the number of full fiscal quarters of the Corporation that have ended after December 31, 2000 but on or before the date of determination (such product representing a 15% per annum credit on the aggregate dividends or distributions made by the Corporation to its stockholders during the period of October 1, 1997 through December 31, 2000), and excluding, to the extent occurring after December 31, 2000, the impact of (A) nonrecurring operating losses, nonrecurring operating gains and extraordinary items, each as determined in accordance with generally accepted accounting principles, (B) any charge incurred after December 31, 2000 relating to asbestos-related liabilities, (C) net after-tax gains or losses in respect of dispositions of assets by the Corporation other than in the ordinary course of business, (D) any charges relating to amortization of goodwill and other intangibles arising from the management buy-out of GAF Corporation in March 1989, and (E) such other items as the Board of Directors may determine to be extraordinary or unusual and the impact of which should not be included in consolidated net income or loss, as the case may be, for the purposes of computing Book Value. There shall be deducted from Book Value an amount equal to a 15% per annum charge on the aggregate capital contributions made to the Corporation by its stockholders during the period commencing January 1, 2001 and ending with the date of determination (the “Period”), amounts actually received by the Corporation during the Period for shares of its capital stock and, to the extent not actually charged against the net income of the Corporation, on the outstanding principal amount of loans and other advances made to the Corporation by affiliates (excluding Subsidiaries of the Corporation) during the Period. There shall be added to Book Value a 15% per annum credit on the aggregate dividends or distributions (including redemption of shares of its capital stock) made by the Corporation to its stockholders during the Period and, to the extent interest is not actually imputed to the Corporation in respect of such amounts, on the outstanding principal amount of loans and other advances made by the Corporation to affiliates (excluding Subsidiaries of the Corporation) during the Period. Any adjustments to Book Value (including the 15% charge and credit referred to in the preceding two sentences) shall take into account the tax effect, if any, associated therewith. If the Corporation’s common stock is converted into or exchanged for other securities or property pursuant to a recapitalization, stock split, combination, reorganization, merger, exchange or similar transaction, or if a sale of all or substantially all of, the common stock of the Corporation shall occur or be pending, Book Value, the Incentive Units and the terms hereof shall be modified by the Board of Directors in such manner as is reasonable under the circumstances. All determinations by the Board of Directors hereunder shall be made in good faith and shall be binding and conclusive.

(e)           “ Change in Control of the Corporation ” shall mean (i) the sale or disposition, in one or a series of related transactions during a twelve-month period ending on the date of the most recent transaction, of all or substantially all of the assets of the Corporation (with assets sold or disposed having a total gross fair market value equal to or more than 75% of the total gross fair market value of all assets owned directly and indirectly by such entity immediately prior to such acquisition or acquisitions), to any “person” or “group” (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of The Securities Exchange Act of 1934, as amended (the “Act”)) other than the Corporation or its Subsidiaries, or (ii) any person or group, other than an Affiliate, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Act), directly or indirectly, of more than 50% of the total voting power of the voting stock of the

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Corporation, including by way of merger, consolidation or otherwise, and an Affiliate of the Corporation ceases to control the Board.

(f)             “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(g)          “ Corporation ” shall have the meaning set forth in the Introduction.

(h)          “ Committee ” shall have the meaning set forth in Section II(a) hereof.

(i)           “ Default Fixed Exercise Date ” shall mean the Incentive Unit award Expiration Date.

(j)             “ Deferral Agreement ” shall mean the agreement entered into by an Employee in accordance with Section IV(h) below.  The Deferral Agreement may be in the form of one or more documents or electronic media, as prescribed by the Committee.

(k)          “ Deferred Compensation Plan ” shall mean the GAF Deferred Compensation Plan, as may be amended from time to time.

(l)           “ Effective Date ” shall have the meaning set forth in the Introduction.

(m)           “ Elected Fixed Exercise Date ” shall mean the fixed date an Employee specifies to exercise his or her Incentive Units pursuant to Section IV(d)(ii).  An Elected Fixed Exercise Date must be on or after the date the Incentive Units vest and on or prior to the award Expiration Date.

(n)          “ Employee ” shall mean a common-law employee of the Corporation or of any Affiliate at a salary grade of 12 (or its equivalent) or above.

(o)          “ Exercise and Payment Agreement ” shall mean the agreement entered into by an Employee in accordance with Section IV(d)(ii).  The Exercise and Payment Agreement may be in the form of one or more documents or electronic media, as prescribed by the Committee.

(p)          “ Expiration Date ” shall mean the date the Incentive Unit award expires in accordance with Section IV(g).

(q)          “ Final Value ” shall have the meaning set forth in Section IV(e) hereof.

(r)            “ Gain ” shall mean the excess, if any, of the Final Value of each Incentive Unit over the Initial Value of such Incentive Unit, reduced by any withholding taxes under Section VI(b).

(s)            “ Good Cause ” shall, with respect to any Employee, mean (i) the Employee’s willful or gross misconduct or willful or gross negligence in the performance of his duties for the Corporation or for any Affiliate, (ii) the Employee’s intentional or habitual neglect of his duties for the Corporation or for any Affiliate, (iii) the Employee’s theft or misappropriation of funds of the Corporation or of any Affiliate, fraud, criminal misconduct,

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breach of fiduciary duty or dishonesty in the performance of his duties on behalf of the Corporation or any Affiliate or commission of a felony, or crime of moral turpitude or any other conduct reflecting adversely upon the Corporation or any Affiliate or (iv) the Employee’s violation of any covenant not to compete or not to disclose confidential information with respect to the Corporation or any Affiliate.

(t)           “ Good Reason ” shall, with respect to any Employee, mean a change or changes in the terms of such Employee’s employment that are materially adverse to such Employee, including changes relating to salary and bonus, level of responsibility or location of employment.

(u)          “ Incentive Unit ” shall mean a bookkeeping item equal in value, as of any Valuation Date, to (i) the Corporation’s Book Value determined as of such Valuation Date divided by (ii) 1,000,010.  The value of each Incentive Unit as of a Valuation Date and the determination of accumulated comprehensive income and losses as of a Valuation Date shall each be determined by the Board and may be adjusted by the Board if the number of outstanding shares of the Corporation’s common stock increases or decreases at any time after the Effective Date.

(v)            “ Initial Value ” shall have the meaning set forth in Section IV(a) hereof.

(w)           “ Plan ” shall have the meaning set forth in the Introduction.

(x)            “ Retirement ” shall mean an Employee’s Separation from Service after (i) he attains age fifty-five (55) and (ii) the sum of his age and the number of his years of service with the Corporation and/or any Affiliate equals sixty (60) or more.  For purposes of determining years of service, service with predecessors to the Corporation and/or Affiliates shall be considered.

(y)            “ Section 409A ” shall have the meaning set forth in the Introduction.

(z)            “ Separation from Service”  shall mean the Employee’s termination of employment with the Corporation and all Affiliates, voluntarily or involuntarily, for any reason other than on account of death, or as otherwise provided by Treasury Regulation Section 1.409A-1(h).  However, the Employee’s employment relationship shall be treated as continuing intact while the individual is on a military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months (or longer, if required by statute or contract).  If the period of the leave exceeds six months and the Employee’s right to reemployment is not provided either by statute or contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period for purposes of this Plan only.

(aa)        “ Subsidiary ” shall mean a corporation or other entity of which more than fifty percent (50%) of the aggregate of its outstanding voting securities are owned directly or indirectly by the Corporation.

(bb)        “ Valuation Date ” shall mean the last day of business of each fiscal quarter of the Corporation.

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(cc)          “ Value ” shall mean the value of each Incentive Unit as of a specified date, as determined on a consistent basis by the Committee in its sole discretion.

II.  ADMINISTRATION

(a)          Administration; Term of Office; Appointment of Chairperson . The Plan shall be administered by a committee (the “Committee”) appointed by the Board from among the Employees. The Committee shall be comprised, unless otherwise determined by the Board, of the individuals serving as the Corporation’s Chief Executive Officer, Chief Financial Officer and Vice President-Human Resources. Each member of the Committee shall hold office until the date that he or she resigns from the Committee or is removed from membership on the Committee by action of the Board. In the event an individual for any reason ceases to be a member of the Committee, the Board shall appoint another qualified individual to serve on the Committee. The members of the Committee shall choose from among themselves one such member to serve as chairperson of the Committee.

(b)          Quorum and Manner of Acting . Except as hereinafter provided, a majority of the members of the entire Committee shall constitute a quorum for the transaction of business and the vote of a majority of the Committee members present at the time of the vote shall be the act of the Committee. In the absence of a quorum at any meeting of the Committee, a majority of the Committee members present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to the Committee members who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other Committee members. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. In the event any Committee member is disqualified from acting on a specific matter pursuant to Section II(f) hereof, such individual shall not be taken into account in determining whether a quorum of the Committee exists for taking action with respect to such matter. The Committee members shall act only as a Committee and the individual Committee members shall have no power as such. All decisions of the Committee or the Board in the interpretation and administration of the Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to, Employees and their Beneficiaries or successors).

(c)            Action Without a Meeting . Any action required or permitted to be taken by the Committee at a meeting may be taken without a meeting if all members of the Committee consent in writing to the adoption of a resolution authorizing such action. The resolution and written consents thereto by the members of the Committee shall be filed with the minutes of the proceedings of the Committee.

(d)          Telephonic Participation . Any one or more members of the Committee may participate in a meeting of the Committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.

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(e)            Compensation . Members of the Committee shall not be compensated for service as a C