -- Power of Attorney (included on signature pages to Registration Statement).
*25 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of
New York, as Trustee under the Indenture.
27 -- Financial Data Schedule for the first nine 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 BMCA's B Form 10-Q for the fiscal quarter ended September 27, 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>
- ------------------
* Previously filed.
** Filed herewith.
<PAGE>
REORGANIZATION AGREEMENT
------------------------
This Agreement ("Agreement") is made as of December 31, 1998 among
Building Materials Corporation of America, doing business as GAF Materials
Corporation, a Delaware corporation ("BMCA"), and each of the following Delaware
corporations, each a newly formed, wholly-owned subsidiary of BMCA: Building
Materials Investment Corporation ("BMIC") and Building Materials Manufacturing
Corporation ("BMMC" and, together with BMIC, each individually, a "Subsidiary"
and collectively the "Subsidiaries").
RECITALS:
---------
A. BMCA is engaged in the operation of a building materials business.
B. BMCA has determined for various business reasons that it is
desirable to transfer certain assets to the Subsidiaries in a transaction
qualifying for nonrecognition under Section 351 of the Internal Revenue Code of
1986, as amended, in consideration for the assumption of certain related
liabilities and other obligations by the Subsidiaries and their issuance of
shares of their common stock to BMCA.
C. The Subsidiaries wish to acquire such assets from BMCA and assume
such related liabilities and other obligations pursuant to the terms of this
Agreement.
AGREEMENTS:
-----------
Subject to the terms and conditions hereof, in consideration of the
mutual agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
I. TRANSFER OF ASSETS AND LIABILITIES AND ISSUANCE OF COMMON STOCK
---------------------------------------------------------------
At the Closing (as hereinafter defined):
<PAGE>
1.1. BMCA shall sell, assign, transfer and convey to each of the
Subsidiaries the assets described in the Assignment and Assumption Agreement
applicable to each such Subsidiary, attached hereto as Exhibits A and B,
respectively, and each of the Subsidiaries shall accept such assets.
1.2. In consideration for the transfer of the assets, each of the
Subsidiaries shall:
(i) assume the liabilities set forth in the Assignment and
Assumption Agreement applicable to such Subsidiary;
(ii) issue ten (10) shares of its common stock, par value
$.001 per share, to BMCA, which shares shall be fully paid and
nonassessable and are registered in the name of BMCA and represent all
of the issued and outstanding shares of capital stock of such
Subsidiary; and
(iii) guarantee or assume those obligations as set forth in
the Supplement to the Subsidiary Guaranty and Supplemental Indentures
applicable to such Subsidiary, in substantially the form attached
hereto as Exhibit C.
The transactions contemplated by this Article I are hereinafter
referred to as the "Transactions."
II. THE CLOSING
-----------
2.1. Place and Time. The closing of the Transactions (the
"Closing") shall be held at the executive offices of
BMCA at 1361 Alps Road, Wayne, New Jersey, on January
1, 1999.
2.2. Documents to be Delivered at the Closing. The
following documents or certificates shall be
delivered at the Closing:
(i) an executed Assignment and Assumption Agreement relating
to the assets to be transferred to, and the liabilities and obligations
to be assumed by, each Subsidiary;
<PAGE>
(ii) a certificate representing ten (10) fully paid and
nonassessable shares of common stock of each Subsidiary duly issued in
the name of BMCA; and
(iii) a copy of the Subsidiary Guaranty and Supplemental
Indentures being entered into by each Subsidiary.
III. TRANSITION SERVICES INTERIM ARRANGEMENT
---------------------------------------
Notwithstanding anything to the contrary herein, BMCA and BMMC
acknowledge that it may be impractical or impossible for BMCA to vest legal
title in and to all of the assets or full legal rights in all of the contracts,
permits and other agreements to be sold, assigned, transferred and conveyed to
BMMC in accordance with the terms of this Agreement because of the need to
obtain necessary consents, approvals, amendments or other steps required to
accomplish such vesting. Therefore the parties agree that for a three month
period commencing on January 1, 1999 ("Interim Period"), BMCA shall continue to
operate all such assets, and to exercise all rights and perform all obligations
under all such contracts, permits and other agreements on behalf of BMMC. BMMC
shall reimburse BMCA promptly after request by BMCA for all reasonable costs of
such operation of assets and continued exercise of rights and performance of
obligations under contracts, permits and other agreements. In addition, BMMC
shall pay to BMCA a service fee of $250,000 for performance of such services
during the Interim Period. BMCA and BMMC agree that the Interim Period may be
extended for an additional three months upon agreement by both parties. In such
an event, in addition to the reimbursement of expenses, BMMC shall pay a service
fee of $250,000 for said additional three month period.
IV. LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
4.1 Disclaimer by BMCA. Each of the Subsidiaries acknowledges that the
respective assets are transferred to it on an "AS IS, WHERE IS" basis and
without any representations or warranties of any kind whatsoever, except as
follows:
(i) BMCA is a corporation duly organized and existing in good
standing under the laws of the State of Delaware and has taken all
action, corporate and otherwise, to authorize the execution, delivery
and performance of this Agreement and the documents delivered pursuant
to Article II; and
<PAGE>
(ii) BMCA warrants that each of the Subsidiaries shall, at the
Closing, acquire such title to the assets transferred to it as BMCA had
immediately prior to such transfer, subject to any and all outstanding
claims, liens, encumbrances, security interests and other interests
existing at the beginning of business on January 1, 1999 and subject to
Article III hereof.
4.2. Indemnification by BMCA as to Certain Liabilities BMCA and the
Subsidiaries acknowledge that none of the Subsidiaries has assumed or shall be
liable for any liabilities or obligations, contingent or otherwise, arising out
of or as a result of the transactions contemplated hereby, except for those
liabilities and obligations expressly assumed in the Assignment and Assumption
Agreement, Subsidiary Guaranty and Supplemental Indentures executed and
delivered by such Subsidiary. BMCA hereby agrees to indemnify, defend and hold
harmless each of the Subsidiaries from and against any and all liabilities,
costs and expenses in connection with any investigations, claims, actions, suits
or proceedings arising out of or resulting from the ownership of any assets
prior to the Closing by BMCA, except for those expressly assumed by such
Subsidiary in the Assignment and Assumption Agreement signed by it. If any
Subsidiary shall receive notice of any such investigation, claim, action, suit
or proceeding, it shall promptly notify BMCA and BMCA shall be obligated to
defend or settle the same through its own counsel and at its own expense, but
each of the Subsidiaries shall provide any cooperation reasonably requested by
BMCA upon receipt of reasonable assurance from BMCA, as the case may be, that it
will reimburse the reasonable cost of such cooperation.
V. FURTHER DOCUMENTS
-----------------
The parties hereto agree to execute, deliver and perform from time to
time such other and further acts, deeds and documents as shall be necessary or
appropriate for better vesting of, and evidencing title to, or permitting use
of, the assets transferred pursuant to this Agreement to the Subsidiaries.
VI. FINAL AGREEMENT
---------------
This Agreement contains the final, complete and exclusive statement of
the agreement among the parties with respect to the transactions contemplated
hereby and
<PAGE>
all prior or contemporaneous oral and all prior written agreements with respect
to the subject matter hereof are hereby superseded.
No modification or amendment hereof shall be effective unless in
writing and duly executed by each of the parties hereto. No failure of any party
to enforce any provisions hereof or to resort to any remedy or to exercise any
one or more alternate remedies and no delay in enforcing, resorting to or
exercising any remedy shall constitute a waiver by that party of its right
subsequently to enforce the same or any other provision hereof or to resort to
any one or more of such rights or remedies on account of any such ground then
existing or which may subsequently occur.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. This Agreement shall
not confer any rights or remedies upon any person or entity other than to a
party herein.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BUILDING MATERIALS CORPORATION OF AMERICA
By: /s/ Sunil Kumar
-------------------------------------------------
Name:
Title:
BUILDING MATERIALS INVESTMENT CORPORATION
By: /s/ Sunil Kumar
-------------------------------------------------
Name:
Title:
BUILDING MATERIALS MANUFACTURING CORPORATION
By: /s/ Sunil Kumar
-------------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
This Assignment and Assumption Agreement is made as of January 1, 1999
by and between Building Materials Corporation of America, a Delaware corporation
("BMCA"), and Building Materials Investment Corporation ("BMIC"), a Delaware
corporation ("Subsidiary").
WHEREAS, BMCA has determined for various business reasons that it is
desirable to transfer certain of its assets, rights and properties to
Subsidiary, in a transaction qualifying for nonrecognition under Section 351 of
the Internal Revenue Code of 1986, as amended; and
WHEREAS, Subsidiary desires to acquire such assets, rights and
properties from BMCA and assume certain liabilities and other obligations
related thereto.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Conveyance of Assets
--------------------
BMCA hereby sells, assigns, transfers and conveys to Subsidiary (the
"conveyance") all of its right, title and interest in and to the assets listed,
on Schedule 1 attached hereto (the "Assets").
2. Acceptance and Assumption
-------------------------
Subsidiary hereby accepts such conveyance of the Assets and assumes the
proper, full and timely payment and performance of all the liabilities,
contingent or otherwise, of BMCA described in Schedule 2 attached hereto (the
"Assumed Liabilities").
<PAGE>
3. Representations and Warranties
------------------------------
The Assets are conveyed hereunder on an "AS IS, WHERE IS" basis,
without any representations or warranties whatsoever, except as follows:
A. BMCA is a corporation duly organized and existing in good
standing under the laws of the State of Delaware and has taken all
action, corporate and otherwise, to authorize the execution, delivery
and performance of this Assignment and Assumption Agreement.
B. BMCA warrants that Subsidiary shall have and hold such
title to the Assets transferred, to each of them as BMCA had
immediately prior to their transfer, subject to any and all outstanding
claims, liens, encumbrances, security interests and other interests
existing as of the beginning of business on January 1, 1999.
4. Indemnification
---------------
Subsidiary shall indemnify, defend and hold harmless BMCA, and its
other subsidiaries from and against any and all of the Assumed Liabilities and
all liabilities, costs and expenses in connection with any investigations,
claims, actions, suits or proceedings arising out of or resulting from the
Assumed Liabilities on and after January 1, 1999. If BMCA shall receive notice
of any such investigation, claim, action, suit or proceeding, it shall promptly
notify Subsidiary which shall be entitled and obligated to defend or settle the
same through its own counsel and at its own expense, but BMCA, as the case may
be, shall provide any cooperation reasonably requested by Subsidiary upon
receipt of reasonable assurance from Subsidiary that it will reimburse the
reasonable cost of such cooperation
Subsidiary disclaims any assumption or other responsibility for the
liabilities and continuing obligations of BMCA, other than those expressly
assumed herein or in the Subsidiary Guaranties and Supplemental Indentures
executed by it and attached to the Reorganization Agreement and shall be
indemnified against such liabilities and obligations by BMCA to the extent
provided in Section 4.2 of the Reorganization Agreement.
<PAGE>
5. Further Documentation
---------------------
BMCA agrees to execute, upon the request of Subsidiary, such other and
further specific documents as may be reasonably required to evidence the title
of Subsidiary and its right to use the Assets in its business including, but not
limited to, any instruments necessary or appropriate to record or register title
to such Assets or to evidence the consent or approval of government agencies or
other third parties to the exercise by Subsidiary of the rights of Subsidiary
with respect to such Assets.
<PAGE>
IN WITNESS WHEREOF, this Assignment and Assumption Agreement is
executed as of January 1, 1999.
BUILDING MATERIALS CORPORATION OF AMERICA
By:
-------------------------------------------------
Name:
Title:
BUILDING MATERIALS INVESTMENT CORPORATION
By:
-------------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
---------
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
This Assignment and Assumption Agreement is made as of January 1, 1999
by and between Building Materials Corporation of America, a Delaware corporation
("BMCA"), and Building Materials Manufacturing Corporation ("BMMC"), a Delaware
corporation ("Subsidiary").
WHEREAS, BMCA has determined for various business reasons that it is
desirable to transfer certain of its assets, rights and properties to
Subsidiary, in a transaction qualifying for nonrecognition under Section 351 of
the Internal Revenue Code of 1986, as amended; and
WHEREAS, Subsidiary desires to acquire such assets, rights and
properties from BMCA and assume certain liabilities and other obligations
related thereto.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Conveyance of Assets
--------------------
BMCA hereby sells, assigns, transfers and conveys to Subsidiary (the
"conveyance") all of its right, title and interest on and to the assets listed
in Schedule 1 attached hereto (the "Assets").
2. Acceptance and Assumption
-------------------------
Subsidiary hereby accepts such conveyance of the Assets and assumes the
proper, full and timely payment and performance of all the liabilities,
contingent or otherwise, of BMCA described in Schedule 2 attached hereto (the
"Assumed Liabilities").
<PAGE>
3. Representations and Warranties
------------------------------
The Assets are conveyed hereunder on an "AS IS, WHERE IS" basis,
without any representations or warranties whatsoever, except as follows:
A. BMCA is a corporation duly organized and existing in good
standing under the laws of the State of Delaware and has taken all
action, corporate and otherwise, to authorize the execution, delivery
and performance of this Assignment and Assumption Agreement.
B. BMCA warrants that Subsidiary shall have and hold such
title to the assets transferred, to each of them as BMCA had
immediately prior to their transfer, subject to any and all outstanding
claims, liens, encumbrances, security interests and other interests
existing as of the beginning of business on January 1, 1999.
4. Indemnification
---------------
Subsidiary shall indemnify, defend and hold harmless BMCA, and its
other subsidiaries from and against any and all of the Assumed Liabilities and
all liabilities, costs and expenses in connection with any investigations,
claims, actions, suits or proceedings arising out of or resulting from the
Assumed Liabilities on and after January 1, 1999. If BMCA shall receive notice
of any such investigation, claim, action, suit or proceeding, it shall promptly
notify Subsidiary which shall be entitled and obligated to defend or settle the
same through its own counsel and at its own expense, but BMCA, as the case may
be, shall provide any cooperation reasonably requested by Subsidiary upon
receipt of reasonable assurance from Subsidiary that it will reimburse the
reasonable cost of such cooperation
Subsidiary disclaims any assumption or other responsibility for the
liabilities and continuing obligations of BMCA, other than those expressly
assumed herein or in the Subsidiary Guaranties and Supplemental Indentures
executed by it and attached to the Reorganization Agreement and shall be
indemnified against such liabilities and obligations by BMCA to the extent
provided in Section 4.2 of the Reorganization Agreement.
<PAGE>
5. Further Documentation
---------------------
BMCA agrees to execute, upon the request of Subsidiary, such other and
further specific documents as may be reasonably required to evidence the title
of Subsidiary and its right to use the Assets in its business including, but not
limited to, any instruments necessary or appropriate to record or register title
to such Assets or to evidence the consent or approval of government agencies or
other third parties to the exercise by Subsidiary of the rights of Subsidiary
with respect to such Assets.
<PAGE>
IN WITNESS WHEREOF, this Assignment and Assumption Agreement is
executed as of January 1, 1999.
BUILDING MATERIALS CORPORATION OF AMERICA
By:
-------------------------------------------------
Name:
Title:
BUILDING MATERIALS MANUFACTURING CORPORATION
By:
-------------------------------------------------
Name:
Title:
<PAGE>
8% Senior Notes due 2008
- --------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
dated as of January 1, 1999
to
INDENTURE
dated as of December 3, 1998
among
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA,
as Issuer,
BUILDING MATERIALS MANUFACTURING CORPORATION
and
BUILDING MATERIALS INVESTMENT CORPORATION
as Guarantors
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE to the Indenture (as defined below)
(the "First Supplemental Indenture") dated as of January 1, 1999, is made among
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation (the
"Company"), having its principal office at 1361 Alps Road, Wayne, New Jersey
07470, BUILDING MATERIALS MANUFACTURING CORPORATION, a Delaware corporation
wholly-owned by the Company ("Manufacturing Co."), and BUILDING MATERIALS
INVESTMENT CORPORATION, a Delaware corporation wholly-owned by the Company
("Investment Co." and together with Manufacturing Co., the "Guarantors"), and
THE BANK OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee"), and amends the Indenture, dated as of December 3, 1998, between the
Company and the Trustee (as amended from time to time, the "Indenture").
R E C I T A L S:
A. Pursuant to the Indenture, the Company issued $155,000,000 in
aggregate principal amount at maturity of the Securities (as defined in the
Indenture).
B. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
C. The Guarantors have each received certain assets from the Company
pursuant to a Reorganization Agreement dated as of December 31, 1998, and as
consideration for such assets and for other good and valuable consideration, the
Guarantors desire to provide for their guarantee of all of the Company's
obligations under the Securities.
D. Section 9.01(5) of the Indenture provides that the Company and the
Trustee may amend or supplement the Indenture without the consent of Holders to,
among other things, 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.
NOW, THEREFORE, it is hereby agreed as follows:
2
<PAGE>
ARTICLE 1
GUARANTEES
SECTION 1.01. Guarantee. Subject to Section 1.07, each
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guarantees to each Holder (a "Guaranty"), the following obligations: (a) the
full and punctual payment of principal, premium, if any, 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 the Indenture
and the Securities and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Company under the Indenture
(including, without limitation, the compensation and other payment obligations
to the Trustee thereunder) and the Securities (all the foregoing being
hereinafter collectively called the "Guaranteed Obligations"). Each Guarantor
further agrees that the Guaranteed Obligations may be extended or renewed, in
whole or in part, without notice or further assent from such Guarantor and that
such Guarantor will remain bound under the terms hereof notwithstanding any
extension or renewal of any Guaranteed Obligation.
Each Guarantor agrees that its Guarantee herein constitutes a guarantee
of payment, performance and compliance when due (and not a guarantee of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the Guaranteed Obligations.
The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, the Company, any Subsidiary thereof or any
other Person, and, subject to Section 1.05, a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, the Company, any Subsidiary thereof or any other
Person and whether or not any other Guarantor, the Company or any Subsidiary
thereof be joined in any such action or actions. Any payment by the Company or
any Subsidiary thereof or other circumstance which operates to toll any statute
of limitations as to the Company or any such Subsidiary shall operate to toll
the statute of limitations as to each Guarantor.
Notwithstanding anything to the contrary contained herein, at law or
otherwise, the obligations of each Guarantor hereunder and the rights of the
Trustee and each Holder hereunder shall be construed as equal and pari passu to
the obligations of each such Guarantor under that certain Subsidiary Guaranty,
dated as of August 29, 1997, among the guarantors party thereto and The Bank of
New York, as Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "Subsidiary Guaranty") and the rights of The
Bank of New York, as Administrative Agent, and the Lenders under the Subsidiary
Guaranty.
3
<PAGE>
SECTION 1.02 Unconditional Obligations. This Guaranty shall not be
discharged except by complete performance of the Guaranteed Obligations as
contemplated in the Indenture and the Securities. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under the Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any agreement
referred to in clause (a) of this paragraph; (c) any rescission, waiver,
amendment or modification of any of the terms or provisions of the Indenture,
the Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the
failure of any Holder or Trustee to exercise any right or remedy against any
other Guarantor of the Guaranteed Obligations or any other Person; or (f) except
as provided in Section 1.08 of this First Supplemental Indenture, any change in
the ownership of such Guarantor. Each Guarantor hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or any right to require a proceeding or the taking of other
action by the Trustee or any Holder against, and any other notice to, any other
Guarantor or the Company.
SECTION 1.03 Continuing Guaranty. This Guaranty is a continuing one and
all liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. No failure or
delay on the part of any Holder in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Holder would otherwise have. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Holder to any other or further action
to any circumstances without notice or demand. It is not necessary for any
Holder to inquire into the capacity or powers of the Company or any Subsidiary
thereof or the officers, directors, partners or agents acting or purporting to
act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
SECTION 1.04 Subrogation; Acceleration. Each Guarantor agrees that it
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Guaranteed Obligations. Each Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations may
be accelerated as provided in Article VI of the Indenture for the purposes of
such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in
4
<PAGE>
the event of any declaration of acceleration of such obligations as provided in
Article VI of the Indenture, such Guaranteed Obligations (whether or not due and
payable) shall forthwith become due and payable by each Guarantor for the
purposes hereof.
SECTION 1.05 Enforcement. The Holders agree that this Guaranty may be
enforced only by the action of the Trustee in accordance with the terms of the
Indenture and that no other Holders shall have any right individually to seek to
enforce this Guaranty. The Holders further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
SECTION 1.06 Covenants. Each Guarantor agrees that its Guaranteed
Obligations hereunder are senior Indebtedness of such Guarantor and such
Guaranteed Obligations shall not be subordinate to any existing or future
obligations of such Guarantor. Each Guarantor further covenants and agrees that
on and after the date hereof such Guarantor will comply (as a Recourse
Subsidiary of the Company), and will cause each of its Subsidiaries to comply,
with all of the applicable provisions, covenants and agreements contained in the
Indenture, and will take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that it is not in
violation of any provision, covenant or agreement contained in the Indenture,
and so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
Each Guarantor hereby jointly and severally agrees to pay all
reasonable out-of-pocket costs and expenses of each Holder in connection with
the enforcement of this Guaranty and of the Trustee in connection with any
amendment, waiver or consent relating hereto (including in each case, without
limitation, the reasonable fees and disbursements of counsel employed by each
Holder).
SECTION 1.07 Limitation of Liability. Each Guarantor hereby confirms
that it is its intention that this Guaranty not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act or any similar Federal, state or foreign law for the relief of
debtors. Accordingly, each Guarantor hereby irrevocably agrees that the
Guaranteed Obligations guaranteed by such Guarantor shall be limited to such
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution pursuant to any
agreement providing for an equitable contribution among such Guarantor and the
other Guarantors, result in the Guaranteed Obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
5
<PAGE>
SECTION 1.08 Miscellaneous. (a) The Trustee accepts the trusts of the
Indenture, as supplemented by this First Supplemental Indenture, and agrees to
perform the same, but only upon the terms and conditions set forth in the
Indenture, as supplemented by this First Supplemental Indenture, to which the
parties hereto and the Holders from time to time of the Securities agree and,
except as expressly set forth in the Indenture, shall incur no liability or
responsibility in respect thereof.
(b) This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Holders and their
successors and assigns.
(c) Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
each Guarantor directly affected thereby and with the written consent of the
holders of a majority in aggregate principal amount of the Securities then
outstanding.
All notices, requests, demands or other communications pursuant hereto
shall be made in accordance with Section 10.02 of the Indenture.
In the event that all of the capital stock of one or more Guarantors is
sold or otherwise disposed of or liquidated in compliance with the requirements
of the Indenture and the proceeds of such sale, disposition or liquidation are
applied, to the extent applicable, in accordance with the provisions of the
Indenture, such Guarantor shall upon consummation of such sale or other
disposition (except to the extent that such sale or disposition is to the
Company or another Subsidiary thereof) be released from this Guaranty
automatically and without further action and this Guaranty shall, as to each
such Guarantor or Guarantors, terminate, and have no further force or effect. At
the request of the Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. Confirmation. This First Supplemental Indenture and the
Indenture shall henceforth be read together. Except as expressly set forth
herein, the Indenture shall remain unchanged and is in all respects confirmed
and preserved.
SECTION 2.02. Counterparts. This First Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
SECTION 2.03. Governing Law. This First Supplemental Indenture shall be
governed by the laws of the State of New York without regard to the principles
of conflicts of laws.
6
<PAGE>
The Trustee, the Company, the Guarantors and the Holders 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 the Indenture or this First Supplemental
Indenture.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this First Supplemental
Indenture to be signed and acknowledged by their respective officers thereunto
duly authorized as of the day and year first-above written.
BUILDING MATERIALS CORPORATION OF
AMERICA, as Issuer
By: /s/ Richard A. Weinberg
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel and
Secretary
BUILDING MATERIALS MANUFACTURING
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel and
Secretary
BUILDING MATERIALS INVESTMENT
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel and
Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert Massimillo
Name: Robert Massimillo
Title: Assistant Vice President
8
<PAGE>
Exhibit 5
March 5, 1999
Building Materials Corporation
of America
1361 Alps Road
Wayne, New Jersey 07470
Ladies and Gentlemen:
We have acted as counsel to Building Materials Corporation of
America, a Delaware corporation (the "Company"), Building Materials
Manufacturing Corporation, a Delaware corporation ("BMMC"), and Building
Materials Investment Corporation, a Delaware corporation ("BMIC", together with
BMMC, the "Subsidiary Guarantors"), in connection with (i) the issuance and sale
by the Company of $155,000,000 aggregate principal amount of its 8% Senior Notes
due 2008 (the "Old Notes") and the accompanying Guarantees (the "Old
Guarantees") of the Subsidiary Guarantors, each issued pursuant to an Indenture,
dated as of December 3, 1998, as amended by the First Supplemental Indenture
dated as of January 1, 1999 (the "Indenture"), between the Company, the
Subsidiary Guarantors and The Bank of New York, as Trustee (the "Trustee") and
(ii) the preparation and filing with the Securities and Exchange Commission of
the Company's Registration Statement on Form S-4, Registration No. 333-69749 (as
amended, the "Registration Statement"), under the Securities Act of 1933, as
amended, pursuant to the offer by the Company to exchange its Old Notes for
Series B 8% Senior Notes due 2008 (the "New Notes") and the accompanying
Guarantees (the "New Guarantees").
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Indenture pursuant to which the New Notes will be issued, the form of the New
Notes included as Exhibit 4.2 to the Registration Statement and such corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials and of officers and representatives of
the Company and the Subsidiary Guarantors, and have made such
<PAGE>
Building Materials Corporation
of America
March 5, 1999
Page 2
inquiries of such officers and representatives, as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to all questions
of fact material to this opinion that have not been independently established,
we have relied upon certificates or comparable documents of officers and
representatives of the Company and the Subsidiary Guarantors.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:
1. The New Notes have been duly authorized by the Company and,
when executed on behalf of the Company, authenticated by the Trustee and
delivered in accordance with the terms of the Indenture and as contemplated by
the Registration Statement, will constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the Indenture,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights and remedies
generally and, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether sought in a proceeding at law or in equity).
2. The New Guarantees have been duly authorized by the
Subsidiary Guarantors and when executed and delivered by the Subsidiary
Guarantors in accordance with the terms of the Indenture and as contemplated by
the Registration Statement, will constitute a valid and legally binding
obligation of each of the Subsidiary Guarantors entitled to the benefits
provided by the Indenture, enforceable against each of the Subsidiary Guarantors
in accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting creditors' rights and remedies generally and, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether sought in a proceeding at law
or in equity).
The opinion expressed herein is limited to the laws of the
State of New York, the corporate laws of the State of Delaware and the federal
laws of the United States, and we
<PAGE>
Building Materials Corporation
of America
March 5, 1999
Page 3
express no opinion as to the effect on the matters covered by this letter of the
laws of any other jurisdiction.
We consent to the reference to our name under the caption
"Legal Matters" in the prospectus which is a part of the Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE>
Exhibit 8
March 5, 1999
Building Materials Corporation
of America
1361 Alps Road
Wayne, NJ 07470
Re: Series B 8% Senior Notes Due 2008
=================================
Ladies and Gentlemen:
We have acted as counsel to Building Materials Corporation of
America, a Delaware corporation (the "Company"), Building Materials
Manufacturing Corporation, a Delaware corporation ("BMMC"), and Building
Materials Investment Corporation, a Delaware corporation ("BMIC", together with
BMMC, the "Subsidiary Guarantors"), in connection with (i) the issuance and sale
by the Company of $155,000,000 aggregate principal amount of its 8% Senior Notes
due 2008 (the "Old Notes") and the accompanying guarantees of the Subsidiary
Guarantors, each issued pursuant to an Indenture, dated as of December 3, 1998,
as amended by the First Supplemental Indenture, dated as of January 1, 1999,
between the Company, the Subsidiary Guarantors and The Bank of New York, as
Trustee and (ii) the preparation and filing with the Securities and Exchange
Commission of the Company's Registration Statement on Form S-4, Registration No.
333-69749 (as amended, the "Registration Statement"), under the Securities Act
of 1933, as amended, pursuant to the offer by the Company to exchange its Old
Notes for Series B 8% Senior Notes due 2008 and the accompanying guarantees.
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement,
including the prospectus which is a part thereof (the "Prospectus"), and such
corporate records, agreements, documents and other instruments (the
aforementioned documents together, the "Documents"), and have made such
inquiries of such officers and representatives, as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth. In such examination,
we have assumed the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, the authenticity of the originals of such
latter documents, the genuineness of all signatures, and the correctness of all
representations made therein. (The terms of the Documents are incorporated
herein by reference.) We have further assumed that the final executed Documents
will be substantially the same as those which we have reviewed and that there
are no agreements or understandings between or among
<PAGE>
Building Materials Corporation
of America
March 5, 1999
the parties to the Documents with respect to the transactions contemplated
therein other than those contained in the Documents.
Based on the foregoing, subject to the next succeeding
paragraph, and assuming full compliance with all the terms of the Documents, it
is our opinion that the discussion included in the Prospectus under the caption
"Certain Federal Income Tax Considerations," insofar as it constitutes
statements of law or legal conclusions and except to the extent qualified
therein, is accurate in all material respects.
The foregoing opinion is based on current provisions of the
Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. No opinion
is expressed on any matters other than those specifically covered by the
foregoing opinion.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
2
<PAGE>
EXECUTION COPY
11 3/4% Senior Deferred Coupon Notes due 2004
- --------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
dated as of November 30, 1998
to
INDENTURE
dated as of June 30, 1994
between
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA,
as Issuer
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE to the Indenture (as defined below)
(the "First Supplemental Indenture") is dated as of November 30, 1998, is made
by and between BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation
(the "Company"), having its principal office at 1361 Alps Road, Wayne, New
Jersey 07470, and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee"), and amends the Indenture, dated as of June 30, 1994,
between the Company and the Trustee (the "Indenture"), relating to the 11-3/4%
Senior Deferred Coupon Notes due 2004 of the Company.
R E C I T A L S:
A. Pursuant to the Indenture, the Company issued $310,000,000 in
aggregate principal amount at maturity of its 11-3/4% Senior Deferred Coupon
Notes due 2004 (the "Securities").
B. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
C. Section 9.02 of the Indenture provides that the Company, when
authorized by resolution of its Board of Directors, and the Trustee, upon the
written consent of the holders of a majority in aggregate principal amount of
Securities then outstanding (a "Majority Consent"), may amend or supplement the
Securities and the Indenture, as set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
1. Pursuant to Section 9.02 of the Indenture, and subject to
Paragraph 5 below, the Indenture is hereby amended as follows:
The definition of "Consolidated Net Income (Loss)"
set forth in Section 1.01 of the Indenture is amended by
adding the following sentence to the end of such definition:
"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."
2. Confirmation. This First Supplemental Indenture and the
Indenture shall henceforth be read together. Except as
expressly set forth herein, the Indenture shall remain
unchanged and is in all respects confirmed and preserved.
3. Counterparts. This First Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one
instrument.
2
<PAGE>
4. Effectiveness of Amendment. The amendment to the Indenture set
forth in Paragraph 1 of this First Supplemental Indenture
shall become effective upon (i) the execution of this First
Supplemental Indenture and (ii) the receipt of the Majority
Consent.
5. Governing Law. This First Supplemental Indenture shall be
governed by the laws of the State of New York without regard
to the principles of conflicts of laws.
[signature page follows]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this First Supplemental
Indenture to be signed and acknowledged by their respective officers thereunto
duly authorized as of the day and year first-above written.
BUILDING MATERIALS CORPORATION OF
AMERICA, as Issuer
By: /s/ Susan B. Yoss
--------------------------
Name: Susan B. Yoss
Title: Vice President and Treasurer
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert Massimillo
--------------------------
Name: Robert Massimillo
Title: Assistant Vice President
4
<PAGE>
11 3/4% Senior Deferred Coupon Notes due 2004
- --------------------------------------------------------------------------------
SECOND SUPPLEMENTAL INDENTURE
dated as of January 1, 1999
to
INDENTURE
dated as of June 30, 1994, as previously amended,
among
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA,
as Issuer,
BUILDING MATERIALS MANUFACTURING CORPORATION,
and
BUILDING MATERIALS INVESTMENT CORPORATION,
as Guarantors
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
This SECOND SUPPLEMENTAL INDENTURE to the Indenture (as defined below)
(the "Second Supplemental Indenture") dated as of January 1, 1999, is made among
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation (the
"Company"), having its principal office at 1361 Alps Road, Wayne, New Jersey
07470, BUILDING MATERIALS MANUFACTURING CORPORATION, a Delaware corporation
wholly-owned by the Company ("Manufacturing Co."), and BUILDING MATERIALS
INVESTMENT CORPORATION, a Delaware corporation wholly-owned by the Company
("Investment Co." and together with Manufacturing Co., the "Guarantors"), and
THE BANK OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee"), and amends the Indenture, dated as of June 30, 1994, between the
Company and the Trustee, as previously amended by the First Supplemental
Indenture, dated as of November 30, 1998 (as amended from time to time, the
"Indenture").
R E C I T A L S:
A. Pursuant to the Indenture, the Company issued $310,000,000 in
aggregate principal amount at maturity of the Securities (as defined in the
Indenture).
B. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
C. The Company has transferred certain of its Material Assets to the
Guarantors pursuant to a Reorganization Agreement dated as of December 31, 1998.
D. Section 4.17 of 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 Subsidiaries of the Company, that the Company
shall cause such transferee Subsidiaries to execute and deliver to the Trustee a
supplemental indenture pursuant to which such transferee Subsidiaries shall
unconditionally guarantee, on a senior basis, all of the Company's obligations
under the Securities.
NOW, THEREFORE, it is hereby agreed as follows:
2
<PAGE>
ARTICLE 1
GUARANTEES
SECTION 1.01. Guarantee. Subject to Section 1.07, each
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guarantees to each Holder (a "Guaranty"), the following obligations: (a) the
full and punctual payment of principal, premium, if any, 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 the Indenture
and the Securities and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Company under the Indenture
(including, without limitation, the compensation and other payment obligations
to the Trustee thereunder) and the Securities (all the foregoing being
hereinafter collectively called the "Guaranteed Obligations"). Each Guarantor
further agrees that the Guaranteed Obligations may be extended or renewed, in
whole or in part, without notice or further assent from such Guarantor and that
such Guarantor will remain bound under the terms hereof notwithstanding any
extension or renewal of any Guaranteed Obligation.
Each Guarantor agrees that its Guarantee herein constitutes a guarantee
of payment, performance and compliance when due (and not a guarantee of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the Guaranteed Obligations.
The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, the Company, any Subsidiary thereof or any
other Person, and, subject to Section 1.05, a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, the Company, any Subsidiary thereof or any other
Person and whether or not any other Guarantor, the Company or any Subsidiary
thereof be joined in any such action or actions. Any payment by the Company or
any Subsidiary thereof or other circumstance which operates to toll any statute
of limitations as to the Company or any such Subsidiary shall operate to toll
the statute of limitations as to each Guarantor.
Notwithstanding anything to the contrary contained herein, at law or
otherwise, the obligations of each Guarantor hereunder and the rights of the
Trustee and each Holder hereunder shall be construed as equal and pari passu to
the obligations of each such Guarantor under that certain Subsidiary Guaranty,
dated as of August 29, 1997, among the guarantors party thereto and The Bank of
New York, as Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "Subsidiary Guaranty") and the rights of The
Bank of New York, as Administrative Agent, and the Lenders under the Subsidiary
Guaranty.
3
<PAGE>
SECTION 1.02 Unconditional Obligations. This Guaranty shall not be
discharged except by complete performance of the Guaranteed Obligations as
contemplated in the Indenture and the Securities. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under the Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any agreement
referred to in clause (a) of this paragraph; (c) any rescission, waiver,
amendment or modification of any of the terms or provisions of the Indenture,
the Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the
failure of any Holder or Trustee to exercise any right or remedy against any
other Guarantor of the Guaranteed Obligations or any other Person; or (f) except
as provided in Section 1.08 of this Second Supplemental Indenture, any change in
the ownership of such Guarantor. Each Guarantor hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or any right to require a proceeding or the taking of other
action by the Trustee or any Holder against, and any other notice to, any other
Guarantor or the Company.
SECTION 1.03 Continuing Guaranty. This Guaranty is a continuing one and
all liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. No failure or
delay on the part of any Holder in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Holder would otherwise have. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Holder to any other or further action
to any circumstances without notice or demand. It is not necessary for any
Holder to inquire into the capacity or powers of the Company or any Subsidiary
thereof or the officers, directors, partners or agents acting or purporting to
act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
SECTION 1.04 Subrogation; Acceleration. Each Guarantor agrees that it
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Guaranteed Obligations. Each Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations may
be accelerated as provided in Article VI of the Indenture for the purposes of
such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in
4
<PAGE>
the event of any declaration of acceleration of such obligations as provided in
Article VI of the Indenture, such Guaranteed Obligations (whether or not due and
payable) shall forthwith become due and payable by each Guarantor for the
purposes hereof.
SECTION 1.05 Enforcement. The Holders agree that this Guaranty may be
enforced only by the action of the Trustee in accordance with the terms of the
Indenture and that no other Holders shall have any right individually to seek to
enforce this Guaranty. The Holders further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
SECTION 1.06 Covenants. Each Guarantor agrees that its Guaranteed
Obligations hereunder are senior Indebtedness of such Guarantor and such
Guaranteed Obligations shall not be subordinate to any existing or future
obligations of such Guarantor. Each Guarantor further covenants and agrees that
on and after the date hereof such Guarantor will comply (as a Recourse
Subsidiary of the Company), and will cause each of its Subsidiaries to comply,
with all of the applicable provisions, covenants and agreements contained in the
Indenture, and will take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that it is not in
violation of any provision, covenant or agreement contained in the Indenture,
and so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
Each Guarantor hereby jointly and severally agrees to pay all
reasonable out-of-pocket costs and expenses of each Holder in connection with
the enforcement of this Guaranty and of the Trustee in connection with any
amendment, waiver or consent relating hereto (including in each case, without
limitation, the reasonable fees and disbursements of counsel employed by each
Holder).
SECTION 1.07 Limitation of Liability. Each Guarantor hereby confirms
that it is its intention that this Guaranty not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act or any similar Federal, state or foreign law for the relief of
debtors. Accordingly, each Guarantor hereby irrevocably agrees that the
Guaranteed Obligations guaranteed by such Guarantor shall be limited to such
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution pursuant to any
agreement providing for an equitable contribution among such Guarantor and the
other Guarantors, result in the Guaranteed Obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
5
<PAGE>
SECTION 1.08 Miscellaneous. (a) The Trustee accepts the trusts of the
Indenture, as supplemented by this Second Supplemental Indenture, and agrees to
perform the same, but only upon the terms and conditions set forth in the
Indenture, as supplemented by this Second Supplemental Indenture, to which the
parties hereto and the Holders from time to time of the Securities agree and,
except as expressly set forth in the Indenture, shall incur no liability or
responsibility in respect thereof.
(b) This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Holders and their
successors and assigns.
(c) Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
each Guarantor directly affected thereby and with the written consent of the
holders of a majority in aggregate principal amount of the Securities then
outstanding.
All notices, requests, demands or other communications pursuant hereto
shall be made in accordance with Section 10.02 of the Indenture.
In the event that all of the capital stock of one or more Guarantors is
sold or otherwise disposed of or liquidated in compliance with the requirements
of the Indenture and the proceeds of such sale, disposition or liquidation are
applied, to the extent applicable, in accordance with the provisions of the
Indenture, such Guarantor shall upon consummation of such sale or other
disposition (except to the extent that such sale or disposition is to the
Company or another Subsidiary thereof) be released from this Guaranty
automatically and without further action and this Guaranty shall, as to each
such Guarantor or Guarantors, terminate, and have no further force or effect. At
the request of the Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. Confirmation. This Second Supplemental Indenture and the
Indenture shall henceforth be read together. Except as expressly set forth
herein, the Indenture shall remain unchanged and is in all respects confirmed
and preserved.
SECTION 2.02. Counterparts. This Second Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
SECTION 2.03. Governing Law. This Second Supplemental Indenture shall
be governed by the laws of the State of New York without regard to the
principles of conflicts of
6
<PAGE>
laws. The Trustee, the Company, the Guarantors and the Holders 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 the Indenture or this Second
Supplemental Indenture.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Second Supplemental
Indenture to be signed and acknowledged by their respective officers thereunto
duly authorized as of the day and year first-above written.
BUILDING MATERIALS CORPORATION OF
AMERICA, as Issuer
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
BUILDING MATERIALS MANUFACTURING
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
BUILDING MATERIALS INVESTMENT
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
-------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert Massimillo
------------------------
Name: Robert Massimillo
Title: Assistant Vice President
8
<PAGE>
8-5/8% Senior Notes due 2006
- --------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
dated as of January 1, 1999
to
INDENTURE
dated as of December 9, 1996
among
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA,
as Issuer,
BUILDING MATERIALS MANUFACTURING CORPORATION,
and
BUILDING MATERIALS INVESTMENT CORPORATION,
as Guarantors
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE to the Indenture (as defined below)
(the "First Supplemental Indenture") dated as of January 1, 1999, is made among
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation (the
"Company"), having its principal office at 1361 Alps Road, Wayne, New Jersey
07470, BUILDING MATERIALS MANUFACTURING CORPORATION, a Delaware corporation
wholly-owned by the Company ("Manufacturing Co."), and BUILDING MATERIALS
INVESTMENT CORPORATION, a Delaware corporation wholly-owned by the Company
("Investment Co." and together with Manufacturing Co., the "Guarantors"), and
THE BANK OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee"), and amends the Indenture, dated as of December 9, 1996, between the
Company and the Trustee (as amended from time to time, the "Indenture").
R E C I T A L S:
A. Pursuant to the Indenture, the Company issued $100,000,000 in
aggregate principal amount at maturity of the Securities (as defined in the
Indenture).
B. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
C. The Company has transferred certain of its Material Assets to the
Guarantors pursuant to a Reorganization Agreement dated as of December 31, 1998.
D. Section 4.17 of 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 Subsidiaries of the Company, that the Company
shall cause such transferee Subsidiaries to execute and deliver to the Trustee a
supplemental indenture pursuant to which such transferee Subsidiaries shall
unconditionally guarantee, on a senior basis, all of the Company's obligations
under the Securities.
NOW, THEREFORE, it is hereby agreed as follows:
2
<PAGE>
ARTICLE 1
GUARANTEES
SECTION 1.01. Guarantee. Subject to Section 1.07, each Guarantor,
jointly and severally, hereby unconditionally and irrevocably guarantees to each
Holder (a "Guaranty"), the following obligations: (a) the full and punctual
payment of principal, premium, if any, 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 the Indenture and the Securities and
(b) the full and punctual performance within applicable grace periods of all
other obligations of the Company under the Indenture (including, without
limitation, the compensation and other payment obligations to the Trustee
thereunder) and the Securities (all the foregoing being hereinafter collectively
called the "Guaranteed Obligations"). Each Guarantor further agrees that the
Guaranteed Obligations may be extended or renewed, in whole or in part, without
notice or further assent from such Guarantor and that such Guarantor will remain
bound under the terms hereof notwithstanding any extension or renewal of any
Guaranteed Obligation.
Each Guarantor agrees that its Guarantee herein constitutes a guarantee
of payment, performance and compliance when due (and not a guarantee of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the Guaranteed Obligations.
The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, the Company, any Subsidiary thereof or any
other Person, and, subject to Section 1.05, a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, the Company, any Subsidiary thereof or any other
Person and whether or not any other Guarantor, the Company or any Subsidiary
thereof be joined in any such action or actions. Any payment by the Company or
any Subsidiary thereof or other circumstance which operates to toll any statute
of limitations as to the Company or any such Subsidiary shall operate to toll
the statute of limitations as to each Guarantor.
Notwithstanding anything to the contrary contained herein, at law or
otherwise, the obligations of each Guarantor hereunder and the rights of the
Trustee and each Holder hereunder shall be construed as equal and pari passu to
the obligations of each such Guarantor under that certain Subsidiary Guaranty,
dated as of August 29, 1997, among the guarantors party thereto and The Bank of
New York, as Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "Subsidiary Guaranty") and the rights of The
Bank of New York, as Administrative Agent, and the Lenders under the Subsidiary
Guaranty.
3
<PAGE>
SECTION 1.02 Unconditional Obligations. This Guaranty shall not be
discharged except by complete performance of the Guaranteed Obligations as
contemplated in the Indenture and the Securities. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under the Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any agreement
referred to in clause (a) of this paragraph; (c) any rescission, waiver,
amendment or modification of any of the terms or provisions of the Indenture,
the Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the
failure of any Holder or Trustee to exercise any right or remedy against any
other Guarantor of the Guaranteed Obligations or any other Person; or (f) except
as provided in Section 1.08 of this First Supplemental Indenture, any change in
the ownership of such Guarantor. Each Guarantor hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or any right to require a proceeding or the taking of other
action by the Trustee or any Holder against, and any other notice to, any other
Guarantor or the Company.
SECTION 1.03 Continuing Guaranty. This Guaranty is a continuing one and
all liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. No failure or
delay on the part of any Holder in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Holder would otherwise have. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Holder to any other or further action
to any circumstances without notice or demand. It is not necessary for any
Holder to inquire into the capacity or powers of the Company or any Subsidiary
thereof or the officers, directors, partners or agents acting or purporting to
act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
SECTION 1.04 Subrogation; Acceleration. Each Guarantor agrees that it
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Guaranteed Obligations. Each Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations may
be accelerated as provided in Article VI of the Indenture for the purposes of
such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in
4
<PAGE>
the event of any declaration of acceleration of such obligations as provided in
Article VI of the Indenture, such Guaranteed Obligations (whether or not due and
payable) shall forthwith become due and payable by each Guarantor for the
purposes hereof.
SECTION 1.05 Enforcement. The Holders agree that this Guaranty may be
enforced only by the action of the Trustee in accordance with the terms of the
Indenture and that no other Holders shall have any right individually to seek to
enforce this Guaranty. The Holders further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
SECTION 1.06 Covenants. Each Guarantor agrees that its Guaranteed
Obligations hereunder are senior Indebtedness of such Guarantor and such
Guaranteed Obligations shall not be subordinate to any existing or future
obligations of such Guarantor. Each Guarantor further covenants and agrees that
on and after the date hereof such Guarantor will comply (as a Recourse
Subsidiary of the Company), and will cause each of its Subsidiaries to comply,
with all of the applicable provisions, covenants and agreements contained in the
Indenture, and will take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that it is not in
violation of any provision, covenant or agreement contained in the Indenture,
and so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
Each Guarantor hereby jointly and severally agrees to pay all
reasonable out-of-pocket costs and expenses of each Holder in connection with
the enforcement of this Guaranty and of the Trustee in connection with any
amendment, waiver or consent relating hereto (including in each case, without
limitation, the reasonable fees and disbursements of counsel employed by each
Holder).
SECTION 1.07 Limitation of Liability. Each Guarantor hereby confirms
that it is its intention that this Guaranty not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act or any similar Federal, state or foreign law for the relief of
debtors. Accordingly, each Guarantor hereby irrevocably agrees that the
Guaranteed Obligations guaranteed by such Guarantor shall be limited to such
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution pursuant to any
agreement providing for an equitable contribution among such Guarantor and the
other Guarantors, result in the Guaranteed Obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
5
<PAGE>
SECTION 1.08 Miscellaneous. (a) The Trustee accepts the trusts of the
Indenture, as supplemented by this First Supplemental Indenture, and agrees to
perform the same, but only upon the terms and conditions set forth in the
Indenture, as supplemented by this First Supplemental Indenture, to which the
parties hereto and the Holders from time to time of the Securities agree and,
except as expressly set forth in the Indenture, shall incur no liability or
responsibility in respect thereof.
(b) This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Holders and their
successors and assigns.
(c) Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
each Guarantor directly affected thereby and with the written consent of the
holders of a majority in aggregate principal amount of the Securities then
outstanding.
All notices, requests, demands or other communications pursuant hereto
shall be made in accordance with Section 10.02 of the Indenture.
In the event that all of the capital stock of one or more Guarantors is
sold or otherwise disposed of or liquidated in compliance with the requirements
of the Indenture and the proceeds of such sale, disposition or liquidation are
applied, to the extent applicable, in accordance with the provisions of the
Indenture, such Guarantor shall upon consummation of such sale or other
disposition (except to the extent that such sale or disposition is to the
Company or another Subsidiary thereof) be released from this Guaranty
automatically and without further action and this Guaranty shall, as to each
such Guarantor or Guarantors, terminate, and have no further force or effect. At
the request of the Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. Confirmation. This First Supplemental Indenture and the
Indenture shall henceforth be read together. Except as expressly set forth
herein, the Indenture shall remain unchanged and is in all respects confirmed
and preserved.
SECTION 2.02. Counterparts. This First Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
SECTION 2.03. Governing Law. This First Supplemental Indenture shall be
governed by the laws of the State of New York without regard to the principles
of conflicts of laws.
6
<PAGE>
The Trustee, the Company, the Guarantors and the Holders 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 the Indenture or this First Supplemental
Indenture.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this First Supplemental
Indenture to be signed and acknowledged by their respective officers thereunto
duly authorized as of the day and year first-above written.
BUILDING MATERIALS CORPORATION OF
AMERICA, as Issuer
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
BUILDING MATERIALS MANUFACTURING
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
BUILDING MATERIALS INVESTMENT
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert Massimillo
------------------------
Name: Robert Massimillo
Title: Assistant Vice President
8
<PAGE>
8% Senior Notes due 2007
- --------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
dated as of January 1, 1999
to
INDENTURE
dated as of October 20, 1997
among
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA,
as Issuer,
BUILDING MATERIALS MANUFACTURING CORPORATION,
as Co-obligor
and
BUILDING MATERIALS INVESTMENT CORPORATION,
as Guarantor
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE to the Indenture (as defined below)
(the "First Supplemental Indenture") dated as of January 1, 1999, is made among
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation (the
"Company"), having its principal office at 1361 Alps Road, Wayne, New Jersey
07470, BUILDING MATERIALS MANUFACTURING CORPORATION, a Delaware corporation
wholly-owned by the Company (the "Co-obligor"), and BUILDING MATERIALS
INVESTMENT CORPORATION, a Delaware corporation wholly-owned by the Company (the
"Guarantor"), and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee"), and amends the Indenture, dated as of October 20, 1997,
between the Company and the Trustee (as amended from time to time, the
"Indenture").
R E C I T A L S:
A. Pursuant to the Indenture, the Company issued $100,000,000 in
aggregate principal amount at maturity of the Securities (as defined in the
Indenture).
B. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
C. The Co-obligor has received certain assets from the Company pursuant
to a Reorganization Agreement dated as of December 31, 1998 (the "Reorganization
Agreement"), and as consideration for such assets and for other good and
valuable consideration, the Co- obligor desires to assume the obligations of the
Company under the Indenture and the Securities (without releasing the Company
from such obligations) and, as a result, become a co-obligor of such
obligations.
D. Investment Co. has received certain assets from the Company pursuant
to the Reorganization Agreement, and as consideration for such assets and for
other good and valuable consideration, the Guarantor desires to provide for its
guarantee of the obligations of the Company and the Co-Obligor under the
Indenture and the Securities.
E. Section 9.01(5) of the Indenture provides that the Company and the
Trustee may amend or supplement the Indenture without the Consent of Holders to,
among other things, 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.
NOW, THEREFORE, it is hereby agreed as follows:
2
<PAGE>
ARTICLE 1
SECTION 1.01. Joint and Several Liability. The Co-obligor hereby agrees
to assume all of the obligations of the Company under the Indenture and the
Securities (without releasing the Company from such obligations) and the Company
and the Co-obligor hereby agree that each will be jointly and severally liable
for all of such obligations.
ARTICLE 2
SECTION 2.01. References to Company. Each reference to "the Company" in
the Indenture and the Securities is hereby deemed to also refer to the
Co-obligor and the Co- obligor shall have the same rights, and may exercise the
same powers, as the Company under the Indenture and the Securities.
ARTICLE 3
GUARANTEES
SECTION 3.01. Guarantee. Subject to Section 3.07 and after giving
effect to the transactions contemplated in Articles 1 and 2, the Guarantor
hereby unconditionally and irrevocably guarantees to each Holder (a "Guaranty"),
the following obligations: (a) the full and punctual payment of principal,
premium, if any, and interest on the Securities when due, whether at maturity,
by acceleration, by redemption or otherwise, and all other monetary obligations
of the Company and Co-obligor under the Indenture and the Securities and (b) the
full and punctual performance within applicable grace periods of all other
obligations of the Company and Co-obligor under the Indenture (including,
without limitation, the compensation and other payment obligations to the
Trustee thereunder) and the Securities (all the foregoing being hereinafter
collectively called the "Guaranteed Obligations"). The Guarantor further agrees
that the Guaranteed Obligations may be extended or renewed, in whole or in part,
without notice or further assent from the Guarantor and that the Guarantor will
remain bound under the terms hereof notwithstanding any extension or renewal of
any Guaranteed Obligation.
The Guarantor agrees that its Guarantee herein constitutes a guarantee
of payment, performance and compliance when due (and not a guarantee of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the Guaranteed Obligations.
The obligations of the Guarantor hereunder are independent of the
obligations of any other Guarantor, the Company, any Subsidiary thereof or any
other Person, and, subject to Section 1.05, a separate action or actions may be
brought and prosecuted against the Guarantor whether or not action is brought
against any other Guarantor, the Company, any Subsidiary
3
<PAGE>
thereof or any other Person and whether or not any other Guarantor, the Company
or any Subsidiary thereof be joined in any such action or actions. Any payment
by the Company or any Subsidiary thereof or other circumstance which operates to
toll any statute of limitations as to the Company or any such Subsidiary shall
operate to toll the statute of limitations as to the Guarantor.
Notwithstanding anything to the contrary contained herein, at law or
otherwise, the obligations of each of the Guarantor and the Co-obligor hereunder
and the rights of the Trustee and each Holder hereunder shall be construed as
equal and pari passu to the obligations of each of the Guarantor and the
Co-obligor under that certain Subsidiary Guaranty, dated as of August 29, 1997,
among the guarantors party thereto and The Bank of New York, as Administrative
Agent (as amended, supplemented or otherwise modified from time to time, the
"Subsidiary Guaranty") and the rights of The Bank of New York, as Administrative
agent, and the Lenders under the Subsidiary Guaranty.
SECTION 3.02 Unconditional Obligations. This Guaranty shall not be
discharged except by complete performance of the Guaranteed Obligations as
contemplated in the Indenture and the Securities. The obligations of the
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or the Co-obligor or any other Person under the Indenture,
the Securities or any other agreement or otherwise; (b) any extension or renewal
of any agreement referred to in clause (a) of this paragraph; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of the Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Guaranteed Obligations or any
of them; (e) the failure of any Holder or Trustee to exercise any right or
remedy against any other Guarantor of the Guaranteed Obligations or any other
Person; or (f) except as provided in Section 3.08 of this First Supplemental
Indenture, any change in the ownership of such Guarantor. The Guarantor hereby
waives notice of acceptance of this Guaranty and notice of any liability to
which it may apply, and waives promptness, diligence, presentment, demand of
payment, protest, notice of dishonor or any right to require a proceeding or the
taking of other action by the Trustee or any Holder against, and any other
notice to, any other Guarantor, the Company or the Co-obligor.
SECTION 3.03 Continuing Guaranty. This Guaranty is a continuing one and
all liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. No failure or
delay on the part of any Holder in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Holder would otherwise have. No
notice to or demand on the
4
<PAGE>
Guarantor in any case shall entitle the Guarantor to any other further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
any Holder to any other or further action to any circumstances without notice or
demand. It is not necessary for any Holder to inquire into the capacity or
powers of the Company or any Subsidiary thereof or the officers, directors,
partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
SECTION 3.04 Subrogation; Acceleration. The Guarantor agrees that it
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Guaranteed Obligations. The Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations may
be accelerated as provided in Article VI of the Indenture for the purposes of
such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article VI of the Indenture, such Guaranteed
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purposes hereof.
SECTION 3.05 Enforcement. The Holders agree that this Guaranty may be
enforced only by the action of the Trustee in accordance with the terms of the
Indenture and that no other Holders shall have any right individually to seek to
enforce this Guaranty. The Holders further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of the
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
SECTION 3.06 Covenants. The Guarantor agrees that its Guaranteed
Obligations hereunder are senior Indebtedness of such Guarantor and such
Guaranteed Obligations shall not be subordinate to any existing or future
obligations of the Guarantor. The Guarantor further covenants and agrees that on
and after the date hereof the Guarantor will comply (as a Recourse Subsidiary of
the Company), and will cause each of its Subsidiaries to comply, with all of the
applicable provisions, covenants and agreements contained in the Indenture, and
will take, or will refrain from taking, as the case may be, all actions that are
necessary to be taken or not taken so that it is not in violation of any
provision, covenant or agreement contained in the Indenture, and so that no
Default or Event of Default, is caused by the actions of the Guarantor or any of
its Subsidiaries.
The Guarantor hereby agrees to pay all reasonable out-of-pocket costs
and expenses of each Holder in connection with the enforcement of this Guaranty
and of the Trustee in connection with any amendment, waiver or consent relating
hereto (including in each case,
5
<PAGE>
without limitation, the reasonable fees and disbursements of counsel employed by
each Holder).
SECTION 3.07 Limitation of Liability. The Guarantor hereby confirms
that it is its intention that this Guaranty not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act or any similar Federal, state or foreign law for the relief of
debtors. Accordingly, the Guarantor hereby irrevocably agrees that the
Guaranteed Obligations guaranteed by the Guarantor shall be limited to such
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of the Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution pursuant to any
agreement providing for an equitable contribution among the Guarantor and any
future guarantors, result in the Guaranteed Obligations of the Guarantor in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
SECTION 3.08 Miscellaneous. (a) The Trustee accepts the trusts of the
Indenture, as supplemented by this First Supplemental Indenture, and agrees to
perform the same, but only upon the terms and conditions set forth in the
Indenture, as supplemented by this First Supplemental Indenture, to which the
parties hereto and the Holders from time to time of the Securities agree and,
except as expressly set forth in the Indenture, shall incur no liability or
responsibility in respect thereof.
(b) This First Supplemental Indenture shall be binding upon
the Co-obligor, the Guarantor and their successors and assigns and shall inure
to the benefit of the Holders and their successors and assigns.
(c) Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of the
Guarantor and with the written consent of the holders of a majority in aggregate
principal amount of the Securities then outstanding.
All notices, requests, demands or other communications pursuant hereto
shall be made in accordance with Section 10.02 of the Indenture.
In the event that all of the capital stock of the Guarantor is sold or
otherwise disposed of or liquidated in compliance with the requirements of the
Indenture and the proceeds of such sale, disposition or liquidation are applied,
to the extent applicable, in accordance with the provisions of the Indenture,
the Guarantor shall upon consummation of such sale or other disposition (except
to the extent that such sale or disposition is to the Company or another
Subsidiary thereof) be released from this Guaranty automatically and without
further action and this Guaranty shall, as to the Guarantor, terminate, and have
no further force or effect. At the
6
<PAGE>
request of the Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
ARTICLE 4
MISCELLANEOUS
SECTION 4.01. Confirmation. This First Supplemental Indenture and the
Indenture shall henceforth be read together. Except as expressly set forth
herein, the Indenture shall remain unchanged and is in all respects confirmed
and preserved.
SECTION 4.02. Counterparts. This First Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
SECTION 4.03. Governing Law. This First Supplemental Indenture shall be
governed by the laws of the State of New York without regard to the principles
of conflicts of laws. The Trustee, the Company, the Co-obligor, the Guarantor
and the Holders 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 the
Indenture or this First Supplemental Indenture.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this First Supplemental
Indenture to be signed and acknowledged by their respective officers thereunto
duly authorized as of the day and year first-above written.
BUILDING MATERIALS CORPORATION OF
AMERICA, as Issuer
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
BUILDING MATERIALS MANUFACTURING
CORPORATION, as Co-obligor
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
BUILDING MATERIALS INVESTMENT
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
------------------------
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel
and Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert Massimillo
-------------------------
Name: Robert Massimillo
Title: Assistant Vice President
8
<PAGE>
7 3/4% Senior Notes due 2005
- --------------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
dated as of January 1, 1999
to
INDENTURE
dated as of July 17, 1998
among
- --------------------------------------------------------------------------------
BUILDING MATERIALS CORPORATION OF AMERICA,
as Issuer,
BUILDING MATERIALS MANUFACTURING CORPORATION
and
BUILDING MATERIALS INVESTMENT CORPORATION
as Guarantors
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE to the Indenture (as defined below)
(the "First Supplemental Indenture") dated as of January 1, 1999, is made among
BUILDING MATERIALS CORPORATION OF AMERICA, a Delaware corporation (the
"Company"), having its principal office at 1361 Alps Road, Wayne, New Jersey
07470, BUILDING MATERIALS MANUFACTURING CORPORATION, a Delaware corporation
wholly-owned by the Company ("Manufacturing Co."), and BUILDING MATERIALS
INVESTMENT CORPORATION, a Delaware corporation wholly-owned by the Company
("Investment Co." and together with Manufacturing Co., the "Guarantors"), and
THE BANK OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee"), and amends the Indenture, dated as of July 17, 1998, between the
Company and the Trustee (as amended from time to time, the "Indenture").
R E C I T A L S:
A. Pursuant to the Indenture, the Company issued $150,000,000 in
aggregate principal amount at maturity of the Securities (as defined in the
Indenture).
B. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
C. The Guarantors have each received certain assets from the Company
pursuant to a Reorganization Agreement dated as of December 31, 1998, and as
consideration for such assets and for other good and valuable consideration, the
Guarantors desire to provide for their guarantee of all of the Company's
obligations under the Securities.
D. Section 9.01(5) of the Indenture provides that the Company and the
Trustee may amend or supplement the Indenture without the consent of Holders to,
among other things, 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.
NOW, THEREFORE, it is hereby agreed as follows:
2
<PAGE>
ARTICLE 1
GUARANTEES
SECTION 1.01. Guarantee. Subject to Section 1.07, each
Guarantor, jointly and severally, hereby unconditionally and irrevocably
guarantees to each Holder (a "Guaranty"), the following obligations: (a) the
full and punctual payment of principal, premium, if any, 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 the Indenture
and the Securities and (b) the full and punctual performance within applicable
grace periods of all other obligations of the Company under the Indenture
(including, without limitation, the compensation and other payment obligations
to the Trustee thereunder) and the Securities (all the foregoing being
hereinafter collectively called the "Guaranteed Obligations"). Each Guarantor
further agrees that the Guaranteed Obligations may be extended or renewed, in
whole or in part, without notice or further assent from such Guarantor and that
such Guarantor will remain bound under the terms hereof notwithstanding any
extension or renewal of any Guaranteed Obligation.
Each Guarantor agrees that its Guarantee herein constitutes a guarantee
of payment, performance and compliance when due (and not a guarantee of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any security held for payment of the Guaranteed Obligations.
The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, the Company, any Subsidiary thereof or any
other Person, and, subject to Section 1.05, a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, the Company, any Subsidiary thereof or any other
Person and whether or not any other Guarantor, the Company or any Subsidiary
thereof be joined in any such action or actions. Any payment by the Company or
any Subsidiary thereof or other circumstance which operates to toll any statute
of limitations as to the Company or any such Subsidiary shall operate to toll
the statute of limitations as to each Guarantor.
Notwithstanding anything to the contrary contained herein, at law or
otherwise, the obligations of each Guarantor hereunder and the rights of the
Trustee and each Holder hereunder shall be construed as equal and pari passu to
the obligations of each such Guarantor under that certain Subsidiary Guaranty,
dated as of August 29, 1997, among the guarantors party thereto and The Bank of
New York, as Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "Subsidiary Guaranty") and the rights of The
Bank of New York, as Administrative Agent, and the Lenders under the Subsidiary
Guaranty.
3
<PAGE>
SECTION 1.02 Unconditional Obligations. This Guaranty shall not be
discharged except by complete performance of the Guaranteed Obligations as
contemplated in the Indenture and the Securities. The obligations of each
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under the Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any agreement
referred to in clause (a) of this paragraph; (c) any rescission, waiver,
amendment or modification of any of the terms or provisions of the Indenture,
the Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the
failure of any Holder or Trustee to exercise any right or remedy against any
other Guarantor of the Guaranteed Obligations or any other Person; or (f) except
as provided in Section 1.08 of this First Supplemental Indenture, any change in
the ownership of such Guarantor. Each Guarantor hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or any right to require a proceeding or the taking of other
action by the Trustee or any Holder against, and any other notice to, any other
Guarantor or the Company.
SECTION 1.03 Continuing Guaranty. This Guaranty is a continuing one and
all liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. No failure or
delay on the part of any Holder in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Holder would otherwise have. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Holder to any other or further action
to any circumstances without notice or demand. It is not necessary for any
Holder to inquire into the capacity or powers of the Company or any Subsidiary
thereof or the officers, directors, partners or agents acting or purporting to
act on its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
SECTION 1.04 Subrogation; Acceleration. Each Guarantor agrees that it
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Guaranteed Obligations. Each Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations may
be accelerated as provided in Article VI of the Indenture for the purposes of
such Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in
4
<PAGE>
the event of any declaration of acceleration of such obligations as provided in
Article VI of the Indenture, such Guaranteed Obligations (whether or not due and
payable) shall forthwith become due and payable by each Guarantor for the
purposes hereof.
SECTION 1.05 Enforcement. The Holders agree that this Guaranty may be
enforced only by the action of the Trustee in accordance with the terms of the
Indenture and that no other Holders shall have any right individually to seek to
enforce this Guaranty. The Holders further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
SECTION 1.06 Covenants. Each Guarantor agrees that its Guaranteed
Obligations hereunder are senior Indebtedness of such Guarantor and such
Guaranteed Obligations shall not be subordinate to any existing or future
obligations of such Guarantor. Each Guarantor further covenants and agrees that
on and after the date hereof such Guarantor will comply (as a Recourse
Subsidiary of the Company), and will cause each of its Subsidiaries to comply,
with all of the applicable provisions, covenants and agreements contained in the
Indenture, and will take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that it is not in
violation of any provision, covenant or agreement contained in the Indenture,
and so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
Each Guarantor hereby jointly and severally agrees to pay all
reasonable out-of-pocket costs and expenses of each Holder in connection with
the enforcement of this Guaranty and of the Trustee in connection with any
amendment, waiver or consent relating hereto (including in each case, without
limitation, the reasonable fees and disbursements of counsel employed by each
Holder).
SECTION 1.07 Limitation of Liability. Each Guarantor hereby confirms
that it is its intention that this Guaranty not constitute a fraudulent transfer
or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent
Conveyance Act or any similar Federal, state or foreign law for the relief of
debtors. Accordingly, each Guarantor hereby irrevocably agrees that the
Guaranteed Obligations guaranteed by such Guarantor shall be limited to such
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution pursuant to any
agreement providing for an equitable contribution among such Guarantor and the
other Guarantors, result in the Guaranteed Obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
5
<PAGE>
SECTION 1.08 Miscellaneous. (a) The Trustee accepts the trusts of the
Indenture, as supplemented by this First Supplemental Indenture, and agrees to
perform the same, but only upon the terms and conditions set forth in the
Indenture, as supplemented by this First Supplemental Indenture, to which the
parties hereto and the Holders from time to time of the Securities agree and,
except as expressly set forth in the Indenture, shall incur no liability or
responsibility in respect thereof.
(b) This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Holders and their
successors and assigns.
(c) Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
each Guarantor directly affected thereby and with the written consent of the
holders of a majority in aggregate principal amount of the Securities then
outstanding.
All notices, requests, demands or other communications pursuant hereto
shall be made in accordance with Section 10.02 of the Indenture.
In the event that all of the capital stock of one or more Guarantors is
sold or otherwise disposed of or liquidated in compliance with the requirements
of the Indenture and the proceeds of such sale, disposition or liquidation are
applied, to the extent applicable, in accordance with the provisions of the
Indenture, such Guarantor shall upon consummation of such sale or other
disposition (except to the extent that such sale or disposition is to the
Company or another Subsidiary thereof) be released from this Guaranty
automatically and without further action and this Guaranty shall, as to each
such Guarantor or Guarantors, terminate, and have no further force or effect. At
the request of the Company, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. Confirmation. This First Supplemental Indenture and the
Indenture shall henceforth be read together. Except as expressly set forth
herein, the Indenture shall remain unchanged and is in all respects confirmed
and preserved.
SECTION 2.02. Counterparts. This First Supplemental Indenture may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
SECTION 2.03. Governing Law. This First Supplemental Indenture shall be
governed by the laws of the State of New York without regard to the principles
of conflicts of laws.
6
<PAGE>
The Trustee, the Company, the Guarantors and the Holders 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 the Indenture or this First Supplemental
Indenture.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this First Supplemental
Indenture to be signed and acknowledged by their respective officers thereunto
duly authorized as of the day and year first-above written.
BUILDING MATERIALS CORPORATION OF
AMERICA, as Issuer
By: /s/ Richard A. Weinberg
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel and
Secretary
BUILDING MATERIALS MANUFACTURING
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel and
Secretary
BUILDING MATERIALS INVESTMENT
CORPORATION, as Guarantor
By: /s/ Richard A. Weinberg
Name: Richard A. Weinberg
Title: Exec. V.P., General Counsel and
Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Robert Massimillo
Name: Robert Massimillo
Title: Assistant Vice President
8
<PAGE>
Exhibit 21
BUILDING MATERIALS CORPORATION OF AMERICA
LIST OF SUBSIDIARIES
STATE OF
COMPANY INCORPORATION D/B/A
- ------- ------------- -----
Building Materials Corporation Delaware GAF Materials Corporation
of America and Old American Products
U.S. Intec Holdings Inc. Delaware
U.S. Intec Inc. Texas Tri-Ply Corporation and
Intec/Permaglas Corporation
Exterior Technologies Corporation Texas
Intec Marine Inc. Texas
USI Materials Inc. Delaware
GAF Leatherback Corp. Delaware
BMCA Insulation Products Inc. Delaware
BMC Warehousing Inc. Delaware
GAFTECH Corporation Delaware
South Ponca Realty Corp. Delaware
GAF Real Properties Inc. Delaware
BMCA Receivables Corp. Delaware
TOPCOAT, Inc. Delaware
GAF Kalamazoo Acquisition Corp. Delaware
GAF Materials Corporation (Canada) Delaware
Pequannock Valley Claim Service Delaware
Company, Inc.
LL Building Products Inc. Delaware
BMCA Goldsboro, Inc. Delaware
GAF Premium Products Inc. Delaware
Wind Gap Real Property Delaware
Acquisition Corp.
Building Materials Manufacturing Delaware
Corporation
Building Materials Investment Delaware
Corporation
<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
March 5, 1999
<PAGE>
LETTER OF TRANSMITTAL
BUILDING MATERIALS CORPORATION OF AMERICA
OFFER FOR ALL OUTSTANDING
8% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
SERIES B 8% SENIOR NOTES DUE 2008,
PURSUANT TO THE PROSPECTUS
DATED , 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
The Bank of New York (Eligible Institutions and 101 Barclay Street
101 Barclay Street - 7E Withdrawal Notices Only) Corporate Trust Services Window
New York, New York 10286 (212) 815-6339 Ground Level
Attn: Reorganization Section Confirm by Telephone: New York, New York 10286
(212) 815-6335 Attn: Reorganization Section
For Information Call:
(212) 815-6335
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS BY ELIGIBLE INSTITUTIONS VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated ,
1999 (the "Prospectus"), of Building Materials Corporation of America, a
Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter"), which together constitute our offer (the "Exchange Offer") to
exchange an aggregate principal amount of up to $155,000,000 of our Series B 8%
Senior Notes due 2008 (the "Registered Notes") for a like principal amount of
our issued and outstanding 8% Senior Notes due 2008 (the "Old Notes").
For each Old Note accepted for exchange, you will receive a Registered Note
having a principal amount equal to that of the surrendered Old Note. Holders
whose Old Notes are accepted for exchange will receive accrued interest thereon
to, but not including, the date of issuance of such Registered Notes, such
interest to be payable with the first interest payment on the Registered Notes.
Interest on the Registered Notes will accrue from their respective dates of
issuance. Holders of Old Notes accepted for exchange will be deemed to have
waived the right to receive any other payments or interest on the Old Notes. We
reserve the right, at any time or from time to time, to extend the Exchange
Offer at our discretion, in which event the term "Expiration Date" shall mean
the latest time and date to which the Exchange Offer is extended. We shall
notify the holders of the Old Notes of any extension by means of a press release
or other public announcement prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
A holder of Old Notes must complete this Letter (except those holders
delivering an Agent's Message in lieu thereof) either if certificates are to be
forwarded herewith or if a tender of certificates for Old Notes, if available,
is to be made by book-entry transfer to the account maintained by The Bank of
New York (the "Exchange Agent") at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Holders of Old Notes
whose certificates are not immediately available, or who are unable to deliver
their certificates or confirmation of the book-entry tender of their Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
In lieu of delivering this Letter, an Agent's Message will constitute valid
delivery. The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility and received by the Exchange Agent and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgement from a participant tendering
Old Notes that are the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by this Letter and that we may
enforce such agreement against such participant.
<PAGE>
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount at
maturity of Old Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- -------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) OF PRINCIPAL AMOUNT PRINCIPAL AMOUNT
REGISTERED HOLDER(S) (PLEASE CERTIFICATE AT MATURITY AT MATURITY
FILL IN, IF BLANK) NUMBER(S)* OF OLD NOTE(S) TENDERED**
<S> <C> <C> <C>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed
to have tendered ALL of the Old Notes represented by the Old Notes
indicated in column 2. See Instruction 2. Old Notes tendered hereby
must be in denominations of principal amount of $1,000 and any
integral multiple thereof. See Instruction 1.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) __________________________________________
Window Ticket No. (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery _______________________
Name of Institution which Guaranteed Delivery ____________________________
If delivered by Book-Entry Transfer, complete the following:
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name _____________________________________________________________________
Address __________________________________________________________________
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
1. Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
2. The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the Old Notes are accepted by the Company.
The undersigned hereby further represents that: (i) any Registered Notes
acquired in exchange for Old Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such Registered Notes,
whether or not such person is the undersigned, (ii) that neither the holder of
such Old Notes nor any such other person is engaging in or intends to engage in
a distribution of such Registered Notes, (iii) that neither the holder of such
Old Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Registered Notes and (iv) that
neither the holder of such Old Notes nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended
(the "Securities Act"), of the Company.
3. The undersigned also acknowledges that the Exchange Offer is being made
in reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") set forth in no-action letters issued to third parties,
that the Registered Notes issued in exchange for the Old Notes pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder that is our "affiliate" 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 (i) such Registered Notes are acquired in the ordinary course of such
holders' business, (ii) such holders are not engaging in and do not intend to
engage in the distribution of such Registered Notes and (iii) such holders have
no arrangements or understandings with any person to participate in the
distribution of such Registered Notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of Registered Notes. If the undersigned
is a broker-dealer that will receive Registered Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Notes. However, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
4. The undersigned may, if, and only if, it would not receive freely
tradeable Registered Notes in the Exchange Offer or is not eligible to
participate in the Exchange Offer, elect to have its Old Notes registered in the
shelf registration described in the Registration Rights Agreement, dated as of
December 3, 1998, among the Company, Bear, Stearns & Co. Inc. and Chase
Securities Inc. (the "Registration Agreement") in the form filed as Exhibit 4.3
to the Registration Statement of the Company, Registration No. 333-69749.
Capitalized terms used in this paragraph 4 and not otherwise defined herein
shall have the meanings given them in the Registration Agreement. Such election
may be made by checking the box under "Special Registration Instructions" below.
By making such election, the undersigned agrees, as a holder of Old Notes
participating in a Shelf Registration, to comply with the Registration Agreement
and to indemnify and hold harmless each Initial Purchaser and each person, if
any, who controls any Initial Purchaser within the meaning of either Section 15
of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Company, each director and officer of the
Company and each person, if any, who controls the Company within the meaning of
either such Section, from and against any losses, claims, damages and
liabilities or any actions in respect thereof, to which such Initial Purchaser
or any controlling person of such Initial Purchaser, and the Company or any of
its directors, officers or controlling persons may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon any omission or alleged omission to state therein a
material fact necessary to make the statements therein (in the case of the
prospectus, in light of the circumstances under which they were made) not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement
3
<PAGE>
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to us by or on behalf of the undersigned
specifically for inclusion therein; and shall reimburse us, as incurred, for any
legal or other expenses reasonably incurred by the Company or any director,
officer or controlling person thereof in connection with the investigation or
defending or preparing to defend against or appearing as a third-party witness
in connection with any loss, claim, damage, liability or action in respect
thereof. Any such indemnification shall be governed by the terms and subject to
the conditions set forth in the Registration Agreement, including, without
limitation, the provisions regarding notice, retention of counsel, contribution
and payment of expenses set forth therein. The above summary of the
indemnification provisions of the Registration Agreement is not intended to be
exhaustive and is qualified in its entirety by the Registration Agreement.
5. The undersigned will, upon request, execute and deliver any additional
documents deemed by us to be necessary or desirable to complete the sale,
assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus. See Instruction 9.
6. Unless otherwise indicated in the box entitled "Special Issuance
Instructions" below, please issue the Registered Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the Registered Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
4
<PAGE>
THE UNDERSIGNED ACKNOWLEDGES THAT THE EXCHANGE OFFER IS SUBJECT TO THE MORE
DETAILED TERMS SET FORTH IN THE PROSPECTUS AND, IN CASE OF ANY CONFLICT BETWEEN
THE TERMS OF THE PROSPECTUS AND THIS LETTER, THE PROSPECTUS SHALL PREVAIL.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY IF certificates for Old Notes To be completed ONLY IF certificates for Old Notes not
not exchanged and/or Registered Notes are to be issued exchanged and/or Registered Notes are to be sent to someone
in the name of someone other than the person or persons other than the person or persons whose
whose signature(s) appear(s) on this Letter below, or signature(s) appear(s) on this Letter below or to such
if Old Notes delivered by book-entry transfer which are person or persons at an address other than shown in the
not accepted for exchange are to be returned by credit box entitled "Description of Old Notes" on this Letter
to an account maintained at the Book-Entry Transfer above.
Facility other than the account indicated above.
Issue: / / Registered Notes and/or / / Old Notes to: Mail: / / Registered Notes and/or / / Old Notes to:
Name(s): Name(s):
-------------------------------------------- ------------------------------------------
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
-------------------------------------------- ------------------------------------------
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
Address: Address:
-------------------------------------------- ------------------------------------------
-------------------------------------------- ------------------------------------------
(ZIP CODE) (ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Old Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility account
set forth below:
-------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
</TABLE>
5
<PAGE>
SPECIAL REGISTRATION INSTRUCTIONS
(SEE PARAGRAPH 4 ABOVE)
To be completed ONLY IF (i) the undersigned satisfies the conditions set forth
in paragraph 4 above, (ii) the undersigned elects to register its Old Notes in
the shelf registration described in the Registration Agreement, and (iii) the
undersigned agrees to comply with the Registration Agreement and to indemnify
certain entities and individuals as set forth in paragraph 4 above.
/ / By checking this box the undersigned hereby (i) represents that it is
entitled to have its Old Notes registered in a shelf registration in accordance
with the Registration Agreement, (ii) elects to have its Old Notes registered
pursuant to the shelf registration described in the Registration Agreement, and
(iii) agrees to comply with the Registration Agreement and to indemnify certain
entities and individuals identified in, and to the extent provided in, paragraph
4 above.
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER (OR AN AGENT'S MESSAGE IN LIEU THEREOF) OR A FACSIMILE
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M. NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
x________________________________________________________ _______________1998
x________________________________________________________ _______________1998
x________________________________________________________ _______________1998
SIGNATURE(S) OF OWNER DATE
Area Code and Telephone Number ________________________________________________
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) exactly as the name(s) appear(s) on the certificate(s) for
the Old Notes or, if tendered by a participant in the Book-Entry Transfer
Facility, exactly as such name appears on a security position listing as the
owner of the Old Notes, or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s): _______________________________________________________________________
________________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDING ZIP CODE)
Employer Identification or Social Security Number_______________________________
(PLEASE COMPLETE SUBSTITUTE
FORM W-9, IF APPLICABLE. SEE
"IMPORTANT TAX INFORMATION"
BELOW)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: _______________________________________________________
(AUTHORIZED SIGNATURE)
________________________________________________________________________________
(TITLE)
________________________________________________________________________________
(NAME AND FIRM)
6
<PAGE>
INSTRUCTIONS
1. Delivery of This Letter and Notes; Guaranteed Delivery
Procedures. Holders of Old Notes must complete this Letter (except those
holders delivering an Agent's Message in lieu thereof) either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile thereof), with any required signature guarantees (unless an Agent's
Message is transmitted in lieu thereof), and any other documents required by
this Letter, must be received by the Exchange Agent at the address set forth
herein on or prior to the Expiration Date, or the tendering holder must comply
with the guaranteed delivery procedures set forth below. Old Notes tendered
hereby must be in denominations of principal amount at maturity of $1,000 or any
integral multiple thereof.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution
(as defined below); (ii) on or prior to 5:00 p.m., New York City time, on the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or a facsimile thereof or an
Agent's Message in lieu thereof) and Notice of Guaranteed Delivery (or an
Agent's Message with respect to guaranteed delivery in lieu thereof),
substantially in the form provided by us (by facsimile transmission (if
available to such holder), mail or hand delivery). The Notice of Guaranteed
Delivery must set forth the name and address of the holder of Old Notes and the
amount of Old Notes tendered, state that the tender is being made thereby and
guarantee that within three New York Stock Exchange ("NYSE") trading days after
the date of execution of the Notice of Guaranteed Delivery, the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation (including by means of an Agent's Message), as the case may be,
together with this Letter (or a facsimile hereof or an Agent's Message in lieu
thereof) and any other documents required by this Letter will be deposited by
the Eligible Institution with the Exchange Agent; and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by this
Letter, must be received by the Exchange Agent within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER, THE OLD NOTES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE
AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIMES SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.
See "The Exchange Offer" section in the Prospectus.
2. Partial Tenders. If less than all of the Old Notes evidenced by a
submitted certificate are to be tendered, the tendering holder(s) should fill in
the aggregate principal amount at maturity of Old Notes to be tendered in the
box above entitled "Description of Old Notes--Principal Amount at Maturity
Tendered." A reissued certificate representing the balance of nontendered Old
Notes of a tendering holder who physically delivered Old Notes will be sent to
such tendering holder, unless otherwise provided in the appropriate box on this
Letter, promptly after the Expiration Date. All of the Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
3. Signatures on This Letter; Bond Powers and Endorsements; Guarantee of
Signatures. If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
7
<PAGE>
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the Registered Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) or bond
powers must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificates must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) or bond powers must be
guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing. Unless we waive the condition, in such
an instance you must submit with this Letter evidence satisfactory to us of
their authority to so act.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses) that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Program or the Stock Exchanges Medallion Program
(each an "Eligible Institution" and collectively, "Eligible Institutions").
Signatures on the Letter need not be guaranteed by an Eligible Institution
if (A) the Old Notes are tendered (i) by a registered holder of Old Notes (which
term, for purposes of the Exchange Offer, includes any participant in the
Book-Entry Transfer Facility system whose name appears on a security position
listing as the holder of such Old Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on this
Letter, or (ii) for the account of an Eligible Institution and (B) the box
entitled "Special Registration Instructions" on this Letter has not been
completed.
4. Special Issuance and Delivery Instructions. Tendering holders of Old
Notes should indicate in the applicable box the name and address to which
Registered Notes issued pursuant to the Exchange Offer and/or substitute
certificates evidencing Old Notes not exchanged are to be issued or sent, if
different from the name or address of the person signing this Letter. In the
case of issuance in a different name, the employer identification or social
security number of the person named must also be indicated. Noteholders
tendering Old Notes by book-entry transfer may request that Old Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Old Notes not exchanged will be returned to the name and address of
the person signing this Letter.
5. Transfer Taxes. We will pay all transfer taxes, if any, applicable to
the transfer of Old Notes to us or our order pursuant to the Exchange Offer. If,
however, Registered Notes and/or substitute Old Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Old Notes tendered hereby, or if tendered Old
Notes are registered in the name of any person other than the person signing
this Letter, the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
6. Waiver of Conditions. We reserve the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
8
<PAGE>
7. No Conditional Tenders. We will not accept any alternative,
conditional, irregular or contingent tenders. All tendering holders of Old
Notes, by execution of this Letter, shall waive any right to receive notice of
the acceptance of their Old Notes for exchange.
Although we intend to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give any such notice.
8. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
9. Withdrawal of Tenders. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth above prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the holder
in the same manner as the original signature on this Letter by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the trustee under the
Indenture pursuant to which the Old Notes were issued register the transfer of
such Old Notes into the name of the person withdrawing the tender, and
(iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. Any Old Notes so properly withdrawn will
be deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are not exchanged for any reason will be returned to the holder thereof without
cost to such holder as soon as practicable after withdrawal, rejection of
tender, or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following the procedures described above at any time on or
prior to 5:00 p.m., New York City time, on the Expiration Date.
We will determine all questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes in
our sole discretion, and our determination will be final and binding on all
parties. We reserve the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes our acceptance of which would, in the opinion
of our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities, or conditions of tender as to particular Old Notes. Our
interpretation of the terms and conditions of the Exchange Offer (including the
instructions of this Letter) will be final and binding on all parties.
10. Requests for Assistance or Additional Copies. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus, this Letter and other related documents may be directed to the
Exchange Agent, at the address and telephone number indicated above.
9
<PAGE>
IMPORTANT TAX INFORMATION
Under current federal income tax law to prevent backup withholding on any
Registered Notes delivered pursuant to the Exchange Offer and any payments made
in respect of the Registered Notes, a holder of New Notes generally is required
to provide us (as payor) with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 or otherwise to establish a basis for
exemption from backup withholding. If a holder of Registered Notes is an
individual, the TIN is such holder's social security number. If a holder
required to do so fails to provide us with the correct taxpayer identification
number, the holder may be subject to a $50 penalty imposed by the Internal
Revenue Service. Accordingly, each prospective holder of Registered Notes to be
issued pursuant to Special Issuance Instructions should complete the attached
Substitute Form W-9. The Substitute Form W-9 need not be completed if the box
entitled Special Issuance Instructions has not been completed.
Certain holders of Registered Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt prospective holders of Registered
Notes should indicate their exempt status on Substitute Form W-9. A foreign
individual may qualify as an exempt recipient by submitting to us, through the
Exchange Agent, a properly completed Internal Revenue Service Form W-8 (which
the Exchange Agent will provide upon request) signed under penalty of perjury,
attesting to the holder's exempt status. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, we are required to withhold 31% of any
payment made to the holder of Registered Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any Registered Notes delivered pursuant to
the Exchange Offer and any payments received in respect of the Registered Notes,
each prospective holder of Registered Notes to be issued pursuant to Special
Issuance Instructions should provide us, through the Exchange Agent, with
either: (i) such prospective holder's correct TIN by completing the form below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
prospective holder is awaiting a TIN) and that (A) such prospective holder has
not been notified by the Internal Revenue Service that he or she is subject to
backup withholding as a result of a failure to report all interest or dividends
or (B) the Internal Revenue Service has notified such prospective holder that he
or she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective holder of Registered Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the Registered Notes. If the Registered Notes will be held in
more than one name or are not held in the name of the actual owner, consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance regarding which number to report.
10
<PAGE>
<TABLE>
<CAPTION>
PAYOR'S NAME: THE BANK OF NEW YORK
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND -------------------------------
CERTIFY BY SIGNING AND DATING BELOW. Social Security Number(s)
FORM W-9 OR
DEPARTMENT OF THE TREASURY -------------------------------
INTERNAL REVENUE SERVICE Employer Identification
Number(s)
PAYOR'S REQUEST FOR
TAXPAYER ---------------------------------------------------------------------------------------------
IDENTIFICATION PART 2 -- CERTIFICATION-- Under penalties of perjury, I PART 3
NUMBER ("TIN") certify that: Awaiting TIN
(1) The number shown on this form is my current taxpayer
identification number (or I am waiting for a number
to be issued to me), and
(2) I am not subject to backup withholding because:
(a) I am an exempt holder, (b) I have not been
notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends,
or (c) the IRS has notified me that I am no longer
subject to backup withholding.
---------------------------------------------------------------------------------------------
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you are subject to backup withholding you receive another notification from the IRS stating
that you are no longer subject to backup withholding, do not cross out such item (2).
- -------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1998
---------------------------------------------------------------------------- -------------------
</TABLE>
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF REGISTERED NOTES TO BE ISSUED PURSUANT
TO THE SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS
FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF THE REGISTERED NOTES
DELIVERED TO YOU PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED
BY YOU IN RESPECT OF THE REGISTERED NOTES. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver such an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide such
a number.
SIGNATURE ________________________________ DATE ________________________, 1998
- --------------------------------------------------------------------------------
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
8% SENIOR NOTES DUE 2008
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF BUILDING MATERIALS CORPORATION OF AMERICA
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer relating to the tender of 8% Senior Notes due 2008 (the "Old
Notes") of Building Materials Corporation of America (the "Company") made
pursuant to the Prospectus, dated , 1999 (the "Prospectus"), if
certificates for Old Notes of the Company are not immediately available or if
the procedure for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Exchange Agent prior to
5:00 p.m., New York City time, on , 1999 (the "Expiration Date"). Such
form may be delivered or transmitted by facsimile transmission (if available to
such holder), mail or hand delivery to The Bank of New York (the "Exchange
Agent") as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender Old Notes pursuant to the Exchange Offer, the
Exchange Agent must receive from an Eligible Institution prior to 5:00 p.m., New
York City time, on the Expiration Date, a completed, signed and dated Letter of
Transmittal relating to the Old Notes (or facsimile thereof or an Agent's
Message in lieu thereof). Capitalized terms used herein and not defined herein
are used as so defined in the Prospectus.
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Facsimile By Hand/Overnight
Certified Mail: Transmission Number: Delivery:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street--7E (212) 815-6339 101 Barclay Street
New York, New York 10286 Confirm by Telephone: Corporate Trust Services Window
Attn: Reorganization Section (212) 815-6335 Ground Level
For Information Call: New York, New York 10286
(212) 815-6335 Attn: Reorganization Section
</TABLE>
------------------------
DELIVERY OF THIS NOTICE TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS NOTICE VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Building Materials Corporation of
America, a Delaware corporation (the "Company"), in accordance with the
Company's offer, upon the terms and subject to the conditions set forth in the
Prospectus dated , 1999 (the "Prospectus"), and in the accompanying
Letter of Transmittal, receipt of which is hereby acknowledged,
$ in aggregate principal amount of Old Notes pursuant to the
guaranteed delivery procedures described in the Prospectus.
Name(s) of Record Holder(s)
----------------------------------------------------
(Please Type or Print)
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
Area Code & Telephone No.
---------------------------
Certificate Number(s) for Old Notes (if available)
-----------------------------
Total Principal Amount Represented by Certificate(s): $
------------------------
- --------------------------------------------------------------------------------
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
x________________________________________________________ _______________1998
x________________________________________________________ _______________1998
Signature(s) of Holder(s) Date
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Capacity:
------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
/ / The Depository Trust Company
(Check if Old Notes will be tendered by book-entry transfer)
Account Number
---------------------------
THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Old Notes being tendered hereby, in proper form for transfer,
or confirmation of book-entry transfer of such Old Notes into the Exchange
Agent's account at The Depository Trust Company, in proper form for transfer,
together with 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 within three New York Stock Exchange trading days after the date of
execution hereof.
- -------------------------------------- ----------------------------------------
Name of Firm Authorized Signature
- -------------------------------------- ----------------------------------------
Address Title
Name:
- -------------------------------------- ----------------------------------
Zip Code (Please Type or Print)
Dated:
- -------------------------------------- ----------------------------------
Area Code and Tel. No.
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
3
<PAGE>
________, 1999
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
Building Materials Corporation of America (the "Company")
proposes to make an offer (the "Exchange Offer") to exchange its 8% Senior Notes
due 2008 (the "Old Securities") for its Series B 8% Senior Notes due 2008 (the
"New Securities"). The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated _______________, 1999 (the
"Prospectus"), proposed to be distributed to all record holders of the Old
Securities. The Old Securities and the New Securities are collectively referred
to herein as the "Securities".
The Company hereby appoints The Bank of New York to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company
on or about _______________, 1999. The Letter of Transmittal accompanying the
Prospectus (or in the case of book entry securities, the ATOP system) is to be
used by the holders of the Old Securities to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for Old
Securities tendered in connection therewith.
The Exchange Offer shall expire at 5:00 p.m., New York City
time, on _________________, 1999 or on such later date or time to which the
Company may extend the Exchange Offer (the "Expiration Date"). Subject to the
terms and conditions set forth in the Prospectus, the Company expressly reserves
the right to extend the Exchange Offer from time to time and may extend the
Exchange Offer by giving oral (confirmed in writing) or written notice to you
before 9:00
<PAGE>
A.M., New York City time, on the business day following the previously scheduled
Expiration Date.
The Company expressly reserves the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Old Securities not
theretofore accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer specified in the Prospectus under the caption "The
Exchange Offer -- Expiration Date; Amendments." The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act
in accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old
Securities at The Depository Trust Company (the "Book-Entry Transfer Facility")
for purposes of the Exchange Offer within two business days after the date of
the Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the Old
Securities by causing the Book-Entry Transfer Facility to transfer such Old
Securities into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Securities (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Securities to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Old Securities have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Old Securities
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will
2
<PAGE>
endeavor to inform the presenters of the need for fulfillment of all
requirements and to take any other action as may be necessary or advisable to
cause such irregularity to be corrected.
4. With the approval of the Chief Executive Officer, any
Senior Vice President, any Executive Vice President, or any Vice President of
the Company (such approval, if given orally, to be confirmed in writing) or any
other party designated by such an officer in writing, you are authorized to
waive any irregularities in connection with any tender of Old Securities
pursuant to the Exchange Offer.
5. Tenders of Old Securities may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer -- Procedures for Tendering", and Old Securities shall be
considered properly tendered to you only when tendered in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old
Securities which the Chief Executive Officer, any Senior Vice President, any
Executive Vice President, or any Vice President of the Company shall approve as
having been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Old
Securities received subsequent to the Expiration Date and accept its
instructions with respect to disposition of such Old Securities.
7. You shall accept tenders:
(a) in cases where the Old Securities are registered in two or
more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old
Securities provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
3
<PAGE>
You shall accept partial tenders of Old Securities where so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Old Securities to the transfer agent for split-up and return any untendered
Old Securities to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date, of
all Old Securities properly tendered and you, on behalf of the Company, will
exchange such Old Securities for New Securities and cause such Old Securities to
be cancelled. Delivery of New Securities will be made on behalf of the Company
by you at the rate of $1,000 principal amount of New Securities for each $1,000
principal amount of the corresponding series of Old Securities tendered promptly
after notice (such notice if given orally, to be confirmed in writing) of
acceptance of said Old Securities by the Company; provided, however, that in all
cases, Old Securities tendered pursuant to the Exchange Offer will be exchanged
only after timely receipt by you of certificates for such Old Securities (or
confirmation of book-entry transfer into your account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other required
documents. You shall issue New Securities only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Old Securities tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Old
Securities tendered if any of the conditions set forth in the Exchange Offer are
not met. Notice of any decision by the Company not to exchange any Old
Securities tendered shall be given (and confirmed in writing) by the Company to
you.
11. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Old Securities tendered because of an
invalid tender, the
4
<PAGE>
occurrence of certain other events set forth in the Prospectus under the caption
"The Exchange Offer -- Conditions" or otherwise, you shall as soon as
practicable after the expiration or termination of the Exchange Offer return
those certificates for unaccepted Old Securities (or effect appropriate
book-entry transfer), together with any related required documents and the
Letters of Transmittal relating thereto that are in your possession, to the
persons who deposited them.
12. All certificates for reissued Old Securities, unaccepted
Old Securities or for New Securities shall be forwarded by first-class mail.
13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, bank or
other persons or to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other
than those specifically set forth herein or in the Section of the Prospectus
captioned "The Exchange Offer" as may be subsequently agreed to in writing by
you and the Company;
(b) will be regarded as making no representa-
tions and having no responsibilities as to the validity, sufficiency, value or
genuineness of any of the certificates or the Old Securities represented thereby
deposited with you pursuant to the Exchange Offer, and will not be required to
and will make no representation as to the validity, value or genuineness of the
Exchange Offer;
(c) shall not be obligated to take any legal
action hereunder which might in your reasonable judgment involve any expense or
liability, unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be pro-
tected in acting in reliance upon any certificate, instrument, opinion, notice,
letter or other document or security delivered to you and reasonably believed by
you to be genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender,
statement, request, comment, agreement or other instrument
5
<PAGE>
whatsoever not only as to its due execution and validity and effectiveness of
its provisions, but also as to the truth and accuracy of any information
contained therein, which you shall in good faith believe to be genuine or to
have been signed or represented by a proper person or persons;
(f) may rely on and shall be protected in
acting upon written or oral instructions from any officer of
the Company;
(g) may consult with your counsel with
respect to any questions relating to your duties and responsibilities and the
advice or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken by
you hereunder in good faith and in accordance with the advice or opinion of such
counsel; and
(h) shall not advise any person tendering Old
Securities pursuant to the Exchange Offer as to the wisdom of making such tender
or as to the market value or decline or appreciation in market value of any Old
Securities.
15. You shall take such action as may from time to time be
requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus)
or such other forms as may be approved from time to time by the Company, to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Company will furnish you with copies of such
documents at your request. All other requests for information relating to the
Exchange Offer shall be directed to the Company, Attention: Investors Relations.
16. You shall advise by facsimile transmission or telephone,
and promptly thereafter confirm in writing to the Treasurer of the Company and
such other person or persons as it may request, daily (and more frequently
during the week immediately preceding the Expiration Date and if otherwise
requested) up to and including the Expiration Date, as to the number of Old
Securities which have been tendered pursuant to the Exchange Offer and the items
received by you pursuant to this Agreement, separately reporting and giving
cumulative totals as to items properly received and items improperly
6
<PAGE>
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as it or he
or she reasonably requests. Such cooperation shall include, without limitation,
the granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Old
Securities tendered, the aggregate principal amount of Old Securities accepted
and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery
shall be stamped by you as to the date and the time of receipt thereof and shall
be preserved by you for a period of time at least equal to the period of time
you preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right
of set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on Schedule I attached
hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement.
7
<PAGE>
21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including reasonable attorneys' fees and expenses,
arising out of or in connection with any act, omission, delay or refusal made by
you in reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Old Securities reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Old Securities; provided, however, that the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross negligence or
willful misconduct. In no case shall the Company be liable under this indemnity
with respect to any claim against you unless the Company shall be notified by
you, by letter or by facsimile confirmed by letter, of the written assertion of
a claim against you or of any other action commenced against you, promptly after
you shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate at its own expense in the
defense of any such claim or other action, and, if the Company so elects, the
Company shall assume the defense of any suit brought to enforce any such claim.
In the event that the Company shall assume the defense of any such suit, the
Company shall not be liable for the fees and expenses of any additional counsel
thereafter retained by you so long as the Company shall retain counsel
satisfactory to you to defend such suit, and so long as you have not determined,
in your reasonable judgment, that a conflict of interest exists between you and
the Company.
22. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any
8
<PAGE>
transfer taxes are payable in respect of the exchange of Old Securities, the
Company's check in the amount of all transfer taxes so payable, and the Company
shall reimburse you for the amount of any and all transfer taxes payable in
respect of the exchange of Old Securities; provided, however, that you shall
reimburse the Company for amounts refunded to you in respect of your payment of
any such transfer taxes, at such time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
If to the Company:
Building Materials Corporation of America
1361 Alps Road
Wayne, New Jersey 07470
Facsimile: (973) 628-3326
Attention: Executive Vice President-Finance
9
<PAGE>
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Securities, funds or property then held by you
as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
10
<PAGE>
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
BUILDING MATERIALS CORPORATION OF
AMERICA
By:______________________
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:_____________________
Name:
Title:
11
<PAGE>
SCHEDULE I
FEES
$2,500.00
12
