AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1997
Registration No. 333-20095
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------

PRE-EFFECTIVE AMENDMENT NO. 2 TO

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------

ATRIUM COMPANIES, INC.
and Certain Subsidiaries identified in footnote (1) below
(Exact name of registrant as specified in its charter)

DELAWARE 3442 75-2642488
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

1341 W. MOCKINGBIRD LANE
SUITE 1200W
DALLAS, TEXAS 75247
(214) 630-5757
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
---------------

RANDALL S. FOJTASEK
ATRIUM COMPANIES, INC.
1341 W. MOCKINGBIRD LANE
SUITE 1200W
DALLAS, TEXAS 75247
(214) 630-5757
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------

COPIES TO:

DEREK R. MCCLAIN JEFF L. HULL
HAROLD J. HERMAN ATRIUM COMPANIES, INC.
VINSON & ELKINS L.L.P. 1341 W. MOCKINGBIRD LANE
3700 TRAMMELL CROW CENTER SUITE 1200W
2001 ROSS AVENUE DALLAS, TEXAS 75247
DALLAS, TEXAS 75201-2975 (214) 630-5757
(214) 220-7797

---------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement

---------------

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

(1) The following direct and indirect subsidiaries of Atrium Companies, Inc.
are Co-Registrants, each of which is incorporated in the jurisdiction
and has the I.R.S. Employer Identification Number indicated: H-R Window
Supply, Inc., a Texas corporation (75-2382008); Vinyl Building
Specialties of Connecticut, Inc., a Connecticut corporation (06-
0765499); Bishop Manufacturing Co. of New York, Inc., a Connecticut
corporation (06-1351269); Bishop Manufacturing Company, Incorporated, a
Connecticut corporation (06-0735384); and Bishop Manufacturing Company
of New England, Inc., a Connecticut corporation (06-1251035).

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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

================================================================================
2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PROSPECTUS DATED AS OF MARCH 31, 1997

OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
10 1/2% SENIOR SUBORDINATED NOTES DUE 2006
OF
ATRIUM COMPANIES, INC.

-------------------------------

Interest Payable May 15 and November 15

Atrium Companies, Inc. (the "Company") is offering upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
letter of transmittal (the "Letter of Transmittal") (which together constitute
the "Exchange Offer") to exchange $1,000 principal amount of its new 10 1/2%
Senior Subordinated Notes due 2006 (the "New Notes") for each $1,000 principal
amount of its outstanding 10 1/2% Senior Subordinated Notes due 2006 (the "Old
Notes") in the aggregate principal amount of $100,000,000. The form and terms
of the New Notes are identical to the form and terms of the Old Notes except
that the Old Notes were offered and sold in reliance upon certain exemptions
from registration under the Securities Act of 1933, as amended (the "Securities
Act"), while the offering and sale of the New Notes in exchange for the Old
Notes has been registered under the Securities Act, with the result that the
New Notes will not bear any legends restricting their transfer. The New Notes
will evidence the same debt as the Old Notes and will be issued pursuant to,
and entitled to the benefits of, the Indenture (as herein defined) governing
the Old Notes. The Exchange Offer is being made in order to satisfy certain
contractual obligations of the Company. See "The Exchange Offer" and
"Description of New Notes." The New Notes and the Old Notes are sometimes
collectively referred to herein as the "Notes."

Interest on the New Notes will be payable semiannually on May 15 and
November 15 of each year, commencing on May 15, 1997. The New Notes will mature
on November 15, 2006. Except as described below, the Company may not redeem the
New Notes prior to November 15, 2001. On or after such date, the Company may
redeem the New Notes, in whole or in part, at the redemption prices set forth
herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time and from time to time on or prior to
November 15, 2000, the Company may, subject to certain requirements, redeem the
New Notes with the net cash proceeds of one or more Equity Offerings (as
defined) at a price equal to 110 1/2% of the principal amount to be redeemed,
together with accrued and unpaid interest, if any, to the date of redemption,
provided that at least $65 million of the aggregate principal amount of the
Notes remains outstanding after each such redemption. The New Notes will not be
subject to any sinking fund requirement. Upon the occurrence of a Change of
Control (as defined), (i) the Company will have the option, at any time on or
prior to November 15, 2001 (but in any event within 90 days after the
occurrence of the respective Change of Control), to redeem the New Notes, in
whole but not in part, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium (as defined), together with accrued
and unpaid interest, if any, to the date of redemption, and (ii) if the New
Notes are not redeemed, the Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
In addition, under certain circumstances the Company will be obligated to make
an offer to repurchase the New Notes at 100% of the principal amount, plus
accrued and unpaid interest to the date of repurchase, with the net cash
proceeds of certain sales or other dispositions of assets. See "Description of
New Notes."

The New Notes will be unsecured and will be subordinated to all existing
and future Senior Indebtedness (as defined) of the Company. The New Notes will
rank pari passu with any future Senior Subordinated Indebtedness (as defined)
of the Company and will rank senior to all other subordinated indebtedness of
the Company. The New Notes will be fully and unconditionally guaranteed (the
"Subsidiary Guarantees") on an unsecured, senior subordinated basis, by each of
the Company's subsidiaries on the issue date of the New Notes and by each
subsidiary (excluding foreign subsidiaries and Unrestricted Subsidiaries) of
the Company acquired thereafter (collectively, the "Subsidiary Guarantors").
The Indenture (as defined) permits the Company to incur additional indebtedness
(including Senior Indebtedness), subject to certain limitations. See
"Description of New Notes." As of February 28, 1997

(Cover page continued on next page)
3
the Company had no outstanding Senior Indebtedness, and the Company had no
Senior Subordinated Indebtedness outstanding other than the Notes. See
"Description of New Notes -- Ranking and Subordination."

The Exchange Offer will expire at 5:00 p.m., New York City time,
____________________, 1997, or such later date and time to which it is extended
(the "Expiration Date").

The Old Notes are designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal amount
of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement (as herein defined) and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity in the market for the Old Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading market
for either the Old Notes or the New Notes.

FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE NEW NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE ___.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

March 31, 1997

(Cover page continued on next page)
2
4
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA

On November 8, 1996, Fojtasek Companies, Inc., a Texas corporation
("Fojtasek"), and a wholly-owned subsidiary of FCI Holding Corp., a Delaware
corporation ("FCI Holding"), was merged with and into FCI Holding, a
wholly-owned subsidiary of Atrium Corporation ("Holding"). As a result of the
merger, the surviving Delaware corporation was renamed "Atrium Companies,
Inc.," which is the issuer of the Notes and a direct wholly-owned subsidiary of
Holding.

The definitions set forth below contain, in chronological order,
descriptions of certain business combination and recapitalization transactions
effected during 1995 and 1996 that have resulted in the existing business of
the Company and its corporate structure. For a diagram outlining the Company's
current corporate structure, see "The Transaction."

As used in this Prospectus, unless the context otherwise requires:

(i) the "Company" refers to Atrium Companies, Inc., the surviving
corporation following the merger of Fojtasek with and into FCI Holding,
and its consolidated subsidiaries;

(ii) the "Heritage Transaction" refers to a recapitalization
transaction effected on July 3, 1995 pursuant to which Fojtasek became a
wholly-owned subsidiary of newly-formed FCI Holding. Heritage Fund I,
L.P., an equity investment fund ("Heritage"), purchased 67.9% of FCI
Holding's outstanding common stock (including 49.8% of its outstanding
voting common stock). FCI Holding was formed to achieve certain business
and tax objectives. Concurrently with the acquisition of Bishop, the
then-existing common and preferred stock of FCI Holding (including such
stock owned by Heritage) was exchanged by the holders thereof for the
same number of securities, with the same rights, in Holding, with the
result that FCI Holding became a wholly-owned subsidiary of Holding;

(iii) the "acquisition of Keller" or the "Keller acquisition" refers to
the acquisition by the Company of certain assets in June 1996 and
inventory in September 1996 of Keller Aluminum Products of Texas
("Keller"), a division of Keller Building Products, which was owned by
Keller Industries, Inc.;

(iv) the "acquisition of Bishop" or the "Bishop acquisition"
refers to a transaction, effective as of September 30, 1996, pursuant to
which FCI Holding became a wholly-owned subsidiary of Holding (which was
formed on August 2, 1996 to achieve certain business and tax objectives)
and the Company acquired all the outstanding capital stock of Vinyl
Building Specialties of Connecticut, Inc. and Bishop Manufacturing Co.
of New York, Inc. (collectively with their consolidated subsidiaries,
"Bishop"); and

(v) the "Transaction" refers to a recapitalization transaction
that closed concurrent with the closing of the Offering of Old Notes (the
"Offering") pursuant to which (A) affiliates of Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse") purchased a number of newly issued shares of
Common Stock of Holding representing approximately 82% of the shares of
Common Stock outstanding and (B) certain outstanding shares, and certain
options and warrants to acquire shares, of Common Stock of Holding and
all outstanding shares of preferred stock of Holding were redeemed (the
"Redemption").

Unless the context otherwise requires, references herein to the capital
stock of Holding give effect to a recapitalization of Holding's three classes
of common stock into a single class of Common Stock, which was effected in
connection with the Transaction.

Unless otherwise indicated, all references in this Prospectus to window
market unit data and housing starts are derived from the September 1996 Summary
Reports on Window Frame Materials prepared by F.W. Dodge and all references to
other industry data are derived from sources believed by the Company to be
reliable.

3
5
SUMMARY

The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Certain of the statements contained in this summary and elsewhere
in this Prospectus, including information with respect to the Company's
business strategy, are forward-looking statements. See "Risk Factors" for a
discussion of important factors that could affect such matters.

THE COMPANY

The Company, founded in 1953, is a leading manufacturer and distributor
of residential windows and doors in the Southwest, South and Southeast regions
of the United States. The Company's primary market, which in 1995
represented 75.1% of the Company's revenues and 37.2% of total U.S. housing
starts, consists of Arizona, Colorado, Florida, Georgia, Louisiana, Nevada, New
Mexico, Oklahoma, Tennessee and Texas (collectively, the "Primary Market"). The
Primary Market includes certain of the fastest growing residential housing
markets in the United States with a compound annual growth rate ("CAGR") in
single-family housing starts of 10.3% for the five-year period ended December
31, 1995 compared to 5.9% nationally for the same period. The Company is also
one of a limited number of window and door manufacturers that offers a
diversified product line, consisting of aluminum, vinyl and wood products. The
Company estimates that its market share of aluminum window units sold in its
Primary Market has increased from 11.9% in 1991 to 17.6% in 1995 and that its
share of total window units sold in its Primary Market has increased from 7.6%
to 10.3% during the same period. The Company's revenues and total window unit
shipments in its Primary Market have increased at CAGRs of 19.3% and 19.0%,
respectively, in this period. The Company's pro forma net sales, income before
extraordinary charge and EBITDA as adjusted (as defined in the Notes to the
"Unaudited Summary Pro Forma Financial Data") for the year ended December 31,
1996 were $166.7 million, $6.0 million and $24.4 million, respectively.

Historically, the Company has emphasized the sale of aluminum windows
and doors, as aluminum windows are the product of choice and regional standard
in the Company's Primary Market. In 1995, aluminum windows accounted for 71.3%
of residential new construction window units and 43.0% of residential
remodel/replacement window units within the Company's Primary Market as
compared to 40.9% and 30.1%, respectively, on a national basis for the same
period. The Company believes that the preference for aluminum windows over
vinyl and wood windows in the Company's Primary Market is attributable to
aluminum's lower cost, greater durability and lower maintenance requirements,
as well as the reduced need for thermal efficiency in homes in moderate
Southern climates.

The Company believes that, in 1995, United States residential window and
door expenditures were approximately $6.5 billion, of which new construction
and remodel/replacement expenditures represented approximately $2.0 billion and
$4.5 billion, respectively. The Company believes that it is one of the two
largest aluminum window manufacturers in its Primary Market and that it enjoys
purchasing, manufacturing and distribution advantages compared to smaller
regional manufacturers. Excluding wood manufacturers, the Company believes that
the window and door industry is highly fragmented and is characterized
primarily by small regional manufacturers of windows and doors. This industry
fragmentation also presents opportunities for growth through acquisition, a
strategy that the Company has implemented through the recent acquisitions of
Bishop and Keller. Bishop manufactures and sells primarily vinyl windows and
doors to the remodel/replacement market in the Northeast. This acquisition
expands the Company's vinyl window product offering and increases its
penetration of the remodel/replacement market. The Keller acquisition increases
the Company's aluminum extrusion capacity by approximately 35% and provides the
Company with new equipment and tooling for fabricating several types of vinyl
window and door products and a full line of single- and multi-family aluminum
windows and storm doors. The Company intends to continue to pursue strategic
acquisitions to enhance its market share and expand its product offering.

The Company is vertically integrated with operations that include (i)
the extrusion of aluminum and vinyl, which is utilized internally in the
Company's fabrication operations or sold to third parties ("Extrusion"), (ii)
the assembly of window and door units and sale of such units to wholesalers,
lumberyards, do-it-yourself ("DIY") home centers and homebuilders
("Fabrication") and (iii) the sale of finished products to homebuilders,
remodelers and contractors through four Company-owned distribution centers
located in Dallas, Texas; Las Vegas, Nevada; Phoenix,

4
6
Arizona; and Farmingdale, New York (the "Distribution Centers"). The Company
performs these operations at facilities that comprise an aggregate of
approximately 1.4 million square feet.

The Company currently sells its products under five brand names,
"Atrium," "Skotty," "H-R," "KBP," and "Bishop." The Company believes that
Atrium has significant national brand name recognition at the building trade
and consumer level, while Skotty, H-R, KBP and Bishop each have significant
regional brand name recognition within their primary channels of distribution.
The Company has been effective in utilizing these brand names to establish
relationships with leading wholesalers, lumberyards and builders in each of its
markets and to gain distribution in new markets. The Company distributes its
windows and doors through (i) one-step distribution to major retail DIY home
centers, lumberyards and the Company's Distribution Centers, (ii) two-step
distribution to wholesalers who resell to DIY home centers and lumberyards and
(iii) direct sales to homebuilders (of both single-family and multi-family
housing), remodelers and contractors. See "Business -- Distribution and
Marketing."

The Company's principal executive offices are located at 1341 W.
Mockingbird Lane, Suite 1200W, Dallas, Texas 75247, and the telephone number is
(214) 630-5757.

OPERATIONS

Following is a breakdown of the Company's consolidated pro forma revenue
(including the acquisition of Bishop) by operating component (excluding
intercompany sales) from 1992 through 1996:

YEAR ENDED DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996 CAGR
-------- --------- -------- -------- -------- --------
(dollars in thousands)

Extrusion ............. $ 17,673 $ 19,527 $ 26,100 $ 28,052 $ 30,860 15.0%
Fabrication ........... 65,558 81,074 95,397 104,736 119,111 16.1
Distribution Centers .. 4,717 8,809 16,080 17,186 16,739 37.3
-------- -------- -------- -------- -------- ----
Net Revenue ........... $ 87,948 $109,410 $137,577 $149,974 $166,710 17.3%
======== ======== ======== ======== ======== ====

Extrusion. Aluminum extrusion is a process that converts raw aluminum
billet into product components that can be used in the fabrication of windows
and doors. The Company also extrudes vinyl pellets into sub-components used in
the fabrication of aluminum, vinyl and wood windows and doors. During 1996,
55.3% of the Company's extrusion revenue was derived from sales to third
parties, including businesses outside of the window and door industry, with the
remainder sold internally to the Company's fabrication operations. By extruding
aluminum and vinyl in-house as opposed to purchasing components from outside
suppliers, the Company is able to secure a low-cost, reliable source of
extrusions, control product quality and reduce inventory levels. The Company
extrudes aluminum at divisions in Wylie, TX ("Extruders") and Woodville, TX
(near Houston) ("Woodville Extruders"). Vinyl is extruded at Dow-Tech Plastics
("Dow-Tech") in Carrollton, TX.

Fabrication. The Company fabricates and distributes a broad line of
aluminum, vinyl and wood windows and doors at its six fabrication divisions.
Window products include single- and double-hung windows, sliding windows,
casement windows and specialty windows such as half rounds, transoms and
ellipticals. Door products include center-hinge patio doors, French patio doors
and sliding patio doors. The fabrication process includes frame and sash
cutting and welding, glass processing and final assembly of completed windows
and doors. The Company's six fabrication divisions include (i) Skotty Aluminum
(Irving, TX), (ii) H-R Windows (Dallas, TX), (iii) Atrium Vinyl (Dallas, TX),
(iv) Atrium Wood (Dallas, TX), (v) Kel-Star Building Products (Woodville, TX)
and (vi) Bishop (Bridgeport, CT and Clinton, MA). The Company designs,
manufactures and repairs its fabrication equipment at North Texas Die & Tool,
based in Irving, TX.

Distribution. The Company owns and operates four Distribution Centers,
consisting of Atrium Door & Window Distributors of Arizona, Nevada, New York
and Texas. The Arizona Distribution Center carries Skotty and Atrium products
and sells directly to large homebuilders in the area. The Nevada Distribution
Center markets primarily Skotty products and sells directly to homebuilders in
its region. The New York Distribution Center markets Bishop products primarily
to remodelers and contractors in a seven-state region in the Northeast. The
Texas Distribution Center sells Atrium products and distributes directly to
large homebuilders in Texas.

5
7
COMPETITIVE STRENGTHS

The Company's market leadership and financial performance are
attributable to a number of factors, including the following:

o LEADING SHARE IN PRIMARY MARKET

The Company believes that it is one of the two largest manufacturers of
aluminum windows in its Primary Market, with an estimated unit market share in
1995 of approximately 17.6%, compared to 11.9% in 1991. The Company believes
that its market share in 1995 of all window units sold in its Primary Market,
including aluminum, vinyl and wood, was approximately 10.3%, compared to 7.6%
in 1991. The Company's market share position provides competitive advantages in
the areas of purchasing, manufacturing and distribution.

o ESTABLISHED BRAND NAMES AND REPUTATION

The Company believes that it has significant brand name recognition
across each of its product lines, with such brand names as "Atrium," "Skotty,"
"H-R," "KBP" and "Bishop." The Company believes that each of these brands has
an established reputation within the building trade for product quality and
that this brand name recognition and reputation have enabled it to establish
relationships with leading wholesalers, builders and DIY home centers in each
of its markets. Further, the Company has been effective in leveraging the
strength of its brand names and reputation to gain distribution in new markets.

o STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS

Each of the Company's fabrication divisions distributes its products
through a combination of wholesalers, lumberyards, DIY home centers and direct
sales to large homebuilders and independent contractors. In addition, more than
one Company division may sell its products into the same geographic market
through the use of different brand names and distribution channels. The Company
believes that this distribution strategy maximizes the Company's market
penetration and reduces reliance upon any one distribution channel for the sale
of its products. As a manufacturer and distributor of windows and doors for the
past 43 years, the Company has developed many long-standing relationships with
key distributors.

o LOW-COST PRODUCTION PROCESSES

The Company believes that its low-cost operations are attributable to
its vertical integration and efficient production processes. Extrusion allows
the Company to ensure a low-cost, reliable source of extrusions, control
product quality and reduce inventory levels. The Company has been successful in
improving the efficiency of its operations through the rationalization of
product lines, reduction of overhead, reconfiguration of production processes,
reduction of inventory levels and the implementation of a management
information system. The Company believes that its low-cost operations provide
better margins and increased pricing flexibility in its markets relative to its
competition.

o EXPERIENCED, ENTREPRENEURIAL MANAGEMENT

The Company has assembled a strong management team at both the corporate
and operating levels. The Company's general managers have an average of 27
years of experience in the window industry and 13 years with the Company. At
the operating level, each division is managed on a stand-alone basis with a
general manager supported by sales and production managers. Incentives are
created for general managers through a combination of equity ownership and
bonus-based compensation based on divisional financial performance. All
divisional managers own Common Stock or options to purchase Common Stock of
Holding.

6
8
BUSINESS STRATEGY

In order to enhance its leading market share position and to maximize
profitability and cash flow, the Company's principal strategic objectives are
as follows:

o TARGET FAST-GROWING MARKETS

The Company intends to further strengthen its market position in its
fast-growing Primary Market and to evaluate opportunities for expansion into
developing high-growth markets in other regions of the United States. The
Company's Primary Market includes some of the fastest growing residential
housing markets in the United States with a CAGR of single-family housing
starts of 10.3% from 1991 to 1995 compared to 5.9% nationally for the same
period. Additionally, in the Company's Primary Market, unit sales of windows
into the new construction and remodel/replacement markets had CAGRs of 11.7%
and 8.8% from 1991 to 1995, respectively, compared to 5.7% and 5.0% for the
same period, respectively, on a national basis.

o FOCUS ON PRODUCTS OF CHOICE

The Company's strategy is to manufacture the window products of choice
in its targeted markets. In the Southwest, South and Southeast regions of the
United States, aluminum windows have historically been the product preferred by
homebuilders, remodelers, contractors and homeowners in the residential new
construction and remodel/replacement markets. This strong regional preference
for aluminum windows over vinyl or wood windows is attributable to the lower
cost, lower maintenance requirements and greater durability of aluminum
windows, as well as the reduced need for thermal efficiency in homes in
moderate Southern climates. In the Northeast, wood and vinyl windows have been
the products of choice due in part to their superior insulating qualities. The
Company's acquisition of Bishop, a vinyl window and door manufacturer, together
with the Company's existing wood window capabilities, will enable the Company
to provide the preferred products in the Northeast market.

o EXPAND INTO VINYL

The Company plans to continue to expand its presence in the vinyl window
and door market. In the Company's Primary Market, vinyl windows represented
10.8% and 28.3% of residential new construction and remodel/replacement units,
respectively, during 1995. The Company has significantly increased its vinyl
window and door fabrication capacity through the commencement of operations at
Atrium Vinyl in 1995 and the acquisitions of Bishop and Keller in 1996. The
Company's pro forma sales of vinyl windows and doors (as if the acquisition of
Bishop had occurred January 1, 1996 combined with the actual historical sales
of Atrium Vinyl and Keller during 1996) for the year ended December 31, 1996
were $20.5 million. The Company intends to utilize its nationally recognized
"Atrium" brand name and well-established distribution channels to further
penetrate the highly fragmented vinyl window market.

o EXTEND ATRIUM BRAND NAME

The Company is seeking to leverage the strength of its nationally
recognized "Atrium" brand name by (i) introducing Atrium-branded vinyl products
into existing distribution channels in the Company's Primary Market and in
Bishop's primary market in the Northeast and (ii) renaming the Las Vegas,
Phoenix, Dallas and Farmingdale distributors as the Atrium Door & Window
Distributors of Nevada, Arizona, Texas and New York, respectively. The Company
believes that the extension of the Atrium brand name to its vinyl products will
accelerate the Company's expansion into the vinyl window and door market.

o EXPAND THROUGH STRATEGIC ACQUISITIONS

7
9
(ii) achieve significant cost reductions through purchasing synergies and the
application of the Company's best practices and (iii) diversify the Company's
geographic, product and market focus. The Bishop and Keller acquisitions are
two recent examples of focused, value-added acquisitions that are consistent
with the Company's overall business strategy.

RECENT ACQUISITIONS

The Company purchased from Keller certain assets in June 1996
and inventory in September 1996. The acquired capital assets include an
aluminum extrusion line, a painting line and vinyl window and door and aluminum
window and storm door fabrication equipment and tooling. The extrusion line
will increase the Company's aluminum extrusion capacity by approximately 35%
and will enable it to extrude in-house virtually all of its anticipated
aluminum extrusion requirements. The vinyl fabrication equipment and tooling
will extend the Company's product offering to include the fabrication of vinyl
sliding patio doors, vinyl casement windows, vinyl horizontal sliding windows
and vinyl double-hung windows and the assembly of vinyl bay and bow windows.
This equipment and tooling has been relocated to the Company's Atrium Vinyl
division in Dallas. Additionally, equipment for the fabrication of a full line
of single- and multi-family aluminum windows and storm doors is being utilized
in the Woodville division near Houston, Texas. The Company has established two
new divisions named Kel-Star Building Products and Woodville Extruders that
will operate the assets acquired pursuant to the Keller acquisition. Kel-Star
Building Products will market its products under the "KBP" brand to take
advantage of existing name recognition of Keller Building Products.

In September 1996, the Company completed the acquisition of Bishop,
which manufactures and sells primarily vinyl windows and doors to the
remodel/replacement market in the Northeast. The Company acquired Bishop to (i)
increase the Company's presence in the fast-growing vinyl window market, (ii)
diversify geographically and (iii) increase its presence in the
remodel/replacement market. The Bishop acquisition allows the Company to extend
its vinyl product offering to include sliding patio doors, French patio doors,
casement windows, horizontal sliding windows, bay and bow windows, double-hung
windows and storm doors. In addition, a distribution facility owned by Bishop
has been renamed Atrium Door & Window Distributors of New York.

8
10
THE EXCHANGE OFFER

The Exchange Offer applies to $100.0 million aggregate principal amount
of the Old Notes. The form and terms of the New Notes are identical to the form
and terms of the Old Notes except that the Old Notes were offered and sold in
reliance upon certain exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"), while the offering and sale of the New
Notes in exchange for the Old Notes has been registered under the Securities
Act, with the result that the New Notes will not bear any legends restricting
their transfer. See "Description of New Notes."

The Exchange Offer . . . . . . . . . . $1,000 principal amount of New
Notes in exchange for each $1,000
principal amount of Old Notes. As
of the date hereof, Old Notes
representing $100.0 million
aggregate principal amount were
outstanding. The terms of the New
Notes and the Old Notes are
substantially identical.

Based on an interpretation by the
Commission's staff set forth in
no-action letters issued to third
parties unrelated to the Company,
the Company believes that, with the
exceptions discussed herein, New
Notes issued pursuant to the
Exchange Offer in exchange for Old
Notes may be offered for resale,
resold and otherwise transferred by
any person receiving the New Notes,
whether or not that person is the
holder (other than any such holder
or such other person that is an
"affiliate" of the Company within
the meaning of Rule 405 under the
Securities Act), without compliance
with the registration and
prospectus delivery provisions of
the Securities Act, provided that
(i) the New Notes are acquired in
the ordinary course of business of
that holder or such other person,
(ii) neither the holder nor such
other person is engaging in or
intends to engage in a distribution
of the New Notes, and (iii) neither
the holder nor such other person
has an arrangement or understanding
with any person to participate in
the distribution of the New Notes.
However, the Company has not
sought, and does not intend to
seek, its own no-action letter, and
there can be no assurance that the
Commission's staff would make a
similar determination with respect
to the Exchange Offer. See "The
Exchange Offer -- Purpose and
Effect." Each broker-dealer that
receives New Notes for its own
account in exchange for Old Notes,
where those Old Notes were acquired
by the broker-dealer as a result of
its market-making activities or
other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any
resale of those New Notes. See
"Plan of Distribution."

Exchange and Registration
Rights Agreement . . . .. . . . . . . . . The Old Notes were sold by the
Company on November 27, 1996 in a
private placement. In connection
with the sale, the Company entered
into an Exchange and Registration
Rights Agreement with the initial
purchasers of the Old Notes (the
"Registration Rights Agreement")
providing for the Exchange Offer. See
"The Exchange Offer -- Purpose and
Effect."

Expiration Date . . . . . . . . . . . . The Exchange Offer will expire at
5:00 P.M., New York City time,
_____________, 1997, or such later
date and time to which it is
extended.

Withdrawal Rights . . . . . . . . . . . The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New
York City time, on the Expiration
Date. Any Old Notes not accepted
for exchange for any reason will be
returned without expense to the
tendering holder thereof as
promptly as practicable after the
expiration or termination of the
Exchange Offer.

Interest on the New Notes
and Old Notes . . . . . . . . . . . . Interest on each New Note will
accrue from the date of issuance of
the Old Note for which the New Note
is exchanged or from the date of the
last periodic payment of interest on
such Old Note, whichever is later. No
interest will be paid on Old Notes
which are exchanged for New Notes.

Conditions to the Exchange
Offer . . . . . . . . . . . . . . . . The Exchange Offer is subject to
certain customary conditions, certain
of which may be waived by the
Company. See "The Exchange Offer --
Conditions."

11
Procedures for Tendering
Old Notes . . . . . . . . . . . . . . Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a copy thereof, in
accordance with the instructions
contained herein and therein, and
mail or otherwise deliver the Letter
of Transmittal, or the copy, together
with the Old Notes and any other
required documentation, to the
Exchange Agent at the address set
forth herein. Persons holding Old
Notes through the Depository Trust
Company (the "DTC") and wishing to
accept the Exchange Offer must do so
pursuant to the DTC's Automated
Tender Offer Program, by which each
tendering Participant (as defined)
will agree to be bound by the Letter
of Transmittal. By executing or
agreeing to be bound by the Letter of
Transmittal, each holder will
represent to the Company that, among
other things, (i) any Exchange Notes
to be received by it will be acquired
in the ordinary course of its
business, (ii) it has no arrangement
with any person to participate in the
distribution of the Exchange Notes
and (iii) it is not an "affiliate,"
as defined in Rule 405 of the
Securities Act, of the Company or any
of the Subsidiary Guarantors, or if
it is an affiliate, it will comply
with the registration and prospectus
delivery requirements of the
Securities Act to the extent
applicable. If the holder is not a
broker-dealer, it will be required to
represent that it is not engaged in,
and does not intend to engage in, the
distribution of the Exchange Notes.
If the holder is a broker-dealer that
will receive Exchange Notes for its
own account in exchange for Notes
that were acquired as a result of
market-making activities or other
trading activities, it will be
required to acknowledge that it will
deliver a prospectus in connection
with any resale of such Exchange
Notes.

Pursuant to the Registration Rights
Agreement, the Company is required to
file a registration statement for a
continuous offering pursuant to Rule
415 under the Securities Act in
respect of the Old Notes if existing
Commission interpretations are
changed such that the New Notes
received by holders in the Exchange
Offer are not or would not be, upon
receipt, transferable by each such
holder (other than an affiliate of
the Company or any of the Subsidiary
Guarantors) without restriction under
the Securities Act. See "The Exchange
Offer -- Purpose and Effect."

Acceptance of Old Notes and
Delivery of New Notes . . . . . . . . The Company will accept for exchange
any and all Old Notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The New Notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration
Date. See "The Exchange Offer --
Terms on the Exchange Offer."

Exchange Agent . . . . . . . . . . . . United States Trust Company of New
York is serving as Exchange Agent
in connection with the Exchange
Offer and is also serving as
Trustee under the Indenture.

Federal Income Tax
Considerations . . . . . . . . . . . . . The exchange pursuant to the
Exchange Offer will not be a
taxable event for federal income
tax purposes. See "Certain United
States Federal Income Tax
Considerations."

Effect of Not Tendering . . . . . . . . Old Notes that are not tendered or
that are tendered but not accepted
will, following the completion of
the Exchange Offer, continue to be
subject to the existing
restrictions upon transfer thereof.
The Company will have no further
obligation to provide for the
registration under the Securities
Act of such Old Notes.

Global Note . . . . . . . . . . . . . . The New Notes will generally only
be issued in registered form.
Holders of beneficial interests
in the Global Notes will not be
considered the owners or holders of
any New Notes under the Global
Notes or the Indenture for any
purpose. Holders of beneficial
interests in the Global Notes may
be unable to transfer or pledge
their interest in the Global Notes
if physical delivery is required.
Payments by the Participants and
the Indirect Participants to the
beneficial owners of New Notes will
be governed by standing
instructions and customary practice
and will be the responsibility of
the Participants or Indirect
Participants and not the Company or
Trustee. See "Book Entry; Delivery
and Form."

10
12
TERMS OF THE NEW NOTES

Issuer . . . . . . . . . . . . . . . . . Atrium Companies, Inc.

Securities . . . . . . . . . . . . . . . $100,000,000 aggregate principal
amount of 10 1/2% Senior Subordinated
Notes due 2006.

Maturity . . . . . . . . . . . . . . . . November 15, 2006

Interest Payment Dates . . . . . . . . . Interest will accrue from the date of
original issuance of the Old Notes,
or from the most recent date to which
interest has been paid or provided
for, whichever is later, and will be
payable semiannually in arrears on
May 15 and November 15 of each year,
commencing May 15, 1997. No interest
will be paid on Old Notes exchanged
for New Notes.

Sinking Fund . . . . . . . . . . . . . . None.

Optional Redemption . . . . . . . . . . . New Notes are redeemable, in whole
or in part, at the option of the
Company on or after November 15,
2001, at the redemption prices set
forth herein plus accrued and unpaid
interest to the date of redemption.
In addition, at any time or from time
to time on or prior to November 15,
2000, the Company, at its option, may
redeem the Notes with the net cash
proceeds of one or more Equity
Offerings at a redemption price equal
to 110 1/2% of the principal amount
thereof plus accrued and unpaid
interest to the date of redemption;
provided, that at least $65.0 million
of the aggregate principal amount of
the Notes remains outstanding after
any such redemption. See "Description
of New Notes -- Redemption."

Ranking . . . . . . . . . . . . . . . . . The New Notes will be unsecured and
will be subordinated in right of
payment to all existing and future
Senior Indebtedness of the Company.
The New Notes will rank pari passu
with any future Senior Subordinated
Indebtedness of the Company and will
rank senior to all other subordinated
indebtedness of the Company. The
Subsidiary Guarantees will be
general, unsecured obligations of the
Subsidiary Guarantors, subordinated
in right of payment to all existing
and future Guarantor Senior
Indebtedness (as defined) of the
Subsidiary Guarantors. As of
February 28, 1997, the Company had no
outstanding Senior Indebtedness and
the Company had no Senior
Subordinated Indebtedness outstanding
other than the Notes and no
Subordinated Obligations
outstanding. As of the same date,
the Subsidiary Guarantors had no
Guarantor Senior Indebtedness
outstanding. See "Description of
New Notes -- Ranking and
Subordination."

Subsidiary Guarantees . . . . . . . . . . The New Notes will be unconditionally
guaranteed (the "Subsidiary
Guarantees") on an unsecured, senior
subordinated basis by each of the
Company's Subsidiaries (as defined)
existing on the issue date of the
Notes and by each Subsidiary of the
Company (other than foreign
Subsidiaries and Unrestricted
Subsidiaries) created or acquired
thereafter (collectively, the
"Subsidiary Guarantors"). See
"Description of New Notes --
Subsidiary Guarantees."

Change of Control . . . . . . . . . . . . Upon the occurrence of a Change of
Control, (i) the Company will have
the option, at any time on or prior
to November 15, 2001 (but in any
event within 90 days after the
occurrence of the respective Change
of Control), to redeem the New Notes
in whole but not in part at a
redemption price equal to 100% of the
principal amount thereof plus the
Applicable Premium (as defined)
together with accrued and unpaid
interest, if any, to the date of
redemption, and (ii) if the New Notes
are not redeemed, the Company will be
required to make an offer to
repurchase the New Notes at a price
equal to 101% of the principal amount
thereof, together with accrued and
unpaid interest, if any, to the date
of repurchase. See "Description of
New Notes -- Change of Control."

Restrictive Covenants . . . . . . . . . . The Indenture imposes certain
limitations on the ability of the
Company and its Restricted
Subsidiaries to, among other things,
incur additional indebtedness, pay
dividends or make certain other
restricted payments, consummate
certain asset sales, enter into
certain transactions with affiliates,
merge or consolidate with any other
person or sell, assign, transfer,
lease, convey or otherwise dispose of
all or substantially all of the
assets of the Company and its
Restricted Subsidiaries.

For additional information regarding
the Notes, see "Description of New
Notes."

RISK FACTORS

Holders of Old Notes should carefully consider all of the information
set forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" for risks involved with an investment in
the New Notes.

11
13
THE TRANSACTION

The Company is a wholly-owned subsidiary of Holding. The Old Notes were
offered in connection with the purchase by affiliates of Hicks Muse of newly
issued shares of Common Stock of Holding for $32.0 million. Such shares, after
giving effect to the other elements of the Transaction, represent approximately
82% of the outstanding shares of Common Stock. Hicks Muse is a private
investment firm based in Dallas, New York, St. Louis and Mexico City that
specializes in acquisitions, recapitalizations and other principal investing
activities. Since the firm's inception in 1989, Hicks Muse has completed or has
pending more than 60 transactions having a combined transaction value exceeding
$19.0 billion.

In connection with the offering of Old Notes, Holding effected the
Redemption of certain shares of its Common Stock and all of its preferred
stock, as well as certain options and warrants to purchase shares of its
capital stock. As a result of the Transaction, on the closing date, certain
stockholders of Holding and Company managers (the "Other Stockholders") own the
remaining outstanding shares of Common Stock. The parties whose Common Stock
and options and warrants in Holding were redeemed (the "Selling
Securityholders") received approximately $59.4 million (subject to adjustment)
in the Transaction. See "The Transaction" and "Beneficial Ownership and Certain
Transactions."

Holding required approximately $134.2 million in cash to consummate the
Transaction, consisting of $59.4 million in Redemption payments to the Selling
Securityholders, $54.3 million, representing all outstanding indebtedness under
the Old Credit Facility (as defined) and debt assumed in connection with its
acquisition of Bishop, $12.5 million in Redemption payments to preferred
stockholders of Holding (including cumulative dividends in arrears) and $8.0
million of fees and expenses. The funds required to consummate the Transaction
were provided by (i) the proceeds of the Offering, (ii) $32.0 million in equity
financing from the issuance by Holding of new Common Stock to affiliates of
Hicks Muse and (iii) drawings of $2.2 million under the Company's new senior
secured credit facility (the "New Credit Facility") (see "Description of New
Credit Facility").

For financial reporting purposes, the Transaction has been accounted for
as a recapitalization and, accordingly, the assets and liabilities of the
Company were not revalued.

The following table sets forth the actual sources and uses of funds in
connection with the Transaction, as completed on November 27, 1996.

Amount
------
(dollars in
millions)

SOURCES OF FUNDS:
New Credit Facility(1) .................................................. $ 2.2
Old Notes ............................................................... 100.0
Issuance of Common Stock to Hicks Muse affiliates ....................... 32.0
------
Total Sources .................................................... $ 134.2
======
USES OF FUNDS:
Redemption payments to Selling Securityholders .......................... $ 59.4
Repayment of old debt(2) ................................................ 54.3
Redemption of preferred stock (including cumulative dividends in arrears) 12.5
Fees and expenses(3) .................................................... 8.0
------
Total Uses ....................................................... $ 134.2
======

- -------------------------

(1) The New Credit Facility provides the Company with a revolving loan
facility of up to $20.0 million.

(2) Represents all amounts outstanding as of November 27, 1996 (the "Closing
Date") under the Company's revolving credit facility and term loan
facility (collectively, the "Old Credit Facility") and $0.2 million of
indebtedness assumed in connection with the acquisition of Bishop.

(3) Includes the underwriting discount to BT Securities Corporation of $3.0
million and $5.0 million of other expenses related to legal fees,
financial advisory fees, accounting fees and printing expenses incurred
in connection with the Offering, the Transaction and the establishment
of the New Credit Facility. See "Use of Proceeds" and "Beneficial
Ownership and Certain Transactions -- Certain Transactions -- The
Transaction."

12
14
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA

The unaudited pro forma income statement and other financial data for
the year ended December 31, 1996, give effect to (i) the acquisition of Bishop,
(ii) the Transaction and the Offering (collectively, the "Financing") and (iii)
the Exchange Offer as if they had occurred on January 1, 1996. The balance
sheet data as of December 31, 1996 represents the actual historical account
balances of the Company as of December 31, 1996. The summary pro forma
financial data are not necessarily indicative of either future results of
operations or the results that would have occurred if those events had been
consummated on the indicated date. The following information should be read in
conjunction with the Consolidated Financial Statements of the Company, the
Combined Consolidated Financial Statements of Bishop and the Unaudited Pro
Forma Financial Statement and, in each case, the related notes thereto,
included elsewhere in this Prospectus.

YEAR ENDED
DECEMBER 31, 1996
----------------
(DOLLARS IN THOUSANDS)

INCOME STATEMENT DATA:
Net sales ....................................... $166,710
Cost of goods sold .............................. 107,730
Gross profit .................................... 58,980
Selling, delivery, general and administrative
expenses ...................................... 37,621
Stock option compensation expense ............... 444
Income from operations .......................... $ 20,915

OTHER FINANCIAL DATA:
EBITDA as adjusted (1) .......................... $ 24,350
Depreciation and amortization ................... 2,716
Capital expenditures (2) ........................ 3,600
Ratio of earnings to fixed charges (3) .......... 1.8x

BALANCE SHEET DATA (END OF PERIOD):
Working capital ................................. $ 25,278
Total assets .................................... 74,750
Total debt ...................................... 100,000

(1) EBITDA as adjusted represents income before interest, income taxes,
extraordinary charge, depreciation and amortization, stock option
compensation expense, and certain non-recurring expenses related to
professional fees of $350. As the Company has historically incurred
significant non-cash and non-recurring charges, management believes
EBITDA as adjusted provides a more meaningful comparison of historical
results. While EBITDA as adjusted is not intended to represent cash flow
from operations as defined by GAAP and should not be considered as an
indicator of operating performance or an alternative to cash flow or
operating income (as measured by GAAP) or as a measure of liquidity, it
is included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital
expenditures and working capital requirements. The Company believes
EBITDA as adjusted provides investors and analysts in the building
materials industry the necessary information to analyze and compare
historical results of the Company on a comparable basis with other
companies on the basis of operating performance, leverage and liquidity.
Additionally, as EBITDA is not defined by GAAP, it may not be calculated
or comparable to other similarly titled measures within the building
materials industry.

(2) Capital expenditures for the year ended December 31, 1996 include the
capital assets purchased from Keller for $1,150 as part of the Keller
acquisition.

(3) For purposes of calculating the pro forma ratio of earnings to fixed
charges, earnings represent income (loss) before income taxes,
extraordinary charge and fixed charges. Fixed charges consist of the
total of (i) interest, whether expensed or capitalized; (ii)
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized; and (iii) that portion of
rental expense considered to represent interest cost (assumed to be one-
third).

13
15

RISK FACTORS

Prospective investors should carefully consider the following factors in
addition to the other information included in this Prospectus before exchanging
any of the Old Notes for New Notes.

SUBSTANTIAL LEVERAGE AND NEGATIVE NET WORTH

The Company is highly leveraged and has substantial indebtedness. As of
February 28, 1997 the Company and its consolidated subsidiaries had an
aggregate of $100.0 million of outstanding indebtedness consisting entirely of
the Old Notes. In addition, the Company had a stockholder's deficit of $41.2
million at December 31, 1996. The Indenture permits the Company to incur
additional indebtedness, including Senior Indebtedness, subject to certain
limitations. As of December 31, 1996, the maximum amount of Senior Indebtedness
the Company and its Subsidiary Guarantors, collectively and in the aggregate,
could incur was $45.0 million under the current provisions of the Indenture.
See "Capitalization" and "Description of New Notes."

The Company's high degree of leverage could have important consequences
to the holders of the New Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired in the future; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) certain of the Company's borrowings will be at variable rates
of interest (including borrowings under the New Credit Facility), which expose
the Company to the risk of increased interest rates; (iv) the indebtedness
outstanding under the New Credit Facility is secured and matures prior to the
maturity of the New Notes; (v) the Company may be substantially more leveraged
than certain of its competitors, which may place the Company at a competitive
disadvantage; and (vi) the Company's substantial degree of leverage may limit
its flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Description of New Credit
Facility" and "Description of New Notes."

ABILITY TO SERVICE DEBT

The Company's ability to make scheduled payments or to refinance its
obligations with respect to its Indebtedness will depend on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to certain financial, business and other factors beyond its
control. If the Company's cash flow and capital resources are insufficient to
fund its debt service obligations, the Company may be forced to reduce or delay
planned expansion and capital expenditures, sell assets, obtain additional
equity capital or restructure its debt. There can be no assurance that the
Company's operating results, cash flow and capital resources will be sufficient
for payment of its Indebtedness in the future. In the absence of such operating
results and resources, the Company could face substantial liquidity problems
and might be required to dispose of material assets or operations to meet its
debt service and other obligations, and there can be no assurance as to the
timing of such sales or the proceeds that the Company could realize therefrom.
In addition, because the Company's obligations under the New Credit Facility
bears interest at floating rates, an increase in interest rates could adversely
affect, among other things, the Company's ability to meet its debt service
obligations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and "Description
of New Credit Facility."

The ability of the Company to service its indebtedness is dependent upon
the future performance of the Company. In addition, the Company believes that
its ability to repay portions of its long-term indebtedness (including the New
Notes) is dependent on the availability of refinancing indebtedness. The future
performance of the Company and the availability of refinancing indebtedness
each is subject to general economic and market conditions and to financial,
competitive, business and other factors, including factors beyond the Company's
control.

SUBORDINATION OF THE NEW NOTES

The New Notes are unsecured, senior subordinated obligations of the
Company and are subordinated in right of payment to all existing and future
Senior Indebtedness of the Company, including without limitation any amounts
outstanding under the New Credit Facility. As of February 28, 1997, the Company
had no Senior Indebtedness

14
16
outstanding, but the Company can incur Senior Indebtedness under the terms of
the Indenture. As of December 31, 1996, the maximum amount of Senior
Indebtedness the Company and its Subsidiary Guarantors, collectively and in the
aggregate, could incur was $45.0 million, under the current provisions of the
Indenture. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company,
assets of the Company will be available to pay obligations on the New Notes,
only after all Senior Indebtedness has been paid in full, and there can be no
assurance that there will be sufficient assets to pay amounts due on all or any
of the New Notes. See "Description of New Notes -- Ranking and Subordination."

Similarly, the Indebtedness evidenced by the Subsidiary Guarantees of
the New Notes by the Subsidiary Guarantors will be subordinated to the prior
payment in full of all existing and future Guarantor Senior Indebtedness (as
defined under "Description of New Notes"), including all amounts owing pursuant
to their guarantees of the New Credit Facility. As of December 31, 1996, the
liabilities of the Company's subsidiaries (including trade credit but excluding
the Subsidiary Guarantees and the subsidiary guarantees of, and borrowings
backed by letters of credit issued pursuant to, the New Credit Facility)
totaled approximately $1.1 million (none of which would have been Guarantor
Senior Indebtedness). See "Description of New Notes -- Ranking and
Subordination" and "-- Subsidiary Guarantees."

FRAUDULENT CONVEYANCE CONSIDERATIONS

The incurrence by the Company of a portion of the indebtedness evidenced
by the Notes to finance the Redemption as described under "Summary -- The
Transaction" is subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy or reorganization case or a lawsuit by or
on behalf of creditors of the Company. Under these statutes, if a court were to
find that obligations (such as the Notes) were incurred with the intent of
hindering, delaying or defrauding present or future creditors, that the Company
received less than a reasonably equivalent value or fair consideration for
those obligations or that the Company contemplated insolvency with a design to
prefer one or more creditors to the exclusion, in whole or in part, of other
creditors and, at the time of the occurrence of the obligations, the obligor
either (i) was insolvent or rendered insolvent by reason thereof, (ii) was
engaged or was about to engage in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital or (iii)
intended to or believed that it would incur debts beyond its ability to pay
such debts as they matured or became due, such court could void the Company's
obligations under the Notes, subordinate the Notes to other indebtedness of the
Company or take other action detrimental to the holders of the Notes. Some
courts have held that an obligor's purchase of its own capital stock does not
constitute reasonably equivalent value or fair consideration for indebtedness
incurred to finance that purchase.

The measure of insolvency for purposes of a fraudulent conveyance claim
will vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a particular time if the sum
of its debts at that time is greater than the then fair value of its assets or
if the fair salable value of its assets at that time is less than the amount
that would be required to pay its probable liability on its existing debts as
they become absolute and mature. The Company believes that, after giving effect
to the Transaction and the Offering, the Company will be (i) neither insolvent
nor rendered insolvent by the incurrence of indebtedness in connection with the
Transaction and the Offering, (ii) in possession of sufficient capital to run
its business effectively and (iii) incurring debts within its ability to pay as
the same mature or become due.

There can be no assurance, however, as to what standard a court would
apply in order to evaluate the parties' intent or to determine whether the
Company was insolvent at the time of, or rendered insolvent upon consummation
of, the Transaction or the sale of the Notes or that, regardless of the method
of valuation, a court would not determine that the Company was insolvent at the
time of, or rendered insolvent upon consummation of, the Transaction.

In addition, the Subsidiary Guarantees may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
any of the Subsidiary Guarantors. In such a case, the analysis set forth above
would generally apply, except that the Subsidiary Guarantees could also be
subject to the claim that, since the Subsidiary Guarantees were incurred for
the benefit of the Company (and only indirectly for the benefit of the
Subsidiary Guarantors), the obligations of the Subsidiary Guarantors thereunder
were incurred for less than reasonably equivalent value or fair consideration.
A court could avoid a Subsidiary Guarantor's obligation under the Subsidiary
Guarantee, subordinate the Subsidiary Guarantee to other indebtedness of a
Subsidiary Guarantor or take other action detrimental to the holders of the
Notes.

15
17
To the extent any Subsidiary Guarantee was avoided as a fraudulent
conveyance, limited as described above, or held unenforceable for any other
reason, holders of the Notes would, to such extent, cease to have a claim in
respect of such Subsidiary Guarantee and, to such extent, would be creditors
solely of the Company and any Subsidiary Guarantor whose Subsidiary Guarantee
was not avoided, limited or held unenforceable. In such event, the claims of
the holders of the Notes against the issuer of an avoided, limited or
unenforceable Subsidiary Guarantee would be subject to the prior payment of all
liabilities of such Subsidiary Guarantor. There can be no assurance that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of Notes.

RESTRICTIVE DEBT COVENANTS

The New Credit Facility contains a number of significant covenants that,
among other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur guarantee obligations,
repay other indebtedness or amend other debt instruments, pay dividends, create
liens on assets, enter into leases, make investments, loans or advances, make
acquisitions, engage in mergers or consolidations, make capital expenditures,
engage in certain transactions with subsidiaries and affiliates and otherwise
restrict corporate activities. In addition, under the New Credit Facility, the
Company is required to comply with specified financial ratios and tests,
including a minimum interest coverage ratio and a trailing four quarter minimum
EBITDA test. See "Description of New Credit Facility."

Since consummation of the Financing, the Company has been in compliance
with the covenants and restrictions contained in the New Credit Facility and in
the Indenture. However, its ability to continue to comply may be affected by
events beyond its control, including prevailing economic, financial and
industry conditions. The breach of any of such covenants or restrictions could
result in a default under the New Credit Facility and the Indenture, which
would permit the senior lenders or the holders of the Notes, as the case may
be, to declare all amounts borrowed thereunder to be due and payable, together
with accrued and unpaid interest, and the commitments of the senior lenders to
make further extensions of credit under the New Credit Facility could be
terminated. If the Company were unable to repay its indebtedness to its senior
lenders, such lenders could proceed against the collateral securing such
indebtedness as described under "Description of New Credit Facility."

LIMITATION ON CHANGE OF CONTROL

Upon a Change of Control (as defined under "Description of New Notes")
the Company will be required to offer to purchase all of the outstanding Notes
at a price equal to 101% of the principal amount thereof to the date of
repurchase plus accrued and unpaid interest, if any, to the date of repurchase.
The Change of Control purchase feature of the Notes may in certain
circumstances discourage or make more difficult a sale or takeover of the
Company. In particular, a Change of Control may cause an acceleration of, or
require an offer to repurchase under, the New Credit Facility and certain other
indebtedness, if any, of the Company and its subsidiaries, in which case such
indebtedness would be required to be repaid in full before repurchase of the
Notes. The Company could, subject to limitations on additional Senior
Indebtedness, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations or highly leveraged
transactions that would not constitute a Change of Control under the Indenture,
but could increase the amount of indebtedness outstanding at such time or
otherwise affect the Company's capital structure or credit rating or otherwise
adversely affect Holders of the Notes. See "Description of New Notes -- Change
of Control" and "Description of New Credit Facility." The inability to repay
such indebtedness, if accelerated, and to purchase all of the tendered Notes
would constitute an event of default under the Indenture. Finally, there can be
no assurance that the Company will have funds available to repurchase the Notes
upon the occurrence of a Change of Control.

FLUCTUATIONS IN RAW MATERIALS COST AND SUPPLY

The Company purchases aluminum, vinyl, wood, glass and other raw
materials from various suppliers. While all such materials are available from
numerous independent suppliers, commodity raw materials are subject to
fluctuations in price. Because such materials in the aggregate constitute
significant components of the Company's cost of goods sold, such fluctuations
could have a material adverse effect on the Company's results of operations.
Although the Company believes that it can pass on gradual increases in raw
material prices, there can be no assurance that the Company will continue to be
able to do so in the future. In addition, sharp increases in material prices
are more difficult

16
18
to pass through to the customer in a short period of time and may negatively
impact the short-term financial performance of the Company. See "Business --
Raw Materials."

ENVIRONMENTAL MATTERS

The past and present business operations of the Company and the past and
present ownership and operation of real property by the Company are subject to
extensive and changing federal, state, local and foreign environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposal of wastes (including solid and hazardous wastes) or
otherwise relating to health, safety and protection of the environment. As
such, the nature of the Company's operations and previous operations by others
at real property owned by the Company expose the Company to the risk of claims
under environmental, health and safety laws and regulations, and there can be
no assurance that material costs or liabilities will not be incurred in
connection with such claims. Based on its experience to date, the Company does
not expect such claims or the costs of compliance with federal, state, local
and foreign environmental, health and safety laws and regulations to have a
material impact on its capital expenditures, earnings or competitive position.
No assurance can be given, however, that the discovery of presently unknown
environmental conditions, changes in environmental, health and safety laws and
regulations or their interpretation, or other unanticipated events will not
give rise to expenditures or liabilities that may have such an effect. The
Company has been named as a potentially responsible party at two superfund
sites pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 or comparable state statutes. Based on currently
available information, the Company believes that its liability, if any,
associated with remediation of these sites or facilities will not have a
material adverse effect on the Company's financial condition or results of
operations. See "Business -- Government Regulation and Environmental Matters."

SEASONALITY

Markets for the Company's building-related products are seasonal, with
peak activity in the second and third quarters of the year due to increased
construction during those periods. The Company expects to use the New Credit
Facility to meet seasonal variations in its working capital requirements.

CYCLICALITY

Demand in the window and door manufacturing industry is influenced by
new home construction activity and the demand for replacement products. For
1996, the Company believes that approximately 65% of its pro forma revenue was
related to new home construction. Although the Company is targeting a more
balanced mix of new home construction and remodel/replacement revenue to reduce
cyclicality, there can be no assurance that the Company will achieve such mix.
Even if such mix were achieved, it would not insulate the Company from the
effects of cyclicality. Trends in the housing sector (the most important of
which to the Company is new housing starts in the Company's Primary Market)
directly impact the financial performance of the Company. Accordingly, the
strength of the U.S. economy, the age of existing home stock, job growth,
interest rates and migration of the inter/intra U.S. population have a direct
impact on the Company. Any declines in new housing starts and/or demand for
replacement products may adversely impact the Company and there can be no
assurance that any such adverse effects would not be material.

GEOGRAPHIC CONCENTRATION

The Company sells its products primarily in the Southwest, South and
Southeast United States. Although the Company intends to expand its operations
into new geographic areas, 37.2% of the Company's pro forma revenue for the
year ended December 31, 1996 was derived from customers in the state of Texas.
No other state accounted for more than 7.5% of pro forma revenue for the year
ended December 31, 1996. As a result of this geographic concentration,
unfavorable changes in economic conditions affecting the Southwest, South and
Southeast United States, and particularly the state of Texas, could have a
materially adverse effect on the Company's business, financial condition or
results of operations. See "Business."

17
19
DEPENDENCE ON KEY PERSONNEL

The success of the Company's business is materially dependent upon the
continued services of its President and Chief Executive Officer, Randall S.
Fojtasek, and other key officers and employees. The loss of Mr. Fojtasek or
such other key personnel due to death, disability or termination of employment
could have a material adverse effect on the results of operations or financial
condition, or both, of the Company. While the Company has non-competition
agreements with Mr. Fojtasek and certain other key officers and employees,
there can be no guarantee that a court will find such agreements fully
enforceable under relevant state law.

CONTROLLING STOCKHOLDER

Affiliates of Hicks Muse own approximately 82% of the outstanding shares
of Common Stock of Holding. As a result of this ownership and the provisions of
the Stockholders Agreement executed by the stockholders of Holding in
connection with the Transaction, Hicks Muse is able to direct the election of
four of the six members of the Board of Directors of Holding and therefore
direct the management and policies of the Company. The interests of Hicks Muse
and its affiliates may differ from the interests of holders of the Notes. See
"Beneficial Ownership and Certain Transactions."

COMPETITION

The Company competes with other national and regional manufacturers in
many product segments. Certain of the Company's principal competitors are less
highly-leveraged than the Company and have greater financial resources than the
Company. Accordingly, such competitors may be better able to withstand changes
in conditions within the industries in which the Company operates and have
significantly greater operating and financial flexibility than the Company. As
a result of the competitive environment in the markets in which the Company
operates, the Company faces (and will continue to face) pressure on sales
prices of its products from competitors, as well as from large customers. As a
result of such pricing pressures, the Company may in the future experience
reductions in the profit margins on its sales, or may be unable to pass future
raw material price or labor cost increases on to its customers (which would
also reduce profit margins).

There can be no assurance that the Company will not encounter increased
competition in the future, which could have a material adverse effect on the
Company's business. See "Business -- Competition."

18
20
POTENTIAL LABOR DISPUTES

Approximately 1,000 of the Company's hourly employees are covered by
collective bargaining agreements which expire in 1998, and approximately 100
additional hourly employees are covered by collective bargaining agreements
which expire in 2001. Although the Company has experienced union-organizing
activities and as a result has entered into collective bargaining agreements,
the Company believes that its relations with its employees are satisfactory.
There can be no assurance, however, that the Company will not experience work
stoppages or slowdowns in the future. In addition, there can be no assurance
that the Company's non-union facilities will not become subject to labor union
organizational efforts or that labor costs will not materially increase. See
"Business -- Employees."

LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY

The Old Notes are designated for trading in the PORTAL market. There is
no established trading market for the New Notes. The Company does not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development of any market or the liquidity of any market
that may develop for the New Notes. If such a market were to exist, no
assurance can be given as to the trading prices of the New Notes. Future
trading prices of the New Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results and
the market for similar securities.

The liquidity of, and trading market for, the New Notes may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.

19
21
THE TRANSACTION

GENERAL

The Company is a wholly-owned subsidiary of Holding. The Old Notes were
offered in connection with the purchase by affiliates of Hicks Muse of newly
issued shares of Common Stock of Holding for $32.0 million. Such shares, after
giving effect to the other elements of the Transaction, represented
approximately 82% of the outstanding shares of Common Stock. Hicks Muse is a
private investment firm based in Dallas, New York, St. Louis and Mexico City
that specializes in acquisitions, recapitalizations and other principal
investing activities. Since the firm's inception in 1989, Hicks Muse has
completed or has pending more then 60 transactions having a combined
transaction value exceeding $19.0 billion.

Concurrently with the closing of the Offering and as part of the
Transaction, Holding effected the Redemption of certain shares of its Common
Stock and all of its preferred stock, as well as certain options and warrants
to purchase shares of its capital stock. As a result of the Transaction, on the
Closing Date, the Other Stockholders own the remaining outstanding shares of
Common Stock. The Selling Securityholders received through the Redemption
approximately $59.4 million (subject to adjustment) in the Transaction. See
"Summary -- The Transaction" and "Beneficial Ownership and Certain
Transactions."

The Company is the primary operating company of the companies
illustrated in the following chart.

[Organizational chart showing the organizational structure of Holding, the
Company and the Subsidiary Guarantors.]

*The identified divisions represent unincorporated operating entities of the
Company.

20
22
Holding required approximately $134.2 million in cash to consummate the
Transaction, consisting of $59.4 million in Redemption payments to the Selling
Securityholders, $54.3 million, representing all outstanding indebtedness under
the Old Credit Facility and debt assumed in connection with its acquisition of
Bishop, $12.5 million in Redemption payments to preferred stockholders of
Holding (including cumulative dividends in arrears) and $8.0 million in fees
and expenses. The funds required to consummate the Transaction were provided by
(i) the proceeds of the Offering, (ii) $32.0 million in equity financing from
the issuance by Holding of new Common Stock to affiliates of Hicks Muse and
(iii) drawings of $2.2 million under the New Credit Facility.

USE OF PROCEEDS

There will be no cash proceeds to the Company from the Exchange Offer.

The Company used the $100.0 million of gross proceeds from the Offering,
together with borrowings of approximately $2.2 million under the New Credit
Facility and $32.0 million in equity financing from the issuance by Holding of
Common Stock to affiliates of Hicks Muse as follows: (i) $59.4 million in
Redemption payments; (ii) $54.3 million to repay indebtedness; (iii) $12.5
million in Redemption payments to preferred stockholders of Holding and (iv)
$8.0 million in fees and expenses.

CAPITALIZATION

The following table presents the capitalization of the Company at
December 31, 1996, on an actual basis after giving effect to the Transaction,
the issuance of the Old Notes and the application of the proceeds of the
Offering and on a pro forma basis for the Exchange Offer. The table should be
read in conjunction with the Consolidated Financial Statements of the Company,
the Unaudited Pro Forma Financial Statement, the related notes thereto in each
case and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

DECEMBER 31, 1996
----------------------------------
PRO FORMA FOR THE
ACTUAL EXCHANGE OFFER
-------------- -----------------

New Credit Facility (1) .............. $ -- $ --
Old Notes ............................ 100,000 --
New Notes ............................ -- 100,000
--------- ---------
Total debt ..................... 100,000 100,000
--------- ---------
Total stockholder's deficit .... (41,176) (41,176)
--------- ---------
Total capitalization ........... $ 58,824 $ 58,824
========= =========

(1) The New Credit Facility provides the Company with a revolving loan
facility of up to $20.0 million. See "Description of New Credit
Facility."

21
23
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The Company's selected consolidated historical financial data presented
below as of and for each of the years in the five year period ended December
31, 1996, were derived from the audited consolidated financial statements of
the Company. The balance sheet data for the Company as of December 31, 1996
reflect the acquisition of Bishop and the purchase of the assets of Keller, and
the income statement data for the year ended December 31, 1996 reflect the
operations of Bishop from the date of acquisition. The selected combined
consolidated financial data for Bishop were derived from the audited combined
consolidated financial statements of Bishop (for the years ended September 30,
1994, 1995 and 1996), and from unaudited consolidated financial statements for
the year ended September 30, 1993. The data should be read in conjunction with
the consolidated financial statements, related notes and other financial
information included elsewhere in this Prospectus. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

THE COMPANY: YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)

INCOME STATEMENT DATA:
Net sales ......................................... $ 80,580 $ 98,752 $ 123,571 $ 135,478 $ 156,269
Cost of goods sold(1).............................. 54,349 66,465 85,572 93,975 102,341
--------- --------- --------- --------- ---------
Gross profit ...................................... 26,231 32,287 37,999 41,503 53,928
Selling, delivery, general and administrative
expenses ........................................ 18,322 22,710 26,895 29,303 34,815
Special charges(2) ................................ -- -- -- 7,188 3,044
Stock option compensation expense (3) ............. -- -- -- 308 3,023
--------- --------- --------- --------- ---------
Income from operations ............................ 7,909 9,577 11,104 4,704 13,046
--------- --------- --------- --------- ---------
Net income (4) .................................... $ 8,344 $ 10,083 $ 9,191 $ 1,849 $ 4,203
========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA as adjusted(5) ............................. $ 9,899 $ 12,030 $ 14,576 $ 15,860 $ 21,136
EBITDA as adjusted excluding Atrium Wood(6) ....... 11,586 14,991 17,418 21,130 24,433
Cash flows related to:
Operating activities ....................... 8,592 8,215 10,451 7,853 8,767
Investing activities ....................... (4,865) (3,118) (4,371) (3,230) (14,732)
Financing activities ....................... (1,712) (7,643) (7,777) (5,745) 6,497
Depreciation and amortization ..................... 935 1,407 1,678 1,779 2,205
Capital expenditures(7) ........................... 1,843 3,686 3,389 2,337 3,380
Ratio of earnings to fixed charges(8) ............. 11.0x 14.8x 12.5x 1.9x 2.5x
BALANCE SHEET DATA (END OF PERIOD) (9):
Working capital, excluding current portion of
long-term debt ............................... $ 19,792 $ 22,517 $ 22,867 $ 19,979 $ 25,278
Total assets ...................................... 48,079 52,517 58,507 48,569 74,750
Total debt ........................................ 9,162 7,614 6,786 49,000 100,000
Stockholder's equity (deficit)(10) ................ 34,150 38,167 40,365 (14,544) (41,176)

BISHOP: YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

INCOME STATEMENT DATA:
Net sales ......................................... $ 10,658 $ 14,006 $ 14,496 $ 14,409
Cost of goods sold................................. 5,203 7,494 6,425 7,437
-------- -------- -------- --------
Gross profit ...................................... 5,455 6,512 8,071 6,972
Selling, general and administrative expenses ...... 4,753 5,183 5,945 5,790
-------- -------- -------- --------
Income from operations ............................ 702 1,329 2,126 1,182
-------- -------- -------- --------
Net income ........................................ $ 441 $ 759 $ 1,254 $ 385
======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA as adjusted(5) ............................. $ 2,214 $ 3,852 $ 4,853 $ 4,172
Cash flows related to:
Operating activities ....................... N/A 403 2,310 (3,215)
Investing activities ....................... N/A (355) (365) (230)
Financing activities ....................... N/A (14) (15) (16)
Depreciation and amortization ..................... 181 312 303 295
Capital expenditures .............................. 807 355 365 230
Ratio of earnings to fixed charges (8) ............ 5.0x 12.0x 20.8x 11.5x
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current portion of
long-term debt ................................. $ 3,326 $ 4,105 $ 5,845 N/A(8)
Total assets ...................................... 5,535 7,053 8,683 N/A(8)
Total debt ........................................ 453 439 425 N/A(8)
Stockholders' equity .............................. 4,087 4,845 6,100 N/A(8)

(1) Effective January 1, 1994, the Company elected to change its method of
accounting for inventory from the first-in, first-out (FIFO) method to
the last-in, first-out (LIFO) method. The LIFO provision in 1994
increased cost of sales by $2,721. The change in the LIFO reserve for
the years ended December 31, 1995 and 1996 of $851 and $491,
respectively, decreased cost of sales. See Note 1 to the Consolidated
Financial Statements of the Company.

(2) Special charges for 1995 included officer and management bonuses,
restructuring charges for severance, and consulting fees of $6,380, $400
and $408, respectively, in connection with the Heritage Transaction.
Special charges for 1996 include management bonuses of $3,044, incurred
in connection with the Transaction.

(3) Stock option compensation expense in 1995 and 1996 of $308 and $3,023,
respectively, consisted of charges associated with granting new stock
options at exercise prices below the fair value of the underlying common
stock and the expense associated with the cash redemption of certain
options, both resulting from the Transaction, and amortization of
deferred compensation charges related to previously issued options.

22
24
(4) Prior to the Heritage Transaction, the Company was a subchapter S
corporation and, for federal income tax purposes, all income or loss
was allocated to the stockholders for inclusion in their respective
federal income tax returns. The Company made periodic distributions to
stockholders for their pro rata portion of federal income taxes payable.
In conjunction with the Heritage Transaction, the Company became a C
corporation. Pro forma income tax expense prior to July 3, 1995, had the
Company been subject to corporate federal income taxes, would have been
as follows:

YEAR ENDED DECEMBER 31,
---------------------------------
1992 1993 1994 1995
------ ------ ------ ------

Income tax expense ........... $3,067 $3,750 $4,032 $1,109
====== ====== ====== ======

(5) EBITDA as adjusted represents income before income taxes, interest,
depreciation and amortization, extraordinary charge and certain
non-recurring charges. As the Company has historically incurred
significant non-cash and non-recurring charges, management believes
EBITDA as adjusted provides a more meaningful comparison of historical
results. The following tables set forth the historical EBITDA as adjusted
for the Company and Bishop, respectively:

YEAR ENDED DECEMBER 31,
----------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------

THE COMPANY:
Earnings before interest, taxes and
extraordinary charge .............................. $ 8,964 $10,623 $10,150 $ 6,146 $12,864
Depreciation and amortization ............................ 935 1,407 1,678 1,779 2,205
Non-recurring charges:
Special charges (see note 2) ....................... -- -- -- 7,188 3,044
Labor union negotiation and other
professional expenses .......................... -- -- 1,203 439 --
Write-down of real estate .......................... -- -- 1,545 -- --
Stock option compensation expense (see note 3) ..... -- -- -- 308 3,023
------- ------- ------- ------- -------
EBITDA as adjusted .......................... $ 9,899 $12,030 $14,576 $15,860 $21,136
======= ======= ======= ======= =======

YEAR ENDED SEPTEMBER 30,
-------------------------------------
1993 1994 1995 1996
------ ------ ------ ------

BISHOP:
Earnings before interest, taxes and extraordinary
charge ........................................ $ 844 $1,354 $2,334 $1,201
Depreciation and amortization ........................ 181 312 303 295
Non-recurring charges:
Adjustment to compensation expense of former
owners ................................... 1,189 2,186 2,216 2,326
Professional expenses .......................... -- -- -- 350
------ ------ ------ ------
EBITDA as adjusted ...................... $2,214 $3,852 $4,853 $4,172
====== ====== ====== ======

While EBITDA as adjusted is not intended to represent cash flow from
operations as defined by GAAP and should not be considered as an
indicator of operating performance or an alternative to cash flow or
operating income (as measured by GAAP) or as a measure of liquidity, it
is included herein to provide additional information with respect to the
ability of the Company to meet its future debt service, capital
expenditures and working capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations." The Company believes EBITDA as adjusted provides investors
and analysts in the building materials industry the necessary information
to analyze and compare historical results of the Company on a comparable
basis with other companies on the basis of operating performance,
leverage and liquidity. Additionally, as EBITDA is not defined

23
25
by GAAP, it may not be calculated or comparable to other similarly
titled measures within the building materials industry.

(6) EBITDA as adjusted excluding Atrium Wood represents EBITDA as adjusted as
defined in (5) above plus the EBITDA losses that the Atrium Wood
division had incurred during each of the periods presented. These
losses were as follows (in thousands):

YEAR ENDED DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------

Atrium Wood loss .................. $(1,687) $(2,961) $(2,842) $(2,770) $(2,481)
Inventory and other reserves ...... -- -- -- (2,500) (816)
------- ------- ------- ------- -------
Atrium Wood EBITDA ................ $(1,687) $(2,961) $(2,842) $(5,270) $(3,297)
======= ======= ======= ======= =======

EBITDA as adjusted excluding Atrium Wood is presented to provide an
understanding of the effect on operations if the Atrium Wood losses are
narrowed or eliminated or if the division is sold or otherwise disposed
of. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the Company's plans for
Atrium Wood.

(7) Capital expenditures for the year ended December 31, 1996 included the
capital assets acquired from Keller for $1,150. Capital expenditures for
the years ended December 31, 1993 and 1994 included $1,098 and $1,429
related to expenditures for assets which are no longer a part of the
Company as a result of the Heritage Transaction and the sale of the
Company's truck fleet.

(8) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes, extraordinary
charge and fixed charges. Fixed charges consist of the total of (i)
interest, whether expensed or capitalized; (ii) amortization of debt
expense and discount or premium relating to any indebtedness, whether
expensed or capitalized; and (iii) that portion of rental expense
considered to represent interest cost (assumed to be one-third).

(9) The Company's consolidated balance sheet at December 31, 1996 reflects
the acquisition of Bishop and the purchase of the assets of Keller. All
significant intercompany transactions and balances have been eliminated
in consolidation. Additionally, the historical results of operations
for the year ended December 31, 1996 for the Company include the results
of Bishop since the date of acquisition on September 30, 1996 and the
results of Keller from the commencement of operations in September 1996.

(10) In 1996, the stockholder's deficit was increased by $39.3 million due to
the effect of the Transaction. In 1995, stockholder's equity was
decreased by $57.0 million due to the effect of the Heritage
Transaction. See "Notes to Consolidated Financial Statements" of the
Company.

24
26
UNAUDITED PRO FORMA FINANCIAL STATEMENT

The following unaudited pro forma statement of income (the "Pro
Forma Financial Statement") of the Company is based on the audited consolidated
financial statements of the Company and Bishop included elsewhere in this
Prospectus.

The Pro Forma Financial Statement of the Company has been prepared to
give effect to the acquisition of Bishop, the Financing (and the application of
the net proceeds therefrom) and the Exchange Offer as though such transactions
had occurred as of January 1, 1996. The pro forma adjustments are based upon
available information and certain assumptions that the Company believes are
reasonable. The Pro Forma Financial Statement should be read in conjunction
with the historical financial statements of the Company and Bishop included
elsewhere herein. Bishop's fiscal year end is September 30. The historical
amounts in the pro forma statement of income for the year ended December 31,
1996 represent (i) the operations of the Company for the year ended December
31, 1996 which include Bishop's operations from the date of acquisition
(September 30, 1996) to December 31, 1996, and (ii) the operations of Bishop
for the nine months ended September 30, 1996. The historical amounts in the pro
forma statement of income for the Company include the results of Keller from
the date the division commenced operations, September 1996.

A pro forma balance sheet is not presented, as the acquisition of
Bishop was completed on September 30, 1996, and the Financing was completed on
November 27, 1996 both of which are reflected in the balance sheet of the
Company included in the December 31, 1996 Consolidated Financial Statements of
the Company included elsewhere herein.

The Pro Forma Financial Statement does not purport to be indicative of
what the Company's results of operations would have been had the acquisition of
Bishop, the Financing and the Exchange Offer been completed as of the assumed
date and for the period presented or that may be obtained in the future.

25
27
ATRIUM COMPANIES, INC.

UNAUDITED PRO FORMA STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

HISTORICAL
----------------------- PRO FORMA
THE COMPANY BISHOP ADJUSTMENTS TOTAL
----------- ---------- ----------- ---------

Net sales ............................ $ 156,269 $ 10,441 $ -- $ 166,710
Cost of goods sold.................... 102,341 5,389 -- 107,730
--------- --------- --------- ---------
Gross profit ................... 53,928 5,052 -- 58,980
Selling, delivery, general and
administrative expenses ............ 34,815 4,288 (1,482)(1) 37,621
Special charges ...................... 3,044 -- (3,044)(2) --
Stock option compensation
expense ............................ 3,023 -- (2,579)(3) 444
--------- --------- --------- ---------
Income from operations.......... 13,046 764 7,105 20,915
Interest expense ..................... 4,786 25 6,456 (4) 11,267
Other income (expense), net........... (182) 107 -- (75)
--------- --------- --------- ---------
Income before income
taxes and extraordinary
charge ....................... 8,078 846 649 9,573
Provision for income taxes ........... 2,699 566 318 (5) 3,583
--------- --------- --------- ---------
Income before
extraordinary charge ....... $ 5,379 $ 280 $ 331 $ 5,990
========= ========= ========= =========

SUPPLEMENTAL INFORMATION:
Depreciation and
amortization ...................... $ 2,205 $ 210 $ 301 $ 2,716

See Accompanying Notes to the Pro Forma Statement of Income.

26
28
NOTES TO THE UNAUDITED PRO FORMA
STATEMENT OF INCOME
(IN THOUSANDS)

(1) SELLING, DELIVERY, GENERAL AND ADMINISTRATIVE EXPENSES: To reverse (i)
the expense related to compensation which the owners of Bishop received
in excess of the compensation structure agreed to, pursuant to a
three-year employment agreement dated September 30, 1996, entered into
as a result of the Bishop acquisition and (ii) to recognize the
amortization of goodwill of $12,040 recorded in the Bishop transaction,
amortized on a straight-line basis over 40 years, as follows:

Reduction to compensation expense of former owners . . . . . $(1,783)
Amortization of goodwill . . . . . . . . . . . . . . . . . . 301
-------
Net adjustment . . . . . . . . . . . . . . . . . . . . $(1,482)
=======

(2) SPECIAL CHARGES: Adjustment reflects the reversal of special charges
which include officer bonuses of $3,044 incurred in connection with the
Transaction.

(3) STOCK OPTION COMPENSATION EXPENSE: The adjustment reflects the reversal
of stock option compensation expense which were charges associated with
granting new stock options at exercise prices below the fair value of the
underlying common stock and the expense associated with the cash
redemption of certain options, both incurred as a result of the
Transaction as follows:

Granting new stock options . . . . . . . . . . . . . . . . . $ (1,320)
Redemption of Substitute Options . . . . . . . . . . . . . . (516)
Redemption of Disposition Options . . . . . . . . . . . . . . (743)
--------
Net Adjustment . . . . . . . . . . . . . . . . . . . . $ (2,579)
=========

(4) INTEREST EXPENSE: Adjustment reflects the interest expense (at assumed
rates as indicated below) associated with the Notes and the borrowings
under the New Credit Facility, the amortization of deferred financing
costs of $5,457 associated with the Notes and the New Credit Facility
(being amortized using the effective interest method over 10 years and
5 years, respectively) and the elimination of historical interest
expense and historical deferred financing costs associated with the old
debt as follows:

The Notes at 10 1/2% ...................... $ 10,500
New Credit Facility at 8%* ................ 176
Amortization of deferred financing costs .. 591
Elimination of historical interest
expense ................................ (4,811)
--------
Net adjustment ...................... $ 6,456
========

* Computed using the pro forma borrowings outstanding upon
consummation of the Financing, which the Company believes is
representative of average borrowings for purposes of this pro
forma statement of income.

(5) PROVISION FOR INCOME TAXES: To recognize the increase in federal and
state income taxes resulting from the pro forma adjustments at the
statutory rate of 35%, adjusted for non-deductible goodwill amortization
of $260.

27
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

GENERAL

The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements of the Company which appear elsewhere in
this Prospectus and, to the extent the discussion and analysis specifically
relates to Bishop, Bishop's historical financial statements are also included
herein.

The Company's results are generally impacted by the level of activity in
residential new construction and remodel/replacement in the Company's Primary
Market and throughout the United States. This activity is influenced by
regional and national economic trends, such as availability of consumer credit,
interest rates, job formation, age of housing stock, inter/intra U.S. migration
and consumer confidence. The Company's operating results reflect significant
sales growth during the five-year period ended December 31, 1996. The Company's
CAGR in sales during this period was 17.3%, which can be attributed to
increased market share and product demand in its markets. The Company
attributes these market share gains to its brand name recognition, strong
customer service, new product offerings, expanded distribution, including the
opening of new Company-owned Distribution Centers, and increased sales to the
DIY home center market.

The Company has implemented measures to enhance manufacturing
efficiencies and reduce operating costs. These initiatives include the
realignment of workflow processes and the reduction of scrap and direct labor
costs. The Company has also outsourced delivery operations and improved
customer service. Further, the Company is implementing an integrated management
information system. This system is expected to provide additional production
efficiencies and optimize inventory management, as well as enhance financial
reporting.

Atrium Wood

The Company has also focused on measures to reduce operating losses at
Atrium Wood. Originally, Atrium Wood manufactured primarily premium patio
doors. Through 1988, Atrium Wood sold its wood door products through
wholesalers who also carried wood windows manufactured by Andersen Corporation
("Andersen"). The wholesaler combined the door and window products to offer a
complete package to its customers. In 1988, Andersen introduced its own wood
door line and the wholesalers began packaging the Andersen doors and windows
together. As a result, Atrium Wood in 1988 began experiencing substantial sales
declines. In response, the Company established an internal sales force to
regain distribution with wholesalers, redesigned its wood doors and broadened
its product offering to include windows. These measures proved unsuccessful,
and sales and EBITDA at Atrium Wood continued to decline.

Although Atrium Wood is currently operating at a loss (see Note 6 to
"Selected Consolidated Historical Financial Data"), the Company believes there
are strategic benefits to offering its customers wood products in addition to
its aluminum and vinyl products. As a result, the Company has continued to
restructure Atrium Wood through the elimination of unprofitable products,
changes in management, reduction of inventory, product redesign and the
streamlining of manufacturing operations. In addition, the Company has cut
fixed selling expenses by utilizing primarily commission-based independent
sales representatives rather than salary and commission-based Company sales
representatives. The Company believes that the measures it has implemented,
combined with the Bishop acquisition which provides it with an expanded,
established distribution channel into the Northeast, a major wood door market,
will result in improved results for Atrium Wood. Management expects the
operating losses of Atrium Wood to narrow during 1997. However, there can be no
assurances that the performance of Atrium Wood will actually improve. The
Company continues to review its strategic options with respect to the wood
product line.

RECAPITALIZATIONS AND ACQUISITIONS

The Transaction

On November 7, 1996, Holding entered into a purchase agreement with an
affiliate of Hicks Muse pursuant to which affiliates of Hicks Muse subsequently
purchased a number of newly issued shares of Common Stock of

28
30
Holding that, after giving effect to other elements of the Transaction,
represents approximately 82% of the outstanding shares of Common Stock. See
"The Transaction." The Transaction was accounted for as a recapitalization,
and, accordingly, the assets and liabilities of the Company were not revalued.
The Transaction resulted in cash and non-cash charges of $4.3 million and $3.2
million, respectively, related to management bonuses, compensatory stock
options and the write-off of deferred financing costs. The cash charges were
funded by part of the proceeds of the Offering.

Bishop Acquisition

On September 30, 1996, the Company completed the Bishop acquisition at a
purchase price of $19.5 million (including the purchase of $3.3 million of
cash). Included in this amount is $5.0 million of non-cash consideration,
representing the estimated value on the acquisition date of shares of Common
Stock of Holding issued to the former shareholders of Bishop (such shares
representing approximately 9% of the shares of Common Stock then outstanding
after giving effect to such acquisition), and a $1.0 million deferred payment
to be paid to the former shareholders of Bishop if certain financial targets
are met. The acquisition of Bishop was accounted for under the purchase method
of accounting effective September 30, 1996. As such, the assets and liabilities
of Bishop have been recorded at their estimated fair market values. An amount
equal to the excess of the purchase price over the fair value of assumed
liabilities was allocated to inventories, property and equipment, identifiable
intangible assets and goodwill. Goodwill is being amortized over 40 years. The
purchase allocation is preliminary and subject to change.

Keller Asset Purchase

On June 13, 1996, the Company purchased certain assets of Keller at a
purchase price of $1.2 million in cash. Additionally, inventory was purchased
from Keller for $0.5 million on September 4, 1996. Both purchases have been
recorded at cost.

Heritage Transaction

On July 3, 1995, the stockholders of FCI Holding, the Company's direct
parent and a direct subsidiary of Holding, executed a stock purchase agreement
with Heritage for the purchase by Heritage of 62.0% of FCI Holding's
outstanding common stock (including 49.5% of its outstanding voting common
stock). This transaction has been accounted for as a recapitalization.
Accordingly, the assets and liabilities of the Company were not revalued.

FCI Holding contributed $22.1 million to the Company, and the
Company used such proceeds in addition to proceeds from bank borrowings of
approximately $57.2 million to pay stockholder cash distributions of
approximately $74.3 million and transaction costs. The Company also made
non-cash distributions to the shareholders of $4.9 million, which when combined
with the cash distributions, resulted in a decrease in stockholder's equity of
approximately $79.7 million. See Note 12 to the Company's Consolidated
Financial Statements.

RAW MATERIAL COSTS AND INFLATION

During the past several years, the rate of general inflation has been
relatively low and has not had a significant impact on the Company's results of
operations. The Company purchases raw materials, including aluminum, glass, wood
and vinyl, that are subject to fluctuations in price that may not reflect the
rate of general inflation. These materials fluctuate in price based on supply
and demand. Historically, there have been periods of significant and rapid
aluminum and wood price changes, both upward and downward, with a concurrent
short-term impact on the Company's operating margins. The Company has
historically mitigated the effects of these fluctuations over the long-term by
passing through price increases to its customers. The Company also enters into
forward commitments for aluminum billet to hedge against price changes. As of
December 31, 1996, the Company had forward commitments totaling $21,656 for
delivery through December 1997 for 12.9 million pounds of aluminum, of which
10.0 million pounds were at fixed prices.

29
31

RESULTS OF OPERATIONS

THE COMPANY

The following table sets forth, for the periods indicated, information
derived from the Company's consolidated statements of income expressed as a
percentage of net sales.

YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
----------- ----------- ------

Net sales .................................. 100.0% 100.0% 100.0%
Cost of goods sold.......................... 69.2 69.4 65.5
----- ----- -----
Gross profit ............................... 30.8 30.6 34.5
Selling, delivery, general and
administrative expenses .................. 21.8 21.6 22.3
Special charges ............................ -- 5.3 1.9
Stock option compensation expense .......... -- 0.2 1.9
----- ----- -----

Income from operations ............... 9.0 3.5 8.4
Interest expense ........................... (0.3) (2.0) (3.1)
Other income (expense), net................. (0.8) 1.1 (0.1)
----- ----- -----
Income before income taxes and
extraordinary charge...................... 7.9 2.6 5.2
Provision for income taxes ................. 0.5 1.1 1.7
----- ----- -----

Income before extraordinary charge ......... 7.4 1.5 3.5
Extraordinary charge, net of income tax
benefit................................... -- -- 0.8
----- ----- -----

Net income ................................. 7.4% 1.5% 2.7%
===== ===== =====

Accounting Adjustments. Certain accounting adjustments affect the
comparability of the Company's operating results for the periods presented.
Prior to the Heritage Transaction, the Company was a subchapter S corporation
for tax purposes and all federal income taxes were paid by the Company's
stockholders. Had the Company been a C corporation for all periods presented,
additional income tax expense would have been $4.0 million and $1.1 million for
1994 and 1995, respectively. Also, in 1994, the Company changed its inventory
valuation method from FIFO to LIFO resulting in a LIFO provision of $2.7
million in 1994, and a $0.9 and $0.5 million benefit in 1995 and 1996,
respectively.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net Sales. Net sales increased by $20.8 million from $135.5 million
during 1995 to $156.3 million during 1996. The increase in sales primarily
resulted from favorable price and volume variances of $7.3 million and $6.0
million, respectively, at the Company's Skotty, Extruders and H-R Windows
divisions. Sales at Atrium Vinyl, which was a start-up operation in 1995,
increased $4.1 million. Additionally, the increase included $4.2 million from
Bishop Manufacturing Companies, acquired September 30, 1996, and a combined $1.3
million from Kel-Star Building Products and Woodville Extruders, which resulted
from a June 13, 1996 asset purchase. These increases were partially offset by a
sales decrease of $3.7 million that was experienced at the Atrium Wood and
Atrium Distributors of Arizona divisions.

Cost of Goods Sold. Cost of goods sold decreased from 69.4% of sales
during 1995 to 65.5% of sales during 1996. This improvement was due largely to
the reduction from 1995 to 1996 in charges associated with inventory and other
product reserves at Atrium Wood of approximately $1.6 million. The remainder was
due to a decrease in raw material prices, the replacement of a significant low
margin H-R customer with customers at higher margins, sales price increases at
the Skotty division, and three months of operations at Bishop, which has a
significantly lower cost of goods sold percentage (58.5%).

30
32

Selling, Delivery, General and Administrative Expenses. Selling,
delivery, general and administrative expenses increased $5.5 million from $29.3
million (which represented 21.6% of sales during 1995) to $34.8 million (which
represented 22.3% of sales during 1996). Delivery expense increased $1.6 million
from $11.9 million to $13.5 million but decreased slightly as a percentage of
sales from 8.8% to 8.6%. General and administrative expenses increased $3.4
million from $11.0 million, 8.1% of sales, to $14.4 million, 9.2% of sales. This
increase was largely due to an increase in amortization of $.4 million, which
related to certain non-compete agreements, as well as $.4 million in consulting
fees. Excluding the increase in amortization and consulting fees, general and
administrative expenses would have been 8.6% of sales. Selling expenses
increased $.4 million from $6.6 million, 4.9% of sales, to $7.0 million, 4.5% of
sales. The increase was a direct result of an increase in overall sales,
however, the decrease as a percentage of sales was due primarily to a
restructuring of sales commission rates.

Special Charges. Special charges decreased $4.2 million from $7.2
million during 1995 to $3.0 million during 1996. Special charges during 1996
consisted of $3.0 million in management bonuses which were the result of the
Hicks Muse Transaction. Special charges during 1995 included officer and
management bonuses of $6.4 million in connection with the Heritage Transaction,
consulting fees of $0.4 million and a restructuring charge of $0.4 million.

Stock Option Compensation Expense. Stock option compensation expense
increased $2.7 million from $0.3 million during 1995 to $3.0 million during
1996. Stock option compensation expense consisted of charges associated with
granting of new stock options at exercise prices below the fair value of the
underlying common stock and the expense associated with the cash redemption of
certain options, both resulting from the Transaction, and amortization of
deferred compensation charges related to previously issued options. Included in
stock option compensation expense is $1.3 million representing the difference
between the fair market value of Holding Common Stock and the exercise price
associated with a Warrant granted to an executive of the Company in connection
with the Transaction.

Interest Expense. Interest expense increased $2.0 million from $2.8
million during 1995 to $4.8 million during the year ended 1996. The increase
was primarily due to the debt incurred in connection with the Heritage
Transaction, which was outstanding for five months of 1995, as compared to
eleven months of 1996. The remainder of the increase was due to interest
related to the $100.0 million of Old Notes, offered in connection with the
Hicks Muse Transaction, which occurred on November 27, 1996 and the
amortization of deferred financing charges for a full year in 1996.

Other Income (Expense), net. Other income (expense), net decreased $1.6
million from other income of $1.4 million during 1995 to other expense of $0.2
million for 1996. In 1995, the Company had rental income prior to the
distribution of certain rental property in the Heritage Transaction and a gain
on sale of assets associated with the sale of the Company's truck fleet in
1995.

Extraordinary Charge. Extraordinary charge of $1.2 million for 1996
represents the write-off of certain deferred financing charges incurred in
connection with the Heritage Transaction, as all outstanding debt was retired
with a portion of the proceeds from the $100.0 million of Old Notes. This
amount is net of income tax effect of $0.7 million.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net Sales. Net sales increased $11.9 million from $123.6 million in 1994
to $135.5 million in 1995. The increase in sales primarily consisted of
favorable price and volume variances of $11.9 million and $2.9 million,
respectively, at the Company's Skotty, Atrium Vinyl, H-R Windows and Extruders
divisions. Sales at Atrium Distributors of Nevada also increased $1.8 million,
largely due to growth in the housing market in Las Vegas. The increase in net
sales was partly offset by a decrease in sales at the Atrium Wood and the
Atrium Distributors of Arizona divisions of $5.1 million.

Cost of Goods Sold. Cost of goods sold increased from 69.2% of net sales
during 1994 to 69.4% of net sales during 1995. This was due largely to
non-recurring 1995 charges of $2.5 million associated with inventory and other
product reserves at Atrium Wood and certain low margin sales to an H-R Windows
customer. These costs were partially offset by a decrease in

31
33
raw material prices and the adoption of LIFO in 1994, which resulted in
a benefit of $0.9 million in 1995 compared to a provision of $2.7 million in
1994. Depreciation included in cost of goods sold was $0.6 million and $0.7
million during the years ended 1994 and 1995, respectively.

Selling, Delivery, General and Administrative Expenses. Selling,
delivery, general and administrative expenses increased $2.4 million from $26.9
million (which represented 21.8% of sales during 1994) to $29.3 million (which
represented 21.6% of sales during 1995). Delivery expense increased $2.3 million
from $9.6 million to $11.9 million, however, increased slightly as a percentage
of sales from 7.8% to 8.8%. Amortization of non-compete agreements and rent
expense included in selling, delivery, general and administrative expenses
increased $0.3 million and $0.5 million, respectively, from 1994 to 1995. These
increases were primarily due to amortization of certain non-compete agreements
and certain property distributions in connection with the Heritage Transaction.
These increases were partially offset by professional fees related to the
negotiation of a union contract which were $0.4 million in 1995 and $1.2 million
in 1994.

Special Charges. Special charges during 1995 include officer and
management bonuses of $6.4 million, and restructuring charges for severance of
$0.4 million in connection with the Heritage Transaction and consulting fees of
$0.4 million. There were no special charges during 1994.

Stock Option Compensation Expense. The Company incurred $0.3 million in
stock option compensation expense in 1995 due to stock options issued in
connection with the Heritage Transaction. No amounts were applicable in 1994.

Interest Expense. Interest expense increased $2.4 million from $0.4
million during 1994 to $2.8 million during 1995. The increase was primarily due
to debt incurred during the Heritage Transaction, which was outstanding for five
months of 1995 and the amortization of the related deferred financing charges.

Other Income (Expense), net. Other income (expense), net increased
$2.4 million from other expense of $1.0 million for 1994 to other income of
$1.4 million for 1995. In 1994, the Company had a write-down of investments in
rental real estate of $1.5 million and other income of $0.5 million related to
rental real estate. In 1995, the rental income was $0.7 million. Additionally,
an income adjustment to a pension liability of $0.3 million was recorded in
1995 and a gain on the sale of the Company's truck fleet was $0.4 million.

BISHOP

The following table sets forth, for the periods indicated, information
derived from the combined consolidated statements of income of Bishop expressed
as a percentage of net sales.

YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1994 1995 1996
------------ ----------- ------------

Net sales ..................................................... 100.0% 100.0% 100.0%
Cost of goods sold............................................. 53.5 44.3 51.6
----- ----- -----
Gross profit .................................................. 46.5 55.7 48.4
Selling, general and administrative expenses .................. 37.0 41.0 40.2
----- ----- -----
Income from operations .................................. 9.5 14.7 8.2
Interest income (expense), net................................. (0.5) (0.3) (0.2)
Other income (expense) ........................................ 0.2 1.4 0.1
----- ----- -----
Income before provision for income taxes....................... 9.2 15.8 8.1
Provision for income taxes .................................... 3.8 7.1 5.4
----- ----- -----
Net income .................................................... 5.4% 8.7% 2.7%
===== ===== =====

Bishop's sales have remained stable since 1994, reflecting the
relatively stable nature of the remodel/replacement construction market and the
general maturity of the housing market in the Northeastern states in which
Bishop operates. Bishop has emphasized high margin customers as opposed to
volume-driven sales. This strategy has resulted in gross margins in excess of
45% in the years ended September 30, 1994, 1995 and 1996, respectively. Cost of
sales of 44.3% in the year ended September 30, 1995 versus 53.5% and 51.6% for
the years ended September 30, 1994 and 1996, respectively, reflects Bishop's
strategy to take advantage of raw material buying opportunities. This included
purchasing annual materials requirements in a single delivery and taking
delivery during

32
34
winter months, which are non-peak periods for vendors. Significant purchasing
discounts were obtained in late 1994, which benefitted the 1995 operations. The
increase in selling, general and administrative expenses as a percentage of net
sales from 1994 to 1995 and 1996 reflects the increased compensation paid to
Bishop's owners in 1995 and 1996. With regard to income taxes, Bishop has not
historically filed a consolidated tax return for its subsidiaries and
affiliates. As a result, the effective tax rates for Bishop on a historical
basis are higher than the statutory rate of 34%. In the future, Bishop will be
included in the Company's consolidated tax return.

LIQUIDITY AND CAPITAL RESOURCES

Cash generated from operations and cash provided by financing activities are
the Company's principal sources of liquidity. During 1996, cash was primarily
used for the acquisition of the Bishop Manufacturing Companies, capital
expenditures, debt repayments and to fund distributions to the Company's parent
in connection with the Transaction. Operating activities provided cash of $8.8
million in 1996, compared with $7.9 million in 1995. The increase in cash from
operations was attributable primarily to an increase in net income of $2.4
million net of an extraordinary charge associated with the write-off of certain
deferred financing charges of $1.2 million. The increase in net income was
partially offset by an increase in working capital of $3.2 million associated
with an increase in accounts receivable and decrease in inventory (excluding
Bishop). Cash flows from financing activities increased from cash used of
$5.7 million to cash provided of $6.5 million primarily due to the issuance of
$100.0 million of Old Notes, which were used to pay-off the Company's
previously outstanding debt and fund certain shareholder distributions made by
Holding. Additionally, the Company borrowed approximately $10.9 million to fund
the acquisition of Bishop. The decrease in cash provided by operations from
1994 to 1995 was primarily attributable to a decrease in net income due to
charges associated with the Heritage Transaction and the change to a C
corporation status for tax purposes in 1995.

OTHER CAPITAL RESOURCES

In connection with the Transaction, the Company entered into a Credit
Agreement providing for borrowing of up to $20.0 million under a revolving
credit facility. Annual standby commitment fees are currently 0.5% of the
unborrowed portion of the facility. Borrowing rates are based upon the lender's
prime rate plus a borrowing margin of 1.5% or a LIBOR-based rate plus a
borrowing margin of 2.5%. The revolving credit facility terminates in March
2002. At December 31, 1996, the Company had $20.0 million of availability under
the revolving credit facility. In November 1996, the Company issued $100.0
million of Old Notes and used the proceeds for repayment of the Company's debt
and contributions to the Company's parent. The repayment of the Company's debt
resulted in an extraordinary charge of $1.2 million (net of applicable income
tax benefit of $0.7 million).

CAPITAL EXPENDITURES AND RESOURCES

The Company had cash capital expenditures (exclusive of the Bishop
acquisition) of $3.4 million, $2.3 million and $3.4 million for the years ended
December 31, 1996, 1995, and 1994, respectively. Capital expenditures increased
in 1996 due to the acquisition of the capital assets of Keller for $1.2
million. Capital expenditures in 1994 included $1.4 million of expenditures for
assets which are no longer a part of the Company as a result of the sale of
the Company's truck fleet in 1995. The Company expects capital expenditures
(exclusive of acquisitions) will be approximately $3.0 million in 1997,
however, actual capital requirements may change, particularly as a result of
acquisitions the Company may make. Capital expenditures exclude costs related
to the implementation of the Company's new management information system which
include internally capitalized costs.

The ability of the Company to meet its debt service and working capital
obligations and capital expenditure requirements is dependent, however, upon
the future performance of the Company and its subsidiaries which, in turn, will
be subject to general economic conditions and to financial, business and other
factors, including factors beyond the Company's control. As of February 28,
1997, the Company had $20.0 million available for borrowings under the credit
facility. See "Description of New Credit Facility."

33
35

SEASONALITY

The Company's business is seasonal. The warmer months generally allow
for a higher level of building, generating a higher level of sales for the
Company. Consequently, the second and third calendar quarters have
traditionally represented the highest level of sales during the year.

CYCLICALITY

Demand in the window and door manufacturing industry is influenced by
new home construction activity and the demand for replacement products. Trends
in the housing sector (the most important of which to the Company is new
housing starts in its Primary Market) directly impact the financial performance
of the Company. Accordingly, the strength of the U.S. economy, the age of
existing home stock, job growth, consumer confidence, consumer credit, interest
rates and migration of the inter/intra U.S. population have a direct impact on
the Company. Any declines in new housing starts and/or demand for replacement
products may adversely impact the Company and there can be no assurance that
any such adverse effects would not be material.

ENVIRONMENTAL REGULATION

The Company is involved in various stages of investigation and cleanup
relative to environmental protection matters, some of which relate to waste
disposal sites. The potential costs related to such matters and the possible
impact thereof on future operations are uncertain due in part to: the
uncertainty as to the extent of pollution; the complexity of Government laws
and regulations and their interpretations; the varying costs and effectiveness
of alternative cleanup technologies and methods; the uncertain level of
insurance or other types of recovery; and the questionable level of the
Company's involvement. The Company has also been named as a potentially
responsible party at two superfund sites pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 or comparable
state statutes. Based on currently available information, the Company believes
that its liability, if any, associated with remediation of these sites or
facilities will not have a material adverse effect on the Company's financial
condition, results of operations or liquidity.

34
36
DESCRIPTION OF NEW CREDIT FACILITY

The description set forth below does not purport to be complete and is
qualified in its entirety by reference to the underlying agreements of the
Senior Bank Facilities, which have been filed as exhibits to the registration
statement of which this Prospectus is a part.

GENERAL

The Company entered into a Credit Agreement providing for a new
revolving credit facility (the "New Credit Facility") with Bankers Trust
Company ("BTCo"). The New Credit Facility enables the Company to obtain
revolving credit loans and the issuance of Letters of Credit for the account of
the Company from time to time for working capital and general corporate
purposes in an aggregate amount outstanding not to exceed $20.0 million. As of
February 28, 1997, no borrowings under the New Credit Facility were
outstanding. The revolving credit loans bear interest at a rate based upon the
lender's prime rate plus a borrowing margin of 1.5% or a LIBOR-based rate plus
a borrowing margin of 2.5%. The Company paid certain fees with respect to the
New Credit Facility, which fees are included in the $8.0 million of expenses
that were incurred by the Company in connection with the Transaction. The New
Credit Facility terminates on the fifth anniversary of the date of the
consummation of the Offering, unless terminated sooner upon an event of default
(defined in the New Credit Facility), and outstanding revolving credit loans
are payable on such date or such earlier date as may be accelerated following
the occurrence of any event of default. The Company had $20.0 million of
availability under the New Credit Facility as of February 28, 1997.

The obligations of the Company and its subsidiaries under the New Credit
Facility will rank senior in right of payment to the Notes. The obligations
under the New Credit Facility, but not the Notes or the Subsidiary Guarantees,
are secured by a first priority lien on all of Holding's and its subsidiaries'
real and personal property and on all of the capital stock of the Company and
its subsidiaries, and all proceeds thereof. The obligations under the New
Credit Facility are guaranteed by Holding and the Company's subsidiaries. The
Notes and the Subsidiary Guarantee are effectively subordinated to the
obligations under the New Credit Facility and to any other senior debt of the
Company and the Subsidiary Guarantors.

CERTAIN COVENANTS

The New Credit Facility contains various covenants that will restrict
the Company from taking various actions and that will require that the Company
achieve and maintain certain financial covenants. The New Credit Facility
includes covenants relating to minimum EBITDA, minimum interest coverage ratio,
and limitations on capital expenditures, investments, indebtedness, liens,
dividends, acquisitions, sales of assets, guarantee obligations, prepayments of
other indebtedness, mergers or consolidations, change in business activities,
affiliate transactions and certain corporate activities. The New Credit
Facility also prohibits the Company from prepaying the Notes and prohibits
certain changes in control of the Company.

EVENTS OF DEFAULT

The New Credit Facility contains customary events of default, including
nonpayment of principal, interest or fees, violation of covenants, inaccuracy
of representations or warranties in any material respect, cross default and
cross acceleration to certain other indebtedness, bankruptcy, ERISA,
environmental matters, material judgments and liabilities and change of
control.

35
37
BUSINESS

COMPANY HISTORY

The Company was founded in 1953 as Lumberman Sash & Door Co. by Joe
Fojtasek and operated as Fojtasek Companies, Inc. from 1988 to November 1996.
Early Company divisions included Skotty Aluminum, Extruders and Atrium Wood.
Over time, the Company started new business divisions such as Atrium Door &
Window Distributors of Arizona (1979), North Texas Die & Tool (1989) and Atrium
Vinyl (1995). The Company added various businesses to its portfolio through
acquisitions, including H-R Windows (1988), Dow-Tech (1990) and the Atrium Door
& Window Distributors of Nevada (1993). Until 1993, the operations were
principally managed by Joe Fojtasek. In 1993, Randall S. Fojtasek, Joe
Fojtasek's son, became Chief Executive Officer and President. He and Executive
Vice President Louis W. Simi, Jr., who has been with the Company for the past
30 years, are responsible for day-to-day operations. In July 1995, the Company
completed an equity recapitalization transaction with Heritage, an equity
investment fund. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recapitalizations and Acquisitions."

The Company purchased from Keller certain capital assets in June 1996
and inventory in September 1996. The acquired capital assets include an
aluminum extrusion line, a painting line and vinyl window and door and aluminum
window and storm door fabrication equipment and tooling. The extrusion line
will increase the Company's aluminum extrusion capacity by approximately 35%
and will enable it to extrude in-house virtually all of its anticipated
aluminum extrusion requirements. The vinyl fabrication equipment and tooling
will extend the Company's product offering to include the fabrication of vinyl
sliding patio doors, vinyl casement windows, vinyl horizontal sliding windows
and vinyl double-hung windows and the assembly of vinyl bay and bow windows.
This equipment and tooling has been relocated to the Company's Atrium Vinyl
division in Dallas. Additionally, equipment for the fabrication of a full line
of single- and multi-family aluminum windows and storm doors is being utilized
in the Woodville division near Houston, Texas. The Company has established two
new divisions named Kel-Star Building Products and Woodville Extruders that
will operate the assets acquired pursuant to the Keller acquisition. Kel-Star
Building Products will market its products under the "KBP" brand to take
advantage of existing name recognition of Keller Building Products.

In September 1996, the Company completed the acquisition of Bishop, which
manufactures and sells primarily vinyl windows and doors to the
remodel/replacement market in the Northeast. The Company acquired Bishop to (i)
increase the Company's presence in the fast-growing vinyl window market, (ii)
diversify geographically and (iii) increase its presence in the
remodel/replacement market. The Bishop acquisition allows the Company to extend
its vinyl product offerings to include sliding patio doors, French patio doors,
casement windows, horizontal sliding windows, bay and bow windows, double-hung
windows and storm doors. As part of the Bishop acquisition, the Company also
acquired a distribution facility which has been renamed Atrium Door & Window
Distributors of New York. See the Combined Consolidated Financial Statements of
Bishop included elsewhere in this Prospectus.

In November 1996, the Company completed an equity recapitalization
transaction with Hicks Muse. See "Summary -- The Transaction."

COMPANY OVERVIEW

The Company is a leading manufacturer and distributor of residential
windows and doors in the Southwest, South and Southeast regions of the United
States. The Company's Primary Market, which in 1995 represented 75.1% of the
Company's revenues and 38.3% of total U.S. housing starts, consists of Arizona,
Colorado, Florida, Georgia, Louisiana, Nevada, New Mexico, Oklahoma, Tennessee
and Texas. The Primary Market includes certain of the fastest growing
residential housing markets in the United States with a CAGR in single-family
housing starts of 10.3% for the five-year period ended December 31, 1995
compared to 5.9% nationally for the same period. The Company is also one of a
limited number of window and door manufacturers that offers a diversified
product line, consisting of aluminum, vinyl and wood products. The Company
estimates that its market share of aluminum window units sold in its Primary
Market has increased from 11.9% in 1991 to 17.6% in 1995 and that its share of
total window units sold in its Primary Market has increased from 7.6% to 10.3%
during the same period. The Company's revenues and total window unit shipments
in the Primary Market have increased at CAGRs of 19.3% and 19.0%, respectively,
in this period. The

36
38

Company's pro forma net sales, income before extraordinary charge and
EBITDA as adjusted (as defined in the Notes to the "Unaudited Summary Pro Forma
Financial Data") for the year ended December 31, 1996 were $166.7 million, $6.0
million and $24.4 million.

The Company is vertically integrated with operations that include (i)
Extrusion, the extrusion of aluminum and vinyl, which is utilized internally in
the Company's fabrication operations or sold to third parties, (ii)
Fabrication, the assembly of window and door units and sale of such units to
wholesalers, lumberyards, DIY home centers and homebuilders and (iii)
Distribution Centers, the sale of finished products to homebuilders, remodelers
and contractors through four Company-owned Distribution Centers located in
Dallas, Texas; Las Vegas, Nevada; Phoenix, Arizona; and Farmingdale, New York.
The Company performs these operations at facilities that comprise an aggregate
of approximately 1.4 million square feet.

37
39
OPERATIONS

Following is a breakdown of the Company's consolidated pro forma revenue
by operating component (excluding intercompany sales) from 1992 through 1996:

YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1992 1993 1994 1995 1996 CAGR
---------- ---------- ----------- --------- ---------- ---------

Extrusion . . . . . . . . . . $17,673 $ 19,527 $ 26,100 $ 28,052 $ 30,860 15.0%
Fabrication . . . . . . . . . 65,558 81,074 95,397 104,736 119,111 16.1
Distribution Centers . . . . 4,717 8,809 16,080 17,186 16,739 37.3
------- -------- -------- -------- -------- ----
Net Revenue . . . . . . . . . $87,948 $109,410 $137,577 $149,974 $166,710 17.3%
======= ======== ======== ======== ======== ====

EXTRUSION

Aluminum extrusion is performed by two divisions: Extruders and
Woodville Extruders. In the aluminum extrusion process, aluminum billet is
heated in an oven and hydraulically pressed through a die to form a shaped
lineal, or rail. The lineal is then air-cooled, straightened, cut into the
finished product length and tempered in an aging oven. The extrusion may then
be painted at the Company's painting operations or anodized by a third party.
In addition to producing aluminum extrusions for the Company's fabrication of
windows and doors, Extruders also provides aluminum extrusions to other window
and door manufacturers, as well as for customers outside of the window and door
industry. Extruders operates two extrusion presses on two 10-hour shifts, five
to six days a week. In connection with the Keller acquisition, the Company
acquired a third extrusion press that will eliminate the need for the
outsourcing of extrusion during peak production periods, as well as provide
capacity for future growth.

Extrusion of vinyl is performed at Dow-Tech. In the vinyl extrusion
process, vinyl pellets are vacuum-loaded into hoppers feeding each of
Dow-Tech's nine extrusion lines. The material is heated and extruded through a
die by an extrusion screw. The extrusion is water-cooled as it is pulled from
the die at varying rates depending on the profile being extruded. Flexible
vinyl is typically rolled onto reels and rigid vinyl is cut to the stock length
of 12 feet or to other lengths according to the customer's order. Dow-Tech
provides vinyl extrusions used by the Company's window fabrication divisions
and by outside customers. The Company intends to expand its vinyl extrusion
capabilities as the volume of its sales of vinyl products increases.

During 1996, approximately 55.3% of the Company's extrusion revenue was
derived from sales to third parties, including businesses outside of the window
and door industry, with the remainder sold internally to the Company's
fabrication operation. By extruding aluminum and vinyl in-house rather than
purchasing from outside suppliers, the Company is able to secure a low-cost,
reliable source of extrusions, control product quality and reduce inventory
levels. The table set forth below provides the Company's estimate of the
capacity of its three extrusion facilities and of such facilities' percentage
utilization during 1996.

CAPACITY 1996
-------- ----
FACILITY PRODUCT (MILLION POUNDS) UTILIZATION%
----------------------------------------- ------------------- -------------------- -------------------

Extruders . . . . . . . . . . . . . . . Aluminum extrusion 43 94%
Woodville Extruders . . . . . . . . . . Aluminum extrusion 15 N/A*
Dow-Tech . . . . . . . . . . . . . . . Vinyl extrusion 10 43%

*Began operations in September 1996.

o Extruders

Extruders, founded in 1974, extrudes aluminum product components used in
the fabrication of the Company's products. Extruders provides extrusions for
other window and door manufacturers, as well as non-window extrusions such as
trailer rails, hand rails and products for the heating, ventilation and air
conditioning markets.

38
40
o Woodville Extruders

Woodville Extruders, purchased as part of the recent Keller acquisition,
provides the Company and third party customers with aluminum extrusions.
Woodville Extruders operates one extrusion line consisting of an extrusion
press, a billet oven and a paint line. The Company believes that the addition
of Woodville Extruders increases its extrusion capacity by approximately 35%
and will enable it to extrude in-house all of its anticipated aluminum
extrusion requirements. In addition, Woodville Extruders has sufficient plant
capacity to install another extrusion press.

o Dow-Tech

Dow-Tech, acquired in 1990, extrudes vinyl sub-components used in the
fabrication of aluminum, vinyl and wood windows and doors. A majority of
Dow-Tech's volume in 1995 was sold to third party customers with the remainder
used in the fabrication of the Company's products. In addition, Dow-Tech will
provide Bishop with vinyl sub-components, thereby reducing Bishop's raw
material costs.

FABRICATION

The Company fabricates and distributes a broad line of aluminum, vinyl
and wood windows and doors at its six fabrication divisions. Windows include
single- and double-hung windows, sliding windows, casement windows and
specialty windows such as half rounds, transoms and ellipticals. Doors include
center-hinge patio doors, French patio doors and sliding patio doors. These
products can be manufactured as single- or double-pane (insulated) windows with
different levels of thermal efficiency. In 1996, more than 90% of the Company's
net revenues were derived from sales of windows. The Company's six fabrication
divisions include (i) Skotty Aluminum (Irving, TX), (ii) H-R Windows (Dallas,
TX), (iii) Atrium Vinyl (Dallas, TX), (iv) Atrium Wood (Dallas, TX), (v)
Kel-Star Building Products (Woodville, TX) and (vi) Bishop (Bridgeport, CT and
Clinton, MA). The Company designs, manufactures and repairs its fabrication
equipment at North Texas Die & Tool, based in Irving, TX.

In the aluminum window fabrication process, extrusions are cut to size
and notched and mechanically fastened to form frames, comprised of sills and
jambs, and sashes, comprised of center bars, lock rails, lift rails and sash
rails. Raw glass, purchased cut-to-size or sized in-house with a
computer-numerically-controlled glass optimizer, is insulated and finished.
Along assembly lines set up according to product type, prepared glass and
component parts are assembled and transferred to a staged shipping area.

In the vinyl fabrication process, vinyl frame extrusions are cut,
notched and welded. The frame is then placed on assembly lines on which
insulated glass and sashes are installed. In the fabrication of wood window and
door products, pre-cut, precision-milled wood components are glued and screwed
together, sanded and affixed with appropriate hardware. These units are then
glazed and packaged for final shipment.

39
41
Following is a description of the fabrication divisions:

DIVISION PRODUCTS TYPE OF DISTRIBUTION CUSTOMER BASE GEOGRAPHIC FOCUS
--------------- ----------------------- -------------------- ----------------------------- ------------------

Skotty Aluminum windows and One-step Lumberyards/DIY home Arizona, Georgia,
Aluminum doors distribution centers/Company Distribution Nevada, Texas
Centers
Two-step Wholesalers
distribution
Direct Homebuilders

H-R Windows Aluminum windows and One-step Lumberyards/DIY home centers Florida, New
doors distribution Mexico, Oklahoma,
Tennessee, Texas
Direct Homebuilders
Two-step Wholesalers
distribution

Atrium Vinyl Vinyl windows and doors One-step Lumberyards/DIY home Georgia, North
distribution centers/Company Distribution Carolina, South
Centers Carolina,
Tennessee
Two-step Wholesalers
distribution

Atrium Wood Wood doors and wood and One-step Lumberyards California,
aluminum-clad wood distribution Nevada, Oregon,
windows Texas, Washington
Two-step Wholesalers
distribution
Direct Homebuilders

Kel-Star Vinyl and aluminum One-step Lumberyards Arkansas,
Building windows and aluminum distribution Louisiana,
Products storm doors Mississippi,
Oklahoma, Texas
Two-step Wholesalers
distribution
Direct Homebuilders

Bishop Vinyl and aluminum One-step Company Distribution Centers Connecticut,
windows and doors distribution Remodeler/Contractor Maine,
Direct Massachusetts,
New Hampshire,
New Jersey, New
York, Rhode
Island

o Skotty Aluminum

Skotty Aluminum, founded in 1960, manufactures a broad product line of
aluminum windows and doors under the "Skotty" brand name. Skotty Aluminum
distributes primarily through one-step distribution to DIY home centers,
lumberyards and Company Distribution Centers, as well as through two-step and
direct distribution. Skotty Aluminum sells its products primarily in the South
and Southeast regions of the United States.

o H-R Windows

H-R Windows, acquired in 1988, manufactures aluminum windows and doors
under the "H-R" brand name. The Company believes that approximately 30% of H-R
Windows' sales are direct to homebuilders, with the remainder of sales
primarily through the one-step distribution channel, including DIY home centers
and regional lumberyards. Although the "Skotty" and "H-R" product lines are
substantially similar, H-R's direct distribution to homebuilders offers the
Company an opportunity to penetrate a segment of the market typically not
captured by Skotty products sold through wholesalers. H-R Windows sells its
products primarily in Texas and the Southeast region of the United States.

o Atrium Vinyl

In order to expand its presence in the vinyl window and door market in
the South, the Company opened the Atrium Vinyl division in 1995. Atrium Vinyl
manufactures and sells vinyl windows under the "Atrium" brand name. Atrium
brand products are distributed primarily through one-step distribution. In
connection with the Keller acquisition, equipment and tooling was acquired
which will expand Atrium Vinyl's product offering to include vinyl sliding
patio doors, vinyl casement windows, vinyl horizontal sliding windows, vinyl
bay and bow windows and vinyl double-hung windows, primarily in the South and
Southeast regions of the United States. In addition, the Company plans to
extend

40
42
the "Atrium" brand name to selected Bishop vinyl window units. The Company
believes that Atrium Vinyl will benefit from Bishop's expertise in
manufacturing vinyl windows and doors and from purchasing synergies. Atrium
Vinyl sells its products primarily in the Southeast region of the United
States.

o Atrium Wood

Through the Atrium Wood division, founded in 1965, the Company
manufactures and sells wood doors and wood and aluminum-clad wood windows under
the "Atrium" brand name. The division's products are distributed primarily
through one-step distribution to lumberyards and through wholesalers.
Approximately 80% of Atrium Wood's sales in 1996 were door products. Atrium
Wood sells its products primarily in the Western region of the United States
and in Texas.

o Kel-Star Building Products

Kel-Star Building Products, whose assets were purchased as part of the
Keller acquisition, manufactures and sells a full line of vinyl and aluminum
windows and aluminum storm doors under the "KBP" brand. While part of Keller
Industries, Inc., this division enjoyed significant brand recognition as "KBP"
("Keller Building Products"). The Company has renamed this division "Kel-Star
Building Products" and its products will be branded "KBP" to leverage Keller's
name recognition. Kel-Star Building Products markets its products primarily
through one-step distribution in the Southern region of the United States.

o Bishop

Bishop, founded in 1958, manufactures vinyl windows and doors under the
"Bishop" brand in the Northeast. The Company believes that approximately 90% of
Bishop's sales in 1996 were to remodel/replacement contractors which resulted
in higher profit margins than sales to one- or two-step distributors. The
Company plans to extend the "Atrium" name to certain of Bishop's vinyl
products, as well as aluminum storm doors. Bishop's geographic focus is the
Northeast, primarily Connecticut, Maine, Massachusetts, New Hampshire, New
Jersey, New York and Rhode Island.

o North Texas Die & Tool

North Texas Die & Tool designs, manufactures and repairs fabrication
saws and dies. Fabrication saws are used to cut aluminum extrusions to the
proper length, while fabrication dies stamp the end of extrusions into shapes
which can be interlocked with other components to form windows.

DISTRIBUTION

The Company owns and operates four Distribution Centers, consisting of
Atrium Door & Window Distributors of Arizona, Nevada, New York and Texas. The
Arizona Distribution Center carries Skotty and Atrium products and sells
directly to large homebuilders in the area. The Nevada Distribution Center
markets primarily Skotty products and sells directly to homebuilders in its
region. The New York Distribution Center markets Bishop products primarily to
remodelers and contractors in a seven-state region in the Northeast. The Texas
Distribution Center sells Atrium products and distributes directly to large
homebuilders in Texas.

41
43
COMPETITIVE STRENGTHS

The Company's market leadership and financial performance are
attributable to a number of factors, including the following:

o LEADING SHARE IN PRIMARY MARKET

o ESTABLISHED BRAND NAMES AND REPUTATION

o STRENGTH IN MULTIPLE DISTRIBUTION CHANNELS

o LOW-COST PRODUCTION PROCESSES

The Company believes that its low-cost operations are attributable to
its vertical integration and efficient production processes. Extrusion allows
the Company to ensure a low-cost, reliable source of extensions, control
product quality and reduce inventory levels. The Company has been successful in
improving the efficiency of its operations through the rationalization of
product lines, reduction of overhead, reconfiguration of production processes,
reduction of inventory levels and the implementation of a management
information system. The Company believes that its low-cost operations provide
better margins and increased pricing flexibility in its markets relative to its
competition.

o EXPERIENCED, ENTREPRENEURIAL MANAGEMENT

42
44
BUSINESS STRATEGY

In order to enhance its leading market share position and to maximize
profitability and cash flow, the Company's principal strategic objectives are
as follows:

o TARGET FAST-GROWING MARKETS

o FOCUS ON PRODUCTS OF CHOICE

o EXPAND INTO VINYL

The Company plans to continue to expand its presence in the vinyl window
and door market. In the Company's Primary Market, vinyl windows represented
10.8% and 28.3% of residential new construction and remodel/replacement units,
respectively, during 1995. The Company has significantly increased its vinyl
window and door fabrication capacity through the commencement of operations at
Atrium Vinyl in 1995 and the acquisitions of Bishop. The Company's
pro forma sales (as if the acquisition of Bishop and Keller had occurred
January 1, 1996, combined with the actual historical sales of Atrium Vinyl and
Keller during 1996) of vinyl windows and doors for the year ended December 31,
1996 were $20.5 million. The Company intends to utilize its nationally
recognized "Atrium" brand name and well-established distribution channels to
further penetrate the highly fragmented vinyl window market.

o EXTEND ATRIUM BRAND NAME

o EXPAND THROUGH STRATEGIC ACQUISITIONS

The Company will pursue opportunities to make acquisitions that
complement and expand its core business or enable the Company to enter into new
markets for its products. The Company operates in a highly fragmented industry
in which, with few exceptions, competitors are privately-owned, regional
companies with sales under $100 million. The Company believes that significant
opportunities exist to make selected strategic acquisitions at attractive
valuations. Strategic acquisitions would allow the Company to (i) leverage its
highly recognized brand names, (ii) achieve significant cost reductions through
purchasing synergies and the application of the Company's best practices and
(iii) diversify the Company's geographic, product and market focus. The Bishop
and Keller acquisitions are two recent examples of focused, value-added
acquisitions that are consistent with the Company's overall business strategy.

43
45
INDUSTRY OVERVIEW

In 1995, new construction spending in the United States totaled $547
billion, of which residential and commercial spending totaled $237 billion and
$310 billion, respectively. Within the residential construction market, new
construction spending and remodel/replacement spending totaled $163 billion and
$74 billion, respectively. The Company believes that, in 1995, United States
residential window and door expenditures were approximately $6.5 billion, of
which new construction and remodel/replacement expenditures represented
approximately $2.0 billion and $4.5 billion, respectively. Total residential
window expenditures in the United States represented $1.5 billion in the new
construction market and $3.0 billion in the remodel/replacement market for the
same period.

The residential construction market consists of single-family and
multi-family housing construction. In 1995, housing starts in the United States
totaled approximately 1.2 million, of which 1.0 million were single-family
homes and 0.2 million were multi-family homes. During 1995, approximately 95%
of the Company's window and door sales were to the single-family housing
construction market, and the remaining 5% of sales were to the multi-family
housing construction market.

In 1995, residential new construction and remodel/replacement window
sales in the Company's Primary Market totaled approximately $445 million and
$450 million, respectively, representing 30.3% and 14.7% of the total U.S. new
construction and remodel/replacement markets, respectively.

As illustrated in the chart below, window unit growth in the Company's
Primary Market has outpaced unit growth in the United States in both the new
construction and remodel/replacement markets. In the United States window units
for new construction increased from 13.3 million units in 1991 to 16.6 million
units in 1995, representing a CAGR of 5.7%, while window units for the
remodel/replacement market increased from 30.1 million units in 1991 to 36.6
million units in 1995 for a CAGR of 5.0%.

WINDOW SALES (UNITS)

1991-1995
1991 1992 1993 1994 1995 CAGR
-------- -------- -------- --------- -------- ----------
(units in millions)

UNITED STATES
New construction . . . . . . . . . . 13.3 14.4 15.0 17.2 16.6 5.7%
Remodel/replacement . . . . . . . . . 30.1 29.3 33.3 36.3 36.6 5.0
---- ---- ---- ---- ---- ----
Total United States . . . . . . 43.4 43.7 48.3 53.5 53.2 5.2%
==== ==== ==== ==== ==== ====

PRIMARY MARKET
New construction . . . . . . . . . . 3.9 4.7 5.0 6.1 6.1 11.7%
Remodel/replacement . . . . . . . . . 4.2 3.9 5.1 5.7 5.9 8.8
---- ---- ---- ---- ---- ----
Total Primary Market . . . . . 8.1 8.6 10.1 11.8 12.0 10.2%
==== ==== ==== ==== ==== ====

Source: F.W. Dodge -- Summary Report on Window Frame Materials, September 1996

In 1995, residential housing starts in the Company's Primary Market
totaled 471,778 units, of which 365,670 were single-family homes and 106,108
were multi-family homes. From 1991 to 1995, single-family housing starts in the
Company's Primary Market outpaced growth in the United States, with a CAGR of
10.3% compared to 5.9% for the total United States. In 1995, the Company's
Primary Market comprised 37.2% of total United States single-family housing
starts.

HOUSING STARTS

1991-1995
1991 1992 1993 1994 1995 CAGR
--------- -------- ---------- ---------- -------- ---------
(units in millions)

TOTAL UNITED STATES
Single family . . . . . . . . . . 781,989 954,144 1,027,445 1,056,201 982,832 5.9%
% Growth . . . . . . . . . . . . --% 22.0% 7.7% 2.8% (6.9)%

PRIMARY MARKET
Single family . . . . . . . . . . 247,310 312,242 363,828 382,909 365,670 10.3%
% Growth . . . . . . . . . . . . --% 26.3% 16.5% 5.2% (4.5)%

Source: F.W. Dodge -- Summary Report on Window Frame Materials, September 1996.

44
46
Window and Door Industry Overview

As illustrated in the charts below, the percentage of total window units
made of aluminum, wood or vinyl varies by region. In the United States,
aluminum windows comprised 40.9% of the residential new construction market and
30.1% of the residential remodel/replacement market, respectively, in 1995. In
the Company's Primary Market, aluminum windows comprised 71.3% of the
residential new construction market and 43.0% of the residential
remodel/replacement market, respectively.

UNIT MARKET SHARE

[Six pie charts comparing the use of vinyl, aluminum, wood and other materials
in the fabrication of window units for the United States and the Company's
Primary Market by new construction, repair and remodel, and total residential
construction.]

Source: F.W. Dodge -- Summary Report on Window Frame Materials, September
1996.

A homebuilder's or homeowner's choice of materials generally is based
upon such considerations as cost, thermal efficiency, maintenance,
architectural tastes and customs. The following table outlines the Company's
estimate of the average cost to homebuilders of a standard single-family house
package, consisting of 15 windows (including two specialty windows) and two
patio doors, for a $100,000 home and demonstrates aluminum's cost advantage:

COST TO PREMIUM TO ALUMINUM
MATERIAL HOMEBUILDER WINDOW PACKAGE
-------- ------------- --------------------

Aluminum . . . . . . $1,350 N/A
Vinyl . . . . . . . . $2,225 65%
Wood . . . . . . . . $3,900 189%

Aluminum

In the Company's Primary Market, aluminum windows are the products of
choice and regional standard because of their low cost, durability and
suitability to warm climates. Because aluminum is the least expensive window
alternative, homebuilders generally prefer aluminum to control costs, as a home
buyer is not generally willing to pay for the increased cost of vinyl or wood.
Aluminum is not utilized as frequently in homes in the North and the Northeast
regions of the United States due to historical architectural trends and the
superior insulating qualities of wood and vinyl windows. In 1995, sales of
aluminum windows nationwide totaled 17.8 million units, or 33.5% of all window
units, while aluminum windows sales in the Company's Primary Market totaled 6.9
million, or 57.3% of all window units.

45
47
Vinyl

Vinyl windows represent the middle price point of windows. Vinyl windows
have thermal efficiency characteristics that approach those of wood windows,
but some home owners do not consider them as aesthetically pleasing.
Historically, vinyl windows have not been as popular as aluminum windows in
warmer climates such as those found in the Company's Primary Market because of
the increased cost of vinyl and because early vinyl windows suffered from ultra
violet degradation, which caused the vinyl to become brittle after prolonged
exposure to the sun. However, in recent years, advances in plastics have
increased the quality and durability of vinyl windows. In 1995, unit sales of
vinyl windows in the United States totaled 16.2 million units, or 30.4% of all
window units, while vinyl window sales in the Company's Primary Market totaled
2.3 million units, or 19.5% of all window units.

Wood

Wood is the most thermally efficient window material, however, it is the
most expensive and requires the greatest amount of maintenance. Since 1991,
unit sales of windows with all-wood frames have declined from 6.2 million to
5.8 million in 1995. Unit sales of aluminum-clad and vinyl-clad wood windows,
which are classified as wood, have grown so that, overall, the wood window
market share has been stable for the last several years. In clad windows,
composite materials such as aluminum, vinyl, fiberglass or industrial coating
are applied to the exterior of the window frame so that the frame inside the
house has the desired aesthetics while the exterior frame has the desired
durability or insulating features. Due to maintenance issues surrounding
all-wood windows, the Company believes that the trend towards aluminum- and
vinyl-clad wood windows and composite frame materials will continue. In 1995,
sales of wood windows, including vinyl- and aluminum-clad wood windows
nationwide totaled 18.3 million units, or 34.5% of all window units sold, while
wood window sales in the Company's Primary Market totaled 2.6 million units, or
21.6% of all window units sold.

COMPETITION

The residential window and door industry is highly fragmented. With few
exceptions, competitors are privately-owned, regional companies with sales
under $100 million. The Company's major competitors throughout its Primary
Market for the sale of aluminum windows are Alenco, a division of Redman
Building Products, and Caradon Better-Bilt Inc. In addition, the Company
competes with various other companies in specific regions within its Primary
Market.

In the vinyl window and door segment, there is no large dominant
manufacturer of vinyl windows that operates on a national basis. The segment is
characterized by small regional manufacturers that compete on a local and
regional basis. Historically, demand for vinyl windows and doors has been
concentrated in the cooler regions of the United States. Bishop's major
competitors for the sale of vinyl windows are SilverLine Building Products and
Milgard Manufacturing Inc. In addition, the Company competes with a number of
regional manufacturers that sell directly to vinyl contractors.

In the wood window and door segment of the industry, two large
manufacturers, Andersen Corporation and Pella Corporation, sell premium
products on a national basis. The Company's wood windows and doors are sold at
a medium price point primarily in the West and Southwest regions of the United
States. The Company has many competitors in the wood window and door segment,
including Kolbe & Kolbe Millwork Co. Inc. and Hurd Millwork Co. Inc.

46
48
DISTRIBUTION

The Company uses multiple distribution channels and brand names to
maximize market penetration. The Company distributes its windows and doors
through (i) one-step distribution to major retail DIY home centers, lumberyards
and the Company's Distribution Centers, (ii) two-step distribution to
wholesalers who resell to DIY home centers and lumberyards and (iii) direct
sales to homebuilders (of both single-family and multi-family housing),
remodelers and contractors. To enhance its market coverage, the Company markets
its windows and doors under five brand names, "Atrium," "Skotty," "H-R," "KBP"
and "Bishop." Following is a breakdown of the Company's distribution channels:

[Chart illustrating the use of the Company's three distribution channels,
direct, one-step and two-step.]

In one-step distribution, the Company distributes to DIY home centers
and lumberyards and through its Distribution Centers. These customers maintain
low levels of inventory and therefore require more frequent deliveries and
generally higher levels of customer service than two-step distributors. In
two-step distribution, the Company sells to wholesalers who resell the products
to lumberyards and DIY home centers. Two-step distributors, who often carry the
Company's products on an exclusive basis, are primarily utilized to service
smaller retailers in rural areas that do not generate enough volume to purchase
directly from the Company. In contrast to one-step distributors, two-step
distributors often carry large inventory positions in order to service the
needs of its retail customers who generally carry limited amounts of inventory.
Two-step distribution is more common in rural areas since urban areas are
serviced by DIY home centers and lumberyards.

During 1996, approximately 10.4% of the Company's sales were made
through three Company-owned Distribution Centers located in Arizona, Nevada and
Texas, primarily through direct distribution channels. The Arizona Distribution
Center carries Skotty and Atrium products and sells directly to large
homebuilders in the area. The Nevada Distribution Center markets primarily
Skotty products and sells directly to homebuilders in its region. The Texas
Distribution Center sells Atrium products and distributes directly to large
homebuilders in Texas. As part of the Bishop acquisition, the Company added a
fourth Distribution Center in New York, which markets Bishop products primarily
to building supply dealers and contractors in a seven-state region in the
Northeast.

47
49
Although in 1996 the Company had sales in the 48 contiguous states,
sales in its Primary Market represented approximately 75% of the Company's net
revenue. The Company believes that substantially all of Bishop's sales in 1996
were in the Bishop primary market, as identified below.

[A map of the United States identifying the Company's Primary and Secondary
markets and Bishop's Primary Market. The map also identifies the locations of
fabrication, extrusion and distribution operations.]

MARKETING

The Company markets its products through a sales force consisting of
Company salaried and commissioned sales representatives and independent
commissioned sales representatives, as well as customer service
representatives. Each of the Company's divisions, with the exception of
Dow-Tech, is supported by a sales manager, direct sales representatives and
independent representatives. Bishop markets its products exclusively through a
direct sales force. The sales managers coordinate marketing activities among
Company and independent representatives. Company sales representatives focus
primarily on direct sales to homebuilders, remodelers and contractors, while
independent sales representatives sell to DIY home centers, lumberyards and
wholesalers. Independent sales representatives carry the Company's window and
door products on an exclusive basis, although they may carry other related
items from other manufacturers.

The Company believes that customer service plays a key role in the
marketing process. On-time delivery of products, order fill rate, consistency
of service and flexibility in meeting changing customer requirements have
enabled the Company to build a large and loyal customer base which includes
companies such as Home Depot, Centex Homes and Continental Homes.

RAW MATERIALS

The primary raw materials used in the production of the Company's
windows and doors are aluminum, glass, wood and vinyl. These materials are
readily available and may be procured from numerous suppliers. Historically,
aluminum billet has been purchased primarily from one source. However, the
Company has recently begun purchasing from several different suppliers. Glass
is purchased from several sources at prices negotiated annually by the Company

50
at the corporate level. This allows the Company's general managers to purchase
glass, as needed, at pre-negotiated prices. Currently, wood is purchased
primarily from a single source, and vinyl is purchased from multiple sources.

EMPLOYEES

The Company employs approximately 1,675 persons, of whom approximately
1,625 are employed at the Company's manufacturing facilities and distribution
centers and approximately 50 are employed at corporate headquarters. Of these
employees, approximately 1,275 are hourly and approximately 400 are salaried.
Approximately 1,100 of the Company's hourly employees are covered by collective
bargaining agreements. As a result of union organizing activities in 1994, the
Company entered into collective bargaining agreements in 1995 with the United
Needle and Industrial Trade Employee Union, SWRJB, ACTWU, AFL-CIO-CLC, covering
certain employees at the Skotty Aluminum, H-R Windows, Atrium Wood and
Extruders manufacturing facilities, all of which expire on May 20, 1998. The
Company anticipates that all such collective bargaining agreements will be
extended and renegotiated in the ordinary course of business.

In addition, in connection with the Keller acquisition, the Company has
collective bargaining agreements with The Sheet Metal International Association
Local Union NO. 54, due to expire on September 30, 2001, for its Kel-Star
operations and Local Union 2743, Southern Council of Industrial Workers,
Chartered By United Brotherhood of Carpenters and Joiners of America, AFL/CIO,
due to expire on October 6, 2001, for its Woodville Extruders operations. There
are no union affiliations in connection with the Bishop facilities. The Company
may experience additional union-organizing activities in the future, which may
result in the negotiation of additional collective bargaining agreements. There
is no assurance that any additional negotiations or collective bargaining
agreements would not have an adverse effect on the results of operations of the
Company. The Company believes that its relationship with its employees is
satisfactory.

49
51
PROPERTIES

The Company's operations are conducted at the owned or leased facilities
described below:

CAPACITY
(SQUARE OWNED/
LOCATION PRINCIPAL USE FEET) LEASED
-------- ------------- -------- ------
Dallas, Texas Fabrication (H-R Windows) 186,000
Fabrication (Atrium Wood) 266,000
Fabrication (Atrium Vinyl) 90,000
-------
542,000 Leased*

Irving, Texas Fabrication (Skotty Aluminum Products) 147,218
Extrusion (North Texas Die & Tool) 1,400
-------
148,618 Owned

Irving, Texas Distribution (Atrium Door & Window 22,000
Distributors of Texas)
Fabrication (Skotty Aluminum Products) 98,000
-------
120,000 Owned

Wylie, Texas Extrusion (Extruders) 100,000 Owned

Carrollton, Texas Extrusion (Dow-Tech) 25,200 Leased

Phoenix, Arizona Distribution (Atrium Door & Window
Distributors of Arizona) 44,743 Leased

Las Vegas, Nevada Distribution (Atrium Door & Window
Distributors of Nevada) 30,400 Leased

Woodville, Texas Fabrication (Kel-Star Building Products) 180,000
Extrusion (Woodville Extruders) 120,000
-------
300,000 Leased

Clinton, Fabrication (Bishop Manufacturing
Massachusetts of New England) 31,000 Owned

Bridgeport, Fabrication (Bishop Manufacturing Co.)
Connecticut Fabrication (Vinyl Building Specialties
of Connecticut) 75,000 Leased

Farmingdale, Distribution (Atrium Door & Window
New York Distributors of New York) 6,000 Leased
---------

Total 1,422,961
=========

*Leased from an affiliate of certain stockholders. See "Certain
Transactions -- Other."

The Company believes that its manufacturing plants are generally in good
operating condition and are adequate to meet anticipated future requirements.

The Company recently moved its corporate headquarters to Dallas, Texas. The
new facilities offer approximately 11,000 square feet and are leased for a
seven-year term.

50
52
BACKLOG AND MATERIAL CUSTOMERS

The Company has no material long-term contracts. Orders are generally
filled within 7 days of receipt. The Company's backlog is subject to
fluctuation due to various factors, including the size and timing of orders for
the Company's products and is not necessarily indicative of the level of future
revenue. For the year ended December 31, 1996, no customer accounted for more
than 10% or more of the Company's sales.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The Company is subject to numerous federal and state statutes and
regulations relating to, among other things, air and water quality, the
discharge of materials into the environment and safety and health issues. The
Company does not expect compliance with such provisions to have a material
impact on the Company's earnings or competitive position in the foreseeable
future. Additionally, no significant capital expenditures are anticipated
related to compliance with such provisions.

The Company is involved in various stages of investigation and cleanup
relative to environmental protection matters, some of which relate to waste
disposal sites. The potential costs related to such matters and the possible
impact thereof on future operations are uncertain due in part to: the
uncertainty as to the extent of pollution; the complexity of Government laws
and regulations and their interpretations; the varying costs and effectiveness
of alternative cleanup technologies and methods; the uncertain level of
insurance or other types of recovery; and the questionable level of the
Company's involvement. The Company is a named party in several government
enforcement and private actions associated with old waste disposal sites, some
of which are on the U.S. Environmental Protection Agency's Superfund priority
list. These actions seek cleanup cost and, in some cases, damages for alleged
personal injury or property damage. The Company does not believe, based upon
the information available at this time, that the outcome of the matters
discussed above will have a material adverse effect on the Company's financial
condition, results of operations or liquidity.

LEGAL PROCEEDINGS

The Company is involved from time to time in litigation arising in the
ordinary course of its business, none of which, after giving effect to the
Company's existing insurance coverage, is expected to have a material adverse
effect on the Company.

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table provides information concerning the directors and the
executive officers of the Company. The directors of the Company are also the
directors of Holding. All directors hold office until the next annual meeting
of stockholders of Holding and until their successors have been duly elected
and qualified. The parties to the Stock Purchase Agreement have agreed to take
all actions required to cause the Board of Directors of Holding at all times to
consist of at least five directors, of whom one shall be designated by the
Fojtasek shareholder group, one shall be designated by Heritage Fund I, L.P.
and the remainder shall be designated by Hicks Muse and Hicks Muse Affiliates.

NAME AGE POSITION
---- --- --------

Randall S. Fojtasek . . . . . . 34 President, Chief Executive Officer and Director
Louis W. Simi, Jr. . . . . . . 56 Executive Vice President and General Manager of Skotty Aluminum
Jeff L. Hull . . . . . . . . . 31 Corporate Controller and Secretary
Howard S. Saffan . . . . . . . 37 Vice President and General Manager of Bishop
Russell S. Fojtasek . . . . . . 35 Vice President and Plant Manager of Skotty Aluminum
Horace T. Hicks . . . . . . . . 60 Vice President and General Manager of H-R Windows
Arthur G. Frost . . . . . . . . 64 Vice President and General Manager of Extruders
Michael J. Hillmeyer . . . . . 57 General Manager of Atrium Wood and Atrium Vinyl
John R. Muse . . . . . . . . . 45 Director
Michael J. Levitt . . . . . . . 38 Director
Stephen M. Humphrey . . . . . . 52 Director
C. Dean Metropoulos . . . . . . 49 Director
Michel Reichert . . . . . . . . 46 Director

Randall S. Fojtasek has served as President and Chief Executive Officer of
the Company since 1993. From 1990 to 1993, he served as Vice President of
Operations and General Manager of Atrium Door & Window Company. Mr. Fojtasek
also is a director of Holding.

51
53
Louis W. Simi, Jr. has served as General Manager of Skotty Aluminum since
1971 and has served in other capacities with the Company since 1966. In 1993,
Mr. Simi was promoted to the position of Executive Vice President of the
Company with oversight for the Company's operations.

Jeff L. Hull has served as Corporate Controller since April 1996 and
Secretary since December 1996. From June 1995, Mr. Hull managed the
asset/liability department of AmVestors Financial Corporation (NYSE:AMV). From
1990 to 1995, he was an audit manager with the accounting firm of Deloitte &
Touche. Mr. Hull is a certified public accountant.

Howard S. Saffan has served as Vice President and General Manager of Bishop
since the Bishop acquisition in September 1996. From 1986 to 1996, Mr. Saffan
served as Chairman of the Board and Chief Executive Officer of Bishop. Prior to
1986, Mr. Saffan held positions with the law firms of Sullivan and Cromwell,
PC, and Ottenbourg, Seindeler, Houston and Rosen and with the Securities and
Exchange Commission.

Russell S. Fojtasek, Randall S. Fojtasek's brother, has served as Vice
President and Plant Manager of Skotty Aluminum since 1992. From 1983 to 1992,
Mr. Fojtasek served in various capacities for Skotty Aluminum.

Horace T. Hicks has served as Vice President and General Manager of H-R
Windows since 1993. From 1988 to 1993, he was the General Manager of H-R
Windows. Mr. Hicks has worked in the window and door fabrication industry
since 1953.

Arthur G. Frost has served as Vice President and General Manager of
Extruders since 1977. Mr. Frost has approximately 20 years of experience in
the extrusion industry.

Michael J. Hillmeyer has served as General Manager of Atrium Wood and
Atrium Vinyl since July 1996. From 1991 to 1996, Mr. Hillmeyer was employed by
the Construction Products Group of Aluminum Company of America ("Alcoa"),
serving as Vice President and General Manager of Alcoa Vinyl Window from 1994
to 1996 and as Vice President of Manufacturing and Engineering for Caradco
Window from 1991 to 1994. Prior to joining Alcoa, Mr. Hillmeyer was Vice
President of Manufacturing for Peachtree Doors, Inc.

John R. Muse became a director of the Company in November 1996 concurrently
with the closing of the Transaction. Mr. Muse is a Managing Director and
Principal of Hicks Muse. Prior to the formation of Hicks Muse in 1989, Mr.
Muse headed the merchant/investment banking operations of Prudential Securities
in the Southwestern region of the United States. Mr. Muse also serves as a
director of Hedstrom Corporation, Hat Brands, The Morningstar Group, Inc.
(NASDAQ:MSTR), Crain Holdings Corp., Ghirardelli Chocolate Company and Olympus
Real Estate Corporation.

Michael J. Levitt became a director of the Company in November 1996
concurrently with the closing of the Transaction. Mr. Levitt is a Managing
Director and Principal of Hicks Muse. Before joining Hicks Muse, Mr. Levitt
was a Managing Director and Deputy Head of Investment Banking with Smith Barney
Inc. from 1993 through 1995. From 1986 through 1993, Mr. Levitt was with
Morgan Stanley & Co. Incorporated, most recently as a Managing Director
responsible for the New York-based Financial Entrepreneurs Group. Mr. Levitt
also serves as a director of Ghirardelli Chocolate Company and International
Home Foods, Inc.

Stephen M. Humphrey became a director of the Company in November 1996
concurrently with the closing of the Transaction. From 1994 to 1996, Mr.
Humphrey served as President and Chief Executive Officer of National Gypsum
Company. Prior to joining National Gypsum, Mr. Humphrey served as President of
On-Highway Products from 1991 to 1994 and Executive Vice President from 1989 to
1991. On-Highway Products is a subsidiary of Rockwell International
Corporation (NASDAQ: ROK).

C. Dean Metropoulos became a director of the Company in November 1996
concurrently with the closing of the Transaction. Mr. Metropoulos is the Chief
Executive Officer of C. Dean Metropoulos & Co., a management services company.
From 1983 through 1993, Mr. Metropoulos served as President and Chief Executive
Officer of Stella Foods, Inc. Before then, Mr. Metropoulos served in a variety
of U.S. and international executive positions with GTE Corporation, including
Vice President and General Manager-Europe and Vice President and Controller,
GTE

52
54
International. Mr. Metropoulos also serves as a director of The Morningstar
Group Inc. (NASDAQ:MSTR), Ghirardelli Chocolate Company and International Home
Foods, Inc.

Michel Reichert has been a director of the Company since 1995. Mr.
Reichert is the managing general partner of Heritage Partners, Inc., a
Boston-based principal investment firm. Prior to founding Heritage Partners,
Inc. in 1993, Mr. Reichert was a Managing Director of BancBoston Capital's
Equity Partners, a direct equity investment unit of Bank of Boston. In
addition to serving as a director of Holding, Mr. Reichert is a director of
AmerTac Holdings, Inc., Jordan's Foods and Klearfold, Inc.

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and its four other most highly
compensated executive officers (collectively, the "Named Officers") for
services rendered in all capacities during the fiscal year ended December 31,
1996:

COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ -------------
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER (2) OPTIONS #
------------------------------------------------------------- --------- ----------- ---------- -------------

Randall S. Fojtasek . . . . . . . . . . . . . . . . . . . . $303,865 $3,075,000(1) $221,500(3) 2,195,222
President and Chief Executive Officer

Louis W. Simi, Jr. . . . . . . . . . . . . . . . . . . . . 125,008 270,681 282,886(3) 161,237
Executive Vice President and General Manager of Skotty
Aluminum

Howard S. Saffan . . . . . . . . . . . . . . . . . . . . . 114,010 990,875(4) -- 700,000
Vice President and General Manager of the
Bishop Companies

Arthur G. Frost . . . . . . . . . . . . . . . . . . . . . . 100,006 224,701 716,711(3) 120,707
Vice President and General Manager of Extruders

Horace T. Hicks . . . . . . . . . . . . . . . . . . . . . . 100,006 110,938 123,172(3) 60,353
Vice President and General Manager of H-R Windows

(1) Includes one-time bonus in the amount of $3,000,000 for completion of the
Transaction.

(2) Perquisites related to automobile allowances are excluded since the
aggregated amounts are the lesser of $50,000 or 10% of the total annual
salary.

(3) In connection with the Heritage Transaction, certain members of management
were granted options at below fair market prices. Accordingly, compensation
expense is being recognized for financial statement purposes. Upon
completion of the Transaction and the exercise of these options, the
compensatory portion of the options were reflected in the individual's wages
and in the Company's financial statements. See "Aggregated Option
Exercises" table for total value realized upon exercise, including the
non-compensatory portion.

(4) Includes $940,875 of bonus received while serving as Chairman of the Board
and Chief Executive Officer of the Bishop Companies.

53
55
OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
-------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM (1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
---- ------------ ----------- ----------- ----------- ------------ ------------

Randall S. Fojtasek ......... 1,333,333(2) 32.5 .01 11/27/2006 2,159,999 3,439,999
861,889(3) 21.0 1.00 11/27/2006 542,990 1,370,404
Louis W. Simi, Jr ........... 161,237(4) 3.9 1.00 11/27/2006 101,579 256,367
Howard S. Saffan ............ 700,000(3) 17.0 1.00 11/27/2006 441,000 1,113,000
Arthur G. Frost ............. 120,707(5) 2.9 1.00 11/27/2006 76,045 191,924
Horace T. Hicks ............. 60,353(4) 1.5 1.00 11/27/2006 38,022 95,961

(1) The assumed rates are compounded annually for the full terms of the
options.

(2) Options vested November 27, 1996 concurrent with the Transaction.
Compensation expense of $1,320,000, representing the aggregate amount
by which the fair market value of the shares underlying the options
exceed their exercise price, was recognized in the Company's financial
statements in the fourth quarter of 1996.

(3) Options vest ratably each day during the first three years of the
option period and may be exercised at such time as the Company's board
of directors determines in good faith that an 8% internal rate of
return has been achieved on Hicks Muse's investment in the Company.

(4) Options vest ratably over five years.

(5) 20% of the Options will vest each year for the first 2 years of the
option period, with the remaining Options to vest at the end of the
third year.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES

NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------------- ------------- -------------------- ----------------------

Randall S. Fojtasek ........ 253,850 253,850 1,333,333/861,889 1,333,333/--
Louis W. Simi, Jr. ......... 286,929 286,926 --/511,237 --/350,000
Howard S. Saffan ........... -- -- --/700,000 --/--
Arthur G. Frost ............ 721,919 721,919 --/320,707 --/200,000
Horace T. Hicks ............ 125,329 125,329 --/160,353 --/100,000

54
56
COMPENSATION AND INCENTIVE PROGRAM

BONUS PLAN

The Company maintains a bonus plan providing for annual bonus awards
to certain key general managers. Such bonus amounts are based on the Company
and the divisions meeting certain performance goals established by the
Company's Board of Directors.

OTHER BENEFIT PROGRAMS

The executive officers also participate in other employee benefit
programs including health insurance, group life insurance, and a savings and
supplemental retirement plan (the "401(k) Plan") on the same basis as other
employees of the Company.

EMPLOYMENT AGREEMENTS

On November 27, 1996, the Company entered into an employment agreement
with Randall S. Fojtasek, pursuant to which Mr. Fojtasek serves as President
and Chief Executive Officer. Pursuant to the agreement, Mr. Fojtasek receives
an annual base salary in the amount of $350,000, subject to increase at the
discretion of the Board of Directors, and such benefits as are customarily
accorded to other executives of the Company and such other benefits as the
Board of Directors may establish. In addition, Mr. Fojtasek shall be eligible
to receive an annual performance bonus in such amount, if any (which amount
shall not exceed $150,000), as determined by the Board of Directors pursuant to
the annual performance bonus plan adopted by the Board. Holding granted to Mr.
Fojtasek a warrant exercisable for 2,195,222 shares of Common Stock. Of such
shares, up to 1,333,333 may be immediately purchased upon exercise of the
warrant at a price of $0.01 per share, and the remaining 861,889 shares may be
purchased upon exercising the warrant at a price of $1.00 per share, with the
right to purchase such shares vesting ratably each day during the first three
years of the term of the warrant, provided that the Board of Directors has
determined in good faith that the affiliates of Hicks Muse have achieved an
internal rate of return of at least 8% on their investment in the shares of
Common Stock purchased pursuant to the Transaction. Mr. Fojtasek's agreement
terminates three years after November 27, 1996. If his employment with the
Company is terminated without cause (as defined), or if Mr. Fojtasek terminates
his employment for good reason (as defined), the Company shall pay to Mr.
Fojtasek (i) in a lump sum cash in the amount of his annual base salary earned
or accrued through the termination date, reimbursement of his reasonable and
necessary expenses, any unpaid accrued vacation pay and any amount arising from
his benefits to be received pursuant to the Company's investment plans, (ii) in
regular installments his annual base salary (plus an amount in reimbursement
for certain expenses equal to $2,000 per month) for a period that ends on the
later of (A) the last day of his employment term or (B) 18 months from the
termination date and (iii) an annual bonus in the amount equal of $50,000 for
each year in the remainder of his employment term. Mr. Fojtasek agreed not to
compete with the Company until the later of the expiration of the term of his
employment agreement and 18 months after the termination of his employment
under the agreement.

In connection with the Heritage Transaction in 1995, the Company
entered into five-year noncompete agreements with Randall S. Fojtasek and
Russell S. Fojtasek, in exchange for which such officers were paid one-time
payments of $2,000,000 and $250,000, respectively.

Messrs. Simi, Hicks, Frost and Saffan have entered into employment
agreements with the Company. The compensation to be provided to Messrs. Simi,
Hicks, Frost and Saffan under their agreements includes an annual base salary
of $125,000, $100,000, $100,000 and $150,000, respectively, subject to
increases at the discretion of the Board of Directors, and such benefits as are
customarily accorded the executives of the Company. In addition, Messrs. Simi,
Hicks and Frost are eligible for incentive bonuses equal to 3% of the pre-tax
profits of the Company divisions that they manage and Mr. Saffan is eligible
for an incentive bonus equal to 2% of the pre-tax profits of the divisions that
he manages.

Each of Messrs. Simi's, Hicks' and Frost's employment agreement
terminates on December 31, 1997. If any of Messrs. Simi's, Hicks' or Frost's
employment with the Company is terminated by the Company for any reason other
than for cause (as defined), such individual will continue to be paid his
salary for 12 months, together with the incentive

55
57
bonus, pro-rated to the date of termination, unless such termination follows a
change of control, in which case he is to be paid the following for the
remaining term of his agreement: his then current salary and the incentive
bonus based on an average of his division's pre-tax profit for the three
preceding fiscal years. If any of Messrs. Simi, Hicks or Frost terminates his
employment prior to the expiration of his agreement's term (and, in Mr. Hicks'
case, for any reason other than a material breach of his agreement by the
Company), and he has not materially breached any provision of his agreement,
such individual will be paid his salary through the date of termination,
together with the incentive bonus, pro-rated to the date of termination.

The initial term of Mr. Saffan's employment agreement continues
through July 1, 1999, and is renewed automatically for additional 1 year terms
unless terminated by either party. Mr. Saffan's employment agreement may be
terminated immediately by the Company for cause (as defined), by him on 30 days
written notice, or by the Company upon 90 days written notice and the payment
(i) his base salary through remainder of the initial or renewal term as
applicable plus (ii) any incentive bonus pro-rated from the first day of the
then current incentive period to the date of such termination plus (iii) if
coverage under the Company's health plan is elected, coverage on the same basis
as prior to termination for a period of twelve months.

Each of Messrs. Simi and Frost have agreed not to compete with the
Company in certain geographic areas for so long as the Company pays salary to
him and for a period of one year thereafter. Mr. Saffan has agreed not to
compete with the Company in certain geographic areas, or to divert any
customers to competitors or to solicit other employees to leave the employment
of the Company for a period of one year after the termination of his employment
agreement. Mr. Hicks has agreed not to compete with the Company in certain
geographic areas for so long as the Company pays salary to him and for a period
of one year thereafter, provided that the Company has not materially breached
his employment agreement, and provided that if he completes the full term of
his employment agreement and he and the Company do not agree on mutually
acceptable terms for the continuation of his employment, and if he has not
materially breached his employment agreement, he shall not be restricted from
engaging in competition with the Company.

DIRECTOR LIABILITY

As authorized by the Delaware General Corporation Law ("GCL"), the
Company's Certificate of Incorporation (the "Certificate") provides that, to
the full extent permitted by the GCL or any other applicable laws as presently
or hereafter in effect, no Director of the Company in his or her capacity shall
be personally liable to the Company in his or her capacity as director of the
Company. The GCL does not permit limitation of liability of any director (i)
for breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit. The Company has entered into certain agreements ("Indemnification
Agreements") with each of its directors and executive officers designed to give
effect to the foregoing provisions of the Certificate and to provide certain
additional assurances against the possibility of uninsured liability. The
effect of these provisions and the Indemnification Agreements will be to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against
a director for breach of fiduciary duty as a director (including breaches
resulting from negligence or gross negligence) except in the situations
described in clauses (i)-(iv) of the second sentence of this paragraph. These
provisions and the Indemnification Agreements will not alter the liability of
Directors of the Company under federal securities laws.

56
58
BENEFICIAL OWNERSHIP AND CERTAIN TRANSACTIONS

STOCK OWNERSHIP

The Company is a wholly-owned subsidiary of Atrium Corporation. Atrium
Corporation's address is P.O. Box 226957, Dallas, Texas 75222. The following
table sets forth certain information regarding the beneficial ownership of
Common Stock of Atrium Corporation, by each person who owns beneficially more
than 5% of the outstanding Common Stock of Atrium Corporation and by the
directors and certain executive officers of Atrium Corporation. Unless
otherwise indicated below, to the knowledge of the Company, all persons listed
below have sole voting and investment power with respect to their shares of
Common Stock.

ATRIUM CORPORATION SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

NUMBER OF PERCENTAGE
SHARES OF SHARES
-------------- -------------

5% Stockholders:
Hicks Muse parties (1) .................................................... 32,000,000 79.0%
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201

Heritage Fund I, L.P. ..................................................... 3,525,000 8.7%
30 Rowes Wharf
Suite 300
Boston, Massachusetts 02110

Officers and Directors:
Randall S. Fojtasek (2) ................................................... 2,333,333 5.8%
Louis W. Simi, Jr ......................................................... -- --
Horace T. Hicks ........................................................... -- --
Howard S. Saffan (3) ...................................................... 750,000 1.9%
Arthur G. Frost ........................................................... -- --
John R. Muse (1) .......................................................... 32,000,000 79.0%
Michael J. Levitt (1) ..................................................... 32,000,000 79.0%
Stephen M. Humphrey (4).................................................... 200,000 *
C. Dean Metropoulos (5).................................................... 200,000 *
Michel Reichert (6) ....................................................... 3,525,000 8.7%
All directors and executive officers as a group (13 persons) .............. 40,039,333 99.3%

- --------------------------
* Less than 1%

(1) Includes shares owned of record by HM3 Coinvestors, L.P.
("Coinvestors") and Hicks, Muse, Tate & Furst Equity Fund III, L.P.
("Hicks Muse Fund III, L.P."). The ultimate general partner of each
of Coinvestors and Hicks Muse Fund III, L.P. is Hicks, Muse Fund III
Incorporated. Thomas O. Hicks, whose address is the same as that for
Hicks Muse, is a controlling stockholder of Hicks Muse and serves as
its Chairman of the Board, Chief Executive Officer, Chief Operating
Officer, President and Secretary. Accordingly, Mr. Hicks may be
deemed to be the beneficial owner of these shares. Mr. Hicks
disclaims beneficial ownership of these shares. Each of Mr. Muse and
Mr. Levitt is a Managing Director and Principal of Hicks Muse and may
also be deemed a beneficial owner of these shares. Each of them
disclaims such beneficial ownership.

(2) Includes 1,333,333 shares that Mr. Fojtasek has the right to acquire
within 60 days of the Closing Date upon exercise of certain warrants
granted to him in connection with the Transaction. Excludes 97,602
shares subject to another warrant granted to Mr. Fojtasek that will
vest daily for three years from the Closing Date subject to the
satisfaction of an internal rate of return condition.

(3) Excludes 79,269 shares subject to an option granted to Mr. Saffan
that will vest daily for three years from the Closing Date subject
to the satisfaction of an internal rate of return condition.

(4) Includes 100,000 shares that Mr. Humphrey has the right to acquire
upon exercise of options.

(5) Includes 100,000 shares held by two trusts for the benefit of Mr.
Metropoulos' children and 100,000 shares that Mr. Metropoulos has the
right to acquire upon exercise of options.

(6) Includes shares owned by Heritage of which Mr. Reichert is managing
general partner. Accordingly, Mr. Reichert may be deemed to be the
beneficial owner of these shares. Mr. Reichert disclaims beneficial
ownership of these shares.

57
59
CERTAIN TRANSACTIONS

The Acquisition of Bishop

Pursuant to a Stock Purchase Agreement dated September 27, 1996 (the
"Bishop Stock Purchase Agreement"), effective on September 30, 1996, Howard S.
Saffan and the other stockholder of Vinyl Building Specialties of Connecticut,
Inc. ("VBS") and Bishop Manufacturing Co. of New York, Inc. ("BNY") sold to
Fojtasek certain of the outstanding shares of capital stock of VBS and BNY for
an aggregate of approximately $13.0 million cash and 9% of the shares of Common
Stock of Holding then outstanding. Simultaneously with such sale, pursuant to a
Securities Exchange Agreement dated as of August 22, 1996 (the "Bishop Exchange
Agreement"), Howard S. Saffan and the other stockholder of VBS and BNY
exchanged the remaining outstanding shares of capital stock of such
corporations for newly-issued shares of capital stock of newly-formed Holding.
At such time, the holders of the outstanding shares of capital stock of FCI
Holding, including Heritage, Joe Fojtasek, Randall S. Fojtasek and Russell S.
Fojtasek, also exchanged all of such outstanding shares for shares of capital
stock of Holding, with the result that FCI Holding became a wholly-owned
subsidiary of Holding. Holding then contributed the shares of the capital stock
of VBS and BNY acquired by it pursuant to the Bishop Exchange Agreement to
Fojtasek, with the result that VBS and BNY became wholly-owned subsidiaries of
Fojtasek. Howard S. Saffan received approximately $6.0 million and 4.2% of the
outstanding shares of common stock of Holding in connection with the
transaction. In exchange for all of their outstanding shares of common stock of
FCI Holding, Heritage, Joe Fojtasek, Randall S. Fojtasek and Russell S.
Fojtasek received approximately 55.2%, 19.6%, 9.9% and 3.4%, respectively, of
the outstanding shares of voting and nonvoting common stock of Holding.
Heritage also received in exchange for the Heritage FCI Holding Warrant and the
Heritage FCI Holding Preferred Stock substantially similar securities of
Holding.

Pursuant to the Bishop Stock Purchase Agreement, the former
shareholders of VBS and BNY will receive as deferred payment for the shares of
VBS and BNY sold thereunder (i) $500,000 if the Consolidated EBIT (as defined)
of Bishop for the period from July 1, 1996 through December 31, 1996 is at
least $1.5 million and (ii) $500,000 if the Consolidated EBIT of Bishop for the
year ending December 31, 1997 is at least $2.5 million. Howard S. Saffan will
receive 50% of any amounts so paid. In connection with the acquisition of
Bishop, Howard S. Saffan also entered into a three-year employment agreement
pursuant to which he will receive an annual salary of $150,000 plus an amount
equal to 2% of Bishop's income from operations.

The Transaction

The descriptions set forth below do not purport to be complete and are
qualified in their entirety by reference to the applicable agreements,
including the Stock Purchase Agreement, dated as of November 7, 1996, between
affiliates of Hicks Muse ("Hicks Muse Affiliates"), Holding and certain stock
and option holders of Holding (the "Stock Purchase Agreement"). In connection
with the Transaction, Heritage, Joe Fojtasek, Randall S. Fojtasek, Russell S.
Fojtasek and Howard S. Saffan received Redemption payments relating to their
shares of Common Stock, warrants and options of $33.4 million (net of the $2.0
million reduction described below), $9.7 million, $4.7 million, $1.7 million
and $2.0 million, respectively. In addition, Heritage received Redemption
payments on account of its preferred stock of Holding of approximately $12.5
million (including cumulative dividends in arrears). Upon the closing of the
Transaction, the Company paid Randall S. Fojtasek a bonus of $3.0 million.
Pursuant to an agreement between Heritage and Holding, $2.0 million of
Redemption payments that would otherwise have been payable to Heritage were
withheld by Holding for the purpose of funding a portion of such bonus. See
"The Transaction" and "Management -- Compensation and Incentive Program."

On the Closing Date, the Company, certain stockholders of the Company,
Hicks Muse and Hicks Muse Affiliates entered into a stockholders agreement (the
"Stockholders Agreement") under which the parties agreed to take all actions
required to cause the Board of Directors of Holding at all times to consist of
at least five directors, of whom one shall be designated by Joe Fojtasek,
Randall S. Fojtasek, Russell S. Fojtasek and Howard S. Saffan, one shall be
designated by Heritage Fund I, L.P. and the remainder shall be designated by
Hicks Muse and Hicks Muse Affiliates.

The parties to the Stockholders Agreement agreed, until the earlier of
(i) the tenth anniversary of the date of the Stockholders Agreement or (ii) the
consummation of a firm commitment initial public offering, that in connection
with any sale by Hicks Muse Affiliates of more than 50% of their shares of
Holding Common Stock, Hicks Muse

58
60
Affiliates shall have the right to require each other stockholder who is a
party to the Stockholders Agreement to sell the portion of its Common Stock
that represents the same percentage of the Fully-Diluted Common Stock (as
defined) held by that stockholder as the shares being disposed of by Hicks Muse
Affiliates represent of the Fully-Diluted Common Stock held by Hicks Muse
Affiliates. At least 30 days prior to the closing of any sale by Hicks Muse
Affiliates (including a sale described in the preceding sentence in connection
with which Hicks Muse Affiliates do not exercise their right to require such
other stockholders to participate in the sale), Hicks Muse shall cause Hicks
Muse Affiliates to offer to include in the sale the percentage of each such
other stockholder's Common Stock that represents the same percentage of the
Fully-Diluted Common Stock held by that stockholder as the shares being
disposed of by Hicks Muse Affiliates represent of the Fully-Diluted Common
Stock held by Hicks Muse Affiliates; provided that only stockholders which are
Accredited Investors (as defined in Rule 501(a)(1), (2), (3) and (7) under the
Securities Act) shall be entitled to participate in sales in which the
consideration for the sale includes securities, unless the transferee consents
otherwise. If any such stockholder accepts the offer, Hicks Muse shall cause
Hicks Muse Affiliates to reduce, to the extent necessary, the number of shares
of Common Stock it otherwise would have sold in the proposed transfer so as to
permit those stockholders who have accepted the offer to sell the number of
shares of Common Stock that they are entitled to sell under the above terms.
The rights described above do not apply to any exchange, reclassification or
other conversion of the shares pursuant to a merger or consolidation of Holding
or any subsidiary or to a sale or transfer by Holding or any subsidiary of
substantially all its assets. In addition, these rights do not apply to any
transfer, sale or disposition of shares of Common Stock solely among the
members of Hicks Muse Affiliates.

Pursuant to the Stockholders Agreement, the stockholders who are
parties to the Stockholders Agreement that are not Hicks Muse Affiliates
agreed, until the earlier of (i) the tenth anniversary of the date of the
Stockholders Agreement or (ii) the consummation of a firm commitment initial
public offering, not to sell any Common Stock or securities that are
exercisable for or convertible into Common Stock without first notifying Hicks
Muse and affording Hicks Muse an opportunity to buy all, but not less than all,
of the offered shares on terms and conditions of the proposed transfer by the
non-Hicks Muse Affiliates stockholders. If Hicks Muse or an assignee of Hicks
Muse rejects the non-Hicks Muse Affiliates stockholder's offer, the stockholder
may transfer within 30 days all, but not less than all, of the offered
securities on terms no more favorable than those proposed to Hicks Muse,
provided that the transfer complies with the Securities Act. If the securities
are not so transferred, and the non-Hicks Muse Affiliates stockholder still
desires to transfer the securities, the securities must be reoffered to Hicks
Muse.

Until the tenth anniversary of the date of the Stockholders Agreement
and subject to certain exceptions, Holding agreed not to issue or sell or
permit any Affiliated Successor (as defined) to issue or sell, any shares of
Common Stock or securities that are exercisable for or convertible into Common
Stock, without first notifying each stockholder and offering to sell to any
stockholder who is an Accredited Investor, on the same terms, all or part of
that stockholder's pro rata portion of such securities as calculated under the
provisions of the Stockholders Agreement.

The Stockholders Agreement includes registration rights provisions
under which Hicks Muse, on behalf of Hicks Muse Affiliates, will be entitled to
exercise three demand and an unlimited number of "piggyback" registration
rights, and Randall S. Fojtasek, on behalf of certain non-Hicks Muse
Affiliates, or Heritage, on behalf of certain affiliates of Heritage, will be
entitled to make (in the aggregate) one demand and an unlimited number of
piggyback registrations to require Holding to register under the Securities Act
certain shares of Common Stock held by them. Hicks Muse may exercise its demand
rights if the offering shall be a firm commitment initial underwritten offer of
Holding's Common Stock under the Securities Act where the proceeds to Holding
exceed $10 million and after such offering such shares are listed on the New
York Stock Exchange or quoted or listed on the NASDAQ National Market, and
either Hicks Muse, Randall S. Fojtasek or Heritage may exercise their
respective demand rights for 270 days after the initial underwritten offering.
In addition, the demand rights may be exercised only with respect to a number
of shares that represent, in the aggregate, more than 4.0% of the Fully-Diluted
Common Stock or have an aggregate gross offering price of at least $5.0
million. The exercise of the demand and piggy-back rights are subject to other
limitations and conditions that are customary in registration rights
agreements.

On the Closing Date, Holding and the Company entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with an affiliate of Hicks
Muse ("Hicks Muse Partners") pursuant to which Holding and the Company agreed
to pay Hicks Muse Partners an annual fee of $320,000 for oversight and
monitoring services to the Company. The annual fee is adjustable on January 1
of each calendar year to an amount equal to 0.2% of the budgeted consolidated
net sales of the Company and its subsidiaries for the then-current fiscal year,
but in no event may the fee

59
61
be less than $320,000. Upon the acquisition by the Company or any of its
subsidiaries of another entity or business, the fee shall be adjusted
prospectively in the same manner using the pro forma budgeted consolidated
annual net sales of the Company and its subsidiaries (including the sales of
the acquired entity or business). John R. Muse and Michael J. Levitt, directors
of Holding and the Company, are each principals of Hicks Muse Partners. In
addition, Holding and the Company, jointly and severally, have agreed to
indemnify Hicks Muse Partners, its affiliates, and their respective directors,
officers, controlling persons, agents and employees from and against all
claims, liabilities, losses, damages, expenses and fees related to or arising
out of or in connection with the services rendered by Hicks Muse Partners under
the Monitoring and Oversight Agreement and not resulting primarily from the bad
faith, gross negligence or willful misconduct of Hicks Muse Partners. The
Monitoring and Oversight Agreement makes available to the Company and its
subsidiaries the personnel resources of Hicks Muse Partners concerning a
variety of financial and operational matters. The services that have been and
will continue to be provided to the Company by Hicks Muse Partners could not
otherwise be obtained by the Company without the addition of personnel or the
engagement of outside professional advisors. In the Company's opinion, the fees
provided for under the Monitoring and Oversight Agreement reasonably reflect
the benefits received and to be received by Holding and the Company.

On the Closing Date, Holding and the Company also entered into a
ten-year agreement (the "Financial Advisory Agreement"), pursuant to which
Hicks Muse Partners received a financial advisory fee of $2.0 million on the
Closing Date as compensation for its services as financial advisor to the
Company in connection with the Transaction. Hicks Muse Partners also will be
entitled to receive a fee equal to 1.5% of the "transaction value" (as defined)
for each "add-on transaction" (as defined) in which the Company or any of its
subsidiaries is involved. The term "transaction value" means the total value of
the add-on transaction, including without limitation, the aggregate amount of
the funds required to complete the add-on transaction (excluding any fees
payable pursuant to the Financial Advisory Agreement), including the amount of
any indebtedness, preferred stock or similar items assumed (or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly involving the Company or
any of its subsidiaries, and any other person or entity. In addition, Holding
and the Company, jointly and severally, will indemnify Hicks Muse Partners, its
affiliates, and their respective directors, officers, controlling persons,
agents and employees from and against all claims, liabilities, losses, damages,
expenses and fees related to or arising out of or in connection with the
services rendered by Hicks Muse Partners under the Financial Advisory Agreement
and not resulting primarily from the bad faith, gross negligence or willful
misconduct of Hicks Muse Partners. The Financial Advisory Agreement makes
available to the Company and its subsidiaries the personnel resources of Hicks
Muse Partners concerning a variety of financial and operational matters. The
services that have been and will continue to be provided by Hicks Muse Partners
could not otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. In the Company's
opinion, the fees paid under the Financial Advisory Agreement reasonably
reflect the benefits received and to be received by the Company.

On the Closing Date, the Company entered into indemnification
agreements with each of its directors and executive officers under which the
Company will indemnify the director or officer to the fullest extent permitted
by law, and to advance expenses, if the director or officer becomes a party to
or witness or other participant in any threatened, pending or completed action,
suit or proceeding (a "Claim") by reason of any occurrence related to the fact
that the person is or was a director, officer, employee, agent or fiduciary of
the Company or a subsidiary of the Company or another entity at the Company's
request (an "Indemnifiable Event"), unless a reviewing party (either outside
counsel or a director or directors appointed by the Board of Directors)
determines that the person would not be entitled to indemnification under
applicable law. In addition, if a change in control or a potential change in
control of the Company occurs and if the person indemnified so requests, The
Company will establish a trust for the benefit of the indemnitee and fund the
trust in an amount sufficient to satisfy all expenses reasonably anticipated at
the time of the request to be incurred in connection with any Claim relating to
an Indemnifiable Event. The reviewing party will determine the amount deposited
in the trust. An indemnitee's rights under his or her indemnification agreement
are not exclusive of any other rights under the Company's Articles of
Incorporation or By-Laws or applicable law.

At the closing of the Transaction, Holding entered into a Replacement
Option Agreement with certain of its option holders under which such option
holders are entitled to acquire upon exercise of such option shares of Common
Stock.

60
62
Holding and certain of its option holders entered into Disposition
Option Agreements under which such option holders were granted the right to
acquire, under certain circumstances, shares of Common Stock. On the Closing
Date, all such Disposition Option Agreements were redeemed by Holding in
exchange for an aggregate of $742,500.

On the Closing Date, a Hicks Muse Affiliate, Holding, Heritage,
Randall S. Fojtasek (on behalf of certain Selling Securityholders) and
Citibank, N.A. entered into an indemnification escrow agreement, funded in the
amount of $2.0 million by the Selling Securityholders, securing the
indemnification obligations of such Selling Securityholders to Hicks Muse and
its affiliates (including, after the closing of the Transaction, Holding) under
the stock purchase agreement related to the Transaction. On the Closing Date, a
Hicks Muse Affiliate, Holding, the Company and Howard Saffan (on behalf of
himself and other former Bishop stockholders) entered into another
indemnification escrow agreement, funded in the amount of $3.0 million by the
former Bishop stockholders, which secured the indemnification obligations of
the former Bishop stockholders to the Company and Hicks Muse and its affiliates
(including Holding) under the agreements related to the acquisition of Bishop
and under the stock purchase agreement related to the Transaction.

Other

On July 3, 1995, Fojtasek Industrial Properties, Ltd., a limited
partnership in which Joe Fojtasek, Randall S. Fojtasek and Russell S. Fojtasek
own equity interests of approximately 49.1%, 10.2% and 10.2%, respectively,
executed a lease with the Atrium Wood division with respect to Atrium Wood's
and Atrium Vinyl's facility (the "Atrium Lease") and a lease with the H-R
Windows division with respect to its facility (the "H-R Windows Lease"). Both
leases are absolute net leases. The Atrium Lease is for an initial three-year
term with two five-year renewal options. The H-R Windows Lease is for an
initial ten-year term with two five-year renewal options. The amounts paid
under these two leases totaled $605,338 in 1996. The Company believes the terms
of the leases are as favorable as could be obtained from an unaffiliated party.
See Note 9 to the Company's Consolidated Financial Statements .

61
63
THE EXCHANGE OFFER

PURPOSE AND EFFECT

The Old Notes were sold by the Company on November 27, 1996 in a
private placement pursuant to certain exemptions from registration under the
Securities Act. In connection with that placement, the Company and the
Subsidiary Guarantors entered into the Registration Rights Agreement which
requires that the Company and the Subsidiary Guarantors file a registration
statement under the Securities Act with respect to the New Notes on or prior to
60 days after the date of issuance of the Old Notes (the "Issue Date") and,
upon the effectiveness of that registration statement, offer to the holders of
the Old Notes the opportunity to exchange their Old Notes for a like principal
amount of New Notes, which will be issued without a restrictive legend and may
be reoffered and resold by the holder without registration under the Securities
Act. The Registration Rights Agreement further provides that the Company and
the Subsidiary Guarantors must use their reasonable best efforts to cause the
registration statement with respect to the Exchange Offer to be declared
effective within 135 days following the Issue Date and use their reasonable
best efforts to consummate the Exchange Offer within 165 days of the Issue
Date. A copy of the Registration Rights Agreement has been filed as an exhibit
to the registration statement of which this Prospectus is a part.

In order to participate in the Exchange Offer, a holder must represent
to the Company, among other things, that (i) any New Notes to be received by it
will be acquired in the ordinary course of its business, (ii) it has no
arrangement with any person to participate in the distribution of the New Notes
and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company or any of the Subsidiary Guarantors, or if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer
should acknowledge that it acquired the Old Notes for its own account as the
result of market making activities or other trading activities. Any holder who
is unable to make the appropriate representations to the Company will not be
permitted to tender the Old Notes in the Exchange Offer and will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act (or an appropriate exemption therefrom) in connection with any
sale or transfer of the Old Notes.

If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution
of the New Notes. If the holder is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.

The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity
of the market for the Old Notes could be adversely affected. No assurance can
be given as to the liquidity of the trading market for either the Old Notes or
the New Notes.

Based on an interpretation by the Commission's staff set forth in
no-action letters issued to third parties unrelated to the Company, the Company
believes that, with the exceptions discussed herein, New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any person receiving the New Notes, whether
or not that person is the holder (other than any such holder or such other
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that (i) the New
Notes are acquired in the ordinary course of business of that holder or such
other person, (ii) neither the holder nor such other person is engaging in or
intends to engage in a distribution of the New Notes, and (iii) neither the
holder nor such other person has an arrangement or understanding with any
person to participate in the distribution of the New Notes. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
those Old Notes were acquired by the broker-dealer as a result of its
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of those New Notes.
See "Plan of Distribution."

62
64
CONSEQUENCES OF FAILURE TO EXCHANGE

Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not intend to register the
Old Notes under the Securities Act and, after consummation of the Exchange
Offer, will not be obligated to do so. Based on an interpretation by the staff
of the Commission set forth in a series of no-action letters issued to third
parties, the Company believes that, except as set forth in the next sentence,
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may
be offered for resale, resold or otherwise transferred by holders thereof
(other than any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Old Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000 in principal amount.

The form and terms of the New Notes are identical to the form and
terms of the Old Notes except that the Old Notes were offered and sold in
reliance upon certain exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"), while the offering and sale of the New
Notes in exchange for the Old Notes has been registered under the Securities
Act, with the result that the New Notes will not bear any legends restricting
their transfer. The New Notes will evidence the same debt as the Old Notes and
will be issued pursuant to, and entitled to the benefits of, the Indenture
pursuant to which the Old Notes were, and the New Notes will be, issued.

As of the date of this Prospectus, $100,000,000 aggregate principal
amount of the Old Notes were outstanding. The Company has fixed the close of
business on _______________ as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus, together with the
Letter of Transmittal, will initially be sent. As of such date, there were
_____ registered holders of the Old Notes. Holders of Old Notes do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder.

The Company shall be deemed to have accepted validly tendered Old
Notes when, as, and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the New Notes from the Company. If any
tendered Old Notes are not accepted for exchange because of an invalid tender,
the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.

Holders who tender Old Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Old Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "The Exchange Offer -- Solicitation of Tenders; Fees and Expenses."

63
65
EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "Expiration Date" shall mean 5:00 p.m., New York City time,
on _______________, 1997, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended. In order to
extend the Exchange Offer, the Company will notify the Exchange Agent of any
extension by oral or written notice prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. The
Company reserves the right, in its sole discretion, (i) to delay accepting any
Old Notes, to extend the Exchange Offer or, if any of the conditions set forth
under "The Exchange Offer -- Conditions" shall not have been satisfied, to
terminate the Exchange Offer, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, or (ii) to amend the terms of
the Exchange Offer in any manner.

INTEREST ON THE NEW NOTES

The New Notes will bear interest at the rate of 10 1/2% per annum from
November 27, 1996, the date of original issuance of the Old Notes, or from the
most recent date to which interest has been paid or provided for, whichever is
later. No interest will be paid on the Old Notes accepted for exchange.

PROCEDURES FOR TENDERING

Only a holder of Old Notes may tender the Old Notes in the Exchange
Offer. Except as set forth under "The Exchange Offer -- Book Entry Transfer,"
to tender in the Exchange Offer a holder must complete, sign and date the
Letter of Transmittal, or a copy thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver the Letter of Transmittal or copy to the Exchange Agent prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if that procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "DTC" or the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent prior to the Expiration Date, or (iii)
the holder must comply with the guaranteed delivery procedures described below.
To be tendered effectively, the Old Notes, Letter of Transmittal and other
required documents must be received by the Exchange Agent at the address set
forth under "The Exchange Offer -- Exchange Agent" prior to the Expiration
Date.

The tender by a holder that is not withdrawn before the Expiration
Date will constitute an agreement between that holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.

THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE AND
PROPER INSURANCE SHOULD BE OBTAINED. NO LETTER OF TRANSMITTAL OR OLD NOTES
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THESE
TRANSACTIONS FOR SUCH HOLDERS.

Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in the beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.

64
66
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as defined
herein) unless Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box titled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. If signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, the guarantee must be by any eligible guarantor institution that
is a member of or participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program, the Stock
Exchange Medallion Program, or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").

If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.

If the Letter of Transmittal or any Old Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal unless waived by the Company.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.

In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.

By tendering, each holder will represent to the Company that, among
other things, (i) the New Notes acquired pursuant to the Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, (ii) if it is not a
broker-dealer, neither the holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes, (iii) neither the holder
nor any such other person has an arrangement or understanding with any person
to participate in the distribution of such New Notes, and (iv) neither the
holder nor any such other person is an "affiliate" (as defined in Rule 405 of
the Securities Act) of the Company. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities (other than Old Notes acquired directly from the Company),
may participate in the Exchange Offer but may be deemed an "underwriter" under
the Securities Act and, therefore, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."

In all cases, issuance of New Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. If any tendered Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering holder thereof (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.

BOOK-ENTRY TRANSFER

The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility system may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in
any case other than as set forth in the following paragraph, be transmitted to
and received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.

The DTC's Automated Tender Offer Program ("ATOP") is the only method
of processing exchange offers through the DTC. To accept the Exchange Offer
through ATOP, participants in the DTC must send electronic instructions to the
DTC through the DTC's communication system in place of sending a signed, hard
copy Letter of Transmittal. The DTC is obligated to communicate those
electronic instructions to the Exchange Agent. To tender Old Notes through
ATOP, the electronic instructions sent to the DTC and transmitted by the DTC to
the Exchange Agent must contain the character by which the participant
acknowledges its receipt of and agrees to be bound by the Letter of
Transmittal.

GUARANTEED DELIVERY PROCEDURES

If a registered holder of the Old Notes desires to tender such Old
Notes and the Old Notes are not immediately available, or time will not permit
such holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.

WITHDRAWAL RIGHTS

Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.

65
67
For a withdrawal of a tender of Old Notes to be effective, a written
or (for DTC participants) electronic ATOP transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender, and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions as
to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "The Exchange Offer -- Procedures for Tendering" at any time on
or prior to the Expiration Date.

CONDITIONS

Notwithstanding any other term of the Exchange Offer, the Company
shall not be required to accept for exchange, or exchange New Notes for, any
Old Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:

(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or

(b) any action or proceeding is instituted or threatened in any court
or by any governmental agency that might materially impair the ability of
the Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Company; or

(c) any governmental approval has not been obtained, which approval
the Company shall deem necessary for the consummation of the Exchange
Offer.

If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of holders to withdraw such Old Notes (see "--
Withdrawal Rights") or (iii) waive such unsatisfied conditions with respect to
the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during
such five-to-ten-business-day period.

EXCHANGE AGENT

All executed Letters of Transmittal should be directed to the Exchange
Agent. United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions, requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:

By Registered or Certified Mail,
by Overnight Courier or by Hand:

United States Trust Company of New York
P.O. Box 844
Cooper Station
Attn: Corporate Trust Services
New York, New York 10276-0844

By Hand:
United States Trust Company of New York
111 Broadway
Lower Level
Corporate Trust Services
New York, New York 10006

By Overnight Courier:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attn: Corporate Trust Services

By Facsimile:
(212) 420-6152

Confirm by Telephone:
(800) 548-6565

SOLICITATIONS OF TENDERS; FEES AND EXPENSES

The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.

The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of- pocket expenses in
connection therewith.

The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.

TRANSFER TAXES

Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.

66
68
DESCRIPTION OF NEW NOTES

GENERAL

The Old Notes were and the New Notes will be issued under an Indenture,
dated as of November 27, 1996 (the "Indenture"), among the Company, the
Subsidiary Guarantors and United States Trust Company of New York, as Trustee
(the "Trustee"), a copy of which is available upon request to the Company. The
terms of the New Notes are identical in all material respects to the Old Notes,
except that the New Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer. Upon the issuance
of the New Notes, the Indenture will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of certain provisions of the Indenture and the New Notes does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture (including the definitions of
certain terms therein and those terms made a part thereof by the Trust
Indenture Act) and the Notes. The Old Notes and the New Notes are sometimes
collectively referred to herein as the "Notes." See "-- Certain Definitions."

Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, The City of New York (which
initially shall be the corporate trust office of the Trustee in New York, New
York), except that, at the option of the Company, payment of interest may be
made by check mailed to the address of the holders as such address appears in
the Note Register. Initially, the Trustee will act as Paying Agent and
Registrar for the New Notes. The New Notes may be presented for registration of
transfer and exchange at the offices of the Registrar, which initially will be
the Trustee's corporate trust office. The Company may change any Paying Agent
and Registrar without notice to holders of the New Notes.

The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of New
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.

Old Notes that remain outstanding after the consummation of the Exchange
Offer and New Notes issued in connection with the Exchange Offer will be
entitled to vote or consent on all matters as a single class of securities
under the Indenture.

TERMS OF NOTES

The New Notes will be unsecured, senior subordinated obligations of the
Company, limited to $100 million aggregate principal amount, and will mature on
November 15, 2006. Each New Note will bear interest at the rate of 10 1/2% per
annum from November 27, 1996, the date of original issuance of the Old Notes,
or from the most recent date to which interest has been paid or provided for,
whichever is later, and will be payable semiannually on and of each year,
commencing on May 15, 1997, to holders of record at the close of business on
the May 1 or November 1 immediately preceding the interest payment date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The New Notes will not be entitled to the benefit of any
mandatory sinking fund.

OPTIONAL REDEMPTION

Except as set forth below, the New Notes will not be redeemable at the
option of the Company prior to November 15, 2001. On and after such date, the
New Notes will be redeemable, at the Company's option, in whole or in part, at
any time upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), if redeemed
during the 12-month period commencing on November 15 of the years set forth
below, plus accrued and unpaid interest to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date):

67
69

Period REDEMPTION PRICE
------

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 105.250%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 103.500%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 101.750%
2004 and thereafter . . . . . . . . . . . . . . . . . . 100.000%

In addition, at any time and from time to time prior to November 15, 2000,
the Company may, at its option, redeem the New Notes, in part, with net cash
proceeds of one or more Equity Offerings by the Company or Holding (to the
extent, in the case of Holding, that net cash proceeds thereof are contributed
to the common or non-redeemable preferred equity capital of the Company) so
long as there is a Public Market at the time of such redemption, at a
redemption price equal to 110 1/2% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of redemption;
provided, however, that after any such redemption the aggregate principal
amount of the Notes outstanding must equal at least $65 million. In order to
effect the foregoing redemption with the proceeds of any Equity Offering, the
Company shall make such redemption not more than 12 months after the
consummation of any such Equity Offering.

At any time on or prior to November 15, 2001, the Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event more than 90 days after the occurrence of such Change of
Control) mailed by first-class mail to each holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued and unpaid interest, if any, to, the date
of redemption (the "Redemption Date") (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date).

"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the
excess of (A) the present value at such time of (1) the redemption price of
such Note at November 15, 2001 (such redemption price being described under "--
Optional Redemption") plus (2) all required interest payments due on such Note
through November 15, 2001, computed using a discount rate equal to the Treasury
Rate plus 100 basis points, over (B) the principal amount of such Note.

"Treasury Rate" 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
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to November 15, 2001; provided, however, that
if the period from the Redemption Date to November 15, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate 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 period from the Redemption Date to November 15, 2001
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.

Selection. In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided, however, that if a partial redemption is made with
proceeds of an Equity Offering, selection of the Notes or portion thereof for
redemption shall be made by the Trustee only on a pro rata basis, unless such
method is otherwise prohibited. Notes may be redeemed in part in multiples of
$1,000 principal amount only. Notice of redemption will be sent, by first class
mail, postage prepaid, at least 45 days (unless a shorter period is acceptable
to the Trustee) prior to the date fixed for redemption to each holder whose
Notes are to be redeemed at the last address for such holder then shown on the
registry books. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after any redemption date,
interest will cease to accrue on the Notes or part thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the redemption price pursuant to the Indenture.

68
70
RANKING AND SUBORDINATION

The payment of the principal of, premium (if any), and interest on the
Notes is subordinated in right of payment, as set forth in the Indenture, to
the payment when due of all Senior Indebtedness of the Company. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "Defeasance" below is not subordinate to
any Senior Indebtedness or subject to the restrictions described herein. As of
February 28, 1997, the Company had no outstanding Senior Indebtedness. Although
the Indenture contains limitations on the amount of additional Indebtedness
that the Company may incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness. See "Certain Covenants -- Limitation on Indebtedness"
below.

"Senior Indebtedness" is defined, whether outstanding on the Issue Date or
thereafter issued, as all obligations under the New Credit Facility and all
other Indebtedness of the Company, including interest and fees thereon, unless,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that the obligations in respect of such
Indebtedness are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness will not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, foreign, local
or other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), or
(4) any Indebtedness, Guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated Indebtedness
and any Subordinated Obligations.

Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in any respect to Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is contractually
subordinated in right of payment to Senior Subordinated Indebtedness. In
addition, no Subsidiary Guarantor shall incur any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any
Guarantor Senior Indebtedness of such Subsidiary Guarantor unless such
Indebtedness is Guarantor Senior Subordinated Indebtedness of such Subsidiary
Guarantor or is contractually subordinated in right of payment to Guarantor
Senior Subordinated Indebtedness of such Subsidiary Guarantor. Unsecured
Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness
merely because it is unsecured.

The Company may not pay principal of, premium (if any), or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and/or any such acceleration
has been rescinded or such Senior Indebtedness has been paid in full; provided,
however, the Company may pay the Notes without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of the Senior Indebtedness with respect to which either of the
events set forth in clause (i) or (ii) of the immediately preceding sentence
has occurred and is continuing. During the continuance of any default (other
than a default described in clause (i) or (ii) of the preceding sentence) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Notes (except (i) in
Qualified Capital Stock issued by the Company to pay interest on the Notes or
issued in exchange for the Notes, (ii) in securities substantially identical to
the Notes issued by the Company in payment of interest accrued thereon or (iii)
in securities issued by the Company which are subordinated to the Senior Debt
at least to the same extent as the Notes and having an Average Life at least
equal to the remaining Average Life of the Notes) for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee (with a copy to
the Company) of written notice (a "Blockage Notice") of such default from the
Representative of the holders of such Designated Senior Indebtedness specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice
is no longer continuing or (iii) because such

69
71
Designated Senior Indebtedness has been repaid in full). Notwithstanding the
provisions described in the immediately preceding sentence, but subject to the
provisions of the first sentence of this paragraph and the provisions of the
immediately succeeding paragraph, the Company may resume payments on the Notes
after the end of such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period.

Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization or bankruptcy of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full of the Senior
Indebtedness before the holders of the Notes are entitled to receive any
payment, and until the Senior Indebtedness is paid in full, any payment or
distribution to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness as their interests may appear. If a distribution is made to
holders of the Notes that, due to the subordination provisions, should not have
been made to them, such holders are required to hold it in trust for the
holders of Senior Indebtedness and pay it over to them as their interests may
appear.

If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the Representative (if any) of any
issue of Designated Senior Indebtedness which is then outstanding: provided,
however, that the Company and the trustee shall be obligated to notify such a
Representative only if such Representative has delivered or caused to be
delivered an address for the service of such a notice to the Company and the
trustee (and the Company and the trustee shall only be obligated to deliver the
notice to the address so specified). If a notice is required pursuant to the
immediate preceding sentence, the Company may not pay the Notes until five
Business Days after the respective Representative of the Designated Senior
Indebtedness receives notice (at the address specified in the preceding
sentence) of such acceleration and, thereafter, may pay the Notes only if the
subordination provisions of the Indenture otherwise permit payment at that
time.

By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness (including holders of
the Notes) may recover less, ratably, than holders of Senior Indebtedness.

SUBSIDIARY GUARANTIES

Each Subsidiary Guarantor unconditionally guarantees, jointly and
severally, to each holder and the Trustee, on a senior subordinated basis, the
full and prompt payment of principal of and interest on the Notes, and of all
other obligations of the Company under the Indenture.

The Indebtedness evidenced by each Subsidiary Guarantee (including the
payment of principal of, premium, if any, and interest on the Notes) will be
subordinated to Guarantor Senior Indebtedness on substantially the same basis
as the Notes are subordinated to Senior Indebtedness. As of February 28, 1997,
the Company had no outstanding Guarantor Senior Indebtedness. Although the
Indenture contains limitations on the amount of additional Indebtedness that
the Company's Restricted Subsidiaries may incur, under certain circumstances
the amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Guarantor Senior Indebtedness. See "Certain Covenants --
Limitation or Indebtedness" below. See "-- Ranking and Subordination" above.

The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
guarantees under the New Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
under the Indenture, result in the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Subsidiary Guarantor that
makes a payment or distribution under a Subsidiary Guarantee shall be entitled
to contribution from each other Subsidiary Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Subsidiary Guarantor.

70
72
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor). Upon the sale or disposition of a Subsidiary Guarantor
(or all or substantially all of its assets) to a Person (whether or not an
Affiliate of the Subsidiary Guarantor) which is not a Subsidiary of the
Company, which sale or disposition is otherwise in compliance with the
Indenture (including the covenant described under "Certain Covenants --
Limitation on Sales of Assets and Subsidiary Stock"), such Subsidiary Guarantor
shall be deemed released from all its obligations under the Indenture and its
Subsidiary Guarantee and such Subsidiary Guarantee shall terminate; provided,
however, that any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under the New Credit Facility and all
of its guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.

Subsequent to the Issuance Date, separate financial information for the
Subsidiary Guarantors will not be provided except to the extent required by
Regulation S-X under the Securities Act.

CHANGE OF CONTROL

Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date): (i) any sale, lease, exchange or other transfer (collectively, a
"Transfer") (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company and its Subsidiaries to any
Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group") (whether or not otherwise in compliance with the
provisions of the Indenture), other than a Transfer to Hicks Muse or any of its
Affiliates, officers and directors (the "Permitted Holders"); or (ii) a
majority of the Board of Directors of Holding or the Company or of any direct
or indirect holding company thereof shall consist of Persons who are not
Continuing Directors of Holding or the Company, as the case may be; or (iii)
the acquisition by any Person or Group (other than the Permitted Holders) of
the power, directly or indirectly, to vote or direct the voting of securities
having more than 50% of the ordinary voting power for the election of directors
of Holding or the Company or of any direct or indirect holding company thereof.

Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such holder has the right to require the Company to purchase
such holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on a record date to receive
interest on the relevant interest payment date); (2) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (3) the procedures determined by the Company, consistent
with the Indenture, that a holder must follow in order to have its Notes
purchased.

Alternatively, under a Change of Control, the Company will have the option,
at any time on or prior to November 15, 2001 (but in any event within 90 days
after the occurrence of the respective Change of Control), to redeem the New
Notes in whole but not in part at a redemption price equal to 100% of the
principal amount thereof plus the applicable Premium (as defined) together with
accrued and unpaid interest, if any, to the date of redemption.

The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.

The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company and its Subsidiaries. With respect to the disposition of property or
assets, the phrase "all or substantially all" as used in the Indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which is the choice of law
under the Indenture) and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a Person, and therefore it may
be unclear as to whether a Change of Control has occurred and whether the
Company is required to make an offer to repurchase the Notes as described
above.

71
73
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the New Credit Facility. Future Senior
Indebtedness of the Company and its Subsidiaries may also contain prohibitions
of certain events that would constitute a Change of Control or require such
Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require the Company to repurchase the
Notes could cause a default under such Senior Indebtedness, even if the Change
of Control itself does not, due to the financial effect of such repurchase of
the Company. Finally, the Company's ability to pay cash to the holders upon a
repurchase may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when
necessary to make any required repurchases. Even if sufficient funds were
otherwise available, the terms of the New Credit Facility may prohibit the
Company's prepayment of Notes prior to their scheduled maturity. Consequently,
if the Company is not able to prepay the Indebtedness under the New Credit
Facility and any other Senior Indebtedness containing similar restrictions or
obtain requisite consents, as described above, the Company will be unable to
fulfill its repurchase obligations if holders of Notes exercise their
repurchase rights following a Change of Control, thereby resulting in a default
under the Indenture.

CERTAIN COVENANTS

The Indenture contains certain covenants including, among others, the
following:

Limitation on Indebtedness.

(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that the Company
and any of its Restricted Subsidiaries may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than 2.00:1.00, if
such Indebtedness is Incurred on or prior to the second anniversary of the
Issue Date, and 2.25:1.00, if such Indebtedness is Incurred thereafter.

(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness
Incurred pursuant to (A) the New Credit Facility (including, without
limitation, any renewal, extension, refunding, restructuring, replacement or
refinancing thereof referred to in the definition thereof) or (B) any other
agreements or indentures governing Senior Indebtedness; provided, however, that
the aggregate principal amount of all Indebtedness Incurred pursuant to this
clause (i) does not exceed $20 million at any time outstanding, less the
aggregate principal amount thereof repaid with the net proceeds of Asset
Dispositions (to the extent, in the case of a repayment of revolving credit
indebtedness, the commitment to advance loans has been terminated); (ii)
Indebtedness represented by Capitalized Lease Obligations, mortgage financings
or purchase money obligations, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in a Related Business or Incurred to refinance any
such purchase price or cost of construction or improvement, in each case
Incurred no later than 365 days after the date of such acquisition or the date
of completion of such construction or improvement; provided, however, that the
principal amount of any Indebtedness Incurred pursuant to this clause (ii)
shall not exceed $10 million at any time outstanding; (iii) Permitted
Indebtedness; and (iv) Indebtedness (other than Indebtedness described in
clauses (i) - (iii)) in a principal amount which, when taken together with the
principal amount of all other Indebtedness Incurred pursuant to this clause
(iv) and then outstanding, will not exceed $15 million (it being understood
that any Indebtedness Incurred under this clause (iv) shall cease to be deemed
Incurred or outstanding for purposes of this clause (iv) (but shall be deemed
to be Incurred for purposes of paragraph (a)) from and after the first date on
which the Company or its Restricted Subsidiaries could have Incurred such
Indebtedness under the foregoing paragraph (a) without reliance upon this
clause (iv)).

(c) Neither the Company nor any Restricted Subsidiary shall Incur any
Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the
Company unless such Indebtedness shall be subordinated to the Notes to at least
the same extent as such Subordinated Obligations. No Restricted Subsidiary
shall Incur any Indebtedness under paragraph (b) above if the proceeds thereof
are used, directly or indirectly, to refinance any Guarantor Subordinated
Obligation of such Subsidiary Guarantor unless such Indebtedness shall be
subordinated to the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty to at least the same extent as such Guarantor Subordinated
Obligation.

(d) In addition, the Company shall not Incur any Secured Indebtedness which
is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such

72
74
Secured Indebtedness for so long as such Secured Indebtedness is secured by a
Lien. No Subsidiary Guarantor shall Incur any Secured Indebtedness which is not
Guarantor Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure such Subsidiary Guarantor's obligations under the
Subsidiary Guaranty equally and ratably with such Secured Indebtedness for so
long as such Secured Indebtedness is secured by a Lien.

(e) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.

Limitation on Layering. The Company shall not Incur any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is contractually subordinated in right of payment to all Senior
Subordinated Indebtedness (including the Notes). No Subsidiary Guarantor shall
Incur any Indebtedness if such Indebtedness is contractually subordinate or
junior in ranking in any respect to any Guarantor Senior Indebtedness of such
Subsidiary Guarantor unless such Indebtedness is Guarantor Senior Subordinated
Indebtedness of such Subsidiary Guarantor or is contractually subordinated in
right of payment to all Guarantor Senior Subordinated Indebtedness of such
Subsidiary Guarantor (including its Guarantee of the Notes).

Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock, and (B) dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company which holds the equity interest in the
paying Restricted Subsidiary (and if the Restricted Subsidiary paying the
dividend or making the distribution is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a pro rata basis), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than a Restricted Subsidiary of the Company or any Capital Stock
of a Restricted Subsidiary of the Company held by any Affiliate of the Company,
other than another Restricted Subsidiary (in either case, other than in
exchange for its Capital Stock (other than Disqualified Stock)), (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of purchase, repurchase or
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment as described in
preceding clauses (i) through (iv) being referred to as a "Restricted
Payment"); if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); or (2) the Company is not able to incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) under "Limitation on
Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the first day of the fiscal
quarter beginning on or after the Issue Date to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days
prior to the date of such Restricted Payment) (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate
net proceeds received by the Company from the issue or sale of its Capital
Stock (other than Disqualified Stock) or other capital contributions subsequent
to the Issue Date (other than net proceeds received from an issuance or sale of
such Capital Stock to a Subsidiary of the Company or an employee stock
ownership plan or similar trust); provided, however, that the value of any
non-cash net proceeds shall be as determined by the Board of Directors in good
faith, except that in the event the value of any non-cash net proceeds shall be
$5 million or more, the value shall be as determined in writing by an
independent investment banking firm of nationally recognized standing; (C) the
aggregate Net Cash Proceeds received by the Company from the issue or sale of
its Capital Stock (other than Disqualified Stock) to an employee stock
ownership plan or similar trust subsequent to the Issue Date; provided,
however, that if such plan or trust Incurs any Indebtedness to or Guaranteed by
the Company or any of its Restricted Subsidiaries to finance the acquisition of
such Capital Stock, such aggregate amount shall be limited to such Net Cash
Proceeds less such Indebtedness Incurred or Guaranteed by the Company or any of
its Restricted Subsidiaries and any increase in the Consolidated Net Worth of
the Company resulting from principal repayments made by such plan or trust

73
75
with respect to Indebtedness Incurred by it to finance the purchase of such
Capital Stock; (D) the amount by which Indebtedness of the Company is reduced
on the Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Capital Stock of
the Company (less the amount of any cash, or other property, distributed by the
Company upon such conversion or exchange); (E) the amount equal to the net
reduction in Investments (other than Permitted Investments) made after the
Issue Date by the Company or any of its Restricted Subsidiaries in any Person
resulting from (i) repurchases or redemptions of such Investments by such
Person, proceeds realized upon the sale of such Investment to an unaffiliated
purchaser, repayments of loans or advances or other transfers of assets by such
Person to the Company or any Restricted Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investment") not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
included in the calculation of the amount of Restricted Payments; provided,
however, that no amount shall be included under this Clause (E) to the extent
it is already included in Consolidated Net Income; and (F) the aggregate Net
Cash Proceeds received by a Person in consideration for the issuance of such
Person's Capital Stock (other than Disqualified Stock) which are held by such
Person at the time such Person is merged with and into the Company in
accordance with the "Merger and Consolidation" covenant subsequent to the Issue
Date; provided, however, that concurrently with or immediately following such
merger the Company uses an amount equal to such Net Cash Proceeds to redeem or
repurchase the Company's Capital Stock.

(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership
plan or similar trust); provided, however, that (A) such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale shall be excluded from clause (3)(B)
of paragraph (a); (ii) any purchase or redemption of Subordinated Obligations
of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of the Company;
provided, however, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments; (iii) any purchase or
redemption of Subordinated Obligations from Net Available Cash to the extent
permitted under "Limitation on Sales of Assets and Subsidiary Stock" below;
provided, however, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments; (iv) dividends paid within 60
days after the date of declaration if at such date of declaration such dividend
would have complied with this provision; provided, however, that such dividend
shall be included in the calculation of the amount of Restricted Payments; (v)
payments by the Company to fund the payment by any direct or indirect holding
company thereof of audit, accounting, legal or other similar expenses, to pay
franchise or other similar taxes and to pay other corporate overhead expenses,
so long as such dividends are paid as and when needed by its respective direct
or indirect holding company and so long as the aggregate amount of payments
pursuant to this clause (v) does not exceed $500,000 in any calendar year; (vi)
payments by the Company to fund taxes of Holding for a given taxable year in an
amount equal to the lesser of (x) the Company's "separate return liability" and
(y) the portion of the tax liability of the "affiliated group" (within the
meaning of Section 1504(a)(1) of the Code (as defined)) of which the Company is
a member in accordance with the method described in Treasury Regulations
Section 1.1552-1(a)(1) pursuant to (x) or (y) of this clause (vi) to the extent
that the Company files a combined or consolidated income tax return with
Holding under any state or local income tax law for a taxable year, the payment
by the Company to Holding to fund such tax liability for such taxable year
shall be provided for in a manner as similar as possible to that provided for
United States federal income taxes (for purposes of this clause (vi) "separate
return liability" for a given taxable year shall mean the hypothetical United
States tax liability of the Company defined as if the Company had filed its own
U.S. federal tax return for such taxable year); (vii) payments of dividends on
the Company's common stock after an initial public offering of common stock of
the Company or of Holding in an annual amount not to exceed 6.0% of the gross
proceeds (before deducting underwriting discounts and commissions and other
fees and expenses of the offering) received by the Company (directly or as a
common equity contribution from Holding) from shares of common stock sold for
the account of the Company or of Holding, as the case may be (and not for the
account of any stockholder), in such initial public offering; (viii) payments
by the Company to repurchase, or to enable Holding to repurchase, Capital Stock
or other securities of Holding from members of management of Holding or the
Company in an aggregate amount not to exceed $2 million; (ix) payments to
enable Holding to redeem or repurchase stock purchase or similar rights granted
by Holding with respect to its Capital Stock in an aggregate amount not to
exceed $1 million; (x) payments, not to exceed $200,000 in the aggregate, to
enable Holding to make cash payments to holders of its Capital Stock in lieu of
the issuance of

74
76
fractional shares of its Capital Stock; (xi) payments made pursuant to any
merger, consolidation or sale of assets effected in accordance with the "Merger
and Consolidation" covenant; provided, however, that no such payment may be
made pursuant to this clause (xi) unless, after giving effect to such
transaction (and the incurrence of any Indebtedness in connection therewith and
the use of the proceeds thereof), the Company would be able to incur $1.00 of
additional Indebtedness in compliance with paragraph (a) under the "Limitation
on Indebtedness" covenant and such that, after Incurring that $1.00 of
additional Indebtedness, the Leverage Ratio would be less than 3.50:1.00; (xii)
the redemption payments to be made by the Company on the Issue Date in
connection with the Transaction as described in the Prospectus; and (xiii)
payments to the former Bishop stockholders required pursuant to the Stock
Purchase Agreement dated as of August 22, 1996 relating to the Company's
acquisition of Bishop, which payments shall not exceed $1,000,000 in the
aggregate, provided, however, that in the case of clauses (vii), (viii), (ix),
(x) and (xi) no Default or Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof.

(c) For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined, subject to the additional requirements of the immediately
succeeding proviso, in good faith by the Company) of the assets so utilized in
making such Restricted Payment, provided, further that (i) in the case of any
Restricted Payment made with capital stock or indebtedness, such Restricted
Payment shall be deemed to be made in an amount equal to the greater of the
fair market value thereof and the liquidation preference (if any) or principal
amount of the capital stock or indebtedness, as the case may be, so utilized,
and (ii) in the case of any Restricted Payment in an aggregate amount in excess
of $5.0 million, a written opinion as to the fairness of the valuation thereof
(as determined by the Company) for purposes of determining compliance with the
"Limitation on Restricted Payments" covenant in the Indenture shall be issued
by an independent investment banking firm of national standing.

Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted Subsidiaries
to, create or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any such Restricted Subsidiary to (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except: (a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the New Credit Facility;
(b) any encumbrance or restriction with respect to such a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness issued by such Restricted
Subsidiary on or prior to the date on which such Restricted Subsidiary was
acquired by the Company and outstanding on such date (other than indebtedness
issued as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary of the Company or was acquired by the Company); (c) any encumbrance
or restriction with respect to such a Restricted Subsidiary pursuant to an
agreement evidencing Indebtedness Incurred without violation of the Indenture
or effecting a refinancing of Indebtedness issued pursuant to an agreement
referred to in clauses (a) or (b) or this clause (c) or contained in any
amendment to an agreement referred to in clauses (a) or (b) or this clause (c);
provided, however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any of such agreement, refinancing agreement
or amendment, taken as a whole, are no less favorable to the holders in any
material respect, as determined in good faith by the senior management of the
Company or Board of Directors of the Company, than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in agreements
in effect at, or entered into on, the Issue Date; (d) in the case of clause
(iii), any encumbrance or restriction (A) that restricts in a customary manner
the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture, (C) that is included in a
licensing agreement to the extent such restrictions limit the transfer of the
property subject to such licensing agreement or (D) arising or agreed to in the
ordinary course of business and that does not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
of its Subsidiaries in any manner material to the Company or any such
Restricted Subsidiary; (e) in the case of clause (iii) above, restrictions
contained in security agreements, mortgages or similar documents securing
Indebtedness of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements; (f)
any restriction with respect to such a Restricted Subsidiary imposed pursuant
to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (g) encumbrances or
restrictions arising or existing by reason of applicable law.

75
77
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Company's senior management or
the Board of Directors (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition,
(ii) at least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company or any Restricted Subsidiary elects (or is
required by the terms of any Senior Indebtedness), to prepay, repay or purchase
(x) Senior Indebtedness or (y) Indebtedness (other than Preferred Stock) of a
Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the
Company) within 180 days from the later of the date of such Asset Disposition
or the receipt of such Net Available Cash; (B) second, within one year from the
receipt of such Net Available Cash, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), at the
Company's election either (x) to the investment in or acquisition of Additional
Assets or (y) to prepay, repay or purchase (1) Senior Indebtedness or (2)
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary (in each
case other than Indebtedness owed to the Company); (C) third, within 45 days
after the later of the application of Net Available Cash in accordance with
clauses (A) and (B) and the date that is one year from the receipt of such Net
Available Cash, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an offer to
purchase Notes at par plus accrued and unpaid interest, if any, thereon; and
(D) fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to (w) the investment
in or acquisition of Additional Assets, (x) the making of Temporary Cash
Investments, (y) the prepayment, repayment or purchase of Indebtedness of the
Company (other than Indebtedness owing to any Subsidiary of the Company) or
Indebtedness of any Subsidiary (other than Indebtedness owed to the Company or
any of its Subsidiaries) or (z) any other purpose otherwise permitted under the
Indenture, in each case within the later of 45 days after the application of
Net Available Cash in accordance with clauses (A), (B) and (C) or the date that
is one year from the receipt of such Net Available Cash; provided, however,
that, in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (B), (C) or (D) above, the Company or such Restricted
Subsidiary shall retire such Indebtedness and shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions, the Company and its Restricted Subsidiaries shall not be required
to apply any Net Available Cash in accordance herewith except to the extent
that the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this covenant at any time exceed $5 million. The
Company shall not be required to make an offer for Notes pursuant to this
covenant if the Net Available Cash available therefor (after application of the
proceeds as provided in clauses (A) and (B)) is less than $5 million for any
particular Asset Disposition (which lesser amounts shall be carried forward for
purposes of determining whether an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).

For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such Senior
Indebtedness or Indebtedness in connection with such Asset Disposition (in
which case the Company shall, without further action, be deemed to have applied
such assumed Indebtedness in accordance with clause (A) of the preceding
paragraph) and (y) securities received by the Company or any Restricted
Subsidiary of the Company from the transferee that are promptly (and in any
event within 60 days) converted by the Company or such Restricted Subsidiary
into cash.

Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
will be permitted to consummate an Asset Swap if (i) at the time of entering
into such Asset Swap and immediately after giving effect to such Asset Swap, no
Default or Event of Default shall have occurred or be continuing or would occur
as a consequence thereof, (ii) in the event such Asset Swap involves an
aggregate amount in excess of $1 million, the terms of such Asset Swap have
been approved by a majority of the members of the Board of Directors of the
Company, and (iii) in the event such Asset Swap involves an aggregate amount in
excess of $5 million, the Company has received a written opinion from an
independent investment banking firm of nationally recognized standing that such
Asset Swap is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.

(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a)(iii)(C), the Company will be required to purchase
Notes tendered pursuant to an offer by the Company for the Notes at a

76
78
purchase price of 100% of their principal amount plus accrued and unpaid
interest, if any, to the purchase date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to
the offer is less than the Net Available Cash allotted to the purchase of the
Notes, the Company will apply the remaining Net Available Cash in accordance
with clause (a)(iii)(D) above.

(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.

Limitation on Affiliate Transactions. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction or series of related transactions (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any Affiliate of the Company other than a
Wholly-Owned Subsidiary (an "Affiliate Transaction") unless: (i) the terms of
such Affiliate Transaction are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is not
such an Affiliate; (ii) in the event such Affiliate Transaction involves an
aggregate amount in excess of $2.5 million, the terms of such transaction have
been approved by a majority of the members of the Board of Directors of the
Company and by a majority of the disinterested members of such Board, if any
(and such majority or majorities, as the case may be, determines that such
Affiliate Transaction satisfies the criteria in (i) above); and (iii) in the
event such Affiliate Transaction involves an aggregate amount in excess of $5
million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.

(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under
"Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, or any stock options and stock ownership
plans for the benefit of employees, officers and directors, consultants and
advisors approved by the Board of Directors of the Company, (iii) loans or
advances to employees in the ordinary course of business of the Company or any
of its Restricted Subsidiaries, (iv) any transaction between Wholly-Owned
Subsidiaries, (v) indemnification agreements with, and the payment of fees and
indemnities to, directors, officers and employees of the Company and its
Restricted Subsidiaries, in each case in the ordinary course of business, (vi)
transactions pursuant to agreements in existence on the Issue Date which are
(x) described in the Prospectus or (y) otherwise, in the aggregate, immaterial
to the Company and its Restricted Subsidiaries taken as a whole, (vii) any
employment, non-competition or confidentiality agreements entered into by the
Company or any of its Restricted Subsidiaries with its employees in the
ordinary course of business, (viii) payments made in connection with the
Transaction, including fees to Hicks Muse, as described in the Prospectus, (ix)
the issuance of Capital Stock of the Company (other than Disqualified Stock)
and (x) any obligations of the Company pursuant to the Monitoring and Oversight
Agreement and the Financial Advisory Agreement as in effect on the Issue Date.

Limitation on Capital Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Capital Stock (other
than Preferred Stock) to any Person (other than to the Company or a
Wholly-Owned Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly-Owned Subsidiary of the Company) to own any Capital Stock
(other than Preferred Stock) of a Restricted Subsidiary of the Company, if in
either case as a result thereof such Restricted Subsidiary would no longer be a
Restricted Subsidiary of the Company; provided, however, that this provision
shall not prohibit (x) the Company or any of its Restricted Subsidiaries from
selling, leasing or otherwise disposing of all of the Capital Stock of any
Restricted Subsidiary or (y) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary in compliance with the Indenture.

SEC Reports. The Company will file with the Trustee and provide to the
holders of the Notes, within 15 days after it files them with the Commission,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe) which the Company files with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event
that the

77
79
Company is not required to file such reports with the Commission pursuant to
the Exchange Act, the Company will nevertheless deliver such Exchange Act
information to the holders of the Notes within 15 days after it would have been
required to file it with the Commission.

Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all of its
assets to, any Person, unless: (i) the resulting, surviving or transferee
Person (the "Successor Company") shall be a corporation, partnership, trust or
limited liability company organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as having
been incurred by the Successor Company or such Restricted Subsidiary at the
time of such transaction), no Default or Event of Default shall have occurred
and be continuing; (iii) immediately after giving effect to such transaction,
the Successor Company would be able to incur at least an additional $1.00 of
Indebtedness pursuant to paragraph (a) of "Limitation on Indebtedness"; and
(iv) the Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the Indenture.

The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.

Notwithstanding the foregoing clauses (ii) and (iii), (1) any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (2) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits.

EVENTS OF DEFAULT

Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, whether or not such payment is prohibited by the provisions described
under "Ranking and Subordination" above, (ii) a default in the payment of
principal of any Note when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise, whether or
not such payment is prohibited by the provisions described under "Ranking and
Subordination" above, (iii) the failure by the Company to comply with its
obligations under the "Merger and Consolidation" covenant described under
"Certain Covenants" above, (iv) the failure by the Company to comply for 30
days after notice with any of its obligations under the covenants described
under "Change of Control" above or under covenants described under "Certain
Covenants" above (in each case, other than a failure to purchase Notes which
shall constitute an Event of Default under clause (ii) above), other than "--
Merger and Consolidation," (v) the failure by the Company or any Subsidiary
Guarantor to comply for 60 days after notice with its other agreements
contained in the Indenture, (vi) Indebtedness of the Company or any Restricted
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million and such
default shall not have been cured or such acceleration rescinded after a 10-day
period (the "cross acceleration provision"), (vii) certain events of
bankruptcy, insolvency or reorganization of the Company or a Significant
Subsidiary (the "bankruptcy provisions"), (viii) any judgment or decree for the
payment of money in excess of $5 million (to the extent not covered by
insurance) is rendered against the Company or a Significant Subsidiary and such
judgment or decree shall remain undischarged or unstayed for a period of 60
days after such judgment becomes final and non-appealable (the "judgment
default provision") or (ix) any Subsidiary Guarantee by a Significant
Subsidiary ceases to be in full force and effect (except as contemplated by the
terms of the Indenture) or any Subsidiary Guarantor that is a Significant
Subsidiary denies or disaffirms its obligations under the Indenture or its
Subsidiary Guarantee and such Default continues for 10 days. However, a default
under clause (iv) or (v) will not constitute an Event of Default until the
Trustee or the holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified in clause (iv) or (v) hereof after receipt of such
notice.

78
80
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest, if any,
on all the Notes to be due and payable. Upon such a declaration, such principal
and accrued and unpaid interest shall be due and payable immediately. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Notes may rescind any such acceleration with respect to the
Notes and Its consequences.

Subject to the provisions of the Indenture relating to the duties of the
Trustee, if 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 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 when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing,
(ii) holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or
expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity and (v)
the holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount 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 holder or
that would involve the Trustee in personal liability. Prior to taking any
action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.

The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of, premium (if any) or interest on any Note, the Trustee
may withhold notice if and so long as its board of directors, a committee of
its board of directors or a committee of its Trust officers in good faith
determines that withholding notice is in the interests of the Noteholders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults.

AMENDMENTS AND WAIVERS

Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding New Note affected, no amendment may, among other things, (i) reduce
the amount of Notes whose holders must consent to an amendment, (ii) reduce the
stated rate of or extend the stated time for payment of interest on any New
Note, (iii) reduce the principal of or extend the Stated Maturity of any New
Note, (iv) reduce the premium payable upon the redemption or repurchase of any
New Note or change the time at which any New Note may be redeemed as described
under "Optional Redemption" above, (v) make any New Note payable in money other
than that stated in the New Note, (vi) impair the right of any holder to
receive payment of principal of and interest on such holder's Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such holder's Notes or (vii) make any change in the
amendment provisions which require each holder's consent or in the waiver
provisions.

Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for

79
81
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
further Guarantees with respect to the Notes, to secure the Notes, to add to
the covenants of the Company for the benefit of the holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any holder or to comply with any requirement of
the Commission in connection with the qualification of the Indenture under the
Trust Indenture Act. However, any amendment made to the subordination
provisions of the Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding shall not be effective as to the holders
of such outstanding Senior Indebtedness unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.

The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.

After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders or any defect
therein, will not impair or affect the validity of the amendment.

DEFEASANCE

The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under covenants
described under "Certain Covenants" (other than "Merger and Consolidation"),
the operation of the cross acceleration provision, the bankruptcy provisions
with respect to Significant Subsidiaries, the judgment default provision and
the Subsidiary Guaranty provision described under "Events of Default" above and
the limitations contained in clauses (iii) and (iv) under "Certain Covenants --
Merger and Consolidation" above ("covenant defeasance").

The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries), (viii) or (ix) under "Events of Default" above or
because of the failure of the Company to comply with clause (iii) or (iv) under
"Certain Covenants -- Merger and Consolidation" above.

In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of 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 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.

CONCERNING THE TRUSTEE

United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the New Notes.

The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim a security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (as
defined) it must eliminate such conflict or resign.

80
82
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Notes issued thereunder, unless
they shall have offered to the Trustee security and indemnity satisfactory to
it.

GOVERNING LAW

The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.

CERTAIN DEFINITIONS

"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments
of the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.

"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including,
without limitation, the probable liability of such Subsidiary Guarantor with
respect to its contingent liabilities (after giving effect to all other fixed
and contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guarantee, of such Subsidiary Guarantor at
such date and (y) the present fair salable value of the assets of such
Subsidiary Guarantor at such date exceeds the amount that will be required to
pay the probable liability of such Subsidiary Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any Subsidiary by
such Subsidiary Guarantor in respect of the obligations of such Subsidiary
under the Subsidiary Guarantee), excluding debt in respect of the Subsidiary
Guarantee, as they become absolute and matured.

"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.

"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock (or any
other equity interests in) of a Restricted Subsidiary (other than directors'
qualifying shares) or of any other property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any
of its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) a disposition of obsolete or worn out
equipment or equipment that is no longer useful in the conduct of the business
of the Company and its Restricted Subsidiaries and that is disposed of in each
case in the ordinary course of business, (iv) dispositions of property for net
proceeds which, when taken collectively with the net proceeds of any other such
dispositions under this clause (iv) that were consummated since the beginning
of the calendar year in which such disposition is consummated, do not exceed $1
million, and (v) transactions permitted under "Certain Covenants -- Merger and
Consolidation" above. Notwithstanding anything to the contrary contained above,
a Restricted Payment made in compliance with the "Limitation on Restricted
Payments" covenant shall not constitute an Asset Disposition except for
purposes of determinations of the Consolidated Coverage Ratio (as defined) and
the Leverage Ratio (as defined).

81
83
"Asset Swap" means the execution of a definitive agreement, subject only to
customary closing conditions that the Company in good faith believes will be
satisfied, for a substantially concurrent purchase and sale, or exchange, of
Productive Assets between the Company or any of its Restricted Subsidiaries and
another Person or group of affiliated Persons; provided, however, that any
amendment to or waiver of any closing condition that individually or in the
aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap.

"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Is, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).

"Average Life" means, as of the date of determination, with respect to any
indebtedness, the quotient obtained by dividing (i) the sum of the products of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by
(ii) the sum of all such payments.

"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP, and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date such lease may be terminated without penalty.

"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.

"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, (v) exchange or
translation losses on foreign currencies, and (vi) all other non-cash items
reducing Consolidated Net Income (excluding any non-cash item to the extent it
represents an accrual of or reserve for cash disbursements for any subsequent
period prior to the stated maturity of the Notes) and less, to the extent added
in calculating Consolidated Net Income, (x) exchange or translation gains on
foreign currencies and (y) non-cash items (excluding such non-cash items to the
extent they represent an accrual for cash receipts reasonably expected to be
received prior to the Stated Maturity of the Notes), in each case for such
period. Notwithstanding the foregoing, the income tax expense, depreciation
expense and amortization expense of a Subsidiary of the Company shall be
included in Consolidated Cash Flow only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.

"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (1) if the Company or any of its Restricted Subsidiaries has incurred any
Indebtedness since the beginning of such period and through the date of
determination of the Consolidated Coverage Ratio that remains outstanding or if
the transaction giving rise to the need to calculate Consolidated Coverage
Ratio is an incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (A) such Indebtedness as if such Indebtedness
had been incurred on the first day of such period (provided that if such
Indebtedness is incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by senior
management of the Company) shall be deemed outstanding for purposes of this
calculation), and (B) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(2) if since the beginning of such period any Indebtedness of the Company or
any of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and has not been replaced), Consolidated Interest Expense
for such

82
84
period shall be calculated after giving pro forma effect thereto as if such
Indebtedness had been repaid, repurchased, defeased or otherwise discharged on
the first day of such period, (3) if since the beginning of such period the
Company or any of its Restricted Subsidiaries shall have made any Asset
Disposition or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Asset Disposition, Consolidated Cash Flow for
such period shall be reduced by an amount equal to the Consolidated Cash Flow
(if positive) attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the Consolidated
Cash Flow (if negative) attributable thereto for such period, and Consolidated
Interest Expense for such period shall be (i) reduced by an amount equal to the
Consolidated Interest Expense attributable to any Indebtedness of the Company
or any of its Restricted Subsidiaries repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary of the Company is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale) and (ii) increased by interest income attributable to the
assets which are the subject of such Asset Disposition for such period, (4) if
since the beginning of such period the Company or any of its Restricted
Subsidiaries (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary of the Company (or any Person which becomes a Restricted
Subsidiary of the Company as a result thereof) or an acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder which constitutes all or substantially all of an operating unit of a
business, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (5) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary of the Company or
was merged with or into the Company or any Restricted Subsidiary of the Company
since the beginning of such period) shall have made any Asset Disposition,
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (3) or (4) above if made by the Company or a Restricted
Subsidiary of the Company during such period, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term in
excess of 12 months).

"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries, plus, to the extent not
included in such interest expense (i) interest expense attributable to capital
leases, (ii) amortization of debt discount, (iii) capitalized interest, (iv)
non-cash interest expense, (v) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Restricted
Subsidiary under any Guarantee of Indebtedness or other obligation of any other
Person, (vii) net payments (whether positive or negative) pursuant to Interest
Rate Agreements, (viii) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust and (ix) cash and
Disqualified Stock dividends in respect of all Preferred Stock of Subsidiaries
and Disqualified Stock of the Company held by Persons other than the Company or
a Wholly Owned Subsidiary and less (a) to the extent included in such interest
expense, the amortization of capitalized debt issuance costs and (b) interest
income. Notwithstanding the foregoing, the Consolidated Interest Expense with
respect to any Restricted Subsidiary of the Company, that was not a
Wholly-Owned Subsidiary, shall be included only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income.

"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net income: (i) any net income (loss) of any person acquired
by the Company or any of its Restricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) any net
income of any Restricted Subsidiary of the Company if such Restricted
Subsidiary is subject to restrictions, directly

83
85
or indirectly, on the payment of dividends or the making of distributions by
such Restricted Subsidiary, directly or indirectly, to the Company (other than
restrictions in effect on the Issue Date with respect to a Restricted
Subsidiary of the Company and other than restrictions that are created or exist
in compliance with the "Limitation on Restrictions on Distributions from
Restricted Subsidiaries" covenant), (iii) any gain or loss realized upon the
sale or other disposition of any assets of the Company or its consolidated
Restricted Subsidiaries (including pursuant to any Sale/Leaseback Transaction)
which are not sold or otherwise disposed of in the ordinary course of business
any gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person, (iv) any extraordinary gain or loss, (v) the cumulative
effect of a change in accounting principles, (vi) non-cash restructuring
charges or writeoffs recorded within the one year period following the Issue
Date in an aggregate amount not to exceed $7.5 million, (vii) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of the
lesser of (A) dividends or distributions paid to the Company or any of its
Restricted Subsidiaries by such Person and (B) the net income of such Person
(but in no event less than zero), and the net loss of such Person (other than
an Unrestricted Subsidiary) shall be included only to the extent of the
aggregate Investment of the Company or any of its Restricted Subsidiaries in
such Person and (viii) any non-cash expenses attributable to grants or
exercises of employee stock options. Notwithstanding the foregoing, (A)
Consolidated Net Income for any period shall be reduced by the aggregate amount
of dividends paid during such period pursuant to clause (v) of paragraph (b) of
the "Limitation on Restricted Payments" covenant and (B) for the purpose of the
covenant described under "Certain Covenants -- Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(E)
thereof.

"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of
the most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.

"Continuing Director" of any Person means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of such Person on the
date of the Indenture, (ii) was nominated for election or elected to the Board
of Directors of such Person with the affirmative vote of a majority of the
Continuing Directors of such Person who were members of such Board of Directors
at the time of such nomination or election, or (iii) is a representative of a
Permitted Holder.

"Currency Agreement" means, in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.

"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.

"Designated Senior Indebtedness" means (i) all obligations under the New
Credit Facility in the case of the Company, (ii) any Guarantee by a Subsidiary
Guarantor of such obligations under the New Credit Facility in the case of such
Subsidiary Guarantor and (iii) any other Senior Indebtedness in the case of the
Company or Guarantor Senior Indebtedness in the case of such Subsidiary
Guarantor which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination, the
holders thereof are committed to lend up to, at least $5 million and is
specifically designated by the Company or such Subsidiary Guarantor in the
instrument evidencing or governing such Senior Indebtedness or Guarantor Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture.

"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final stated maturity of the Notes, or (ii) is convertible into

84
86
or exchangeable (unless at the sole option of the issuer thereof) for (a) debt
securities or (b) any Capital Stock referred to in (i) above, in each case at
any time prior to the final stated maturity of the Notes.

"Equity Offering" means an offering for cash by Holding or the Company of
its common stock, or options, warrants or rights with respect to its common
stock.

"Financial Advisory Agreement" means the Financial Advisory Agreement
between Hicks Muse Partners and the Company as in effect on the Issue Date.

"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those 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 or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.

"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, 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.

"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter issued, the
obligations under any Guarantee of the New Credit Facility by such Subsidiary
Guarantor, all other Guarantees by such Subsidiary Guarantor of Senior
Indebtedness of the Company and all Indebtedness of such Subsidiary Guarantor,
including interest and fees thereon, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that the obligations of such Subsidiary Guarantor in respect of such
Indebtedness are not superior in right of payment to the obligations of such
Subsidiary Guarantor under the Subsidiary Guaranty; provided, however, that
Guarantor Senior Indebtedness shall not include (1) any obligations of such
Subsidiary Guarantor to the Company or any other Subsidiary of the Company, (2)
any liability for Federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities) or (4) any Indebtedness,
Guarantee or obligation of such Subsidiary Guarantor that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of such Subsidiary Guarantor, including any Guarantor Senior
Subordinated Indebtedness and Guarantor Subordinated Obligations of such
Subsidiary Guarantor.

"Guarantor Senior Subordinated Indebtedness" means, with respect to a
Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty and any other Indebtedness of such Subsidiary Guarantor
that specifically provides that such Indebtedness is to rank pari passu in
right of payment with the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty and is not subordinated by its terms in right of payment to
any Indebtedness or other obligation of such Subsidiary Guarantor which is not
Guarantor Senior Indebtedness of such Subsidiary Guarantor.

"Guarantor Subordinated Obligation" means, with respect to a Subsidiary
Guarantor, any Indebtedness of such Subsidiary Guarantor (whether outstanding
on the Issue Date or thereafter incurred) which is subordinate or junior in
right of payment to the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty pursuant to a written agreement.

"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether

85
87
by merger, consolidation, acquisition or otherwise) shall be deemed to be
incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.

"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i), (ii) and (v)) entered into in the
ordinary course of business of such Person to the extent that 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), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except trade payables and accrued
expenses incurred in the ordinary course of business), which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, (v) all
Capitalized Lease Obligations and all Attributable Indebtedness of such Person,
(vi) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of other Persons to the extent Guaranteed by such Person, (viii)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Restricted Subsidiary of the Company, any Preferred Stock of such Restricted
Subsidiary to the extent such obligation arises on or before the Stated
Maturity of the Notes (but excluding, in each case, accrued dividends) and (ix)
to the extent not otherwise included in this definition, obligations under
Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of
any Person at any date shall be the outstanding principal amount of all
unconditional obligations as described above, as such amount would be reflected
on a balance sheet prepared in accordance with GAAP, and the maximum liability
of such Person, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations described above at such date.

"Interest Rate Agreement" means, with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.

"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) 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,
Indebtedness or other similar instruments issued by such Person. For purposes
of the "Limitation on Restricted Payments" covenant, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in a
Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the
fair market value of the net assets of such Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the
time of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors and evidenced by a resolution of such Board of Directors certified in
an Officers' Certificate to the Trustee.

"Issue Date" means the date on which the Notes are originally issued.

"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the sum of
the aggregate outstanding amount of Indebtedness of such Person and its
Subsidiaries as of the date of calculation on a consolidated basis to (ii) the

86
88
Consolidated Cash Flow of such Person for the last four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of determination.

For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Subsidiaries for which such calculation
is made shall be determined on a pro forma basis as if the Indebtedness giving
rise to the need to perform such calculation had been incurred and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the date the respective
calculation is required. In addition to the foregoing, for purposes of this
definition, "Consolidated Cash Flow" shall be calculated on a pro forma basis
after giving effect to (i) the incurrence of the Indebtedness of such Person
and its Subsidiaries (and the application of the proceeds therefrom) giving
rise to the need to make such calculation and any incurrence (and the
application of the proceeds therefrom) or repayment of other Indebtedness,
other than the incurrence or repayment of Indebtedness pursuant to working
capital facilities, at any time subsequent to the beginning of the Four Quarter
Period and on or prior to the date of determination, as if such incurrence (and
the application of the proceeds thereof), or the repayment, as the case may be,
occurred on the first day of the Four Quarter Period and (ii) any Asset
Disposition at any time on or subsequent to the first day of the Four Quarter
Period and on or prior to the date of determination, as if such Asset
Disposition occurred on the first day of the Four Quarter Period. Furthermore,
in calculating "Consolidated Interest Expense" for purposes of the calculation
of "Consolidated Cash Flow," (i) interest on Indebtedness determined on a
fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Rate
Agreements, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements so long as the respective
Interest Rate Agreement has a remaining term in excess of 12 months.

"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).

"Monitoring and Oversight Agreement" means the Monitoring and Oversight
Agreement between Hicks Muse Partners, Holding and the Company as in effect on
the Issue Date.

"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations
relating to the properties or assets subject to such Asset Disposition)
therefrom in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
foreign and local taxes required to be paid or accrued as a liability under
GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to any Person
owning a beneficial interest in assets subject to sale or minority interest
holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition, provided
however, that upon any reduction in such reserves (other than to the extent
resulting from payments of the respective reserved liabilities), Net Available
Cash shall be increased by the amount of such reduction to reserves, and
retained by the Company or any Restricted Subsidiary of the Company after such
Asset Disposition and (v) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of the
purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition) provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Restricted Subsidiary.

"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or

87
89
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.

"New Credit Facility" means the Credit Agreement, to be dated as of
November 27, 1996, among the Company, Holding, Bankers Trust Company, as agent,
and any other financial institutions from time to time party thereto, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including by
way of adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.

"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor, general partner or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.

"Permitted Indebtedness" means (i) Indebtedness of the Company owing to and
held by any Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary
owing to and held by the Company or any Wholly-Owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or any Wholly-Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer thereof;
(ii) Indebtedness represented by (x) the Notes, (y) any indebtedness (other
than the Indebtedness described in clauses (i), (ii) and (iv) of paragraph (b)
of the covenant described under "Limitation on Indebtedness" and other than
Indebtedness Incurred pursuant to clause (i) above or clauses (iv), (v) or (vi)
below) outstanding on the Issue Date and (z) any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (ii) or
Incurred pursuant to paragraph (a) of the covenant described under "Limitation
on Indebtedness"; (iii) (A) Indebtedness of a Restricted Subsidiary Incurred
and outstanding on the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Subsidiary or was otherwise acquired by the
Company); provided, however, that at the time such Restricted Subsidiary is
acquired by the Company, the Company would have been able to incur $1.00 of
additional Indebtedness pursuant to paragraph (a) of the covenant described
under "Limitation on Indebtedness" above after giving effect to the Incurrence
of such Indebtedness pursuant to this clause (iii) and (B) Refinancing,
Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness
Incurred by such Restricted Subsidiary pursuant to this clause (iii); (iv)
Indebtedness (A) in respect of performance bonds, bankers' acceptances and
surety or appeal bonds provided by the Company or any of its Restricted
Subsidiaries to their customers in the ordinary course of their business, (B)
in respect of performance bonds or similar obligations of the Company or any of
its Restricted Subsidiaries for or in connection with pledges, deposits or
payments made or given in the ordinary course of business in connection with or
to secure statutory, regulatory or similar obligations, including obligations
under health, safety or environmental obligations, (C) arising from Guarantees
to suppliers, lessors, licensees, contractors, franchises or customers of
obligations (other than Indebtedness) incurred in the ordinary course of
business and (D) under Currency Agreements and Interest Rate Agreements;
provided, however, that in the case of Currency Agreements and Interest Rate
Agreements, such Currency Agreements and Interest Rate Agreements are entered
into for bona fide hedging purposes of the Company or its Restricted
Subsidiaries (as determined in good faith by the Board of Directors or senior
management of the Company) and correspond in terms of notional amount,
duration, currencies and interest rates as applicable, to Indebtedness of the
Company or its Restricted Subsidiaries Incurred without violation of the
Indenture or to business transactions of the Company or its Restricted
Subsidiaries on customary terms entered into in the ordinary course of
business; (v) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credits, surety bonds or performance bonds securing
any obligations of the Company or any of its Restricted Subsidiaries pursuant
to such agreements, in each case incurred in connection with the disposition of
any business assets or Restricted Subsidiary

88
90
of the Company (other Guarantees of Indebtedness or other obligations incurred
by any Person acquiring all or any portion of such business assets or
Restricted Subsidiary of the Company for the purpose of financing such
acquisition) in a principal amount not to exceed the gross proceeds actually
received by the Company or any of its Restricted Subsidiaries in connection
with such disposition; provided, however, that the principal amount of any
Indebtedness incurred pursuant to this clause (v) when taken together with all
Indebtedness incurred pursuant to this clause (v) and then outstanding, shall
not exceed $10 million; (vi) Indebtedness consisting of (A) Guarantees by the
Company or a Subsidiary Guarantor of Indebtedness incurred by a Wholly-Owned
Subsidiary without violation of the Indenture and (B) Guarantees by a
Restricted Subsidiary of Senior Indebtedness incurred by the Company without
violation of the Indenture (so long as such Restricted Subsidiary could have
incurred such Indebtedness directly without violation of the Indenture); and
(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness is
extinguished within two business clays of its incurrence.

"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Related Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Related
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any of its Restricted Subsidiaries, created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans or advances to employees for purposes of purchasing the
Company's common stock in an aggregate amount outstanding at any one time not
to exceed $500,000 and other loans and advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any of its Restricted Subsidiaries or in satisfaction of judgments
or claims; (viii) a Person engaged in a Related Business or a loan or advance
to the Company the proceeds of which are used solely to make an investment in a
Person engaged in a Related Business or a Guarantee by the Company of
Indebtedness of any Person in which such Investment has been made provided,
however, that no Permitted Investments may be made pursuant to this clause
(viii) to the extent the amount thereof would, when taken together with all
other Permitted Investments made pursuant to this clause (viii), exceed $10
million in the aggregate (plus, to the extent not previously reinvested, any
return of capital realized on Permitted Investments made pursuant to this
clause (viii), or any release or other cancellation of any Guarantee
constituting such Permitted Investment); (ix) Persons to the extent such
Investment is received by the Company or any Restricted Subsidiary as
consideration for asset dispositions effected in compliance with the covenant
described under "Limitations on Sales of Assets and Subsidiary Stock"; (x)
prepayments and other credits to suppliers made in the ordinary course of
business consistent with the past practices of the Company and its Restricted
Subsidiaries; and (xi) Investments in connection with pledges, deposits,
payments or performance bonds made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations.

"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision hereof or any other entity.

"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.

"Productive Assets" means assets of a kind used or usable by the Company
and its Restricted Subsidiaries in the Company's business or any Related
Business.

A "Public Market" exists at any time with respect to the common stock of
Holding or the Company if (a) the common stock of Holding or the Company is
then registered with the Securities and Exchange Commission pursuant to Section
12(b) or 12(g) of the Exchange Act and traded either on a national securities
exchange or in the National

89
91
Association of Securities Dealers Automated Quotation System and (b) at least
15% of the total issued and outstanding common stock of Holding or the Company,
as applicable, has been distributed prior to such time by means of an effective
registration statement under the Securities Act of 1933.

"Qualified Capital Stock" of any Person shall mean any Capital Stock of
such Person which is not Disqualified Stock.

"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the
Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the earlier of (A) the first
anniversary of the Stated Maturity of the Notes and (B) Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the lesser of (A) the Average Life of the Notes and (B) the
Average Life of the Indebtedness being refinanced and, (iii) the Refinancing
Indebtedness is in an aggregate principal amount (or if issued with original
issue discount, an aggregate issue price) that is equal to (or 101% of, in the
case of a refinancing of the Notes in connection with a Change of Control) or
less than the sum of the aggregate principal amount (or if issued with original
issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced.

"Related Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Company's Board of Directors.

"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.

"Restricted Subsidiary" means any Subsidiary of the Company other an
Unrestricted Subsidiary.

"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.

"Secured Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor secured by a Lien.

"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness
is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.

"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.

"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.

"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.

"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more

90
92
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
Unless otherwise specified herein, each reference to a Subsidiary shall refer
to a Subsidiary of the Company.

"Subsidiary Guarantee" means the Guarantee of the Notes by a Subsidiary
Guarantor.

"Subsidiary Guarantor" means each Subsidiary of the Company in existence on
the Issue Date and each Subsidiary (other than foreign subsidiaries and
Unrestricted Subsidiaries) created or acquired by the Company after the Issue
Date.

"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America having capital surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least
one nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act), (iii) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clause
(i) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not more than
180 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group, (v) Investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by
Moody's Investors Service, Inc. and (vi) Investments in mutual funds whose
investment guidelines restrict such funds' investments to those satisfying the
provisions of clauses (i) through (v) above.

"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
consolidated assets of $10,000 or less or (B) if such Subsidiary has
consolidated assets greater than $10,000, then such designation would be
permitted under "Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under clause (a) of
"Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.

"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.

"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary.

91
93
BOOK-ENTRY; DELIVERY AND FORM

The certificates representing the Old Notes were issued, and the
certificates representing the New Notes will be issued, in fully registered
form, without coupons. The Old Notes are represented by two permanent global
certificates in definitive, fully registered form without interest coupons in
the aggregate amount of $100,000,000 (the "Initial Global Notes"). Except as
described in the next paragraph, the New Notes initially will be represented by
one or more permanent global certificates in definitive, fully registered form
(the "Global Notes") and will be deposited with, or on behalf of, the DTC (the
"Depositary"), and registered in the name of Cede & Co., as the DTC's nominee
or will remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement between the DTC and the Trustee. If any holder of Old
Notes whose interest in such Old Notes is represented by an Initial Global Note
fails to tender in the Exchange Offer, the Company may issue and deliver to
such holder a separate certificate representing such holder's Old Notes in
registered form without interest coupons.

New Notes exchanged for Old Notes originally purchased by or transferred to
(i) institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) who are not "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") or (ii)
QIBs who elect to take physical delivery of their certificates (collectively,
"Non-Global Purchasers") will be issued in registered form without interest
coupons (the "Certificated Securities"). Upon the transfer to a QIB of
Certificated Securities initially issued to a Non-Global Purchaser, such
Certificated Securities will, unless the transferee requests otherwise or the
Global Note has previously been exchanged in whole for Certificated Securities,
be exchanged for an interest in the Global Note.

The Depository has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (iv) a "Clearing
Agency" registered pursuant to Section 17A of the Exchange Act. The Depository
was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book entry changes to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. The Depository's Participants include
securities brokers and dealers (including the initial purchasers of the Old
Notes), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. QIBs may elect
to hold New Notes purchased by them through the Depository. QIBs who are not
Participants may beneficially own securities held by or on behalf of the
Depository only through Participants or Indirect Participants. Persons that are
not QIBs may not hold New Notes through the Depository.

The Company has been advised by the Depository that upon deposit of the
Global Notes, (i) the Depository will credit the accounts of Participants with
portions of the principal amount of the Global Notes and (ii) ownership of the
New Notes evidenced by the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depository (with respect to the interests of the Depository's Participants),
the Depository's Participants and the Depository's Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer New Notes
or to pledge the New Notes as collateral will be limited to such extent.

So long as the Depository or its nominee is the registered owner of the
Global Notes, the Depository or such nominee, as the case may be, will be
considered the sole owner or holder of the New Notes represented by the Global
Notes for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to have New Notes
represented by such Global Note registered in their names and will not be
considered the owners or holders thereof under the Indenture for any purpose,
including with respect to giving of any directions, instruction or approval to
the Trustee thereunder. As a result, the ability of a person having a
beneficial interest in New Notes represented by a Global Note to pledge such
interest to persons or entities that do not participate in the Depository's
system or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.

92
94
Payments with respect to the principal of, premium, if any, and interest on
any New Notes represented by a Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Note representing such New Notes under
the Indenture. Under the terms of the Indenture, the Company and the Trustee
may treat the persons in whose names the New Notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving such payment
and for any and all other purposes whatsoever. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of New Notes (including
principal, premium, if any, and interest), or to immediately credit the
accounts of the relevant Participants with such payment, in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in the Global Note as shown on the records of the Depository. Payments
by the Participants and the Indirect Participants to the beneficial owners of
New Notes will be governed by standing instructions and customary practice and
will be the responsibility of the Participants or the Indirect Participants.

CERTIFICATED SECURITIES

If (i) the Company notifies the Trustee in writing that the Depository is
no longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of New
Notes in definitive form under the Indenture, or (iii) upon the occurrence of
certain other events, then, upon surrender by the Depository of its Global
Notes, Certificated Securities will be issued to each person that the
Depository identifies as the beneficial owner of the New Notes represented by
the Global Notes. In addition, subject to certain conditions, any person having
a beneficial interest in a Global Note may, upon request to the Trustee,
exchange such beneficial interest for Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of such person or persons (or the nominee of any thereof) and cause
the same to be delivered thereto.

Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related New Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
the Depository for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the New Notes to be issued).

93
95
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements and
judicial decisions now in effect, all of which are subject to change at any
time by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a holder of the
New Notes. The description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.

EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

The exchange of Old Notes for New Notes should not be an exchange or
otherwise a taxable event to a holder for federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price, adjusted basis
and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.

94
96
PLAN OF DISTRIBUTION

Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the holder (other than any such holder or such other person
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the New Notes are
acquired in the ordinary course of business of the holder or such other person
and neither the holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes. The Company, however, has not sought, and does not intend to seek, its
own no-action letter and there can be no assurance that the Commission's staff
would make a similar determination with respect to the Exchange Offer. Any
holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes cannot rely on this interpretation by the
Commission's staff and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.

Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes 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 in connection with any resale of
such New Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company and
the Subsidiary Guarantors have agreed that they will, for a period of 90 days
following the Expiration Date, make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale for such period of time as such persons must comply with such
requirements in order to resell the New Notes.

Neither the Company nor the Subsidiary Guarantors will receive any proceeds
from any sale of New Notes by broker- dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the New Notes or
a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such New Notes. Any broker-dealer that resells New Notes that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.

The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal for such period of time as such
persons must comply with such requirements in order to resell the New Notes.
The Company and the Subsidiary Guarantors have agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers.

LEGAL MATTERS

The validity of the New Notes offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., Dallas, Texas.

95
97
CHANGE IN ACCOUNTANT

The Company, with the approval of the Board of Directors, on December 17,
1996 changed its independent accountants from Arthur Andersen LLP ("Arthur
Andersen") to Coopers & Lybrand L.L.P. Arthur Andersen's report on the
financial statements of the Company for fiscal years 1995 and 1994 was not
qualified or modified as to uncertainty, audit scope, or accounting
principles. Additionally, no reportable conditions or material weaknesses were
identified during Arthur Andersen's audit of the financial statements. During
Arthur Andersen's appointment as independent accountants, there were no
disagreements on any matter of accounting principles or practices, financial
statement disclosure or auditing scope of procedure which if not resolved to
Arthur Andersen's satisfaction would have caused Arthur Andersen to make
reference to the subject matter of the disagreement in connection with Arthur
Andersen's reports on the Company's financial statements.

EXPERTS

The consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of income, stockholder's equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996,
included in this Prospectus, have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent certified public accountants,
given on the authority of that firm as experts in accounting and auditing.

The combined consolidated balance sheets of Bishop as of September 30,
1996 and 1995 and the combined consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended
September 30, 1996, included in this Prospectus have been audited by Arthur
Andersen LLP, independent certified public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.

96
98
AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement under
the Securities Act with respect to the New Notes offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed therewith. Statements contained in this Prospectus
concerning the provisions of any contract, agreement or other document referred
to herein or therein are not necessarily complete, but contain a summary of the
material terms of such contracts, agreements or other documents. With respect
to each contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for the complete
contents of the exhibit, and each statement concerning its provisions is
qualified in its entirety by such reference. The Registration Statement may be
inspected, without charge, at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its regional offices at 7 World
Trade Center, New York, New York, 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661-2551. Copies of such materials may also be
obtained by mail at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such materials may also be obtained from the web site that the
Commission maintains at www.sec.gov.

97
99
INDEX TO FINANCIAL STATEMENTS

PAGE

ATRIUM COMPANIES, INC.:
Report of Independent Accountants . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholder's Equity (Deficit) for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

BISHOP MANUFACTURING COMPANIES:
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Combined Consolidated Financial Statements:
Combined Consolidated Balance Sheets as of September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . F-26
Combined Consolidated Statements of Income and Retained Earnings
for the years ended September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
Combined Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
Notes to Combined Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29

F-1
100

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Atrium Companies, Inc.:

We have audited the accompanying consolidated balance sheets of Atrium
Companies, Inc., (the "Company") a wholly-owned subsidiary of Atrium
Corporation ("Holding") as of December 31, 1996 and 1995 and the related
consolidated statements of income, stockholder's equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Atrium Companies,
Inc. as of December 31, 1996 and 1995 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

As discussed in Note 1 to the financial statements, effective January 1, 1994,
the Company changed its method of accounting for inventories.

COOPERS & LYBRAND L.L.P.

Dallas, Texas
March 7, 1997

F-2
101
ATRIUM COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

DECEMBER 31,
-----------------------
1996 1995
---------- ----------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 617 $ 85
Accounts receivable, net ............................. 21,975 16,845
Inventories .......................................... 13,474 13,953
Prepaid expenses and other............................ 1,765 994
Deferred tax asset ................................... 2,555 1,217
--------- ---------
Total current assets ................................. 40,386 33,094

PROPERTY, PLANT, AND EQUIPMENT, net ..................... 13,970 11,120
GOODWILL, net............................................ 11,963 --
DEFERRED FINANCING COSTS, net............................ 5,173 1,989
OTHER ASSETS ............................................ 3,258 2,366
--------- ---------
Total assets ......................................... $ 74,750 $ 48,569
========= =========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable ..................................... 8,528 7,521
Current portion of notes payable ..................... -- 4,500
Accrued liabilities .................................. 6,580 5,594
--------- ---------
Total current liabilities ............................ 15,108 17,615

LONG-TERM LIABILITIES:
Notes payable ........................................ 100,000 44,500
Deferred tax liability ............................... 818 998
--------- ---------
Total long-term liabilities .......................... 100,818 45,498
--------- ---------
Total liabilities .................................... 115,926 63,113

COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S EQUITY (DEFICIT):
Common stock $.01 par value, 3,000 shares authorized,
100 shares issued and outstanding .................. -- --
Paid-in capital ...................................... 31,936 23,467
Accumulated deficit .................................. (73,112) (38,011)
--------- ---------
Total stockholder's deficit .......................... (41,176) (14,544)
--------- ---------
Total liabilities and stockholder's deficit .... $ 74,750 $ 48,569
========= =========

The accompanying notes are an integral part of the
consolidated financial statements.

F-3
102
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

1996 1995 1994
--------- --------- ---------

NET SALES ..................................................... $ 156,269 $ 135,478 $ 123,571
COST OF GOODS SOLD ............................................ 102,341 93,975 85,572
--------- --------- ---------
Gross profit ............................................... 53,928 41,503 37,999

OPERATING EXPENSES:
Selling, delivery, general and administrative expenses...... 34,815 29,303 26,895
Special charges ............................................ 3,044 7,188 --
Stock option compensation expense .......................... 3,023 308 --
--------- --------- ---------
40,882 36,799 26,895
--------- --------- ---------
Income from operations .................................. 13,046 4,704 11,104

INTEREST EXPENSE .............................................. 4,786 2,753 355
OTHER INCOME (EXPENSE), net ................................... (182) 1,442 (954)
--------- --------- ---------

Income before income taxes and extraordinary charge ..... 8,078 3,393 9,795

PROVISION FOR INCOME TAXES .................................... 2,699 1,544 604
--------- --------- ---------

Income before extraordinary charge ...................... 5,379 1,849 9,191

EXTRAORDINARY CHARGE ON EARLY RETIREMENT OF DEBT
(net of income tax benefit of $720) ....................... 1,176 -- --
--------- --------- ---------

NET INCOME .................................................... $ 4,203 $ 1,849 $ 9,191
========= ========= =========

The accompanying notes are an integral part of
the consolidated financial statements.

F-4
103
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

RETAINED TOTAL
COMMON STOCK EARNINGS STOCKHOLDER'S
----------------- PAID IN (ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT) (DEFICIT)
-------- ------- ---------- ------------ -------------

BALANCE, December 31, 1993 ................ 100 $-- $ 484 $ 37,683 $ 38,167
Net distributions to stockholders ...... -- -- -- (6,993) (6,993)
Net income ............................. -- -- -- 9,191 9,191
-------- ---- -------- -------- --------
BALANCE, December 31, 1994 ................ 100 -- 484 39,881 40,365
Capital contribution ................... -- -- 22,100 -- 22,100
Net distributions to stockholders ...... -- -- -- (79,741) (79,741)
Land contribution ...................... -- -- 575 -- 575
Stock option compensation expense ...... -- -- 308 -- 308
Net income ............................. -- -- -- 1,849 1,849
-------- ---- -------- -------- --------
BALANCE, December 31, 1995 ................ 100 -- 23,467 (38,011) (14,544)
Capital contributions .................. -- -- 5,025 -- 5,025
Net distributions to Holding............ -- -- -- (39,304) (39,304)
Stock option compensation expense ...... -- -- 3,023 -- 3,023
Income tax benefit of Holding's
stock options......................... -- -- 421 -- 421
Net income ............................. -- -- -- 4,203 4,203
-------- ---- -------- -------- --------
BALANCE, December 31, 1996 ................ 100 $-- $ 31,936 $(73,112) $(41,176)
======== ==== ======== ======== ========

The accompanying notes are an integral part of
the consolidated financial statements.

F-5
104
ATRIUM COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

1996 1995 1994
--------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................. $ 4,203 $ 1,849 $ 9,191
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary charge, net of income tax benefit ......................... 1,176 -- --
Depreciation and amortization ........................................... 2,205 1,779 1,678
Amortization of deferred financing costs................................. 279 138 --
Write-down of investments in rental real estate ......................... -- -- 1,545
Noncash bonuses ......................................................... -- 1,609 --
Gain on retirement of assets ............................................ (10) (429) (31)
Stock option compensation expense ....................................... 3,023 308 --
Deferred taxes .......................................................... (1,303) 202 --
Changes in assets and liabilities, net of acquisition in 1996
Accounts receivable, net ........................................... (3,056) (523) (3,891)
Inventories ........................................................ 2,252 540 (2,342)
Prepaid expenses and other ......................................... (730) 171 (266)
Accounts payable ................................................... 815 1,668 3,270
Accrued liabilities ................................................ (87) 541 1,297
--------- --------- ---------
Net cash provided by operating activities...................... 8,767 7,853 10,451
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .............................. (3,380) (2,337) (3,389)
Proceeds from asset sales ............................................... 25 784 151
Increase in other assets ................................................ (1,134) (1,677) (1,133)
Payment for acquisition, net of cash acquired ........................... (10,243) -- --
--------- --------- ---------
Net cash used in investing activities .............................. (14,732) (3,230) (4,371)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable ................................................ (62,928) (8,605) (1,376)
Proceeds from borrowings ................................................ 13,740 -- --
Proceeds from issuance of senior subordinated notes ..................... 100,000 -- --
Proceeds from issuance of notes payable ................................. -- 57,155 592
Deferred financing costs ................................................ (5,457) (2,127) --
Capital contributions ................................................... 25 22,100 --
Net distributions to stockholders ....................................... -- (74,268) (6,993)
Net distributions to Holding............................................. (39,304) -- --
Income tax benefit upon exercise of Holding's stock options ............. 421 -- --
--------- --------- ---------
Net cash provided by (used in) financing activities................. 6,497 (5,745) (7,777)
--------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....................... 532 (1,122) (1,697)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............................... 85 1,207 2,904
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ..................................... $ 617 $ 85 $ 1,207
========= ========= =========

SUPPLEMENTAL DISCLOSURE:
Cash paid during the period for:
Interest ........................................................... $ 3,699 $ 2,420 $ 355
Income taxes ....................................................... 4,514 1,064 292
Noncash distributions............................................... -- 4,899 --
Noncash contribution from Holding................................... 5,000 -- --

The Company acquired all of the capital stock of Bishop Manufacturing Companies for a combined purchase price of $19,531 of
which $10,243 was paid in cash, as follows:

Fair value of net assets acquired . . . . . . . . . . . . $20,705
Payable to seller . . . . . . . . . . . . . . . . . . . . (1,000)
Cash acquired . . . . . . . . . . . . . . . . . . . . . . (3,288)
Common stock issued by Holding . . . . . . . . . . . . . (5,000)
Liabilities assumed . . . . . . . . . . . . . . . . . . . (1,174)
-------

Cash paid for capital stock of Bishop . . . . . . . . . . $10,243
=======

The accompanying notes are an integral part of
the consolidated financial statements.

F-6
105
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

Atrium Companies, Inc. (the "Company"), (formerly Fojtasek Companies, Inc.,
a Texas corporation), is engaged in the manufacture and sale of doors,
windows and various building materials throughout the United States. A
significant portion of the Company's sales relates to new home construction
activity which is cyclical in nature.

On July 3, 1995, the stockholders of Fojtasek Companies, Inc. ("Fojtasek")
executed a stock purchase agreement (the "Heritage Transaction") whereby
all of Fojtasek's common stock was acquired by FCI Holding Corp. ("FCI
Holding"), a Delaware holding company which was established in connection
with the Heritage Transaction (Note 12). On September 30, 1996, Atrium
Corporation ("Holding"), a Delaware parent company which owned 100% of FCI
Holding (which owned 100% of Fojtasek) acquired Bishop (as defined), a
manufacturer of vinyl replacement windows and doors and contributed the
capital stock of Bishop to Fojtasek (Note 15). On November 8, 1996, in
connection with the Hicks Muse Transaction (the "Transaction"), Fojtasek,
which was a Texas corporation, was merged with and into FCI Holding (Note
12). The two companies were merged to achieve certain business objectives
related to brand-name recognition. The surviving Delaware corporation was
renamed "Atrium Companies, Inc.," (the "Company") which is a direct,
wholly-owned subsidiary of Holding. The merger was accounted for
as a merger of companies under common control and the assets were valued
at historical cost.

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company, Bishop Manufacturing Companies ("Bishop"), acquired in September
1996, and H-R Window Supply, Inc. All significant intercompany transactions
and balances have been eliminated in consolidation.

INDUSTRY SEGMENT

The Company operates in a single industry segment, the fabrication and
distribution of doors and windows and related components.

REVENUE RECOGNITION

Revenue from the sale of doors and windows and related components is
recorded at the time of delivery and billing to the customer. Allowances
are established to recognize the risk of sales returns from customers.

CASH AND CASH EQUIVALENTS

The Company considers all highly-liquid investments with original
maturities of three months or less to be cash equivalents.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are net of allowances for doubtful accounts of $1,497
and $1,155 as of December 31, 1996 and 1995, respectively.

PROVISION FOR WARRANTY CLAIMS

Estimated warranty costs are provided at the time of the sale of the
warranted product.

F-7
106
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. The Company's customers are concentrated in the southern
regions of the U.S. and focus upon the distribution and sale of building
products. Sales in the state of Texas accounted for approximately 37.2% of
revenue in 1996. The Company performs ongoing credit evaluations of its
customers' financial condition. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends, and other information. The Company
does not believe it is dependent upon any single customer. No single
customer accounted for more than 10% of sales.

INVENTORIES

Effective January 1, 1994, the Company elected to change its method of
accounting for inventory from the first-in, first-out (FIFO) method to the
last-in, first-out (LIFO) method. Management believes that the LIFO method
results in a better matching of current costs with current revenues.

The effect of the change in 1994 was to increase cost of sales by $2,721.
The change in the LIFO reserve for the years ended December 31, 1995 and
1996 decreased cost of sales by $851 and $491, respectively.

DEPRECIATION AND AMORTIZATION

The Company provides for depreciation and amortization using straight-line
and accelerated methods to allocate the cost of the assets over their
estimated useful lives, as follows:

ESTIMATED
USEFUL LIFE
------------

Buildings and improvements . . . . . . . . . . . . . . . . 5-40 years
Machinery and equipment . . . . . . . . . . . . . . . . . . 3-12 years

GOODWILL

Goodwill represents the excess of cost over fair market value of net assets
acquired. Goodwill is being amortized over 40 years on a straight-line
basis. Accumulated amortization at December 31, 1996 was $75. Management
continually reviews the carrying value of goodwill for impairment
and the related amortization period based on anticipated undiscounted cash
flows of the assets to which it relates. The Company considers operating
results, trends and prospects of the Company, as well as competitive
comparisons. The Company also takes into consideration competition within
the building materials industry and any other events or circumstances which
might indicate potential impairment. When goodwill is determined to be
permanently impaired, a charge is recognized to the extent the carrying
value of related assets (including goodwill) exceeds the sum of the
undiscounted cash flows from those related assets.

CAPITALIZED SOFTWARE COSTS

The Company capitalizes internal employee costs and external consulting
costs associated with implementing and developing software for internal
use. Internal costs capitalized include payroll and payroll-related
costs for employees who are directly associated with the development,
modification and implementation of the software. External costs include
direct expenses related to consulting and other professional fees
consumed in developing, modifying and implementing the software.
Capitalization of costs occurs upon the completion of the preliminary
project stage and when management believes it is probable a project will
be completed and the software will be used to perform the function
intended. Amortization will begin when the software is put into place
and will be calculated on a straight-line basis over five years.
Management continually reviews the carrying value and expected
functionality of the accumulated costs for potential impairment. When it is
no longer probable that computer software being developed will be completed,
modified or placed in service, the assets carrying value will be adjusted to
the lower of cost or fair value.

FORWARD COMMITMENTS

The Company periodically enters into forward commitments to hedge price
variances in materials. Changes in the market value of forward commitments
are recognized in income when the effects of the related charges in the
hedged items are recognized.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the

F-8
107
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1995 and 1994 balances to
conform with the 1996 presentation.

2. FAIR VALUE OF FINANCIAL INSTRUMENTS:

In accordance with Statement of Financial Accounting Standards (SFAS) No.
107, "Disclosures About Fair Value of Financial Instruments," the following
methods have been used in estimating fair value disclosures for significant
financial instruments of the Company.

Estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. Due
to the fact that considerable judgment is required to interpret market data
to develop the estimates of fair value, the estimates presented are not
necessarily indicative of the amounts that could be realized in a current
market exchange.

Cash and cash equivalents -- The carrying amounts reported in the balance
sheet approximate the fair value.

Notes Payable -- The fair value of the Company's notes in 1996 is based on
quoted market prices and in 1995 based on similar issues as advised by the
Company's bankers.

Forward Aluminum Contracts -- The unrealized gains and losses are based on
quotes for aluminum as reported on the London Metal Exchange.

The carrying amounts and estimated fair values of the Company's financial
instruments as of December 31, 1996 and 1995 were as follows:

1996 1995
----------------------- -----------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ------------ --------------- -----------

ASSETS:
Cash and cash equivalents .... $ 617 $ 617 $ 85 $ 85

LIABILITIES:
Notes Payable ................ $100,000 $102,000 $ 49,000 $ 49,000

Notional Unrealized
Amount Gain/(Loss)
-------- ----------

OFF-BALANCE SHEET:
Forward Aluminum Contracts .... $ 21,656 $ 519

3. INVENTORIES:

Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) method of accounting. Work-in-process and finished
goods inventories consist of materials, labor, and manufacturing
overhead. Inventories consisted of the following at December 31:

F-9
108
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1996 1995
-------- -------

Raw materials . . . . . . . . . . . . . . . $11,765 $11,654
Work-in-process . . . . . . . . . . . . . . 563 686
Finished goods . . . . . . . . . . . . . . 2,526 3,484
----- -----
14,854 15,824
LIFO reserve . . . . . . . . . . . . . . . (1,380) (1,871)
------ ------
$13,474 $13,953
======= =======

4. PROPERTY, PLANT, AND EQUIPMENT:

Property, plant, and equipment, stated at cost, consisted of the
following at December 31:

1996 1995
------- ------

Land . . . . . . . . . . . . . . . . . . . . . $682 $609
Buildings and improvements . . . . . . . . . . 7,139 6,554
Machinery and equipment . . . . . . . . . . . . 11,970 8,802
Construction-in-process . . . . . . . . . . . . 705 72
------- ------
Total . . . . . . . . . . . . . . . . . . 20,496 16,037

Less accumulated depreciation and amortization (6,526) (4,917)

------- -------
$13,970 $11,120
======= =======

Depreciation expense was $1,681, $1,554, and $1,678 for the years ended
December 31, 1996, 1995, and 1994, respectively.

5. OTHER ASSETS:

Other assets consisted of the following at December 31:

1996 1995
------ ------

Non-compete agreements . . . . . . . . . . . . $1,575 $2,025
Capitalized software costs . . . . . . . . . . 1,355 317
Deposits and other . . . . . . . . . . . . . . 328 24
------ ------
$3,258 $2,366
====== ======

The cost of the non-compete agreements are being amortized over the
terms of the related agreements which are five years. Amortization
expense for the years ended December 31, 1996 and 1995 was $450 and
$225, respectively, resulting in accumulated amortization at
December 31, 1996 of $675.

6. DEFERRED FINANCING COSTS:

The deferred financing costs relate to costs incurred in the placement of
the Company's debt and are being amortized using the effective interest
method over the terms of the related debt which range from five to ten
years. Amortization expense for the years ended December 31, 1996 and 1995
was $279 and $138, respectively and was recorded as interest expense in
the accompanying Consolidated Statements of Income.

F-10

109
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

7. ACCRUED LIABILITIES:

Accrued liabilities include the following at December 31:

1996 1995
------ ------

Accrued salaries and wages .............. $2,100 $1,799
Accrued interest ........................ 1,003 195
Contingent payable related to
Bishop acquisition...................... 1,000 --
Warranty and litigation reserve ......... 961 560
Accrued taxes payable ................... 601 1,370
Workers' compensation reserve ........... 500 500
Other ................................... 415 1,170
------ ------
$6,580 $5,594
====== ======

8. NOTES PAYABLE:

Notes payable consisted of the following at December 31:

1996 1995
-------- -------

Senior subordinated notes . . . . . . . . . . . . $100,000 $ --
Term loan . . . . . . . . . . . . . . . . . . . . -- 38,000
Revolving line of credit . . . . . . . . . . . . -- 11,000
-------- --------
100,000 49,000
Less current maturities -- (4,500)
-------- --------
$100,000 $ 44,500
======== ========

In conjunction with the Heritage Transaction, a $40,000 term loan
agreement (the "Term Loan") and a $25,000 revolving credit agreement
(the "Line of Credit") (collectively, the "Old Credit Facility") were
executed with a bank group. The Company initially borrowed $17,155 under
the Line of Credit and $40,000 under the Term Loan. The Line of Credit
required the Company to pay a commitment fee of .375% to .5% on the
unborrowed portion of the facility and had an interest rate of 8.25% at
December 31, 1995. On November 27, 1996, all amounts outstanding under
the Old Credit Facility of approximately $54,124 were repaid in full in
connection with the Transaction. The Company recorded, as an
extraordinary charge $1,176, net of income tax benefit of $720,
related to the remaining deferred financing costs associated with the
Old Credit Facility.

In connection with the Transaction, the Company issued $100,000 aggregate
principal amount of 10 1/2% Senior Subordinated Notes (the "Notes") due
November 15, 2006 under the Indenture dated as of November 27, 1996 (the
"Indenture"). Interest on the Notes is payable semiannually on May 15
and November 15 of each year, commencing on May 15, 1997. The Notes
mature on November 15, 2006. The Company may redeem the Notes prior to
November 15, 2001, subject to certain requirements. Upon the occurrence
of a change of control (as defined), (i) the Company may, at any time on
or prior to November 15, 2001,

F-11
110
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

redeem the Notes, in whole but not in part, at a redemption price equal
to 100% of the principal amount thereof plus a defined premium,
together with accrued and unpaid interest, if any, to the date of
redemption, and (ii) if the Notes are not redeemed, the Company will be
required to make an offer to repurchase the Notes at a price equal to
101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. In addition, under certain
circumstances the Company will be obligated to make an offer to
repurchase the Notes at 100% of the principal amount, plus accrued and
unpaid interest to the date of repurchase, with the net cash proceeds of
certain sales or other dispositions of assets.

In addition, at any time and from time to time prior to November 15,
2000, the Company may, at its option, redeem the Notes, in part, with
net cash proceeds of one or more Equity Offerings by the Company or
Holding, at a redemption price equal to 110 1/2% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date
of redemption; provided, however, that after any such redemption the
aggregate principal amount of the Notes outstanding must equal at least
$65 million. In order to effect the foregoing redemption with the
proceeds of any Equity Offering, the Company shall make such redemption
not more than 12 months after the consummation of any such Equity
Offering.

The Notes are fully and unconditionally guaranteed (the "Subsidiary
Guarantees") on an unsecured, senior subordinated basis, by each of the
Company's subsidiaries (see Note 18). The Indenture permits the Company
to incur additional indebtedness (including Senior Indebtedness) of up
to $45,000 as of December 31, 1996, subject to certain limitations. The
Indenture restricts the Company's ability to pay dividends or make
certain other restricted payments, consummate certain asset sales, or
otherwise dispose of all or substantially all of the assets of the
Company and its subsidiaries. The Indenture also contains certain
financial covenants, none of which are more restrictive than those under
the Credit Facility.

The Company also entered into a Credit Agreement providing for a new
revolving credit facility (the "Credit Facility") with a bank in
connection with the Transaction. The Credit Facility enables the Company
to borrow up to $20,000. The revolving credit loans bear interest
at a rate based upon the lender's prime rate plus a borrowing margin of
1.5% or a LIBOR-based rate plus a borrowing margin of 2.5%. The Company
pays a commitment fee of .5% based on the unused portion of the Credit
Facility. The Credit Facility terminates in March 2002. The Company had
$20,000 of availability under the Credit Facility as of December
31, 1996. The Credit Facility ranks senior in right of payment to the
Notes and is secured by substantially all the assets of the Company and
its subsidiaries and is also guaranteed by Holding and the Company's
subsidiaries (see Note 18). The Credit Facility contains various
covenants that restrict the Company from taking various actions and
require the Company to achieve and maintain certain financial covenants.
Financial covenants include minimum EBITDA (as defined), minimum
interest coverage ratio and limitations on capital expenditures,
investments and incurring other indebtedness. The Credit Facility also
prohibits the Company from prepaying the Notes and prohibits certain
changes in control of the Company.

Principal payments due during the next five years on long-term notes
payable as of December 31, 1996 are as follows:

1997 .......................................... $ --
1998 .......................................... --
1999 .......................................... --
2000 .......................................... --
2001 .......................................... --
Thereafter .................................... 100,000
-------------
$ 100,000
=============

9. FEDERAL INCOME TAX:

Prior to the Heritage Transaction, the Company was an S corporation,
and, for federal income tax purposes, all income or loss was allocated
to the stockholders for inclusion in their respective federal income tax
returns. The Company made periodic distributions to stockholders for
their pro rata portion of federal income taxes payable. In conjunction
with the Heritage Transaction, the Company became a C corporation.
Accordingly, subsequent to the Heritage Transaction, the Company
accounts for income taxes in accordance with SFAS No.

F-12
111
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

109, "Accounting for Income Taxes," which requires that deferred income
tax expenses be provided based upon the liability method.

The components of the provision for income taxes are as follows for the
years ended December 31:

1996 1995 1994
------- ------- -----

Current federal income tax provision .......... $ 3,388 $ 1,420 $ --
Deferred federal income tax
provision (benefit)...................... (930) 202 --
State income tax provision (benefit) .......... 241 (78) 604
------- ------- -----
Provision for income taxes .............. $ 2,699 $ 1,544 $ 604
======= ======= =====

The Company recognized a tax benefit in 1996 of $421 related to
Holding's stock options. This benefit was recorded directly to paid in
capital.

Pro forma federal income tax expense, had the Company been subject to
corporate income taxes for 12 months in 1995 and 1994, would have been
$1,187 and $3,428, respectively.

Temporary differences which give rise to the deferred income tax assets
and liabilities are as follows as of December 31:

1996 1995
------- -------

Deferred income tax assets:
Allowance for doubtful accounts .... $ 495 $ 427
Inventory cost capitalization and
valuation........................ 660 474
Accrued vacation ................... 173 150
Deferred stock compensation ........ 501 114
Warranty and litigation ............ 357 178
Workers' compensation............... 185 112
Other............................... 184 92
------- -------
2,555 1,547

Deferred income tax liabilities:
Depreciation ....................... (811) (634)
Other .............................. (7) (694)
------- -------
(818) (1,328)
------- -------
Net deferred income tax asset ............. 1,737 219
Less-current deferred tax asset............ 2,555 1,217
------- -------
Long-term deferred tax liability .......... $ 818 $ 998
======= =======

SFAS 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not
that some of or all of the deferred tax assets will not be realized. As
of December 31, 1996 and 1995, no valuation reserve was recorded.

F-13
112
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Reconciliation of the federal statutory income tax rate to the effective
tax rate, was as follows for the years ended December 31:

1996 1995
------- -------

Tax computed at statutory rate ............ $ 2,777 $ 1,154
Income tax benefit not recognized on S
corporation tax deductions.......... -- 655

State taxes ............................... 241 (78)
Prior year return to accrual differences... (352) --
Effects of SFAS No. 109 adoption in 1995
and other ........................... 33 (187)
------- -------
Provision for income taxes ................ $ 2,699 $ 1,544
======= =======

10. RELATED PARTIES:

Included in prepaid expenses and other current assets are the following
receivables due from related parties at December 31, 1996 and 1995:

1996 1995
---- ----

Receivables from stockholders ........................ $ 82 $414
Receivables from officers ............................ $ 5 $ 38
Receivables from employees ........................... $ 80 $ 51

MONITORING AND OVERSIGHT AGREEMENT

Holding and the Company have entered into a ten-year monitoring and
oversight agreement (the "Monitoring and Oversight Agreement") with
Hicks, Muse & Co. Partners, L.P. ("Hicks Muse Partners"). Pursuant
thereto, Holding and the Company have agreed to pay to Hicks Muse
Partners an annual fee of $320 for ongoing financial oversight and
monitoring services to the Company. The annual fee is adjustable upward
or downward on January 1 of each calendar year to an amount equal to
0.2% of the budgeted consolidated annual net sales of the Company and
its subsidiaries for the then-current fiscal year; provided, that such
fee shall at no time be less than $320 per year.

The Monitoring and Oversight Agreement makes available on an ongoing
basis the resources of Hicks Muse Partners concerning a variety of
financial and operational matters. The services that have been and will
continue to be provided by Hicks Muse Partners could not otherwise be
obtained by the Company without the addition of personnel or the
engagement of outside professional advisors.

FINANCIAL ADVISORY AGREEMENT

Holding and the Company are parties to a ten-year financial advisory
agreement (the "Financial Advisory Agreement") with Hicks Muse Partners
pursuant to which Hicks Muse Partners received a financial advisory fee
of $2,000 on the closing date of the Transaction as compensation for its
services as financial advisor to the Company in connection with the
Transaction. Pursuant to the Financial Advisory Agreement, Hicks Muse
Partners is also entitled to receive a fee equal to 1.5% of the
transaction value (as defined in the Financial

F-14

113
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Advisory Agreement) for each add-on transaction (as defined) in which
the Company or any of its subsidiaries is involved.

Pursuant to the Financial Advisory Agreement, Hicks Muse Partners
provides investment banking, financial advisory and other similar
services with respect to the add-on transactions in which the Company is
involved. Such transactions require additional attention beyond that
required to monitor and advise the Company on an ongoing basis and
accordingly the Company pays separate financial advisory fees with
respect to such matters in addition to those paid in connection with the
Monitoring and Oversight Agreement. The services that have been and will
continue to be provided by Hicks Muse Partners could not otherwise be
obtained by the Company without the addition of personnel or the
engagement of outside professional advisors.

11. COMMITMENTS AND CONTINGENCIES:

COMMITMENTS

The Company has entered into operating lease agreements for office and
manufacturing space with unrelated third parties and with certain
affiliates of certain stockholders of the Company. Total rent expense
for the years ended December 31, 1996, 1995, and 1994 was $2,012, $3,156
and $1,499, respectively. Of these totals, amounts paid to related
parties were $605, $313 and $226 in 1996, 1995, and 1994, respectively.
Future minimum rents due under operating leases with initial or
remaining terms greater than 12 months are as follows:

RELATED OTHER
PARTIES PARTIES TOTAL
---------- --------- --------

1997 .. ........................................ $605 $655 $1,260
1998 ........................................... 882 571 1,453
1999 ........................................... 462 550 1,012
2000 ........................................... 420 359 779
2001 ........................................... 466 110 576
Thereafter ..................................... 1,555 32 1,587
----- ----- ------
$4,390 $2,277 $6,667
====== ====== ======

The Company has contracts with various suppliers to purchase aluminum for
use in the manufacturing process. The contracts vary from one to twelve
months and are at fixed quantities and fixed and floating prices. As of
December 31, 1996, the Company had forward commitments totaling $21,656
for delivery through December 1997 for 12.9 million pounds of aluminum,
of which 10.0 million pounds were at fixed prices.

The Company has entered into employment agreements with several
executives of the Company including its President and Chief Executive
Officer as well as its several Vice Presidents and General Managers of
the Company's divisions. The agreements generally provide for terms of
employment, annual salaries, bonuses, eligibility for option awards and
severance benefits.

CONTINGENCIES

The Company is party to various claims, legal actions, and complaints
arising in the ordinary course of business. In the opinion of
management, all such matters are without merit or are of such kind, or
involve such amounts, that an unfavorable disposition would not have a
material effect on the financial position, results of operations or
liquidity of the Company.

During 1993, factory employees voted to unionize and become members of
Amalgamated Clothing and Textile Workers Union. A three-year union
contract was executed during 1995. In addition, in connection with the
Keller Acquisition, the Company became a party to collective bargaining
arrangements due to expire in 2001.

The Company is involved in various stages of investigation and cleanup
relative to environmental protection matters, some of which relate to
waste disposal sites. The potential costs related to such matters and
the possible impact thereof on future operations are uncertain due in
part to: the uncertainty as to the extent of pollution; the complexity
of Government laws and regulations and their interpretations; the
varying costs and effectiveness of alternative cleanup technologies and
methods; the uncertain level of insurance or other types of recovery;
and the questionable level of the Company's involvement. The Company
has been named as a potentially responsible party at two superfund sites
pursuant to the Liability Act of 1980 or comparable state statutes.
Based on currently available information, the Company believes that its
liability, if any, associated with remediation of these sites or other
facilities will not have a material adverse effect on the Company's
financial condition, results of operations, or liquidity.

12. STOCK PURCHASE AGREEMENT:

HERITAGE TRANSACTION

On June 23, 1995, Heritage Fund I, L.P. ("Heritage") formed two Delaware
corporations, FCI Holding and its wholly-owned subsidiary,
Fojtasek/Heritage Acquisition Company ("Acquisition Corp."). Heritage
contributed approximately $22,000 to FCI Holding in exchange for
18,318,352 shares of voting common stock, 11,824,398 shares of nonvoting
common stock and 11,000 shares of nonvoting preferred stock of FCI
Holding. Additionally, FCI Holding issued 95,854 shares of voting common
stock to a member of management whom had an equity interest in the voting
common stock of Fojtasek prior to the transaction for approximately $50.
In a simultaneous transaction, (i) Acquisition Corp. used the $22,050
proceeds contributed from FCI Holding plus approximately $57,200 borrowed
under a term loan agreement and a revolving line of credit to purchase a
majority of the voting common stock from the Fojtasek shareholders and
pay transaction costs of approximately $5,000 (ii) Fojtasek shareholders
exchanged their remaining 1,643,985 shares of Fojtasek voting stock (the
"Rollover Stock") to FCI Holding for 18,318,352 shares of FCI Holding
voting common stock, (iii) the Rollover Stock was contributed by FCI
Holding to Acquisition Corp. for shares of Acquisition Corp. stock issued
to FCI Holding and (iv) Acquisition Corp. was merged into Fojtasek.

After the Heritage Transaction, the voting common stock of FCI Holding
was held by Heritage (49.8%), the Fojtasek shareholders (49.8%) and the
management shareholder (0.4%). FCI Holding owned 100% of the interest in
Fojtasek (the surviving company from the merger with Acquisition Corp.)
As a result of its purchase of nonvoting common stock in the
transaction, Heritage held approximately 68% of the economic interest of
FCI Holding.

In connection with the Heritage Transaction, certain assets and
liabilities were excluded from the assets and liabilities of Fojtasek and
distributed as follows. Fojtasek distributed the land, building, and
improvements related to two of its primary operating divisions to certain
Fojtasek shareholders. The book value of the property distributed totaled
approximately $9,300. The shareholders also assumed the industrial
development revenue bonds of $4,400 which were collateralized by the
property. Fojtasek also distributed its investments in rental real estate
to certain Fojtasek shareholders. The net book value of the properties
distributed was approximately $3,100. The shareholders also assumed the
related notes payable which were collateralized by the property. The
outstanding balance of the notes payable transferred was approximately
$2,300. These assets were distributed at fair market value, resulting in
a net loss of $205, which was recorded in the accompanying 1995
Consolidated Statement of Income.

The transaction was accounted for as a recapitalization as it did not
result in a change of control. Accordingly, the assets and liabilities
of Fojtasek were not revalued. The transaction resulted in an increase
to stockholder's deficit of $57,000.

F-15
114
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

FCI Holding issued options (the "Substitute Options") to certain members
of Fojtasek management to purchase FCI Holding's nonvoting common
stock. The options vested ratably over five years or immediately upon a
public offering or a sale of substantially all the assets of FCI Holding
or a subsidiary. In connection with this issuance, $1,350 in
compensation expense representing the difference between the market
value of the underlying common stock and the exercise price of the
option was deferred and amortized over the vesting period. Compensation
expense of approximately $410 and $308 related to the options was
recognized by the Company for the years ended December 31, 1996 and
1995, respectively. In connection with the Transaction, the options
vested immediately and became exercisable. The vested options were
redeemed for cash or exchanged for a new grant of Holding options. The
Company recognized a charge of $516 associated with the vested
options in stock option compensation expense in the accompanying
statement of income. In connection with the exchanged options, $1,040
was deferred and is being amortized over the new 5 year vesting period.

FCI Holding also issued stock options (the "Disposition Options") to
certain members of Fojtasek management. Value is recognized on
these options based on the market value of the Company, which became
exercisable upon a public offering or a sale of substantially all the
assets of FCI Holding or a subsidiary of FCI Holding. In connection
with the Transaction, the options vested and were redeemed and the
resultant compensation expense of $743 was recorded in stock option
compensation expense in the accompanying statement of income.

HICKS MUSE TRANSACTION

The Transaction refers to a recapitalization transaction that closed
concurrent with the closing of the issuance of the Notes in which
affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse")
purchased a number of newly issued shares of Holding Common Stock for
$32,000 pursuant to a Stock Purchase Agreement dated November 7, 1996,
and certain outstanding shares, and certain options and warrants to
acquire shares of Holding's Common Stock and all outstanding shares
of preferred stock of Holding were redeemed.

This transaction, which was completed on November 27, 1996, required
approximately $134,500 to complete, consisting of $59,417 in redemption
payments to the Selling Securityholders, $54,369 representing all
outstanding indebtedness under the Old Credit Facility and debt assumed
in connection with its acquisition of Bishop, $12,472 in redemption
payments to preferred stockholders of Holding (including cumulative
dividends in arrears) and approximately $8,242 of fees and expenses. The
funds required to consummate the Transaction were provided by (i) the
proceeds of the issuance of the Notes, (ii) $32,000 in equity financing
discussed above, (iii) drawings of $2,000 under the Company's Credit
Facility, and (iv) other cash provided by the Company of $500. The shares
issued to Hicks Muse, after giving effect to the other elements of the
Transaction, represent approximately 82.0% of the outstanding common
stock of Holding. The Transaction has been accounted for as a
recapitalization.

13. SPECIAL CHARGES AND STOCK OPTION COMPENSATION EXPENSE

Included in special charges in the accompanying 1996 Consolidated
Statement of Income are officer bonuses of $3,044 incurred in connection
with the Transaction. Special charges in 1995 consisted of consulting
fees of $408, officer and management bonuses of $6,380, and
restructuring charges of $400 incurred in connection with the Heritage
Transaction.

Included in Stock Option Compensation Expense are charges associated
with the issuance of new stock options at exercise prices below the fair
value of the underlying common stock, the expense associated with the
cash redemption of certain options, and amortization of deferred
compensation expense related to previously issued options.

F-16
115
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

14. OTHER INCOME (EXPENSE), NET:

Other income (expense), net consists of the following for the
years ended December 31:

1996 1995 1994
-------- ------- -------

Rental, interest, and other income ................ $ 49 $ 1,012 $ 559
Write-down of investments in rental real estate ... -- -- (1,544)
Gain on sale of assets ............................ 10 430 31
Other ............................................. (241) -- --
------- ------- -------
$ (182) $ 1,442 $ (954)
======= ======= =======

15. ACQUISITIONS:

Bishop:

Effective September 30, 1996, the Company acquired the capital stock of Bishop,
a manufacturer of vinyl replacement windows and doors for the residential
market in the northwest region of the United States, for approximately $19,531.
To consummate the acquisition, the Company paid approximately $13,531 to
Bishop's shareholders (the "Sellers"), agreed to a $1,000 payable to the
Sellers to be paid if certain earnings targets are met, and issued $5,000 of
Holding common stock in exchange for all of Bishop's capital stock. The $1,000
is recorded as an accrued liability in the Company's financial statements at
December 31, 1996. Holding subsequently contributed the Bishop capital stock to
the Company. Consequently, as of September 30, 1996, Bishop became a
wholly-owned subsidiary of the Company. In conjunction with the acquisition of
Bishop, the Company recorded approximately $12,038 of goodwill, which is being
amortized on a straight line basis over 40 years. The Bishop acquisition has
been accounted for under the purchase method of accounting. Accordingly, the
purchase price has been allocated to the assets and liabilities based upon
their estimated fair values at the date of acquisition as described below. The
purchase allocation is preliminary in nature and subject to change.

Cash and advances to the Company....... $ 3,288
Accounts receivable, net ............. 2,073
Inventories .......................... 1,774
Other current assets ................. 256
Property, plant and equipment, net ... 1,206
Other noncurrent assets .............. 70
Goodwill ............................. 12,038
Current liabilities .................. (986)
Other noncurrent liabilities ......... (188)
--------

Total purchase price ........... $19,531
========

F-17
116
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The Company's Consolidated Statement of Income for the year ended
December 31, 1996 includes Bishop's operations from the date of
acquisition. The following table presents the historical consolidated
operating results of the Company for the years ended December 31, 1996
and 1995, compared to pro forma operating results for such periods. The
unaudited pro forma information presents consolidated operating results
as though the acquisition of Bishop had occurred at the beginning of the
periods presented.

YEAR ENDED DECEMBER 31, 1996 YEAR ENDED DECEMBER 31, 1995
---------------------------- ----------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
--------- --------- -------- ---------

Net sales ............... $156,269 $166,710 $135,478 $149,974
Income before
extraordinary charge... 5,379 5,929 1,849 3,655
Net income .............. 4,203 4,753 1,849 3,655

Keller Asset Purchase:

In June 1996, the Company purchased certain assets from a division of
Keller Building Products for $1,150. In September 1996, the Company
purchased the division's inventory for $500. These asset purchases were
recorded at cost.

16. STOCK OPTIONS

To effect the acquisition of Bishop, FCI Holding formed Holding. The
Substitute Option holders exchanged 2,875,922 options for equivalent
nonvoting common stock options (the "Replacement Options") in Holding's
1996 Original Stock Option Plan (the "Original Plan"). In conjunction
with the Transaction, 2,875,922 options of Holding were tendered at an
exercise price of $.01, of which 1,050,000 were exchanged for
Replacement Options of Holding. Approximately $926 of compensation
expense has been recognized in 1996 in connection with the Substitute
Options and the 1,050,000 Replacement Options. Under certain
circumstances, if the option holders terminate employment prior to the
exercise of such option, they have the right to receive $1.00 per
option (net of the exercise price). In 1995, approximately $308 was
recognized as stock option compensation expense in connection with
the Substitute Options.

Upon completion of the Transaction, Holding adopted the 1996 Stock Option
Plan (the "New Plan") authorizing the issuance of 3,500,000 options to
acquire common stock. Holding's New Plan gives certain individuals and
key employees of Holding and any subsidiary corporation thereof who are
responsible for the continued growth of Holding an opportunity to
acquire a proprietary interest in Holding and thus to create in such
persons an increased interest in and a greater concern for the welfare
of Holding or any subsidiary. Through December 31, 1996, the Board of
Directors of Holding has granted 1,910,390 options under the New Plan at
a weighted average price of $1.00 per share which represented fair
market value on the dates of grant. The Company applies APB Opinion 25
and related interpretations in accounting for the Plan.

F-18
117
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The following table summarizes the transactions of the Original Plan and
the New Plan for the periods ended December 31, 1996 and 1995 (all
outstanding options were granted to management of the Company):

December 31, December 31,
1996 1995
------------ -----------

Outstanding options, beginning of period ......... 2,875,922 --
Granted .......................................... 2,960,390 2,875,922
Canceled or expired .............................. -- --
Exchanged ........................................ (1,050,000) --
Exercised ........................................ (1,825,922) --
---------- ----------
Outstanding options, end of year ................. 2,960,390 2,875,922
========== ==========
Average price of options exercised ............... $ .01 $ --
Weighted average exercise price, end of period.... $ .65 $ .01
Options exercisable, end of period ............... -- --
Options available for future grant ............... 1,589,610 --

The options vest over periods ranging from three to ten years.

On November 27, 1996, Holding issued a warrant (the "Warrant") to the
President and Chief Executive Officer (the "Executive") of the Company.
Pursuant to the terms of the Warrant, the Executive is entitled to
purchase 1,333,333 shares of Holding common stock at any time subsequent
to the Hicks Muse Transaction. The exercise price of the Warrant is $.01
per share. An additional 861,889 shares may be purchased under the
Warrant at an exercise price of $1.00, representing the fair market
value on the date of grant upon the realization of an 8.0% internal rate
of return (as defined). The 861,889 options vest ratably each day for
three years. The Warrant will terminate on November 27, 2006. The
Company recorded non-cash compensation expense of approximately
$1,320 for the period ended December 31, 1996 in connection with the
difference between the fair market value of the stock at the date of
issuance ($1.00) and the exercise price ($.01).

The following table summarizes information about stock options and
warrants outstanding at December 31, 1996:

Options Outstanding Options Exercisable
------------------------------------------------ ------------------------------
Weighted Average Weighted Weighted
Remaining Average Average
Range of Number Life Exercise Number Exercise
Exercise Prices Outstanding (months) Price Exercisable Price
--------------- -------------- ------------ ------------ -------------- -------------

Options:
$ .01 1,050,000 119 $ .01 -- --
$1.00 1,910,390 119 $1.00 -- --

Warrants:
$ .01 1,333,333 119 $ .01 1,333,333 $ .01
$1.00 861,889 119 $1.00 -- --

In 1995, the FASB issued FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") which, if fully adopted by the
Company, would change the methods the Company applies in recognizing the
cost of the stock-based plans. Adoption of the cost recognition
provisions of SFAS 123 is optional and the Company has decided not to
elect these provisions of SFAS 123. However, pro forma disclosures as if
the Company adopted the cost recognition provisions of SFAS 123 in 1995
are required by SFAS 123 and are presented below. In 1996, the Company
granted only nonqualified stock options under the plans.

The fair value of each stock option granted is estimated on the date of
grant using the minimum value method of option pricing with the
following weighted-average assumptions for grants in 1996: dividend
yield of 0.0%; risk-free interest rate of 7.0%; and the expected life of
10 years. (In determining the "minimum value" SFAS 123 does not require
the volatility of the Company's common stock underlying the options to
be calculated or considered because the Company was not publicly-traded
when the options were granted).

F-19
118
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Had the compensation cost for the Company's stock-based compensation
plans and warrants been determined consistent with SFAS 123, the
Company's net income for 1996 and 1995 would have been $3,934 and
$1,949, respectively.

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to
1995, and the Company anticipates making awards in the future under its
stock-based compensation plans.

17. Employee Benefit Plans:

Stock Purchase Plan

Holding's 1996 Stock Purchase Plan gives certain key employees of Holding
or related entities who are expected to contribute materially to the
success of Holding or related entities an opportunity to acquire a
proprietary interest in Holding, and thus to retain such persons and
create in such persons an increased interest in and a greater concern for
the welfare of Holding and any Related Entities. The Board of Directors
is authorized to offer 500,000 shares for purchase. As of December 31,
1996, 375,000 shares have been purchased under the plan.

F-20
119
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

401K

During 1996, the Company established an employee benefit plan in
accordance with Section 401(k) of the Internal Revenue Code for salaried
employees. The Company may at its discretion match employee
contributions. During the year ended December 31, 1996, the Company
incurred no expense.

18. SUBSIDIARY GUARANTORS:

In November 1996, the Company issued the Notes. The Company's payment
obligations under the Notes are fully and unconditionally guaranteed on a
joint and several basis (collectively, the "Subsidiary Guarantees") on a
senior subordinated basis by Bishop and H-R Window Supply, Inc. The
Company has no nonguarantor direct or indirect subsidiaries. Accordingly,
the consolidating balance sheets as of December 31, 1996 and the
consolidating income statements and statements of cash flows for the year
ended December 31, 1996 are presented below for Bishop and H-R Window
Supply, Inc., (collectively the "Guarantor Subsidiaries") and for the
Company. The financial data of H-R Window Supply, Inc. prior to 1996 is
not presented as it is immaterial to the Consolidated Financial
Statements. Separate complete financial statements of the respective
Subsidiary Guarantors would not provide additional material information
which would be useful in assessing the financial composition of the
Subsidiary Guarantors. No single Subsidiary Guarantor has any significant
legal restrictions on the ability of investors or creditors to obtain
access to its assets in event of default on the Subsidiary Guarantee
other than its subordination to senior indebtedness described above.

The Notes and the Subsidiary Guarantees are subordinated to all
existing and future Senior Indebtedness of the Company. The indenture
governing the Notes contains limitations on the amount of additional
indebtedness (including Senior Indebtedness) which the Company may
incur. As of December 31,1996, the maximum amount of Senior Indebtedness
the Company and its Subsidiary Guarantees collectively, and in the
aggregate, could incur was $45,000.

Investments in the Company's subsidiaries are accounted for by the
Company on the equity method for purposes of the supplemental
consolidated presentation. Earnings of subsidiaries are therefore
reflected in the Company's investment accounts and earnings. The
principal consolidation entries eliminate investments in subsidiaries
and intercompany balances and transactions.

F-21
120
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996

ASSETS

THE GUARANTOR CONSOLIDATION
COMPANY SUBSIDIARIES ENTRIES CONSOLIDATED
--------- ------------- -------------- --------------

CURRENT ASSETS:
Cash and cash equivalents ............................... $ (171) $ 788 $ -- $ 617
Accounts receivable, net ................................ 20,033 1,942 -- 21,975
Due from parent ......................................... -- 3,483 (3,483) --
Inventories ............................................. 11,792 1,682 -- 13,474
Prepaid expenses and other .............................. 1,721 44 -- 1,765
Deferred tax asset ...................................... 2,555 -- -- 2,555
--------- --------- -------- ---------
Total current assets ............................. 35,930 7,939 (3,483) 40,386
PROPERTY, PLANT, AND EQUIPMENT, net ........................... 12,691 1,279 -- 13,970
INVESTMENT IN SUBSIDIARY ...................................... 20,046 -- (20,046) --
GOODWILL, net .. .............................................. -- 11,963 -- 11,963
DEFERRED FINANCING COSTS, net ................................. 5,173 -- -- 5,173
OTHER ASSETS .................................................. 3,258 -- -- 3,258
--------- --------- -------- ---------
Total assets ..................................... $ 77,098 $ 21,181 $(23,529) $ 74,750
========= ========= ======== =========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable ........................................ $ 8,174 $ 354 $ -- $ 8,528
Due to subsidiary ....................................... 3,483 -- (3,483) --
Accrued liabilities ..................................... 5,799 781 -- 6,580
--------- --------- ------- ---------
Total current liabilities ........................ 17,456 1,135 (3,483) 15,108
LONG-TERM LIABILITIES:
Notes payable ........................................... 100,000 -- -- 100,000
Deferred tax liability .................................. 818 -- -- 818
--------- --------- ------- ---------
Total long-term liabilities ...................... 100,818 -- -- 100,818
--------- --------- ------- ---------
Total liabilities ................................ 118,274 1,135 (3,483) 115,926
--------- --------- ------- ---------
STOCKHOLDER'S EQUITY (DEFICIT):
Common Stock ............................................ -- 11 (11) --
Paid-in capital ......................................... 31,936 19,521 (19,521) 31,936
Retained earnings (accumulated deficit) ................. (73,112) 514 (514) (73,112)
--------- --------- -------- ---------
Total stockholder's equity (deficit)................ (41,176) 20,046 (20,046) (41,176)
--------- --------- -------- ---------
Total liabilities and stockholder's
equity (deficit).................................. 77,098 $ 21,181 $(23,529) $ 74,750
========= ========= ======== =========

F-22
121
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONSOLIDATING INCOME STATEMENT

THE GUARANTOR
COMPANY(1) SUBSIDIARIES(1) CONSOLIDATED
-------------- --------------- ------------

NET SALES ............................................. $ 151,249 $ 5,020 $ 156,269
COST OF GOODS SOLD .................................... 99,610 2,731 102,341
--------- --------- ---------
Gross profit ............................. 51,639 2,289 53,928

OPERATING EXPENSES:
Selling, delivery, general and administrative
expenses ..................................... 33,469 1,346 34,815
Special charges ................................. 3,044 -- 3,044
Stock option compensation expense ............... 3,023 -- 3,023
--------- --------- ---------
39,536 1,346 40,882
--------- --------- ---------
Income from operations ................... 12,103 943 13,046

INTEREST EXPENSE ...................................... 4,782 4 4,786
OTHER INCOME (EXPENSE), net ........................... (187) 5 (182)
--------- --------- ---------
Income before income taxes and
extraordinary charge...................... 7,134 944 8,078

PROVISION FOR INCOME TAXES ............................ 2,315 384 2,699
--------- --------- ---------
Income before extraordinary charges ...... 4,819 560 5,379

EXTRAORDINARY CHARGE FOR EARLY RETIREMENT
OF DEBT, (net of income tax benefit of $720)....... 1,171 5 1,176
--------- --------- ---------

NET INCOME ............................................ $ 3,648 $ 555 $ 4,203
========= ========= =========

(1) The amounts shown are for the year ended December 31, 1996 for the Company
and H-R Window Supply, Inc. and for the three months ended December 31,
1996 for Bishop. Intercompany eliminations have been reflected in the
Company's amounts.

F-23
122
ATRIUM COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

CONSOLIDATING STATEMENT OF CASH FLOWS

THE GUARANTOR
COMPANY (1) SUBSIDIARIES(1) CONSOLIDATED
----------- --------------- ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................. $ 3,648 $ 555 $ 4,203
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary charge, net of income tax benefit....... 1,171 5 1,176
Depreciation and amortization ........................ 2,058 147 2,205
Amortization of deferred financing costs ............. 279 -- 279
Gain on retirement of assets ......................... (10) -- (10)
Stock option compensation expense..................... 3,023 -- 3,023
Deferred taxes ....................................... (1,303) -- (1,303)
Changes in assets and liabilities, net of acquisition
in 1996:
Accounts receivable, net ......................... (3,274) 218 (3,056)
Inventories ...................................... 2,161 91 2,252
Prepaid expenses and other current assets......... (728) (2) (730)
Accounts payable ................................. 899 (84) 815
Accrued liabilities .............................. (31) (56) (87)
--------- --------- ---------
Net cash provided by operating activities ..... 7,893 874 8,767
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .................. (3,236) (144) (3,380)
Proceeds from asset sales ................................... 25 -- 25
Decrease (increase) in other assets ......................... (1,195) 61 (1,134)
Advances to parent/from subsidiary .......................... 343 (343) --
Payment for acquisition, net of cash acquired ............... (10,243) -- (10,243)
--------- --------- ---------
Net cash used in investing activities ................ (14,306) (426) (14,732)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable .................................... (62,740) (188) (62,928)
Proceeds from borrowings .................................... 13,740 -- 13,740
Proceeds from issuance of senior subordinated notes ......... 100,000 -- 100,000
Deferred financing costs .................................... (5,457) -- (5,457)
Capital contributions ....................................... 25 -- 25
Net distributions to Holding................................. (39,304) -- (39,304)
Income tax benefit upon exercise of Holding's stock options.. 421 -- 421
--------- --------- ---------
Net cash provided by (used in) financing activities .. 6,685 (188) 6,497
--------- --------- ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ......................... 272 260 532
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ...................... (443) 528 85
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................ $ (171) $ 788 $ 617
========= ========= =========

(1) The amounts shown are for the year ended December 31, 1996 for the Company
and H-R Window Supply, Inc. and for the three months ended September 30,
1996 for Bishop.

F-24
123
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Atrium Companies, Inc.:

We have audited the accompanying consolidated balance sheets of Vinyl
Building Specialties of Connecticut, Inc. and subsidiaries combined with Bishop
Manufacturing Co. of New York, Inc. (a wholly owned subsidiary of Atrium
Companies, Inc., formerly Fojtasek Companies, Inc.) (collectively referred to
as "Bishop Manufacturing") as of September 30, 1996 and 1995, and the related
combined consolidated statements of income and retained earnings and cash flows
for each of the three years in the period ended September 30, 1996. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bishop
Manufacturing as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Stamford, Connecticut,
October 21, 1996

F-25
124
BISHOP MANUFACTURING COMPANIES
COMBINED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND 1995

ASSETS
1996 1995
----------- -----------

CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 363,292 $ 3,824,076
Due from Atrium Companies, Inc. .................................. 2,924,879 --
Accounts receivable, less allowance for doubtful
accounts of $80,877 and $44,210, respectively................. 2,072,949 1,449,145
Inventories ...................................................... 1,747,059 1,714,195
Prepaid costs .................................................... 575 1,794
Deferred income taxes ............................................ 215,950 201,950
Other current assets ............................................. 39,838 78,985
----------- -----------
Total current assets ...................................... 7,364,542 7,270,145

PROPERTY, PLANT AND EQUIPMENT:
Land ............................................................. 25,000 25,000
Buildings ........................................................ 685,330 685,330
Leasehold improvements ........................................... 124,373 162,182
Machinery and equipment .......................................... 1,181,800 955,111
Transportation equipment and vehicles ............................ 390,619 530,664
Furniture and fixtures ........................................... 102,246 105,276
----------- -----------
2,509,368 2,463,563
Less--accumulated depreciation ......................................... (1,303,153) (1,053,856)
----------- -----------
1,206,215 1,409,707
----------- -----------
OTHER ASSETS ........................................................... 90,245 3,535
----------- -----------
Total assets .............................................. $ 8,661,002 $ 8,683,387
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................. $ 371,630 $ 230,056
Due to Atrium Companies, Inc. .................................... 221,438 --
Accrued liabilities .............................................. 894,225 637,717
Notes payable (Note 4) ........................................... 8,148 15,500
Income taxes payable ............................................. 212,673 557,042
----------- -----------
Total current liabilities ................................. 1,708,114 1,440,315
----------- -----------
NOTES PAYABLE (Note 4) ................................................. 179,327 409,193
OTHER LONG-TERM LIABILITIES ............................................ -- 573,821
MINORITY INTEREST ...................................................... 288,829 160,226
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock ..................................................... 10,000 10,000
Retained earnings ................................................ 6,474,732 6,089,832
----------- -----------
Total stockholders' equity ................................ 6,484,732 6,099,832
----------- -----------
Total liabilities and stockholders' equity ................ $ 8,661,002 $ 8,683,387
=========== ===========

The accompanying notes to combined consolidated financial statements are
an integral part of these combined consolidated balance sheets.

F-26
125
BISHOP MANUFACTURING COMPANIES

COMBINED CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS FOR THE YEARS ENDED
SEPTEMBER 30, 1996, 1995 AND 1994

1996 1995 1994
----------- ----------- -----------

Net sales . . . . . . . . . . . . . . . . . . . . . . . $14,409,175 $14,496,026 $14,006,354
Cost of goods sold . . . . . . . . . . . . . . . . . . 7,436,703 6,425,234 7,494,446
----------- ----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . 6,972,472 8,070,792 6,511,908
Selling, general and administrative expenses . . . . . 5,789,812 5,944,428 5,182,883
----------- ----------- -----------
Income from operations . . . . . . . . . . . . . 1,182,660 2,126,364 1,329,025
Interest income (expense), net . . . . . . . . . . . . 85,996 87,055 (60,028)
Other (expense) income . . . . . . . . . . . . . . . . (103,246) 76,635 24,605
----------- ----------- -----------
Income before provision for income taxes . . . . 1,165,410 2,290,054 1,293,602
Provision for income taxes (Note 6) . . . . . . . . . . 780,510 1,035,540 535,000
----------- ----------- -----------
Net income . . . . . . . . . . . . . . . . . . . 384,900 1,254,514 758,602
RETAINED EARNINGS, beginning of period . . . . . . . . 6,089,832 4,835,318 4,076,716
----------- ----------- -----------
RETAINED EARNINGS, end of period . . . . . . . . . . . $ 6,474,732 $ 6,089,832 $ 4,835,318
=========== =========== ===========

The accompanying notes to combined consolidated financial statements are
an integral part of these combined consolidated statements.

F-27
126
BISHOP MANUFACTURING COMPANIES

COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

1996 1995 1994
----------- ----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................. $ 384,900 $ 1,254,514 $ 758,602
----------- ----------- -----------

Adjustments to reconcile net income to net cash (used) provided by
operating activities:
Depreciation ..................................................... 294,920 303,020 312,017
Gain on sale of fixed assets ..................................... (14,900) -- --
Officers' compensation other than cash ........................... 153,172 -- --
Minority interest ................................................ 128,603 9,934 79,764
Change in allowance for doubtful accounts ........................ 36,667 -- 9,072
Deferred income taxes ............................................ (14,000) (17,000) (103,876)

Changes in assets and liabilities:
(Increase) in due from Atrium ............................. (2,924,879) -- --
(Increase) decrease in accounts receivable ................ (660,471) 411,123 (472,731)
(Increase) in inventories ................................. (32,864) (491,351) (409,065)
Decrease (increase) in prepaid costs ...................... 1,219 491,492 (489,586)
Decrease (increase) in other current assets ............... 39,147 (35,093) 28,520
(Increase) decrease in other assets ....................... (86,710) 2,693 (2,693)
Increase (decrease) in accounts payable ................... 141,574 (697,513) 362,537
Increase in accrued liabilities ........................... 256,508 126,718 174,821
(Decrease) increase in income taxes payable ............... (344,369) 401,613 155,429
(Decrease) increase in other long-term liabilities ........ (573,821) 549,998 --
----------- ----------- -----------
Total adjustments .................................. (3,600,204) 1,055,634 (355,791)
----------- ----------- -----------
Net cash (used) provided by operating activities ... (3,215,304) 2,310,148 402,811
----------- ----------- -----------

CASH USED IN INVESTING ACTIVITIES:
Capital expenditures, net ............................................... (229,700) (365,379) (355,236)
----------- ----------- -----------

CASH FLOW FROM FINANCING ACTIVITIES:
Repayments of notes payable ............................................. (237,218) (14,495) (13,544)
Capital contribution .................................................... 221,438 -- --
----------- ----------- -----------
Net cash (used) in financing activities .......................... (15,780) (14,495) (13,544)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents ............. (3,460,784) 1,930,274 34,031
CASH AND CASH EQUIVALENTS, beginning of period ................................ 3,824,076 1,893,802 1,859,771
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period ...................................... $ 363,292 $ 3,824,076 $ 1,893,802
=========== =========== ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ......................................................... $ 35,140 $ 43,140 $ 54,049
Income taxes ..................................................... $ 923,221 $ 834,060 $ 364,284

The accompanying notes to combined consolidated financial statements are
an integral part of these combined consolidated statements.

F-28
127

BISHOP MANUFACTURING COMPANIES

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(1) ATRIUM ACQUISITION:

Effective June 30, 1996, the shareholders of Vinyl Building Specialties
of Connecticut, Inc. ("VBS") and its subsidiaries, Bishop Manufacturing
Company, Incorporated ("BMC"), a Connecticut corporation, Bishop Manufacturing
Company of New England, Inc. ("BNE"), a Massachusetts corporation, combined with
Bishop Manufacturing Co. of New York, Inc. ("BNY") a Connecticut corporation,
(collectively referred to as the "Companies") entered into a securities and
exchange agreement and a stock purchase agreement (the "Agreement"), with Atrium
Corporation and its subsidiary, Atrium Companies, Inc., ("Atrium"), in which
Atrium agreed to acquire 100% of the Companies' Capital Stock. The stock was
then contributed to Atrium Companies, Inc. The Combined Consolidated Financial
Statements presented represent the financial position, results of operations and
cash flows prior to the effective date of the acquisition and do not reflect the
new basis of accounting resulting from Atrium's acquisition of Bishop. Atrium
completed the transaction effective September 30, 1996 and the Companies became
wholly-owned subsidiaries of Atrium Companies, Inc.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of presentation--

The accompanying combined consolidated financial statements include the
accounts of VBS, BMC, BNE and BNY and have been prepared on the accrual basis
of accounting. All significant intercompany balances and transactions have
been eliminated.

Nature of operations--

The Company manufactures vinyl windows and doors and primarily sells to
independent contractors for use in residential construction.

Use of estimates--

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Inventories--

Inventories are stated at the lower of cost (first-in, first-out method)
or market.

Property, plant and equipment--

Property, plant and equipment used in the business are stated at cost
less related accumulated depreciation. Repairs and maintenance of a routine
nature are charged to operations, while those which improve or extend the lives
of existing assets are capitalized. Depreciation and amortization are provided
primarily on a straight-line basis over the economic useful lives ranging from
five to thirty years.

Income taxes--

The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".

BNY is an S corporation for income tax reporting purposes. Under this
reporting, no provision (benefit) has been provided for income taxes relating
to the results of operations of BNY because the taxable income or loss will be
included with the income of the shareholders on their related individual income
tax returns. As a result of the Agreement, Atrium terminated BNY's
S-Corporation status as of October 1, 1996.

F-29
128
BISHOP MANUFACTURING COMPANIES

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Revenue Recognition

Revenue from the sale of doors and windows and related components is
recorded at the time of delivery and billing to the customer. Allowances are
established to recognize the risk of sales returns from customers.

(3) INVENTORIES:

Inventories are comprised of the following:

1996 1995
---------- ----------

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . $1,330,743 $1,360,809
Work in process . . . . . . . . . . . . . . . . . . . . . . . . 71,472 17,232
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . 344,844 336,154
---------- ----------
$1,747,059 $1,714,195
========== ==========

(4) NOTES PAYABLE:

Notes Payable consist of the following:

1996 1995
-------- --------

Mortgage note (a) . . . . . . . . . . . . . . . . . . . . . . . $ -- $231,133
Promissory note (b) . . . . . . . . . . . . . . . . . . . . . . 187,475 193,560
-------- --------
187,475 424,693
Less: current portion . . . . . . . . . . . . . . . . . . . . 8,148 15,500
-------- --------
Notes payable--non current . . . . . . . . . . . . . . . . . . $179,327 $409,193
======== ========

(a) In fiscal 1993, BNE entered into a fifteen year mortgage note with a
bank. Interest on the note was at the prime rate plus one percent (9.75%
on September 30, 1995). The note was repaid in full in September 1996 by
the Companies.

(b) In fiscal 1993, BNE entered into a promissory note with an agent of the
U.S. Small Business Administration. The promissory note is due in
monthly installments including interest at 6.36%. The final payment is
due on July 1, 2013. The promissory note is secured by BNE's real estate
and is guaranteed by BMC.

(5) COMMITMENTS:

The Companies lease warehouse and distribution facilities and
transportation equipment under operating leases. Future annual lease
commitments under these operating leases as of September 30, 1996 are as
follows:

FISCAL YEARS ENDING SEPTEMBER 30, LEASE COMMITMENTS
---------------------------------------------- --------------------------------------------

1997 . . . . . . . . . . . . . . . . . $ 78,016
1998 . . . . . . . . . . . . . . . . . 54,812
1999 . . . . . . . . . . . . . . . . . 33,205
2000 . . . . . . . . . . . . . . . . . 16,239
2001 . . . . . . . . . . . . . . . . . 15,562
---------
$ 197,834
=========

Rental expense for the year ended September 30, 1996, 1995, and 1994 was
$227,957, $218,870 and $175,744, respectively.

On February 22, 1996, VBS entered into a Stockholders Agreement with
Team Pros America Corporation ("Team Pros"), a customer of the Companies. In
connection with the agreement, the Companies have agreed to lend Team

F-30
129
BISHOP MANUFACTURING COMPANIES

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Pros $48,000 payable in five installments commencing on the date of this
agreement. As of September 30, 1996, the Company has loaned Team Pros
$38,000.

(6) INCOME TAXES:

The components of the income tax provision as of September 30, 1996,
1995, and 1994 are as follows:

1996 1995 1994
-------- ---------- --------

Current:
Federal . . . . . . . . . . . . . . . . . . . $572,060 $774,263 $498,693
State . . . . . . . . . . . . . . . . . . . . 222,450 278,500 140,183
-------- ---------- --------
Total current provision . . . . . . . . 794,510 1,052,763 638,876
-------- ---------- --------

Deferred:
Federal . . . . . . . . . . . . . . . . . . . (10,080) (13,244) (81,553)
State . . . . . . . . . . . . . . . . . . . . (3,920) (3,979) (22,323)
-------- ---------- --------
Total deferred benefit . . . . . . . . (14,000) (17,223) (103,876)
-------- ---------- --------
Total provision . . . . . . . . . . . . $780,510 $1,035,540 $535,000
======== ========== ========

The differences between the U.S. statutory federal income tax rate and
the effective income tax rate as reflected in the accompanying statements of
operations result primarily from BNY losses, state income taxes and
intercompany profit earned on sales from BMC to BNY that do not eliminate for
tax purposes.

Temporary differences that comprise the net deferred tax asset primarily
pertain to accrued liabilities not currently deductible.

(7) RELATED PARTY TRANSACTIONS:

On September 30, 1996, Atrium made an advance to the Companies of
$221,438. The proceeds of the advance were used to reduce the Companies' debt.

(8) MINORITY INTEREST:

Approximately 20% of the stock of BNE is owned by a minority
shareholder. Accordingly, for financial reporting purposes, the assets,
liabilities, results of operations and cash flows of the minority position are
included in the combined consolidated financial statements and the minority
interest is reflected separately in retained earnings. In connection with
Atrium's purchase of the Companies, the minority interest was also acquired,
and has been accounted for under the purchase method.

F-31
130

[THIS PAGE INTENTIONALLY LEFT BLANK]
131
================================================================================

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
INITIAL PURCHASER OF THE OLD NOTES. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.

TABLE OF CONTENTS

PAGE
----

Certain Definitions and Market and
Industry Data . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Transaction . . . . . . . . . . . . . . . . . . . . . . . . 20
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 21
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 21
Selected Consolidated Historical Financial
Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . . . 28
Description of New Credit Facility . . . . . . . . . . . . . . 35
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Beneficial Ownership and Certain
Transactions . . . . . . . . . . . . . . . . . . . . . . . . 57
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . 62
Description of New Notes . . . . . . . . . . . . . . . . . . . 67
Book-Entry; Delivery and Form . . . . . . . . . . . . . . . . . 92
Certain United States Federal Income
Tax Considerations . . . . . . . . . . . . . . . . . . . . . 94
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 95
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 95
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Available Information . . . . . . . . . . . . . . . . . . . . . 97
Index to Financial Statements . . . . . . . . . . . . . . . . . F-1

UNTIL ____________, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
===============================================================================

===============================================================================

$100,000,000

ATRIUM COMPANIES,
INC.

10 1/2% SENIOR SUBORDINATED
NOTES DUE 2006

PROSPECTUS

March 31, 1997

===============================================================================
132

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

DIRECTOR LIABILITY

At the closing of the Transaction, the Company entered into
indemnification agreements with each of its directors and executive officers
under which the Company has agreed to indemnify the director or officer to the
fullest extent permitted by law, and to advance expenses, if the director or
officer becomes a party to or witness or other participant in any threatened,
pending or completed action, suit or proceeding (a "Claim") by reason of any
occurrence related to the fact that the person is or was a director, officer,
employee, agent or fiduciary of the Company or a subsidiary of the Company or
another entity at the Company's request (an "Indemnifiable Event"), unless a
reviewing party (either outside counsel or a director or directors appointed by
the Board of Directors) determines that the person would not be entitled to
indemnification under applicable law. In addition, if a change in control or a
potential change in control of the Company occurs and if the person indemnified
so requests, The Company will establish a trust for the benefit of the
indemnitee and fund the trust in an amount sufficient to satisfy all expenses
reasonably anticipated at the time of the request to be incurred in connection
with any Claim relating to an Indemnifiable Event. The reviewing party will
determine the amount deposited in the trust. An indemnitee's rights under his
or her indemnification agreement are not exclusive of any other rights under
the Company's Articles of Incorporation or By-Laws or applicable law.

II-1
133
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS:

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------

2.1*+ -- Stock Purchase Agreement by and among HMTF Acquisition Corp., Atrium Corporation and the Selling
Securityholders dated as of November 7, 1996

2.2*+ -- Securities Exchange Agreement among Atrium Corporation, FCI Holding Corp, Heritage Fund I, L.P. Randall
Fojtasek, et. al. dated August 22, 1996, as amended

2.3*+ -- Stock Purchase Agreement by and among Fojtasek Companies, Inc., Howard S. Saffan, Leslie Goldbloom and Kevin
Schumacher dated August 22, 1996, as amended

3.1* -- Certificate of Incorporation of Atrium Companies, Inc., as amended

3.2* -- Bylaws of Atrium Companies, Inc.

3.3* -- Certificate of Incorporation of Vinyl Building Specialties of Connecticut, Inc.

3.4* -- Bylaws of Vinyl Building Specialties of Connecticut, Inc.

3.5* -- Certificate of Incorporation of Bishop Manufacturing Co. of New York, Inc.

3.6* -- Bylaws of Bishop Manufacturing Co. of New York, Inc.

3.7* -- Certificate of Incorporation of Bishop Manufacturing Company, Incorporated

3.8* -- Bylaws of Bishop Manufacturing Company, Incorporated

3.9* -- Certificate of Incorporation of Bishop Manufacturing Company of New England, Inc.

3.10* -- Bylaws of Bishop Manufacturing Company of New England, Inc.

3.11* -- Articles of Incorporation of H-R Window Supply, Inc.

3.12* -- Bylaws of H-R Window Supply, Inc.

4.1* -- Exchange and Registration Rights Agreement made as of November 27, 1996 by and among Atrium Companies, Inc.,
the Subsidiary Guarantors and BT Securities Corporation

4.2* -- Indenture dated as of November 27, 1996 by and among Atrium Companies, Inc., the Subsidiary Guarantors and
United States Trust Company of New York

5.1* -- Opinion of Vinson & Elkins L.L.P.

10.1* -- Financial Advisory Agreement dated as of November 27, 1996 among Atrium Corporation, the Company and Hicks,
Muse & Co. Partners, L.P.

10.2* -- Stockholders Agreement dated as of November 27, 1996, by and among Atrium Corporation, the securityholders
listed therein and Hicks, Muse, Tate & Furst Incorporated

10.3* -- Indemnification Agreement dated as of November 27, 1996 by and between Atrium Corporation and Randall S.
Fojtasek, together with a schedule identifying substantially identical documents and setting forth material
details in which those documents differ from the foregoing documents

10.4* -- Credit Agreement by and among Atrium Companies, Inc., the Banks, Parties thereto, and Bankers Trust Company
dated November 27, 1996

10.5* -- Monitoring and Oversight Agreement among Atrium Corporation, the Company and Hicks, Muse & Co. Partners,
L.P. dated November 27, 1996

10.6* -- Atrium Indemnification Escrow Agreement among Hicks, Muse, Tate & Furst Equity Fund III, L.P., the Company,
Randall S. Fojtasek, Heritage Fund I, L.P., and Citibank N.A. dated November 27, 1996

10.7* -- Bishop Indemnification Escrow Agreement among Hicks, Muse, Tate & Furst Equity Fund III, L.P., the Company,
Howard S. Saffan and Citibank N.A. dated November 27, 1996

10.8* -- Atrium Corporation 1996 Stock Purchase Plan

10.9* -- Atrium Corporation 1996 Stock Option Plan

10.10* -- Employment Agreement dated November 7, 1996 between Atrium Corporation and Randall S. Fojtasek

10.11* -- Employment and Non-Competition Agreement between the Company and Howard S. Saffan dated September 30, 1996

10.12* -- Employment Agreement between the Company and Horace T. Hicks dated January 1, 1995

10.13* -- Employment Agreement between the Company and Louis W. Simi, Jr. dated January 1, 1995

10.14* -- Employment Agreement between the Company and Arthur G. Frost dated January 1, 1995

10.15* -- Escrow Agreement dated July 3, 1995 among Fojtasek/Heritage Acquisition Company, The Company, Randall
Fojtasek and the First National Bank of Boston

10.16* -- Non-Competition Agreement dated July 3, 1995 by and among Randall Fojtasek and Fojtasek/Heritage Acquisition
Company.

II-2
134

10.17* -- Atrium Lease Agreement, as amended

10.18* -- H-R Windows Lease Agreement

12.1** -- Computation of Ratio of Earnings to Fixed Charges

16.1** -- Letter regarding change in certifying accountant

21.1* -- Subsidiaries of the Company

23.1** -- Consent of Coopers & Lybrand L.L.P., Independent Public Accountants

23.2** -- Consent of Arthur Andersen LLP, Independent Public Accountants

23.3* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)

24.1* -- Powers of Attorney (set forth on signature page)

25.1* -- Form T-1 of United States Trust Company of New York

27.1** -- Financial Data Schedule

99.1* -- Form of Letter of Transmittal

99.2* -- Form of Notice of Guaranteed Delivery

- -----------------

* Previously Filed
** Filed herewith
+ The Company will furnish upon request of the Commission any omitted schedule
or exhibit.

(b) FINANCIAL STATEMENT SCHEDULES:

The following financial statement schedule is included in this
Registration Statement:

Report of Independent Public Accountants
II -- Valuation and Qualifying Accounts

ITEM 22. UNDERTAKINGS.

The undersigned Registrant 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 (the "Securities Act");

(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
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 Securities and Exchange Commission pursuant
to rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in this Registration Statement when
it becomes effective;

(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act, 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.

Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against

II-3
135
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 Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Trust Indenture Act.

The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.

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 this Registration Statement when it became effective.

II-4
136
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company has duly caused this Second Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Dallas, State of Texas, on the 31st day of March, 1997.

ATRIUM COMPANIES, INC.

By:/s/ RANDALL S. FOJTASEK
-----------------------------------
Randall S. Fojtasek, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the
capacities and on the date indicated.

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ RANDALL S. FOJTASEK President, Chief Executive Officer and March 31, 1997
------------------------------------ Director (Principal Executive Officer)
Randall S. Fojtasek

* Corporate Controller March 31, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)

* Director March 31, 1997
------------------------------------
John R. Muse

* Director March 31, 1997
------------------------------------
Michael J. Levitt

* Director March 31, 1997
------------------------------------
Stephen M. Humphrey

* Director March 31, 1997
------------------------------------
C. Dean Metropoulos

* Director March 31, 1997
------------------------------------
Michel Reichert

By:/s/ RANDALL S. FOJTASEK
---------------------------------
Randall S. Fojtasek
Attorney-in-fact

137
SIGNATURES

H-R WINDOW SUPPLY, INC.

By:/s/ ROBERT W. WOLF
------------------------------------
Robert W. Wolf, President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the
capacities and on the date indicated.

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ ROBERT W. WOLF President and Director (Principal March 31, 1997
------------------------------------ Executive Officer)
Robert W. Wolf

* Corporate Controller March 31, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)

By:/s/ ROBERT W. WOLF
----------------------------------
Robert W. Wolf
Attorney-in-fact

138
SIGNATURES

VINYL BUILDING SPECIALTIES
OF CONNECTICUT, INC.

By:/s/ RANDALL S. FOJTASEK
------------------------------------
Randall S. Fojtasek, President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the
capacities and on the date indicated.

Signature Capacity Date
--------- -------- ----

/s/ RANDALL S. FOJTASEK President and Director March 31, 1997
------------------------------------ (Principal Executive Officer)
Randall S. Fojtasek

* Chief Financial Officer March 31, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)

By:/s/ RANDALL S. FOJTASEK
----------------------------------
Randall S. Fojtasek
Attorney-in-fact

139
SIGNATURES

BISHOP MANUFACTURING CO. OF NEW YORK, INC.

By:/s/ RANDALL S. FOJTASEK
------------------------------------
Randall S. Fojtasek, President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the
capacities and on the date indicated.

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ RANDALL S. FOJTASEK President and Director March 31, 1997
------------------------------------ (Principal Executive Officer)
Randall S. Fojtasek

* Chief Financial Officer March 31, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)

By:/s/ RANDALL S. FOJTASEK
---------------------------------
Randall S. Fojtasek
Attorney-in-fact

140
SIGNATURES

BISHOP MANUFACTURING COMPANY, INCORPORATED

By:/s/ RANDALL S. FOJTASEK
------------------------------------
Randall S. Fojtasek, President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the
capacities and on the date indicated.

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ RANDALL S. FOJTASEK President and Director (Principal March 31, 1997
------------------------------------ Executive Officer)
Randall S. Fojtasek

* Chief Financial Officer March 31, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)

By:/s/ RANDALL S. FOJTASEK
----------------------------------
Randall S. Fojtasek
Attorney-in-fact

141
SIGNATURES

BISHOP MANUFACTURING COMPANY
OF NEW ENGLAND, INC.

By:/s/ RANDALL S. FOJTASEK
------------------------------------
Randall S. Fojtasek, President

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the
capacities and on the date indicated.

SIGNATURE CAPACITY DATE
--------- -------- ----

/s/ RANDALL S. FOJTASEK President and Director March 31, 1997
------------------------------------ (Principal Executive Officer)
Randall S. Fojtasek

* Chief Financial Officer March 31, 1997
------------------------------------ (Principal Financial and Accounting
Jeff L. Hull Officer)

By:/s/ RANDALL S. FOJTASEK
----------------------------------
Randall S. Fojtasek
Attorney-in-fact

142
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Atrium Companies, Inc.:

In connection with our audits of the consolidated financial statements of
Atrium Companies, Inc. as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996, which financial statements
are included in the Prospectus, we have also audited the financial statement
schedule of Atrium Companies, Inc. listed in Item 21(b) herein.

In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

Dallas, Texas
March 7, 1997

143
ATRIUM COMPANIES, INC.

VALUATION AND QUALIFYING ACCOUNTS

COLUMN C-ADDITIONS
----------------------------
COLUMN B - (1) (2)
BALANCE AT CHARGED TO ACQUIRED COLUMN D - COLUMN E -
BEGINNING COSTS AND THROUGH DEDUCTIONS - BALANCE AT
COLUMN A - DESCRIPTION OF PERIOD EXPENSES ACQUISITION WRITE-OFFS(1) END OF PERIOD
- ---------------------------------------------- ------------ ------------ ------------ ------------ -------------

Allowance for doubtful accounts:

Year ended December 31, 1994 .......... $ 1,300 $ (46) $ -- $ 46 $ 1,300

Year ended December 31, 1995 .......... $ 1,300 $ 486 $ -- $ (631) $ 1,155

Year ended December 31, 1996 .......... $ 1,155 $ 49 $ 237 $ 56 $ 1,497

Allowance for excess and obsolete inventories:

Year ended December 31, 1994 .......... $ 0 $ 0 $ 0 $ 0 $ 0

Year ended December 31, 1995 .......... $ 0 $ 2,000 $ 0 $ (1,440) $ 560

Year ended December 31, 1996 .......... $ 560 $ 816 $ 0 $ (240) $ 1,136

(1) net of recoveries
144
EXHIBIT INDEX