<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended September 30, 1995
Commission File Number 1-7107
LOUISIANA-PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0609074
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
111 S. W. Fifth Avenue, Portland, Oregon 97204-3699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 221-0800
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock: 107,888,132 shares of Common Stock, $1 par
value, outstanding as of September 30, 1995.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Summary Statements of Income
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- -------------------
1995 1994 1995 1994
------- ------- -------- --------
Net sales $ 776.8 $ 818.4 $2,172.9 $2,291.1
------- ------- -------- --------
Costs and expenses:
Cost of sales 590.8 576.6 1,709.6 1,622.2
Depreciation, amortization
and depletion 57.9 52.9 150.8 148.5
Selling and administrative 29.1 33.8 85.4 92.0
Settlement charge and
other unusual items, net 366.6 --- 366.6 ---
Interest expense 1.2 2.2 5.2 7.4
Interest income (1.5) (2.5) (6.6) (6.4)
------- ------- -------- --------
Total costs and expenses 1,044.1 663.0 2,311.0 1,863.7
------- ------- -------- --------
Income (loss) before taxes and
minority interest (267.3) 155.4 (138.1) 427.4
Provision (benefit) for
income taxes (108.6) 59.0 (61.6) 162.4
Minority interest in
net income (loss) of
consolidated subsidiaries .4 1.3 2.0 2.8
------- ------- -------- --------
Net income (loss) $(159.1) $ 95.1 $ (78.5) $ 262.2
======= ======= ======== ========
Net income (loss) per share $ (1.48) $ .86 $ (.73) $ 2.38
======= ======= ======== ========
Cash dividends per share $ .14 $ .125 $ .405 $ .36
======= ======= ======== ========
<PAGE>
<TABLE>
<CAPTION>
Consolidated Summary Balance Sheets
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Sept. 30, 1995 Dec. 31, 1994
-------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 124.7 $ 315.9
Accounts receivable, net 180.2 157.4
Inventories 267.8 213.8
Prepaid expenses 18.4 7.3
Deferred income taxes 86.8 27.5
-------- --------
Total current assets 677.9 721.9
-------- --------
Timber and timberlands 692.6 693.5
Property, plant and equipment 2,573.0 2,358.2
Less reserves for depreciation (1,166.6) (1,085.0)
-------- --------
Net property, plant and equipment 1,406.4 1,273.2
Investments and other assets 50.0 55.1
-------- --------
Total assets $2,826.9 $2,743.7
======== ========
Current portion of long-term debt $ 45.7 $ 81.9
Short-term notes payable 50.2 50.5
Accounts payable and accrued liabilities 206.2 193.5
Current portion of contingency reserves 150.0 ---
Income taxes payable 58.3 18.9
-------- --------
Total current liabilities 510.4 344.8
-------- --------
Long-term debt, excluding current portion 184.3 209.8
Deferred income taxes 188.6 297.3
Contingency reserves, excluding current portion 264.1 ---
Other long-term liabilities and minority interest 35.7 42.4
Stockholders' equity:
Common Stock 117.0 117.0
Additional paid-in capital 477.0 478.4
Retained earnings 1,388.8 1,510.7
Treasury stock (201.5) (86.3)
Loans to Employee Stock Ownership Trusts (92.6) (114.0)
Other equity adjustments (44.9) (56.4)
-------- --------
Total stockholders' equity 1,643.8 1,849.4
-------- --------
Total liabilities and equity $2,826.9 $2,743.7
======== ========
</TABLE>
<PAGE>
Consolidated Summary Statements of Cash Flows
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Nine Months Ended September 30, 1995 1994
------- -------
Cash flows from operating activities:
Net income (loss) $ (78.5) $ 262.2
Depreciation, amortization and depletion 150.8 148.5
Other adjustments, including settlement charge
and other unusual non-cash charges 387.1 25.1
Decrease (increase) in certain working
capital components 36.5 11.1
Increase (decrease) in deferred income taxes (168.0) ---
------- -------
Net cash provided by operating activities 327.9 446.9
------- -------
Cash flows from investing activities:
Plant, equipment and logging
road additions, net (251.0) (192.5)
Timber and timberland additions (37.1) (57.5)
Other investing activities, net 2.5 (1.0)
------- -------
Net cash used in investing activities (285.6) (251.0)
------- -------
Cash flows from financing activities:
Repayment of long-term debt (61.9) (97.0)
Cash dividends (43.4) (39.6)
Increase (decrease) in short-term notes payable (.3) 3.2
Purchase of treasury stock (120.2) (34.6)
Loan to ESOTs --- (56.0)
Treasury stock sold to ESOTs --- 56.0
Other financing activities, net (7.7) 11.6
------- -------
Net cash used in financing activities (233.5) (156.4)
------- -------
Net increase (decrease) in cash
and cash equivalents (191.2) 39.5
Cash and cash equivalents at beginning of year 315.9 261.6
------- -------
Cash and cash equivalents at end of period $ 124.7 $ 301.1
======= =======
<PAGE>
Consolidated Statements of Stockholders' Equity
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Nine Months Ended
September 30, 1995
--------------------
Shares Amount
----------- -------
Common Stock 116,937,022 $ 117.0
=========== =======
Additional Paid-in-Capital:
Beginning Balance $ 478.4
Net transactions (1.4)
-------
Ending Balance $ 477.0
=======
Retained Earnings:
Beginning Balance $1,510.7
Net income (loss) (78.5)
Cash dividends, $.405 per share (43.4)
-------
Ending Balance $1,388.8
=======
Treasury stock:
Beginning Balance 4,944,804 $ (86.3)
Purchases 4,333,397 (120.2)
Shares reissued under employee
stock plans and other purposes (229,311) 5.0
---------- -------
Ending Balance 9,048,890 $(201.5)
========== =======
Loans to ESOTs:
Beginning Balance $ (114.0)
Less accrued contribution 21.4
-------
Ending Balance $ (92.6)
=======
Other Equity Adjustments:
Beginning Balance $ (56.4)
Currency translation adjustment 11.5
-------
Ending Balance $ (44.9)
=======
<PAGE>
Notes To Financial Statements
Louisiana-Pacific Corporation and Subsidiaries
1. The interim period information included herein reflects all adjustments
which are, in the opinion of the management of
L-P, necessary for a fair statement of the results of the respective
interim periods. Such charges, except as discussed elsewhere in this
report, are of a normal recurring nature. Results of operations for
interim periods are not necessarily indicative of results to be expected
for an entire year. It is suggested that these summary financial
statements be read in conjunction with the financial statements and the
notes thereto included in L-P's 1994 Annual Financial Report to
Stockholders and its 1995 First, Second and Third Quarter Interim Reports
to Stockholders. Interim financial statements are by necessity somewhat
tentative; judgments are used to estimate quarterly amounts for items
that are normally determinable only on an annual basis.
2. Earnings per share is based on the weighted average number of shares of
common stock outstanding during the periods (107,160,000 in 1995 and
110,140,000 in 1994). The effect of common stock equivalents is not
material.
3. The effective income tax rate is based on estimates of annual amounts of
taxable income, foreign sales corporation income and other factors.
These estimates are updated quarterly.
4. Determination of interim LIFO inventories requires estimates of year-end
inventory quantities and costs. These estimates are revised quarterly
and the estimated annual change in the LIFO inventory reserve is expensed
over the remainder of the year.
5. Reference is made to "Legal Proceedings" and to "Management's Discussion
and Analysis of Financial Condition and Results of Operations" elsewhere
in this report for a description of certain contingencies which may have
a materially adverse effect on L-P and for a description of settlements
of certain class action proceedings (one of which remains subject to
final court approval) regarding L-P's siding product and the impact of
that settlement on the financial statements as well as certain other
unusual items recorded in the third quarter.
6. Certain 1994 amounts have been reclassified to conform to the 1995
presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
General
The cause of the net loss for the third quarter and first nine months of
1995 was the $366.6 million pre-tax charge ($221.8 million after tax, or $2.07
per share) for settlements of class action proceedings related to L-P's siding
product (one of which remains subject to final court approval) as well as
severance charges and asset write-downs. The charge has been tax effected
because all components are deductible currently or in the future. Continued
oversupply of lumber products and high raw material costs caused third quarter
and nine month building products segment profits to fall from the same periods
in 1994 which were records for the company. Higher earnings in the pulp
segment helped to offset the building products declines. Overall net income
(loss) for the third quarter declined to a loss of $159.1 million ($1.48 per
share) in 1995 from net income of $95.1 million ($.86 per share) in 1994.
Nine months net loss was $78.5 million ($.73 per share) in 1995 compared to
net income of $262.2 million ($2.38 per share) in 1994. Without the unusual
charge, L-P earned $62.7 million ($.59 per share) for the third quarter of
1995 and $143.3 million ($1.34 per share) for the first nine months of 1995.
Net sales declined 5 percent in the third quarter of 1995 to $776.8 million
from $818.4 million in 1994. For the first nine months of 1995, sales also
fell 5 percent to $2,172.9 million from $2,291.1 million in 1994.
The registrant operates in two segments: building products and pulp.
Building products is the most significant segment, accounting for more than
85 percent of sales in first nine months of 1995 and 1994. The results of
operations are discussed separately for each segment below. Key segment
information, production volumes and industry product price trends are
presented in the following tables labeled "Sales and Profit by Major Product
Group," "Summary of Production Volumes" and "Industry Product Price Trends."
<PAGE>
<TABLE>
<CAPTION>
Building Products Segment
Quarter Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------------
1995 1994 % Chg 1995 1994 % Chg
------ ------ ----- -------- ------- -----
(Dollar amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Sales:
Structural panels $311.7 $327.8 -5% $ 837.8 $ 904.1 -7%
Lumber 177.7 225.5 -21% 504.9 689.0 -27%
Other panel products 52.7 62.5 -16% 164.2 179.9 -9%
Other building products 144.2 137.2 +5% 384.3 371.4 +3%
------ ------ -------- --------
Total building products $686.3 $753.0 -9% $1,891.2 $2,144.4 -12%
====== ====== ======== ========
Profit $111.3 $172.5 -35% $ 265.0 $ 493.8 -46%
====== ====== ======== ========
</TABLE>
Relatively high interest rates and poor weather earlier this year in key
areas of the country created weak markets for building products, especially
lumber and structural panels. Demand for structural panel products and, to a
lesser extent, lumber recovered moderately in the third quarter due to
seasonal factors as well as lower interest rates. However, sales of the
Company's OSB siding product have decreased because of recent adverse
publicity. Lumber markets continue to be flooded with Canadian lumber,
keeping prices from recovering to prior year levels.
Sales of structural panel products, which include oriented strand board
(OSB) and plywood, decreased primarily due to an approximate 5 percent decline
in sales volume in both the third quarter and first nine months. Average
selling prices remain slightly below prior year levels primarily because of
lower OSB prices. Plywood prices were higher in 1995 than 1994, but production
earlier in the year was significantly curtailed as the mills ran short of logs
due to wet weather. Prices for L-P's lumber products were lower on average by
approximately 5 percent for the third quarter of 1995 and 7 percent for the
first nine months on decreased volume of approximately 18 percent in the third
quarter and 21 percent for the first nine months of 1995 compared to 1994.
Because of the lower prices and tight log supply, L-P shut down many of its
sawmills temporarily. Manufacturing volume reductions were offset by
increased wholesale activity.
Decreases in other panel products sales were primarily attributable to
lower volumes because of down time at several mills and lower third quarter
prices. The third quarter increase in other building products sales was
primarily due to sales from facilities which were not operating for the full
third quarter of 1994. For the first nine months, these new facilities were
offset by lower wood chip revenue associated with lower lumber production and
lower log sales from the Company's Western fee timber due to lower logging
levels.
The decrease in building products profit was caused by the lower sales
discussed above, as well as higher raw material costs. Log prices were higher
in most areas of the country as were wood chips (used in certain of L-P's
panel products) because of increased demand from pulp and paper mills.
L-P's building products are primarily sold as commodities and therefore
sales prices fluctuate based on market factors over which L-P has no control.
L-P cannot predict whether the prices of its building products will remain at
current levels, or will increase or decrease in the future because supply and
demand are influenced by many factors, only one of which is the cost and
availability of raw materials.
L-P is not able to determine to what extent, if any, it will be able to
pass any future increases in the price of raw materials on to customers
through product price increases.
Pulp Segment
Quarter Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
1995 1994 % Chg 1995 1994 % Chg
------ ------ ----- ------ ------ -----
(Dollar amounts in millions)
Pulp sales $ 90.5 $ 65.4 +38% $281.7 $146.7 +92%
====== ====== ====== ======
Profit $ 17.9 $ 2.1 +752% $ 59.9 $(13.9) n.m.
====== ====== ====== ======
Pulp segment sales jumped dramatically in both the third quarter and
first nine months of 1995 compared to 1994. Prices increased 71 percent for
the third quarter and first nine months of 1995 when compared to 1994. Sales
volumes increased approximately 12 percent during the first nine months.
World-wide pulp markets rebounded strongly late in 1994 and continued through
the three quarters of 1995, which has significantly increased selling prices.
However, in the third quarter, sales volume declined nearly 20 percent despite
higher production levels because significant inventory volumes were liquidated
in the third quarter of 1994 while inventories were built up in the third
quarter of 1995. Production volume was at 87 percent through the first nine
months of 1995, compared to 67 percent in 1994. Pulp sales increases have
also caused export sales to increase significantly as L-P sells the majority
of its pulp to export customers.
Pulp segment profits benefited from the increased sales, showing a profit
in 1995 compared to a loss for the first nine months in 1994. Raw material
costs have increased as prices for chips, the fiber raw material for pulp,
have increased over the prior year.
L-P's pulp products are primarily sold as commodities and therefore sales
prices fluctuate based on market factors over which L-P has no control. L-P
cannot predict whether the prices of its pulp products will remain at current
levels, or will increase or decrease in the future because supply and demand
are influenced by many factors, only one of which is the cost and availability
of raw materials. Pulp markets showed signs of weakening late in the third
quarter and therefore, L-P is not able to determine to what extent, if any, it
will be able to pass any future increases in the price of raw materials on to
customers through product price increases.
Unallocated Expense
Unallocated expense increased to $30.2 million in the third quarter of
1995 from $19.5 million in the second quarter of 1994, and for the first nine
months of 1995 increased to $97.8 million from $51.5 million in the same
period in 1994. The most significant factor in the increase is higher
expenses associated with litigation against the company, including legal fees
and increases in contingency reserves (except for the amount booked for siding
in the third quarter discussed below). Refer to the "Legal Proceedings"
section of the Form 10-Q for a discussion of this litigation. Higher general
administrative expenses and franchise taxes have also contributed to the
increase. Partially offsetting these increases, compensation charges related
to restricted stock plans have decreased due to recent executive resignations
and other factors.
Settlement Charge and other Unusual Items, Net
This line item includes a charge for the settlements of class action
proceedings regarding the company's siding product, one of which remains
subject to final court approval (see "OSB Siding Update" below) of
$345 million before tax. This charge is net of previously recorded reserves
and includes estimates of attorneys' fees and other expenses associated with
the settlements.
This line item also includes a charge for write-downs of property to net
realizable value in accordance with the criteria specified in Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," net of a gain on
the sale of a non-productive asset. Severance costs for executives and other
employees who retired or were terminated in conjunction with recent management
changes and the reorganization of certain corporate operations are also
included in this line item.
Interest Income (Expense)
L-P's debt level has continued to decrease, resulting in lower interest
expense partially offset by higher interest rates on L-P's remaining variable
rate debt. Interest rate increases have favorably impacted L-P's interest
income, but that increase has been partially offset by lower cash and cash
equivalents balances.
Legal and Environmental Matters
Refer to the "Legal Proceedings" section of this From 10-Q for a
discussion of certain litigation which could have a materially adverse effect
on L-P. L-P maintains reserves for certain environmental and legal matters
based upon management's estimates of probable loss. As with all estimates,
there is significant uncertainty concerning the reliability and precision of
such estimates and there can be no assurance that such estimates will not
change in the future as circumstances change or additional facts become known.
In some cases, management is able to estimate only the minimum amount of a
range of possible loss and in other cases management is unable to reasonably
estimate any amount or range of possible loss.
OSB Siding Update
L-P manufactures a complete line of Inner-Seal(R) oriented strand board
("OSB") products for the building and construction industry. Such products
include sheathing, roof decking, flooring, siding and engineered I-joists
using OSB as the web material.
In 1985, L-P began producing and selling OSB-based exterior siding
products in both a lap and panel style. The siding uses OSB as the substrate
and is overlaid with a resin-impregnated paper. The siding products are used
primarily in residential home construction, both single-family and
multifamily, and also to a lesser extent in commercial construction. L-P
offers a warranty on both the OSB substrate and the siding surface, if certain
standards are adhered to, such as proper installation and proper care and
maintenance of the product.
Since 1985, L-P has sold approximately 2.7 billion square feet of these
Inner-Seal(R) OSB siding products throughout the United States. During this
period, L-P has paid approximately $48 million since 1985 to settle claims
relating to siding warranties. This includes claims paid of approximately
$10 million in 1994, $4 million in the third quarter of 1995 and $11 million
in the first nine months of 1995.
As discussed under the "Legal Proceedings" section of this Form 10-Q, L-P
has entered into settlement agreements, one of which remains subject to final
court approval, regarding OSB siding class action litigation across the United
States. As discussed above, L-P recorded a charge of $345 million in the
third quarter for the estimated claims to be paid under these settlements as
well as attorneys' fees and other costs associated with the settlements, net
of previously recorded reserves. This charge was based on L-P's best
estimates of the total amounts to be paid out under these agreements. As with
all accounting estimates, due to the many factors involved in estimating these
costs, significant uncertainty exists in the reliability and precision of such
estimates. As additional facts become known and actual claims are made, the
amounts ultimately paid out under these agreements may differ significantly
from this original estimate, which may result in future charges which could be
material to the results of operations of any given future reporting period,
although management believes any additional charges would be unlikely to have
a material impact on L-P's financial position.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations decreased approximately 27 percent in the
first nine months of 1995 compared to 1994. This resulted primarily from the
lower net income discussed above.
Cash used in investing activities increased to $286 million in 1995 from
$251 million in 1994, primarily due to increased capital expenditures. The
largest portion of these capital expenditures are for new production
facilities. Significant amounts have also been spent on environmental
projects (such as pollution control equipment) and upgrades of existing
production facilities. L-P is budgeting capital expenditures, including
timber and logging road additions, for all of 1995 of $350 million to
$400 million.
Cash used in financing activities increased in 1995 by approximately
$77 million to $233 million from $156 million. The principal factors in this
increase were $120 million in treasury stock purchases compared to $35 million
in 1994, offset by lower debt repayments of about $35 million as L-P made the
last payment on the Santa Fe debt in 1994. The stock purchases in 1995 relate
to L-P's repurchase authorization for 5 million shares which was announced in
July of 1994 and completed in April of 1995. L-P has previously announced a
new authorization to purchase up to 10 million additional shares on the open
market from time to time. The company has not announced any specific time
frame over which it plans to complete these purchases. L-P plans to finance
any treasury stock purchases with existing cash reserves and cash generated
from operations.
Contingency reserves, which represent an estimate of future cash needs
for various contingencies (principally payments for siding litigation
settlements), total $414 million, of which $150 million is classified as the
current portion. As with all accounting estimates, there is inherent
uncertainty concerning the reliability and precision of such estimates. As
described under "Legal Proceedings" elsewhere in this report, the registrant
has been named as a defendant in other litigation for which reserves have not
been established. L-P continues to be in a strong financial condition with
nearly $125 million of cash and cash equivalents and a low ratio of long-term
debt as a percent of total capitalization. Although cash and cash equivalents
decreased $191 million in the first nine months of the year due to the reasons
discussed above, existing cash and cash equivalents combined with an unused
$100 million revolving line of credit and cash generated from operations are
expected to be sufficient to meet projected cash needs including the payments
to the siding litigation settlement referred to above. The company also
believes that because of its conservative financial structure and policies, it
has substantial financial flexibility to generate additional funds should the
need arise.<PAGE>
<TABLE>
<CAPTION>
Sales and Profit by Major Product Group
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1995 1994 1995 1994
------- ------- -------- -------
<S> <C> <C> <C> <C>
Sales:
Structural panel products $ 311.7 $ 327.8 $ 837.8 $ 904.1
Lumber 177.7 225.5 504.9 689.0
Other panel products 52.7 62.5 164.2 179.9
Other building products 144.2 137.2 384.3 371.4
------- ------- -------- --------
Total building products 686.3 753.0 1,891.2 2,144.4
Pulp 90.5 65.4 281.7 146.7
------- ------- -------- --------
Total sales $ 776.8 $ 818.4 $2,172.9 $2,291.1
======= ======= ======== ========
Export sales $ 118.6 $ 105.3 $ 375.0 $ 264.3
======= ======= ======== ========
Profit:
Building products $ 111.3 $ 172.5 $ 265.0 $ 493.8
Pulp 17.9 2.1 59.9 (13.9)
Settlement charge and
other unusual items, net* (366.6) --- (366.6) ---
Unallocated expense, net (30.2) (19.5) (97.8) (51.5)
Interest income (expense), net .3 .3 1.4 (1.0)
------- ------- -------- --------
Income (loss) before taxes and
minority interest $(267.3) $ 155.4 $ (138.1) $ 427.4
======= ======= ======== ========
</TABLE>
* The substantial majority of this amount relates to recent class action
settlements concerning the company's siding product and therefore would
be primarily allocated to building products.
<PAGE>
Operating Volume
Louisiana-Pacific Corporation and Subsidiaries
(Volume amounts stated in millions, unless otherwise noted,
and as a percent of normal capacity)
Quarter Ended Nine Months Ended
September 30 September 30
------------------- -----------------------
1995 1994 1995 1994
-------- -------- ---------- ----------
Inner-Seal/OSB,
sq ft 3/8" basis 886 97% 874 99% 2,576 94% 2,606 99%
Softwood plywood,
sq ft 3/8" basis 418 103 423 112 1,076 88 1,237 109
Lumber, board feet 370 61 504 87 1,063 59 1,565 90
Medium density
fiberboard,
sq ft 3/4" basis 48 86 61 111 156 92 178 108
Particleboard,
sq ft 3/4" basis 81 90 95 108 255 94 281 107
Hardboard,
sq ft 1/8" basis 54 97 56 106 160 97 166 105
Hardwood veneer,
sq ft surface
measure 49 78 68 107 182 97 204 107
Pulp, thousand
short tons 124 83 115 75 390 87 309 67
Chips, thousand BDU's 492 508 1,421 1,678
<PAGE>
<TABLE>
<CAPTION>
Industry Product Price Trends
Louisiana-Pacific Corporation and Subsidiaries
OSB Plywood Lumber Particleboard Pulp
----------- -------- --------- ------------- ----------
N. Central Southern
7/16" basis Pine 1/2" Framing Bleached
24/16 basis lumber Inland softwood
span CDX composite Industrial sulfate
rating 3 ply prices 3/4" basis short ton*
----------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Annual Average
1990 131 182 230 199 723
1991 148 191 236 198 519
1992 217 248 287 200 509
1993 236 282 394 258 418
1994 265 302 405 295 515
1994 Third Quarter Average
273 301 374 300 540
1995 Second Quarter Average
210 303 317 295 774
1995 Third Quarter Average
276 320 333 276 839
Weekly Average
October 6 298 335 329 277 839
October 13 295 315 324 277 839
October 20 288 300 314 277 839
* Discounting sometimes occurs from the published price.
</TABLE>
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The following sets forth the current status of certain legal proceedings:
Certain Environmental Proceedings
The registrant has received a Notice of Violation issued by the state of
Michigan in October 1993, alleging air emissions violations at the
registrant's Newberry, Michigan, OSB plant. The registrant is not aware of
any activity concerning the Newberry matter since December 1993 and does not
know if any further action is contemplated by the state.
On September 9, 1992, the U.S. Department of Justice filed suit in the
U.S. District Court in Anchorage, Alaska, against the registrant's wholly
owned subsidiary Ketchikan Pulp Company ("KPC"), alleging that the pulp mill
in Ketchikan, Alaska, operated by KPC violated the Clean Air Act and the terms
of KPC's wastewater discharge permit. A separate federal grand jury
investigation concerning wastewater discharges at KPC's pulp mill was also
convened. In March 1995, KPC entered into agreements with the federal
government to resolve the issues related to the lawsuit and grand jury
investigation. Under the agreements, which have been approved by the court,
KPC has entered guilty pleas to one felony and 13 misdemeanor violations of
the Clean Water Act; KPC will pay civil and criminal penalties totaling
approximately $6 million, of which $1.75 million will be suspended; and KPC
has agreed to undertake further expenditures, which are primarily capital in
nature, including certain remedial and pollution control related measures,
with an estimated cost of up to approximately $20 million. KPC has agreed to
undertake a study of whether a clean-up of Ward Cove, the body of water
adjacent to the pulp mill, is needed. If the study determines that such
clean-up is needed, KPC may be required to spend up to $6 million on the
clean-up, including the cost of the study, as part of the overall $20 million
of expenditure. KPC cannot estimate what portion, if any, of the clean-up
amount will be required to be spent.
On September 13, 1994, the U.S. Environmental Protection Agency filed an
administrative action, alleging that KPC and two other parties violated
provisions of the Clean Air Act related to asbestos. The action seeks to
recover a penalty of $122,800.
The registrant has been informed that the U.S. Environmental Protection
Agency has referred a matter involving KPC to the U.S. Department of Justice
for possible civil enforcement. The matter involves allegations that KPC's
Annette Island, Alaska, cant mill violated provisions of the Clean Air Act
relating to the prevention of significant deterioration of air quality. The
registrant has received no further information concerning the matter since
February 1995 and does not know if any proceedings are contemplated.
A federal grand jury has been investigating possible violations in
connection with the disposal by a contractor of transformers containing
polychlorinated biphenyls ("PCBs") previously located at the registrant's
former sawmill at Pendleton, Oregon. The registrant believes that neither it
nor any of its employees are targets of the investigation.
Management of the registrant believes that the outcome of the above
matters will not have a materially adverse effect on the consolidated
business, financial condition, liquidity, or results of operations of the
registrant.
Colorado Criminal Proceeding
The registrant began an internal investigation at the registrant's
Montrose (Olathe), Colorado, oriented strand board ("OSB") plant of various
matters, including certain environmental matters, in the summer of 1992 and
reported its initial finding of irregularities to governmental authorities in
September 1992. Shortly thereafter, a federal grand jury commenced an
investigation of the registrant concerning alleged environmental violations at
the registrant's Montrose (Olathe), Colorado, OSB plant. In 1995, additional
subpoenas were issued requiring the production of evidence and testimony
relating to alleged fraud in connection with the submission of
unrepresentative OSB product samples to the APA-The Engineered Wood
Association ("APA"), an industry product certification agency, by the
registrant's Montrose plant and certain of its other OSB plants. The
registrant then commenced an independent investigation, which was recently
concluded, under the direction of former federal judge Charles B. Renfrew
concerning irregularities in sampling and quality assurance in its OSB
operations. In June, 1995, the grand jury returned an indictment in the U.S.
District Court in Denver, Colorado, against the registrant, a former manager
of the Montrose mill, and a former superintendent at the mill. The indictment
charges the registrant with 31 felony counts related to environmental matters
at the Montrose mill, including alleged conspiracy, tampering with opacity
monitoring equipment, and making false statements under the Clean Air Act.
The indictment also charges the registrant with 25 felony counts of fraud
relating to alleged use of the APA trademark on OSB structural panel products
produced by the Montrose mill as a result of the registrant's allegedly
improper sampling practices in connection with the APA quality assurance
program.
At the present time, the registrant cannot predict whether or to what
extent these circumstances will result in further civil litigation or
investigation by government authorities, or the potential financial impact of
any such proceedings. However, the resolution of the above matters could have
a materially adverse impact on the registrant.
OSB Siding Matters
In October 1994, an action was filed against the registrant and other
defendants in the Circuit Court for Lake County, Florida, on behalf of a
purported class of all owners of property in that state whose properties were
constructed using the registrant's OSB siding. The complaint alleged that the
siding is deteriorating prematurely due to defects in the material and sought
damages for alleged breaches of express or implied warranties and for alleged
failure to disclose material defects. A settlement agreement has been
approved by the court but the period for appeal has not yet expired. Under
the settlement, the registrant will establish a claims procedure pursuant to
which members of the settlement class may report problems with the
registrant's OSB siding and have their properties inspected by an independent
adjuster, who will measure the amount of damage and also determine the extent
to which improper design, construction, installation, finishing, painting, and
maintenance may have contributed to any damage. The maximum payment for
damaged siding will be $3.40 per square foot for lap siding and $2.82 per
square foot for panel siding, subject to reduction of up to 75 percent for
damage resulting from improper design, construction, installation, finishing,
painting, or maintenance, and also subject to reduction for age of siding more
than three years old. The registrant has agreed with attorneys representing
the class that if the national class settlement described below is approved by
the court in that case, then the total percentage deductions from the payment
to a member of the Florida class will be not greater than the percentage
deductions computed for a similar claimant under the national settlement
agreement. Class members will be entitled to make claims for up to five years
after October 4, 1995.
The registrant has been named as a defendant in at least ten other
purported class actions filed in various jurisdictions (most of which were
filed in 1995), as well as numerous non-class action proceedings, brought on
behalf of various persons or purported classes of persons (including
nationwide classes) who own or have purchased or used OSB siding manufactured
by the registrant, because of alleged unfair business practices, breach of
warranty, misrepresentation, conspiracy to defraud, and other theories related
to alleged defects, deterioration, or failure of OSB siding products. The
various actions seek damages and other relief for claimed defects,
deterioration, or failures of OSB siding products; in general, the actions
seek to avoid provisions of the registrant's express warranty limiting a
customer's warranty recovery to twice the cost of the product and allege that
actual damages may be significantly higher. Some of the actions also seek
injunctive relief and some seek to recover treble damages or punitive damages,
among other remedies.
Three of the above class actions have been combined in the United States
District Court for the District of Oregon under the caption In re Louisiana-
Pacific Inner-Seal (TM) Siding Products Liability Litigation. On October 18,
1995, that court gave preliminary approval to a settlement agreement between
the registrant and attorneys representing a nationwide class composed of all
persons who own, who have owned, or who subsequently acquire property on which
the registrant's OSB siding is installed prior to January 1, 1996, excluding
persons who timely opt out of the settlement and persons who are members of
the settlement class in the Florida litigation. Subject to final court
approval, the settlement will, if fully implemented, result in resolution of
all claims of any description by class members against the registrant arising
from or relating to any alleged defects of the registrant's OSB siding or
relating to the design, manufacture, or marketing of OSB siding. Under the
settlement agreement (a copy of which is filed as an exhibit hereto and which
is incorporated herein by reference), an eligible claimant whose claim is
filed prior to January 1, 2003 (or earlier in certain cases), and is approved
by an independent claims administrator will be entitled to receive from the
settlement fund established under the agreement a payment equal to the
replacement cost (to be determined by a third-party construction cost
estimator) of damaged siding, reduced by a specified adjustment (of up to
65 percent) based on the age of the siding. Class members who have previously
submitted or resolved claims under any other warranty or claims program of the
registrant may be entitled to receive the difference between the amount which
would be payable under the settlement agreement and the amount previously
paid. Independent adjusters will determine the extent of damage to OSB siding
at each claimant's property. There will be no adjustment to settlement
payments for improper maintenance or installation.
The registrant will be required to pay $275 million into the settlement
fund in seven annual installments: $100 million, $55 million, $40 million,
$30 million, $20 million, $15 million, and $15 million. Pending payment to
claimants, amounts in the settlement fund will be invested and any earnings
from such investments will also be available for payments to claimants. If at
any time after the fourth year of the settlement period the amount of approved
claims (paid and pending) equals or exceeds $275 million, then the settlement
agreement will terminate as to all claims in excess of $275 million unless the
registrant timely elects to provide additional funding within 12 months equal
to the lesser of (i) the excess of unfunded claims over $275 million or
(ii) $50 million and, if necessary to satisfy unfunded claims, a second
payment within 24 months equal to the lesser of (i) the remaining unfunded
amount or (ii) $50 million. If the total payments to the settlement fund are
insufficient to satisfy in full all approved claims filed prior to January 1,
2003, then the registrant may elect to satisfy the unfunded claims by making
additional payments into the settlement fund at the end of each of the next
two 12-month periods or until all claims are paid in full, with each
additional payment being in an amount equal to the greater of (i) 50 percent
of the aggregate sum of all remaining unfunded approved claims or
(ii) 100 percent of the aggregate amount of unfunded approved claims, up to a
maximum of $50 million. If the registrant fails to make any such additional
payment, all class members whose claims remain unsatisfied from the settlement
fund may pursue any available legal remedies without regard to the release of
claims provided in the settlement agreement. If the registrant makes all
payments required under the settlement agreement, including all additional
payments as specified above, class members will be deemed to have released the
registrant from all claims for damaged OSB siding, including without
limitation, claims arising under their existing 25-year limited warranty. In
the event all claims filed prior to January 1, 2003, that are approved have
been paid without exhausting the settlement fund, any amounts remaining in the
settlement fund revert to the registrant.
The settlement agreement is subject to final approval by the court at a
fairness hearing after notice to class members. Potential members of the
settlement class may elect to opt out of the settlement class within specified
times prior to the court's fairness hearing, subject to the registrant's right
to withdraw from the settlement if there are excessive elections to opt out.
The Attorneys General of the states of Florida, Oregon, and Washington
have initiated proceedings seeking information concerning production, testing,
marketing, and performance of the registrant's OSB siding and other attorneys
general have also made inquiries concerning the same topics. The registrant
is cooperating with the various attorneys general. Although the pending
settlement of the OSB siding class actions described above would not directly
affect the attorney general investigations, the registrant believes that the
class action settlement addresses many of the same concerns as are the subject
of the attorney general proceedings.
For additional information concerning OSB siding matters, including
information about financial statement reserves, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- OSB Siding
Update."
Other
In July, 1995, an action entitled MacDonald v. Louisiana-Pacific
Corporation was filed in Superior Court for the State of California for the
County of San Diego, purporting to be a consumer action brought on behalf of
the general public in California. The action alleges that the registrant
violated the California Unfair Business Practices Act through allegedly
fraudulent APA certification, quality sampling, advertising, and marketing of
OSB products. The complaint seeks, among other relief, restitution to members
of the public who purchased the registrant's OSB products, return of moneys
obtained by the registrant from allegedly fraudulent sales, imposition of an
asset freeze and constructive trust, and various forms of injunctive relief.
A similar action, entitled Carney v. Louisiana-Pacific Corporation, was filed
in October 1995 in the Superior Court of the State of California for the City
and County of San Francisco seeking restitution and injunctive relief.
In September 1995, a complaint entitled Agius et ux v. Louisiana-Pacific
Corporation was filed in the United States District Court for the Northern
District of California naming the registrant as a defendant in a purported
class action seeking damages and injunctive relief for violation of the Lanham
Act, breach of warranty, and violation of California consumer protection
statutes, based on alleged fraud and misrepresentation in connection with
testing, APA certification, and marketing of OSB products.
In October 1995, a complaint entitled Thompson v. Louisiana-Pacific
Corporation et ux was filed in United States District Court for the District
of New Hampshire on behalf of a purported class consisting of all residents of
the United States who own structures in which the registrant's OSB panels have
been installed for roofing, flooring, sheathing, and decking. The complaint
alleges that the OSB panels are defective in that they prematurely deteriorate
when exposed to normal weather conditions and alleges that the registrant
engaged in various practices, including allegedly fraudulent APA testing
practices, to mislead consumers concerning the quality of the product. The
complaint seeks compensatory and punitive damages, treble damages, and
equitable relief because of alleged violations of federal RICO statutes,
violation of various state consumer protection statutes, fraud, negligence,
misrepresentation, and breach of implied warranty.
The registrant is unable to make any estimate of the possible outcome of
the above actions or whether they may have a material impact upon the
registrant.
Stockholder Actions
The registrant, certain of its executive officers and former executive
officers, and certain other executives have been named as defendants in
numerous actions brought on behalf of various purported classes of purchasers
of the registrant's common stock. The actions, which have been consolidated
in the United States District Court for the District of Oregon, seek to
recover damages under the securities laws for alleged failures to disclose or
improper disclosures generally relating to the various legal proceedings
described above and the matters that are the subject of such proceedings. The
registrant is defending the actions vigorously, but is unable to make any
estimate of the possible outcome of the securities class actions.
Five individual directors (Messrs. du Pont, Kayser, and Yeager, Ms. Hill
and Mrs. Neff) and three former directors of the registrant have been named as
defendants in ten stockholder derivative actions, which also name the
registrant as a nominal defendant. Eight of these actions were brought in the
Court of Chancery of the State of Delaware in and for New Castle County and
have been consolidated under the caption In re Louisiana-Pacific Corporation
Derivative Litigation, Civil Action No. 14322 (the "Delaware action"). One
action, captioned Silverman, et al. v. Merlo, et al., No. 9505-03630, was
brought in the Circuit Court of the State of Oregon for the County of
Multnomah (the "Oregon action"). The remaining action, captioned Rand v.
Merlo, et al., No. 95-Z-1511, was brought in the United States District Court
for the District of Colorado (the "Colorado action"). The actions seek to
recover damages from the directors on behalf of the corporation because of
alleged mismanagement and breaches of fiduciary duty generally related to the
various legal proceedings described above and the matters that are the subject
of such legal proceedings. The individual directors of the registrant and the
registrant have moved to dismiss the Delaware action, the Oregon action, and
the Colorado action.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report or
incorporated by reference herein are listed in the
accompanying exhibit index.
(b) Reports on Form 8-K. A report on Form 8-K dated July
28, 1995, was filed to report under Item 5 the
resignations of three directors and executive officers
of the registrant and amendments to the registrant's
Rights Agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOUISIANA-PACIFIC CORPORATION
By /s/ WILLIAM L. HEBERT
William L. Hebert
Vice President, Treasurer, and
Controller
(Principal Financial and
Accounting Officer)
DATED: November 6, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Exhibit
10 Settlement Agreement dated October 18, 1995,
between the registrant and attorneys
representing plaintiffs in siding class action
litigation.
11 Calculation of Net Income Per Share for the Nine
Months Ended September 30, 1995.
27 Financial Data Schedule.
<PAGE>
<PAGE>
EXHIBIT 10
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
IN RE LOUISIANA-PACIFIC INNER- NO. 95-879-JE
SEAL(TM) SIDING PRODUCTS LIABILITY _________________
LITIGATION 95-1453-JE
SETTLEMENT AGREEMENT
THIS AGREEMENT is entered into this 18th day of October, 1995, by and
among (1) the plaintiffs in the above litigations, for themselves and on
behalf of the plaintiff class as hereinafter defined ("Settlement Class"); and
(2) the defendants in the litigations. The Defendants and Plaintiffs,
collectively, shall hereinafter be referred to as the "Parties."
Subject to Court approval as required by the Federal Rules of Civil
Procedure and as hereinafter provided, it is hereby stipulated and agreed by
the Parties that, in consideration of the promises and covenants set forth in
this Agreement and upon the entry by the Court of a Final Order and Judgment
approving the settlement and directing the implementation of the terms and
conditions of the settlement as set forth in this Agreement, this action shall
be settled and compromised upon the terms and conditions contained herein.
1. DEFINITIONS
As used in this Agreement and the exhibits annexed hereto, in addition
to any definitions elsewhere in this Agreement, the following terms shall have
the meanings set forth below:
Action means all actions consolidated into the above-referenced caption,
pending in the United States District Court for the District of Oregon.
Agreement or Settlement Agreement means this Settlement Agreement,
including all exhibits hereto.
Claims Administrator means the firm hired to process claims in
accordance with Section 10 of this Agreement.
Claim for Unreimbursed Repair means a claim described in Section 5.7c in
the form attached as Exhibit "D" and filed with the Claims Administrator
within 365 days after the date of the Initial Notice Date.
Class Notice means the initial form of court-approved notice
substantially in the form attached as Exhibit "A" to this Agreement.
Damage means that Exterior Inner-Seal Siding(TM) that fails at the time
of the inspection to perform its essential purposes of cladding and protecting
the wall assembly and presenting appropriate aesthetics. Factors that will be
considered to determine whether siding has sustained damage include, but are
not limited to, dimensional instability, including thickness swell and
warpage, high moisture content, edge checking where there is penetration of
the substrate, fungal degradation, and appearance. Damage does not include
damage resulting from natural disaster including, but not limited to, fire,
hurricane, tornado, flood, or other similar force majeure event.
Date of the Claim means the date or dates on which claims were submitted
under this Agreement by an Eligible Claimant with respect to Damage to
Exterior Inner-Seal(TM) Siding on a Property.
Date of Installation means the date or approximate date that Exterior
Inner-Seal(TM) Siding was installed on the Property of a Settlement Class
Member. In the absence of proof of installation on a different date, the Date
of Installation will be presumed to be the date of certificate of occupancy or
purchase of a newly constructed Property containing such siding (whichever is
earlier), or if a previously owned Property was purchased originally
containing such siding, the date of original construction or purchase of the
Property. If the claimant does not know the date of installation (or whether
the siding is L-P's), the Independent Adjuster shall make a good faith
estimate after first having verified that the siding is Exterior Inner-
Seal(TM) Siding.
Defendants means L-P and Harry A. Merlo.
Eligible Claimant means a current owner of Property who has not assigned
the claim, a subsequent purchaser of Property not subject to a prior
assignment of claim, or a former owner of Property who holds a valid
assignment of claim or who made a prior unreimbursed repair or replacement
prior to January 1, 1996 or who presented a prior claim to L-P.
Exterior Inner-Seal(TM) Siding means any year of manufacture or type of
Oriented Strand Board lap or panel siding, soffit, facia, or trim manufactured
by L-P, but does not include any such products that were sold by L-P without
an express warranty (e.g., utility board), or that were re-classified by L-P
to exclude an express warranty before the date of this Agreement.
Fairness Hearing means the hearing to be conducted by the Court in
connection with the determination of the fairness, adequacy and reasonableness
of this Agreement under Fed. R. Civ. P. 23.
Final Order and Judgment means the Order to be entered by the Court, in
a form that is mutually agreeable to the parties, approving this Agreement
without material alterations, as fair, adequate and reasonable under Fed. R.
Civ. P. 23(e), confirming the Settlement Class certification, and making such
other findings and determinations as the Court deems necessary and appropriate
to effectuate the terms of this Agreement.
First Opt Out Period means the period commencing on the Initial Notice
Date and continuing for 120 days from that date.
Independent Adjuster means the firm(s) or person(s) jointly hired,
selected and trained by L-P, Class Counsel and the Claims Administrator to
evaluate claims submitted pursuant to the terms of this Agreement.
Initial Notice Date means the first date upon which the Class Notice is
initially mailed to the Settlement Class pursuant to Section 7 of this
Agreement.
L-P means Louisiana-Pacific Corporation, its subsidiaries or affiliates,
successors, and assigns.
Person means any individual or legal entity or their successors or
assigns.
Plaintiffs' Class Counsel means the following counsel: (i) A. Hoyt
Rowell, III, of Ness, Motley, Loadbolt, Richardson & Poole; (ii) Steve W.
Berman of Hagens & Berman; (iii) Christopher I. Brain of Tousley Brain ; (iv)
Bennet A. McConaughy of Foster Pepper & Shefelman; (v) Michael F. Ram of
Lieff, Cabraser, Heimann & Bernstein; and (vi) William H. Garvin III of
Fonvielle & Hinkle; as co-lead counsel. Additional counsel for the class are
Don Barrett of The Barrett Law Offices; Michael D. Hausfeld and Gary Mason of
Cohen, Milstein, Hausfeld & Toll; Cunningham, Bounds, Yance, Crowder & Brown;
Doffermyre, Shields, Canfield & Knowles; Walter S. McLin, III and Philip S.
Smith of McLin, Burnsed, Morrison, Johnson & Robuck, P.A.; Law Offices of
Philip Gordon; Heins Mills & Olson, P.L.C.; Hogan, Smith & Alspaugh; Krislov &
Associates; McRight, Jackson, Dorman, Myrick & Moore; Moore & Brown; Pozzi
Wilson & Atchinson; Susman, Buehler & Watkins; and Les M. Swanson.
Preliminary Approval means the Court's conditional certification of the
Settlement Class, preliminary approval of this Agreement, and approval of the
form of the Class Notice pursuant to Fed. R. Civ. P. 23(c)(2) and (e).
Problem Report means a report referred to in Section 5.4 of this
Agreement and attached as Exhibit "C" to this Agreement.
Property means any structure including homes, mobile homes, townhomes,
condominiums, apartments, commercial structures and other types of buildings
or structures on which Exterior Inner-Seal(TM) Siding was installed prior to
January 1, 1996 or on which Exterior Inner-Seal(TM) Siding was replaced by
virtue of Damage.
Recovery Program means the procedure set forth in Section 5 hereof.
Replacement Cost means the average cost per square foot of surface area
of siding for full replacement including all materials and labor as required
to replace and repair Damaged panels or boards and to repaint and otherwise
restore the exterior to the extent necessary to make the repair as
cosmetically acceptable as practicable in conformity with all applicable laws,
building codes, and zoning regulations. Replacement costs will be set by
agreement of the parties using Means' Price Data for such geographic areas as
are agreed upon by the parties (the "Initial Means Price"). The Initial Means
Price will be adjusted annually for inflation using the most representative
Consumer Price Index ("CPI") for the geographic area covered by the respective
Initial Means Price data for the region in which the Property is located.
Means Price Data means the cost, labor, materials and repair data
supplied to the construction industry by the R.S. Means Co., Inc. for the
appropriate location and time period as agreed upon by the parties.
Settlement Amount means the aggregate amount of funding under Section 4,
payment of which is guaranteed by L-P, plus interest or other earnings
thereon.
Settled Claim means any claim, liability, right, demand, suit, matter,
obligation, damage, loss or cost, action or cause of action, of every kind and
description that the Releasing Party, (as defined in Section 14 of this
Agreement), has or may have, whether known or unknown, asserted or unasserted,
latent or patent, that is, has been, could reasonably have been or in the
future might reasonably be asserted by the Releasing Party either in the
Action or in any other action or proceeding in this Court or any other court
or forum, regardless of legal theory, and regardless of the type or amount of
relief or damages claimed, against any of the Defendants, arising from or in
any way relating to any defects or alleged defects of Exterior Inner-Seal(TM)
Siding, or any part thereof. Without limiting the generality of the
foregoing, Settled Claim shall include, with regard to the foregoing subject
matter:
(1) any claim for breach or violation of any federal, state, common or
other law;
(2) any claim for breach of any duty imposed by law, by contract or
otherwise;
(3) any claim based on strict product liability, negligence, reliance,
breach of express or implied warranty, racketeering, fraud, conspiracy,
consumer fraud, negligent misrepresentation, or intentional misrepresentation;
(4) any claim arising from or in any way related to the promotion,
design, manufacture, production, sale, distribution, or assembly of Exterior
Inner-Seal(TM) Siding, and/or any alleged defects in Exterior Inner-Seal(TM)
Siding, or any part thereof;
(5) any claim for personal injury, emotional distress, or mental
anguish associated with any of the above; and
(6) any claim for penalties, punitive damages, exemplary damages, or
any claim for damages based upon a multiplication of compensatory damages
associated with the above.
However, Settled Claim does not include any claim for bodily injury
(including wrongful death) and associated emotional distress and mental
anguish; or claims arising from the purchase, sale or holding of L-P stock and
does not include claims arising from the purchase of new L-P stock and does
not include claims arising from the installation of new Exterior Inner-
Seal(TM) Siding after January 1, 1996.
Settlement Class means a class composed of all Persons who have owned,
own, or subsequently acquire Property on which Exterior Inner-Seal(TM) Siding
has been installed prior to January 1, 1996 who are given notice in accordance
with the Due Process Clause of the United States Constitution.
Excluded from the Settlement Class are:
(1) All Persons who, in accordance with the terms of this Agreement,
properly execute and file a timely request for exclusion from the Settlement
Class; and
(2) All persons who are members of the certified class in the Florida
action entitled Anderson v. Louisiana-Pacific Corporation, No. 94-2458-CA-01.
Settlement Date means the date on which all of the following have
occurred: (a) the entry of the Final Order and Judgment without material
modification and (b) the achievement of finality for the Final Order and
Judgment by virtue of that Order having become final and non-appealable
through (i) the expiration of all appropriate appeal periods without an appeal
having been filed; (ii) final affirmance of the Final Order and Judgment on
appeal or final dismissal or denial of all such appeals, including petitions
for review, rehearing or certiorari; or (iii) final disposition of any
proceedings, including any appeals, resulting from any appeal from the entry
of the Final Order and Judgment.
Settlement Fund means the fund established in accordance with the terms
of Section 4 of this Agreement.
Subsequent Notice Date means the date that a mailed or published class
notice is initially mailed or published pursuant to Section 8 of this
Agreement.
Subsequent Opt Out Period(s) means the 90-day period(s) commencing from
the Subsequent Notice Date, during which time, as set forth in Section 9, a
person who did not receive actual notice of the initial Class Notice (other
than an owner occupied, single family unit)and who acquires Property with
Exterior Inner-Seal(TM) Siding after the initial Class Notice may opt out. A
person who acquires a Property with Exterior Inner-Seal(TM) Siding after the
Initial Notice Date may opt out only during the next Opt Out Period following
the acquisition of Property with Exterior Inner-Seal(TM) Siding.
Term of Agreement or Term means the seven-year period commencing on
January 1, 1996.
2. SETTLEMENT PURPOSES ONLY
2.1 This Agreement is for settlement purposes only, and neither the
fact of, nor any provision contained in, this Agreement or its attachments,
nor any action taken hereunder shall constitute, be construed as, or be
admissible in evidence as, any admission of the validity of any claim or any
fact alleged by Plaintiffs in this Action or in any other pending action or of
any wrongdoing, fault, violation of law, or liability of any kind on the part
of any Defendant or admission by any Defendant of any claim or allegation made
in this Action or in any action, nor as an admission by any of the Plaintiffs,
members of the Settlement Class or Plaintiffs' Class Counsel of the validity
of any fact or defense asserted against them in the Action or in any action.
2.2 Any certification of a preliminary or final Settlement Class
pursuant to the terms of this Agreement shall not constitute, and shall not be
construed as, an admission on the part of any Defendant that this action, or
any other proposed or certified class action, is appropriate for trial class
treatment pursuant to Fed. R. Civ. P. 23 or any similar class action statute
or rule. This Agreement is without prejudice to the rights of Defendants to
(a) oppose certification in this action should the Settlement not be approved
or implemented for any reason, or (b) oppose certification in any other
proposed or certified class action; or (c) use the certification of this
settlement class to oppose certification of any other proposed class arising
out of the claims asserted herein.
3. SUBMISSION FOR PRELIMINARY APPROVAL
3.1 Promptly after execution of this Agreement, the Parties shall
jointly submit this Agreement, through their respective attorneys, to the
Court for Preliminary Approval.
4. SETTLEMENT FUND
4.1. L-P shall contribute a minimum of $275,000,000 to the Settlement
Fund (the "Initial Funding Obligation"), but may increase such amount in
accordance with Sections 4.6-4.9 or otherwise.
4.2 All amounts due and owing by L-P under this Agreement shall be
paid when due as provided herein into the Settlement Fund to be established
and maintained and administered by the Claims Administrator under the
continuing jurisdiction and supervision of the Court. Any and all interest
and earnings of the Settlement Fund assets shall accumulate and become part of
the Settlement Fund.
4.3 Within thirty days of entry of the Final Order and Judgment, L-P
shall make its first payment of $100,000,000 into the Settlement Fund, which
shall be an appropriate qualified settlement account. On the first business
day subsequent to the anniversary date of the entry of the Final Order and
Judgment, L-P shall pay into the Settlement Fund the following amounts:
Year 2 $55,000,000
Year 3 $40,000,000
Year 4 $30,000,000
Year 5 $20,000,000
Year 6 $15,000,000
Year 7 $15,000,000
4.4 The Settlement Amounts in the Settlement Fund shall be allocated
in the following manner. Funds paid pursuant to Section 4.3 shall be
allocated proportionally by regions (as defined in Exhibit G) to pay claims
for Properties located in these regions. The initial allocation by region
shall be proportional to the ratio that the total Exterior Inner-Seal(TM)
Siding distributed within each region bears to the total Exterior Inner-
Seal(TM) Siding distributed to all regions (excluding the State of Florida)
between 1985 and January 1, 1996. To the extent any funds in the Settlement
Fund are not paid out to claimants within the year they were deposited (the
"Undisbursed Funds"), the Undisbursed Funds, together with accumulated
interest and earnings, shall roll over into the succeeding year or years and
be available to pay claims or costs of administration as follows: the
Undisbursed Funds shall be allocated to sub-accounts for each region for which
there were insufficient funds to pay prior approved claims in the same
proportion as the ratio of unpaid claims of each region bears to the total of
all unpaid claims of all regions (excluding claims in Florida).
4.5 All class members shall be bound to the terms of this Agreement
for an initial period of four years starting from entry of the Final Order and
Judgment regardless of whether the Initial Funding Obligation is adequate to
satisfy all claims filed hereunder.
4.6 If, at any time after the expiration of four years starting from
entry of the Final Order and Judgment, the Claims Administrator notifies L-P
that the amount of approved claims (together with allowable administrative
expenses charged against the Settlement Fund) equals or exceeds $275,000,000
(the "Funded Claims"), the Agreement shall terminate as to all other claims
(the "Unfunded Claims") unless within 60 days after its receipt of such
notification, L-P advises Plaintiffs' Class Counsel in writing of its election
to provide additional funding to the Settlement Fund (the "Additional Funding
Election").
4.7 If L-P makes a timely Additional Funding Election,
(a) it shall deposit into the Settlement Fund within 12
months from the date of the notification from the Claims
Administrator an amount equal to (i) the aggregate Unfunded Claims
approved prior to the expiration of such 12-month period or
(ii) $50,000,000 (the "Second Funding Obligation"), whichever is
lesser; and
(b) all class members are bound by this Agreement for such
additional 12-month period.
4.8 If the payment of the Second Funding Obligation is insufficient to
satisfy in full all approved claims (together with allowable administrative
expenses charged against the Settlement Fund) that were filed prior to the
expiration of the 12-month period referred to in paragraph 4.7, the Claims
Administrator shall so notify L-P, and
(a) within 12 months thereafter, L-P shall deposit into
the Settlement Fund an amount equal to (i) the aggregate claims
approved prior to the expiration of such second 12-month period or
(ii) $50,000,000 (the "Third Funding Obligation"), whichever is
lesser; and
(b) all class members are bound by this Agreement for such
second 12-month period.
4.9 If at the end of the period of seven years after initial funding
the payments to the Settlement Fund are insufficient to satisfy in full all
approved claims (together with allowable and administrative expenses charged
against the Settlement Fund) that were filed prior to January 1, 2003, the
Claims Administrator shall so notify L-P no later than 60 days thereafter, and
(a) within 60 days of such notification, L-P shall advise
Plaintiffs' Class Counsel in writing whether it elects to satisfy
such remaining unfunded claims (the "Final Funding Obligations");
and if so, it shall make additional payments into the Settlement
Fund at the end of each of the next two 12-month periods or until
all claims are paid in full. Each such additional payment shall
be in an amount equal to: (i) 50% of the aggregate sum of all
remaining unfunded approved claims and administrative expenses; or
(ii) 100% of the aggregate sum (up to a maximum of $50 million),
whichever is greater;
(b) if L-P makes the Final Funding Obligation election and
makes the required payments to the Settlement Fund, all class
members are bound by this Agreement for an additional 24-month
period.
4.10 If L-P fails to make payment of any sum when due under this
paragraph 4, all Class Members whose claims remain unsatisfied from the
Settlement Fund for a period of 90 days thereafter may pursue whatever legal
remedies are available to them without regard to the release of claims
provided in this Agreement and such claims thereafter shall be governed by the
provisions of Section 19.
4.11 Within three business days after Preliminary Approval, L-P shall
deposit into an account designated by Plaintiffs' Class Counsel sufficient
funds to commence distribution of the Initial Class Notice. The amount
deposited will be based on a good faith estimate by Plaintiffs' Class Counsel
of the amounts required for the first sixty days of the distribution of the
Initial Class Notice. Thereafter, until final approval, L-P shall replenish
the fund as is reasonably necessary in the good faith judgment of Plaintiffs'
Class Counsel to meet the obligations of L-P hereunder. Plaintiffs' Class
Counsel shall first have obtained the consent of L-P to the amounts to be
deposited, which consent shall not unreasonably be withheld. If the
Settlement is approved, this account will continue to operate until the funds
are depleted or are transferred to the Settlement Fund. Any amounts expended
on the Class Notice are nonrefundable. If the Settlement is terminated, all
funds in the account shall be returned to L-P. Any amounts paid under this
Section shall be credited toward L-P's payment obligations as specified in
Section 4.3.
4.12 Upon determination of the Claims Administrator that all claims
made within the Term of the Agreement have been paid and processed and the
Settlement Fund is not exhausted, any amounts remaining in the Settlement Fund
shall revert to L-P.
4.13 If all approved claims and administrative expenses are paid in
full, all class members are finally and fully bound by this Agreement and L-P
shall forever be discharged from any further obligations to the class members
and under this Agreement in accordance with Section 14.
5. RECOVERY PROGRAM
5.1 All Eligible Claimants are eligible for relief under this
Agreement in accordance with this Section.
5.2 Eligible Claimants shall be entitled to recover under this
Agreement if: (i) damage has occurred to Exterior Inner-Seal(TM) Siding on the
Property, (ii) the Damage occurred before or during the Term of this
Agreement, and (iii) the Eligible Claimant files a claim within the Term of
this Agreement.
5.3 If an Eligible Claimant has repaired or replaced any damaged
Exterior Inner-Seal(TM) Siding prior to the Initial Notice Date, he is
eligible to participate if he provides proof of ownership of Exterior Inner-
Seal(TM) Siding, proof of repair of such siding as provided in Section 5.7.c.,
and files a Claim for Unreimbursed Repair within 365 days of the Initial
Notice Date.
5.4 To recover under this Agreement, a Settlement Class member must
properly complete a Problem Report or Claim for Unreimbursed Repair (Exhibits
"C" and "D"). If a class member has not received a Class Notice, he or she
may call the Toll-Free Number to report problems with Exterior Inner-Seal(TM)
Siding and/or to obtain information about the Settlement. The Claims
Administrator will then forward to the potentially Eligible Claimant a Problem
Report (Exhibit "C") or a Claim for Unreimbursed Repair (Exhibit "D").
5.4.1 Certain basic information will be gathered when the
Settlement Class member makes a Problem Report, or Claim For Unreimbursed
Repair, i.e., name, address, builder, subdivision, description of problem and
whether the Problem Report is the first or a subsequent claim under this
Agreement, proof of the use of the Exterior Inner-Seal(TM) Siding and
ownership verification of the Property or assignment of claim.
5.4.2 Data from all Problem Reports and Claims for Unreimbursed
Repair shall be entered into the computer system for processing and made
available to the Independent Adjuster, Plaintiffs' Class Counsel and L-P.
5.5 Once a Problem Report or Claim for Unreimbursed Repair has been
received by the Claims Administrator, and subject to the frequency limitation
of Section 5.9, an Independent Adjuster will be sent as soon as practicable to
inspect the Property at no cost to the Settlement Class member; but after the
expiration of one year from the commencement of the Recovery Program, such
inspection will occur within 60 days from the date the Problem Report or Claim
for Unreimbursed Repair is received by the Claims Administrator.
5.6 The inspection by the Independent Adjuster shall include the
following:
a. The Independent Adjuster will verify that the Class
Member had or has Exterior Inner-Seal(TM) Siding on the Property.
b. The Independent Adjuster will determine the Date of
Installation of Exterior Inner-Seal(TM) Siding.
c. The Independent Adjuster will verify whether the
Exterior Inner-Seal(TM) Siding on the Property has sustained
Damage; and, if so, he will apply a protocol to determine the
amount of Exterior Inner-Seal(TM) Siding that should be replaced.
The protocol will be based on reasonable and mutually acceptable
standards. The standards shall take into account the cause and
extent of the existing failed siding, the location and dispersal
of the failed siding, the construction procedures necessary for
replacing the failed siding in a workmanlike manner, and the
availability and feasibility of aesthetically and structurally
matching the existing siding. In making this determination, the
Independent Adjuster may give due consideration to the appearance,
moisture content, and thickness swell of the siding.
d. The Independent Adjuster will complete an inspection
form for each claim inspected.
5.7 After completion of the inspection, the Independent Adjuster will
forward his report to the Claims Administrator who will determine the amount
an Eligible Claimant shall be paid based on the information contained in the
report of the Independent Adjuster, the Replacement Cost of the affected
siding and the factors listed below:
a. The maximum amount that may be awarded for replacing
siding for a single Property under the terms of this Agreement
shall be the Replacement Cost times the surface area of the siding
to be replaced. No deduction for footage will be made for windows
or doors within the siding area to be replaced. If a side of a
unit has sustained Damage, then such side will be deemed to have a
minimum of thirty-two (32) square feet of Damage to that side.
With regard to panels, if a panel is Damaged, the entire panel
will be included as Damaged square footage to be replaced.
b. The Claims Administrator, using the information
provided by the Independent Adjuster in the Field Inspection and
Evaluation Form, shall make certain deductions based on the age of
the siding, calculated as of the Date of the Claim. These
deductions shall be calculated as follows:
Years 1 and 2 from
Date of Installation 0% deduction
Years 3 and 4 from 5% deduction per year (prorated
Date of Installation monthly)
Year 5 and subsequent
years from Date of 8% deduction per year (prorated
Installation monthly)
In no event shall the deductions exceed 65% of the Replacement Cost.
c. Class members who have sustained Damage to Exterior
Inner-Seal(TM) Siding on their Property, which they have replaced
or attempted to repair at their own expense without reimbursement
from L-P, are entitled to file a Claim for Unreimbursed Repair in
accordance with this paragraph 5.7.c. if they establish by clear
evidence to the reasonable satisfaction of the Independent
Adjuster that:
(i) Exterior Inner-Seal(TM) Siding was installed on the
Property and sustained Damage;
(ii) Exterior Inner-Seal(TM) Siding was replaced or
repaired as a result of such Damage; provided that, expenditures
for painting, washing, caulking and similar routine maintenance
items do not constitute reimbursable expenses unless performed
within two years of the Date of Installation to repair damage on
Product that was properly installed, finished and maintained in
accordance with L-P's standard instructions in effect on the Date
of Installation. In no case shall the Eligible Claimant be
entitled to recover an amount as reimbursement for such repair or
replacement that is greater than the amount to which he would be
entitled to recover for repair costs under this Agreement or the
actual out-of-pocket cost of the repairs, whichever is less.
5.8 The Independent Adjuster shall forward to the Claims
Administrator, L-P and designated Plaintiffs' Class Counsel a Field Inspection
and Evaluation Form (Exhibit "E"). The Claims Administrator will forward to
the Eligible Claimant a check, appropriate release (in the form of
Exhibit "F") and a Notice of Settlement. Each class member shall advise any
subsequent purchaser from him or her of the settlement or record the Notice of
Settlement in the title records of the Property and make such other
appropriate disclosure as may be required by local or state laws regarding the
purchase and sale of property. Any class member who fails to perform the
obligations of this Section 5.8 shall indemnify and hold harmless L-P and/or
the Settlement Fund for all duplicate payments made to subsequent purchasers.
5.9 In the event an Eligible Claimant suffers subsequent damage to
Exterior Inner-Seal(TM) Siding that was not compensated under a prior Problem
Report or Claim for Unreimbursed Repair, the claimant may make another Problem
Report within the Term of this Agreement and proceed through the Recovery
Program. A claimant may make a claim once every twelve month period. After a
claimant has filed three claims during the Term of this Agreement, the
claimant must pay the cost of any additional inspections by an Independent
Adjuster.
5.10 Notwithstanding that a member of the Settlement Class previously
has submitted or resolved a claim (the "Prior Claim") pursuant to any L-P
claim or warranty program (or signed a release of claims as part of such
program), said class member may participate under the terms of this Agreement
to the extent that the claimant (a) establishes Damage; (b) would have
received a greater amount had the Prior Claim been processed under this
Agreement; (c) files a Problem Report (Exhibit C) within 365 days of the
Initial Notice Date. Any amount due to such claimant under this Agreement on
account of the Prior Claim shall be reduced by the amount of any payment
previously made by L-P. For subsequent damage not covered by the original
claim, such claimant may make claims under this Agreement without regard to
the Prior Claim or its resolution.
5.11 Any class member who is a subsequent purchaser of the Property may
file a claim for Exterior Inner-Seal(TM) Siding that has sustained Damage only
if such Damaged siding has not previously been subject to a claim filed by his
predecessor for which compensation has been paid. However, for any new Damage
not covered by the Prior Claim, the subsequent purchaser may make claims under
this Agreement without regard to the Prior Claim or its resolution.
5.12 The Claims Administrator shall process payment of claims in the
order of the Date of Claims.
5.13 This Agreement applies to any Exterior Inner-Seal(TM) Siding
installed prior to January 1, 1996.
6. Selection and Training of Independent Adjusters
6.1 All fees and expenses incurred in relation to the performance of
the duties and obligations of the Independent Adjusters shall be paid from the
Settlement Fund.
6.2 Each Independent Adjuster will be required to attend a training
course presented and developed by L-P with the assistance of Plaintiffs' Class
Counsel or their designees. The content of the course will be agreed to by
the Plaintiffs' Class Counsel and L-P and updated as required by experience.
The Independent Adjuster shall have the right to hire and fire adjusters
subject to the provisions of Section 6.5.
6.3 L-P and Plaintiffs' Class Counsel, upon agreement, shall have the
right to supplement the list of Independent Adjusters and substitute or add
others with the consent of opposing counsel, which consent shall not be
unreasonably withheld.
6.4 Plaintiffs' Class Counsel and L-P shall have the right during the
Term of this Agreement independently to test, on a sample basis, the findings
of the Independent Adjusters.
6.5 In the event either L-P or Plaintiffs' Class Counsel reasonably
believes that any of the Independent Adjusters are not properly applying any
of the terms of Section 5, or in the event there is a question about the
application of the terms of this Agreement by the Independent Adjusters, then:
a. The objecting Party's counsel shall notify counsel for
the other Party to this Agreement in writing of his concern;
b. Plaintiffs' Class Counsel and counsel for L-P will
meet within 30 days of receipt of the written notification to try
to resolve the concern;
c. In the event the Plaintiffs' Class Counsel and counsel
for L-P cannot resolve the concern, then the dispute shall be
submitted to a special master to be appointed by the Court whose
ruling shall be final and not appealable;
d. In any event, Plaintiffs' Class Counsel and counsel
for L-P shall meet in person or by telephone conference every six
months to discuss the implementation and execution of this
Agreement during the preceding six months and will attempt to
resolve any concerns of the Parties.
7. Initial Notice to the Class
7.1 Upon Preliminary Approval, and as the Court may direct,
Plaintiffs' Class Counsel or their designee shall cause the Class Notice
describing the settlement embodied herein and the Fairness Hearing to be
provided to the members of the Settlement Class as provided in this Section.
7.2 The Class Notice, in a form similar to Exhibit "A" attached and
approved by the Court, shall be mailed, first class postage prepaid, together
with a request for exclusion substantially in the form of Exhibit "B" attached
hereto to each member of the Settlement Class identified by Plaintiffs' Class
Counsel through reasonable efforts. In addition, such mailing shall be sent
to each member of the Settlement Class whose identity becomes known as a
result of the Class Notice being published or other subsequent mailings will
be made as the identities or addresses of additional class members becomes
known.
7.3 The Class Notice shall be distributed to prior claimants and to
contractors, builders, suppliers and distributors who are known by L-P to have
been involved in the sale, distribution or use of Exterior Inner-Seal(TM)
Siding and to other interested organizations. The Class Notice shall
initially be published in newspapers, trade journals, and magazines, and/or
broadcast by radio and/or television in a manner reasonably calculated to
reach members of the Settlement Class, as more particularly described in the
initial notice plan to be approved by the Court. The Class Notice shall
inform the reader, and/or listener or viewer, as the case may be, of a toll-
free telephone number through which he may arrange for a mailing of the Class
Notice, Problem Report, or Claim for Unreimbursed Repair (Exhibits C and
Exhibit D).
7.4 No later than the first dissemination of the Class Notice,
Plaintiffs' Class Counsel or their designee, shall cause a nationwide toll-
free telephone facility to be established. This facility shall be capable of
(a) receiving requests for the Class Notice and other materials described in
this Section 7; (b) providing generalized information concerning deadlines for
opt outs, proofs of claim, and presentations to the Court at the Fairness
Hearing; and (c) mailing the materials to Settlement Class Members as provided
in this Section 7. The facility may, as appropriate under instructions from
Plaintiffs' Class Counsel, provide additional information or refer individual
inquiries to Plaintiffs' Class Counsel for response. The facility shall
maintain records of all mailings and such other information in such form and
in such manner as Plaintiffs' Class Counsel may direct.
7.5 The Class Notice, either in its original form or as modified by
the Court or parties based on experience, shall be disseminated throughout the
term of this Agreement as Plaintiffs' Class Counsel and/or the Claims
Administrator identify additional class members.
8. Subsequent Notice and Subsequent Published Notice
8.1 A Subsequent Notice in a form approved by the Court shall be
mailed to all prior claimants and any contractors, builders, distributors or
suppliers that are known to the Claims Administrator or become known during
the Term of the Agreement.
8.2 A Subsequent Published Notice in a form agreed to by the Parties
and approved by the Court shall be published in newspapers, trade journals,
and magazines, in a manner reasonably calculated to reach New Settlement Class
Members as the Claims Administrator may determine. The Subsequent Published
Notice shall inform the reader of the toll-free telephone number through which
he may arrange for a mailing in accordance with this Section 8 to be sent to
him.
8.3 The Subsequent Notice and Published Notice shall be disseminated
not later than the end of the third and sixth years from the Settlement Date.
The publication period for the Subsequent Notice program shall be thirty days.
8.4 The Claims Administrator shall cause notice to be mailed, first
class prepaid, together with attachments (Exhibits "B" and "C") to each person
who requests such information in response to a Subsequent Published Notice.
9. Class Members' Right of Exclusion/Inclusion
9.1 A Settlement Class member may opt out of the Settlement Class at
any time during the First Opt Out Period. In order to exercise the opt out
right set forth in this Section, the Settlement Class member must complete and
return a request for exclusion substantially in the form of Exhibit "B," or a
reasonable substitute therefor. Such request must be postmarked on or before
the end of the First Opt Out Period, which shall be 120 days from the date of
the Initial Notice Date. Except for those class members who have properly
opted out, all Settlement Class members will be deemed a Settlement Class
member for all purposes under this Agreement. Any Settlement Class member who
elects to opt out of the Settlement Class pursuant to this Section shall not
be entitled to relief under or be affected by this Agreement.
9.2 A Person who acquires a Property with Exterior Inner-Seal(TM)
Siding after the Initial Notice Date but before the second notice may opt out
within 90 days from the date of the initial publication of second class
notice. A Person who acquires a Property with Exterior Inner-Seal(TM) Siding
after the second notice but before the third notice may opt out within 90 days
from the date of the initial publication of the third notice. The Settlement
Class member must complete and return to the Claims Administrator a request
for exclusion substantially in the form of Exhibit B, or a reasonable
substitute therefor. Such request must be postmarked on or before the
expiration of the applicable Subsequent Opt Out Period. Any Settlement Class
member who has not so elected will be a Settlement Class member for all
purposes under this Agreement. Any such Settlement Class member who elects to
opt out of the Settlement Class pursuant to this Section 9.2 shall not be
entitled to relief under or be affected by this Agreement.
9.3 A Person who acquires Property, other than an owner-occupied,
single family unit, after the Initial Notice Date with actual notice or
knowledge (as opposed to constructive notice) of this Agreement shall have no
right to opt out of the Settlement Class with respect to that Property.
9.4 With respect to any Settlement Class member who elects to opt out,
to the extent that the statutes of limitations and/or repose or any defense of
lapse of time are tolled by operation of law, they will continue to be tolled
until ninety (90) days after receipt of the election to opt out or for such
longer period as the law may provide without reference to this Agreement.
10. Claims Administration
10.1 The Claims Administrator shall, under the supervision of the
Court, administer the relief provided by this Settlement Agreement by
resolving claims in a rational, responsive, cost effective, and timely manner.
The Claims Administrator shall maintain the records of its activities in
computerized database form and shall provide such periodic and special reports
and such otherinformation as the Court or the Parties may request.
11. Right of Withdrawal
11.1 If the total number of Settlement Class members who elect to opt
out from the Settlement Class during the First Opt Out Period is, in L-P's
opinion, excessive, L-P shall have the independent right to withdraw from this
Agreement by giving written notice thereof to the other Parties no later than
ten days prior to the Fairness Hearing.
12. Statutes of Limitations or Repose
12.1 A Settlement Class member shall not be barred from obtaining
relief under this Agreement because of a statute of limitations or repose or
due to the execution of a prior release.
13. Exclusive Remedy; Dismissal of Action; Jurisdiction of Court
13.1 This Agreement shall be the sole and exclusive remedy for any and
all Settled Claims of Settlement Class members against Defendants arising from
the use of Exterior Inner-Seal(TM) Siding, and upon entry of the Final Order
and Judgment by the Court, each Settlement Class member who has not opted out
of the Settlement Class or Settlement Class members who acquire Property
containing Exterior Inner-Seal Siding after the Initial Notice Date and who do
not opt out in the Subsequent Notice Periods, shall be barred from initiating,
asserting, or prosecuting any Settled Claims against Defendants.
13.2 On the Settlement Date, the Complaint shall be dismissed subject
to the reactivation of claims as provided in Section 20 of this Agreement.
Except as provided in Section 20 of this Agreement, Settlement Class members
may not commence or actively prosecute actions on Settled Claims against any
Defendant once the Final Order and Judgment is entered.
13.3 The Court shall retain exclusive and continuing jurisdiction of
the Action, all Parties and Settlement Class members, to interpret and enforce
the terms, conditions, and obligations of this Agreement.
14. Releases and Assignments
14.1 Upon entry of the Final Order and Judgment, and subject to
Section 20 of this Agreement, each Settlement Class member who has not opted
out of the Settlement Class, on behalf of himself and any Person claiming by
or through him as his heir, administrator, devisee, predecessor, successor,
representative of any kind, shareholder, partner, director, owner of any kind,
affiliate, subrogee, assignee, or insurer (the "Releasing Party"), shall be
deemed to and does hereby release and forever discharge, L-P, including its
successors, parents, subsidiaries, divisions, departments, or affiliates, and
any and all of its past, present and future officers, directors (including,
without limitation, Harry A. Merlo), stockholders, partners, agents, servants,
successors, subrogees and assigns and their respective insurers ("Releasees"),
of and from any and all Settled Claims and related subrogation claims of the
Releasing Party's subrogees or insurance carriers not protected from waiver of
subrogation by the provisions of the applicable insurance policies (or
assigned or subrogated prior to final approval of this Agreement and not
subject to compromise or settlement by the policyholder) except as provided
herein. Each Releasing Party, upon entry of the Final Order and Judgment, and
subject to Section 19 of this Agreement, shall be deemed to and does hereby
release and discharge each Releasee of and from any and all Settled Claims.
To the extent claims may be asserted against persons or entities in the chain
of distribution, installation or finishing of the Exterior Inner-Seal siding,
the Releasing Party shall be deemed to and does hereby release and forever
discharge those persons or entities from claims based solely on distribution,
handling, installation, specification, or use of the Exterior Inner-Seal(TM)
Siding.
14.2 Nothing in this Agreement shall prejudice or in any way interfere
with the rights of the Settlement Class members, and the Defendants to pursue
all their rights and remedies against any persons or entities not a party
except as released in Section 14.1.
14.3 Nothing in this Agreement shall be construed to affect in any way,
or require the forfeiture or compromise of any claims that may arise from
Settlement Class members' purchase of Exterior Inner-Seal_ Siding subsequent
to January 1, 1996.
14.4 When any subsequent purchaser succeeds to the rights of any
Settlement Class member by acquiring Property covered by this Agreement, the
subsequent purchaser shall automatically receive and succeed to all rights and
obligations created by this Agreement as limited by the terms and conditions
of this Agreement, unless a valid assignment of claim is executed between
those parties, in which event the assignment of claim shall control who is
entitled to participate under the terms of this Agreement.
15. Expenses and Fees
15.1 All expenses incurred in administering this Agreement, including
cost of the Class and Subsequent Notices and costs of implementing and
administering the claims process and the costs of the Independent Adjusters,
shall be paid from the Settlement Fund.
15.2 The reasonable fees and expenses of Plaintiffs' Class Counsel
shall be paid by L-P on the Settlement Date separate and apart from the
Settlement Amount, in such amount as is approved by the Court.
15.3 Notwithstanding the failure by the Court to issue the Final Order
and Judgment or a decision by L-P to exercise its right to withdraw pursuant
to Section 11 of this Agreement, the Settlement Fund will bear, in accordance
with the terms of this Agreement, the costs of the Class Notice and any
expenses associated with this Settlement incurred to such point and any
associated shutdown expenses, including any notices as the Court may hereafter
direct, excluding attorneys' fees, and L-P shall not have the right to recoup
such funds.
16. Tax Status of Settlement Fund
16.1 The Settlement Fund created under this Agreement will be
established and maintained as a Qualified Settlement Fund ("QSF") in
accordance with Section 468B of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder. Any Defendant shall be permitted,
in its discretion, and at its own cost, to seek a private letter ruling from
the Internal Revenue Service ("IRS") regarding the tax status of the
Settlement Fund. The Parties agree to negotiate in good faith, subject to
Court Approval, any changes to the Agreement necessary to obtain IRS approval
of the Settlement Fund as a QSF.
16.2 The Claims Administrator is appointed to act as administrator of
the Settlement Fund within the meaning of Treas. Reg. Section 1-468B-2(k)(3).
As theadministrator, the Claims Administrator will comply with the duties and
obligations applicable to the administrator under the regulations under IRC
section 468B, including undertaking the following actions: (a) apply for the
tax identification number required for the Settlement Fund; (b) file, or cause
to be filed, all tax returns the Settlement Fund is required to file under
federal or state laws; (c) pay from the Settlement Fund all taxes that are
imposed upon the Settlement Fund by federal or state laws; (d) comply with
applicable federal or state information reporting and withholding
requirements; and (e) file, or cause to be filed, tax elections available to
the Settlement Fund, including a request for a prompt assessment under IRC
sec. 6501(d) if and when it deems it appropriate to do so. If at any time it
is determined that the Settlement Fund does not qualify as a Qualified
Settlement Fund under Section 468B, the Claims Administrator shall apply for
refunds of all taxes paid on the fund's modified gross income as defined in
Reg. Section 1.468B-2. The Claims Administrator shall pay to L-P all such
refunds received, together with interest actually received, from all taxing
authorities.
16.3 L-P, as transferor of the Settlement Fund, shall prepare and file
the information statements concerning its settlement payments to the
Settlement Fund as required to be provided to the IRS pursuant to the
regulations under IRC section 468B.
16.4 At least 95% of the Settlement Fund shall be invested in direct
obligations of the United States, or in money market funds solely invested in
such obligations, or their equivalent, unless otherwise agreed to by L-P and
Plaintiffs' Class Counsel.
17. Enforcement of Court's Settlement Approval Order
17.1 In the event L-P fails to make a payment due and owing under the
terms of this Agreement, or is in default of this Agreement in any other
respect, Plaintiffs' Class Counsel shall so notify the Court. L-P shall then
be given up to 20 calendar days to "cure" the default. If L-P does not "cure"
the default in the time provided in this Section 17.1, Plaintiffs' Class
Counsel shall apply to the Court for the relief set forth in Section 17.2 of
this Agreement.
17.2 In the event of a default by L-P under this Agreement, the Court
may exercise all equitable powers over L-P to enforce this Agreement and the
Final Order and Judgment irrespective of the availability or adequacy of any
remedy at law. Such powers include, among others, the power of specific
performance.
18. Representations and Warranties
18.1 L-P represents and warrants that it (i) has all requisite
corporate power and authority to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby; (ii) the execution,
delivery and performance of this Agreement and the consummation by it of the
actions contemplated herein have been duly authorized by all necessary
corporation action on the part of L-P; and (iii) this Agreement has been duly
and validly executed and delivered by L-P and constitutes its legal, valid and
binding obligation.
19. Termination of the Agreement
19.1 The performance of this Agreement is expressly contingent upon the
Court's issuance of the Final Order and Judgment. If the Court fails to issue
such Order following conclusion of the Fairness Hearing, L-P may elect to
terminate this Agreement within twenty (20) business days of such failure,
rendering it as having no force or effect whatsoever, null and void, ab
initio, and not admissible as evidence for any purpose in any pending or
future litigation (in any jurisdiction) involving any of the Parties. If the
Court approves this Agreement, but this Agreement has not become final pending
the resolution of an appeal of this Final Order and Judgment, L-P may elect to
provide the relief to Settlement Class members under the terms and conditions
of this Agreement. If L-P so elects to provide such relief to Settlement
Class members pending the resolution of any such appeal, such relief will be
conditioned upon the Eligible Claimant executing a release consistent with
Sections 5.8 and 14 of this Agreement and all amounts so spent shall be
credited against and deducted from the Settlement Amount. If L-P does not so
elect, Plaintiff Class Counsel, acting on behalf of and for the benefit of
Settlement Class members, may elect within twenty (20) business days thereof
to terminate this Agreement, rendering it having no force and effect
whatsoever, null and void ab initio, and not admissible as evidence for any
purpose in this or any other pending or future litigation (in any
jurisdiction) involving any of the Parties or Settlement Class members, and
Defendants shall retain the right to oppose class certification. If L-P
elects to provide such relief to Settlement Class members pending the
resolution of any such appeal and after receiving Court approval, and the
Settlement Date is never reached, L-P shall retain the right to terminate, at
any time, this Agreement as provided for above in this paragraph and any
amounts remaining in the Settlement Fund after the payment of administrative
expenses (including the cost of termination) shall be returned to L-P by the
Claims Administrator.
19.2 In the event L-P elects not to contribute additional funds under
Section 4 of this Agreement, Settlement Class members who would still be
eligible for relief under this Agreement may pursue, notwithstanding any other
provision in this Agreement or the Final Order and Judgment thereon to the
contrary, their unpaid Settled Claims and new claims associated therewith
against L-P, the statute of limitations and/or repose will be deemed to have
been tolled from April 28, 1995, until one hundred eighty (180) days after the
date that L-P elects not to contribute additional funds under Section 4, or
for such longer period as the law may provide without reference to this
Agreement.
19.3 Notwithstanding any other provision of this Agreement, if this
Agreement is terminated for any reason, L-P hereby stipulates and agrees that
the Plaintiffs may pursue their claims by moving for class certification, and
the appropriateness of the plaintiffs to act as representative plaintiffs
shall be based on their status as of the date of Preliminary Approval, even if
one or more of the plaintiffs' individual claims will thereafter have been
paid under this Agreement. In that event, L-P will also not object to the
addition or substitution of class representative plaintiffs, but may oppose
class certification on other grounds nunc pro tunc without prejudice from the
existence of this Agreement.
19.4 Until the Term of this Agreement has expired, L-P agrees to use
its best efforts to preserve all records and evidence which are or could be
relevant to, or could lead to the discovery of relevant evidence, concerning
the research and development of Exterior Inner-Seal(TM) Siding, its marketing,
distribution, and manufacture, and the operation of its claims process.
20. Miscellaneous Provisions
20.1 Subject to Court approval, L-P shall pay, separate and apart from
the Settlement Amount, to each original plaintiff or plaintiff within ten days
of the Settlement Date, $3,000 to each individual or married couple in
recognition of their efforts on behalf of the Settlement Class, and $10,000
for the corporate class representative.
20.2 This Agreement, including all Exhibits attached hereto, shall
constitute the entire Agreement among the Parties with regard to the subject
of this Agreement and shall supersede any previous agreements and
understandings between the Parties with respect to the subject matter of this
Agreement. This Agreement may not be changed, modified, or amended except in
writing signed by all Parties, subject to Court approval. The parties
contemplate that, except for Exhibit F, the exhibits may be modified by
subsequent agreement of L-P and Plaintiffs' Class Counsel prior to
dissemination to the Settlement Class.
20.3 This Agreement shall be construed under and governed by the laws
of the State of Oregon, applied without regard to its laws applicable to
choice of law.
20.4 This Agreement may be executed by the Parties in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
20.5 This Agreement shall be binding upon and inure to the benefit of
the Settlement Class, the Parties, and their representatives, heirs,
successors, and assigns.
20.6 This Agreement is conditioned upon L-P's providing to Plaintiffs'
Class Counsel additional confirmatory information and discovery.
20.7 The headings of the sections of this Agreement are included for
convenience only and shall not be deemed to constitute part of this Agreement
or to affect its construction. The decimal numbering of provisions herein is
intended to designate subsections where applicable.
20.8 Any notice, instruction, application for Court approval or
application for Court orders sought in connection with this Agreement or other
document to be given by any Party to any other Party shall be in writing and
delivered personally so sent by registered or certified mail, postage prepaid,
if to L-P to the attention of L-P's respective representative and to
Plaintiffs' Class Counsel on behalf of Settlement Class members, or to other
recipients as the Court may specify. As of the date of this Agreement, the
respective representatives are as follows:
DATED this 18th day of October, 1995.
Louisiana-Pacific Corporation
By: /S/ DONALD KAYSER
Donald Kayser
Its Chief Executive Officer
By: /S/ ROBERT SCHICK
Robert Schick
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 7702-6760
Counsel for Louisiana-Pacific Corporation
Harry A. Merlo
By: /S/ WILLIAM F. MARTSON, JR.
William F. Martson, Jr.
Tonkon, Torp, Galen, Mardaduke &
Booth
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
Counsel for Harry A. Merlo
<PAGE>
CLASS COUNSEL
By: /S/ A. HOYT ROWELL, III
A. Hoyt Rowell, III
Ness, Motley, Loadbolt, Richardson &
Poole
174 East Bay Street, Suite 100
Charleston, S.C. 29041
By: /S/ STEVE W. BERMAN
Steve W. Berman
Hagens & Berman
1301 Fifth Avenue
Suite 2929
Seattle, WA 98101
By: /S/ CHRISTOPHER I. BRAIN
Christopher I. Brain
Stephan O. Fjelstad
Tousley, Brain
ATT Gateway Tower
Suite 5600
Seattle, WA 98104
By: /S/ BENNET A. McCONAUGHY
Bennet A. McConaughy
Paul L. Ahern, Jr.
Foster Pepper & Shefelman
1111 Third Avenue
Suite 3400
Seattle, WA 98101
William H. Garvin III
FONVIELLE & HINKLE
3375-A Capital Circle N.E.
Tallahassee, FL 32308
Telephone: (904) 422-7773
<PAGE>
Michael F. Ram
Jonathan D. Selbin
LIEFF, CABRASER, HEIMANN & BERNSTEIN
Embarcadero Center West
275 Battery Street
30th Floor
San Francisco, CA 94111-3339
Telephone: (415) 956-1000
Attorneys for Plaintiffs
Of Counsel:
Don Barrett
BARRETT LAW OFFICES
404 Court Square North
Lexington, MS 39095
Telephone: (601) 834-2376
Michael D. Hausfeld
Gary Mason
COHEN, MILSTEIN, HAUSFELD & TOLL
1100 New York Avenue N.W.
Suite 500, West Tower
Washington, DC 20005-3934
Telephone: (202) 408-4600
John Crowder
Andrew Citrin
CUNNINGHAM, BOUNDS, YANCE
CROWDER & BROWN
Post Office Box 66705
Mobile, AL 36660
Telephone: (334) 471-6191
Ralph I. Knowles, Jr.
DOFFERMYRE, SHIELDS, CANFIELD
& KNOWLES
1600 The Peachtree
1355 Peachtree Street
Atlanta, GA 30309
Telephone: (404) 881-8900
<PAGE>
Walter S. McLin, III
Phillip S. Smith
McLIN, BURNSED, MORRISON,
JOHNSON & ROBUCK, P.A.
Philip H. Gordon
GORDON LAW OFFICES
419 South 9th Street
Boise, ID 83702
Telephone: (208) 345-1449
Samuel Heins
HEINS, MILLS & OLSON
700 Northstar East
Minneapolis, MN 55402
Telephone: (612) 338-4605
David Guin
HOGAN, SMITH & ALSPAUGH
2323 Second Avenue North
Birmingham, AL 35203-3758
Telephone: (205) 324-5635/
1-800-223-2535
Clinton Krislov
Jonathan Nachain
KRISLOV & ASSOCIATES
222 N. LaSalle Street
Suite 810
Chicago, IL 60601
Telephone: (312) 606-0500
Richard T. Dorman
McRIGHT, JACKSON, DORMAN,
MYRICK & MOORE
1100 First Alabama Building
106 St. Francis Street
Mobile, AL 36652
Telephone: (334) 432-3444
Beverly C. Moore, Jr.
Sandra B. Brantley
MOORE & BROWN
4900 Massachusetts Avenue, N.W.
Suite 230
Washington, DC 20016
Telephone: (202) 364-1032
Jeffrey S. Mutnick
Robert K. Udziela
Keith E. Tichenor
<PAGE>
John S. Stone
POZZI WILSON ATCHISON
1100 S.W. 6th Avenue, Suite 1400
Portland, OR 97204
Telephone: (503) 226-3232
Charles R. Watkins
SUSMAN, BUEHLER & WATKINS
Two First National Plaza
Suite 620
Chicago, IL 60603
Telephone: (312) 346-3466
Les M. Swanson
400 Director Building
808 S.W. Third Avenue
Portland, OR 97204
Telephone: (503) 228-1838
The following exhibits to the Settlement Agreement are omitted. Copies will
be provided to the Commission upon its request.
Exhibit A Form of notice of class action and proposed settlement to
owners and former owners of houses and other structures with
Louisiana-Pacific exterior Inner-Seal Siding
Exhibit B Form of Exclusion request
Exhibit C Form of Problem report
Exhibit D Form of Claim for unreimbursed repair
Exhibit E Form of Field inspection and evaluation form
Exhibit F Form of Release
Exhibit G List of region/states
<PAGE>
EXHIBIT 11
Louisiana-Pacific Corporation and Subsidiaries
Calculation of Net Income Per Share
For the Nine Months Ended September 30, 1995
Number of shares
Including Excluding
Common Stock Common Stock
Equivalents Equivalents (1)
------------ ------------
Weighted average number of shares
of common stock outstanding 116,937,022 116,937,022
Weighted average number
of shares sold to ESOTs subsequent
to January 1, 1994, not allocated
to participants' accounts(2) (1,670,782) (1,670,782)
Weighted average number of
shares of treasury stock held
during the period (8,104,257) (8,104,257)
Common stock equivalents:
Application of the "treasury
stock" method to stock option
and purchase plans 705,575 ---
------------ ------------
Weighted average number of shares
of common stock and common stock
equivalents 107,867,558 107,161,983
============ ============
Rounded to 107,870,000 107,160,000
============ ============
Net income (loss) $(78,500,000) $(78,500,000)
============ ============
Net income (loss) per share $ (.73) $ (.73)
============ ============
(1) Accounting Principles Board Opinion No. 15, "Earnings Per Share", allows
companies to disregard dilution of less than three percent in the
computation of earnings per share. Therefore, shares used in computing
earnings per share for financial reporting purposes is 107,160,000
shares.
(2) American Institute of Certified Public Accountants Statement of Position
No. 93-6, "Employers' Accounting for Employee Stock Ownership Plans"
requires that shares held by the registrant's ESOTs which were acquired
by the ESOTs on or after January 1, 1994, which are not allocated to
participants' accounts, are not considered outstanding for purposes of
computing earnings per share. Shares held by the ESOTs which were
acquired by the ESOTs prior to January 1, 1994, continue to be
considered outstanding (whether or not allocated to participants'
accounts) for purposes of computing earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Consolidated Summary Financial Statements and
Notes included in this Form 10-Q and is qualified in its
entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<PERIOD-TYPE> 9-MOS
<S> <C>
<CASH> 124,700
<SECURITIES> 0
<RECEIVABLES> 180,200
<ALLOWANCES> 0
<INVENTORY> 267,700
<CURRENT-ASSETS> 677,900
<PP&E> 2,573,000
<DEPRECIATION> (1,166,600)
<TOTAL-ASSETS> 2,826,900
<CURRENT-LIABILITIES> 510,400
<BONDS> 184,300
0
0
<COMMON> 117,000
<OTHER-SE> 1,526,800
<TOTAL-LIABILITY-AND-EQUITY> 2,826,900
<SALES> 2,172,900
<TOTAL-REVENUES> 2,172,900
<CGS> 1,709,600
<TOTAL-COSTS> 2,317,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,200
<INCOME-PRETAX> (138,100)
<INCOME-TAX> (61,600)
<INCOME-CONTINUING> (78,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,500)
<EPS-PRIMARY> .73
<EPS-DILUTED> 0
</TABLE>
