<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[XX] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] for the fiscal year ended December 31, 1994
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
_________ to ___________
Commission file number 0-016951
--------
FIBREBOARD CORPORATION
(exact name of registrant as specified in charter)
Delaware 94-0751580
----------------------------------------------------
(State or other juris- (I.R.S. Employer Iden-
diction of incorporation) tification No.)
2121 N. California Blvd., Suite 560, Walnut Creek, CA 94596
------------------------------------------------------------
(Address of principal executive offices)
(510) 274-0700
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
-----------------------------
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 XXX No
--------. --------.
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K XXX
---------.
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 17, 1995 was $129,142,976.
As of the close of business on March 17, 1995, the Registrant had
outstanding 4,237,787 shares of common stock.
Documents Incorporated by Reference
Portions of Fibreboard Corporation's Proxy Statement relating to its 1995
Annual Meeting of Stockholders, which will be filed pursuant to Regulation 14A
not later than April 30, 1995, are incorporated by reference in Part III.
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Fibreboard Corporation (Fibreboard) is a Delaware corporation incorporated
in 1917. Between June 1978 and June 1988, Fibreboard was a wholly-owned
subsidiary of Louisiana-Pacific Corporation (L-P). In June 1988, L-P
distributed Fibreboard's common stock to its shareholders, and Fibreboard once
again became an independent, publicly held company. Fibreboard operates in two
primary industry segments: building products and resort operations.
Sales in 1994 for each segment were as follows:
<TABLE>
<CAPTION>
In Millions %
----------- ---
<S> <C> <C>
Building Products --
Wood Products $180.3 50
Norandex Inc. 85.6 24
Industrial Insulation Products 56.4 15
Resort Operations 41.4 11
------
$363.7
------
</TABLE>
Building Products consists of the Wood Products Group, Norandex Inc. and
the Industrial Insulation Products Group. Wood Products manufactures lumber,
hardwood plywood and other value-added wood products and owns approximately
80,000 acres of timberland in northern California. Norandex, acquired August
31, 1994, is a manufacturer of vinyl siding for exterior residential
applications, which is distributed, along with a wide variety of other exterior
building products, through a company-owned distribution network of 71 branches
located primarily in the mid-west, Great Lakes, mid-Atlantic and northeast
states. Industrial Insulation Products, sold under the trade name of Pabco,
manufactures molded insulation for high temperature and industrial applications,
fireproofing board used in commercial construction and metal jacketing.
Resort Operations includes Northstar-at-Tahoe, a year-round destination
resort including ski and golf facilities, and Sierra-at-Tahoe, a day ski area,
both located near Lake Tahoe, California.
Fibreboard employs approximately 3,500 people (including approximately
1,100 seasonal employees in Resort Operations), substantially all of whom are
non-union.
Information concerning the revenues, operating results and identifiable
assets of each of Fibreboard's industry segments can be found in Note 12 to
Fibreboard's consolidated financial statements, "Industry Segment Information"
on page 36.
<PAGE>
BUILDING PRODUCTS --
WOOD PRODUCTS GROUP
PRODUCTS
- Softwood lumber, principally pine industrial grade and fir dimension
lumber;
- Mouldings and millwork used in the construction of windows, doors and
furniture parts;
- High-grade hardwood plywood panels used primarily in furniture and
cabinets, including premium priced thin panels used in the furniture
industry; and
- Processed bark for decorative landscape applications and soil
amendments.
More than 35% of Fibreboard's sawmill production is industrial grade lumber
which historically has been retained by Fibreboard or sold to others for further
processing into moulding, millwork, windows, doors and furniture parts.
Fibreboard's management believes that the specialty nature of industrial grade
lumber makes it more profitable and somewhat less subject to price fluctuations
than other grades. The remaining sawmill output is comprised of common and
dimension lumber grades used in lower-end industrial applications and in framing
for home construction and remodeling applications.
MARKETS
Products are marketed directly to factories or remanufacturing operations
for further processing, to wholesalers and to other building material
distributors located principally in the western United States. Fibreboard's
industrial grade lumber market extends to the midwestern states, while its
common and dimension lumber market is largely confined to California.
MARKET POSITION, COMPETITION AND ENTRY BARRIERS
Fibreboard does not account for a significant percentage of the nations's
lumber production. The principal means of competition are price, delivery and
quality. Fibreboard believes that the location of its sawmills are ideal for
the west coast lumber market.
Fibreboard believes it is one of the five largest hardwood plywood
producers in the United States, with an approximate 10% market share.
Fibreboard's market share is limited by its production capacity. The principal
means of competition are quality and delivery. Fibreboard believes its
California manufacturing location is a competitive advantage in serving the
southern California furniture and cabinet industries.
Fibreboard does not account for a significant percentage of the nation's
moulding and millwork production. Fibreboard's moulding and millwork operations
compete with a limited number of large producers and several hundred small
operations, and benefit from Fibreboard's integrated lumber supply.
<PAGE>
There are substantial barriers to entry to Fibreboard's markets including:
(a) difficulties in achieving meaningful economies of scale; (b) industry
capital requirements; (c) timber supply; and (d) existing and potential
environmental regulation and forest land set asides.
SUPPLIERS
Fibreboard's sawmill and plywood operations historically required
approximately 135 million board feet of logs to operate at scheduled capacities.
This requirement will be reduced to 125 million board feet in 1995 and 110
million board feet in 1996 through the initiatives discussed below. Fibreboard
owns approximately 80,000 acres of timberland in northern California which
supply raw materials to its operations. Fibreboard's timberlands are comprised
primarily of ponderosa pine and white fir, with smaller amounts of other
species. These lands can supply on a sustained yield basis approximately 35% -
40% of the log requirements for Fibreboard's present sawmills and plywood mill
operating at scheduled capacities. The balance of Fibreboard's log requirements
are supplied by U.S. Forest Service (USFS) timber cutting contracts, cutting
contracts with private timberland owners and by open market purchases.
Fibreboard's logging operations are conducted by independent contractors.
Fibreboard's USFS timber cutting contracts are typically "pay-as-cut"
contracts. Contracts are generally awarded in an open, competitive bid process,
although some are awarded using sealed bids. Stumpage prices typically are
subject to escalation and de-escalation based on movement of published indices
for finished products.
A significant portion of Fibreboard's log needs have historically come from
the Stanislaus National Forest in California. In 1991, the USFS issued its
Stanislaus management plan which will govern operation of the forest for the
next 10 to 15 years (the Final Plan). The Final Plan projects an annual
allowable sale quantity (the ASQ) of 88 million board feet. This ASQ represents
a 30% reduction from the average quantity of timber sold each year since 1973.
Fibreboard believes this ASQ is unnecessarily low since the annual timber growth
on the Stanislaus is estimated to exceed 300 million board feet. Fibreboard has
appealed the Final Plan to the USFS Washington, D.C. office, challenging the
methodologies used and conclusions reached. The appeal is still pending. If
that appeal is not successful, Fibreboard will consider legal action through the
court system.
In January 1993, the USFS issued interim rules governing the harvest of
federal timber in California to protect the habitat of the California spotted
owl. While the owl has not been declared "endangered" or "threatened" under the
Endangered Species Act, the interim rules impose logging restrictions to allow
further study of the owl's status. The interim rules generally prohibit logging
trees larger than 30 inches in diameter under any USFS timber contract awarded
after March 1, 1993, and impose certain other restrictions.
In early 1995, the USFS released a Draft Environmental Impact Statement
resulting from its study of the California Spotted Owl in the national forests
of the Sierra Nevada mountains of California, including the Stanislaus (the
DEIS). The DEIS presents a number of alternative forest management scenarios,
and recommends an alternative which will further significantly reduce the ASQ
from the levels contemplated in the Final Plan. If approved, implementation of
the recommended alternative will produce an ASQ for the Stanislaus of
approximately 27 million board feet, of which roughly one-third is presumed
devoted to biomass and firewood programs (which yield few, if any, commercial
sawlogs) with 19% of the remainder set
<PAGE>
aside for the small business program. The DEIS is expected to have a similar
impact on the ASQ of neighboring national forests.
The DEIS is not expected to impact 1995 timber sale activity, although the
interim rules in effect serve to reduce the ASQ to a level comparable to that
envisioned by the DEIS. The DEIS is subject to public comment through mid-May
1995, with a final record of decision expected from the USFS late in the year.
Fibreboard believes the DEIS is seriously flawed. The USFS scientific team
concluded the California Spotted Owl population may be greater today than it was
100 years ago, yet the recommended alternative ignores this data. In addition,
the recommended alternative does not adequately address the issue of forest
health, particularly the prevention of catastrophic forest fires or epidemic
insect infestation. Furthermore, the economic analysis of the impact of
implementation on communities whose economic viability will be threatened is
insufficient and not appropriately considered in reaching the recommended
alternative. Fibreboard expects to raise these issues during the public comment
period.
Fibreboard expects to appeal the DEIS, if finalized, and will consider
legal action if the appeal is unsuccessful. Litigation challenging the interim
rules is still pending. Fibreboard cannot predict whether there will be any
ability to lessen the potential impact on the Stanislaus ASQ of adopting the
DEIS recommended timber management alternative.
Fibreboard expects that future costs of timber harvested from USFS lands
will increase as competition for available timber mounts. Fibreboard believes
continued supply constraints will enhance the value of its fee-owned timber,
even though production decreases may be necessitated.
Fibreboard has undertaken a number of initiatives to respond to these
timber supply concerns, including the following:
- A $6.7 million capital expenditure program to install additional state
of the art optimization equipment in Fibreboard's two sawmills will be
completed during 1995. Once completed, the yield and grade of
finished products will improve. The increased yield will result in
Fibreboard being able to manufacture more and higher value finished
products from a lower quantity of raw materials. Once the
improvements are completed, Fibreboard anticipates reducing the
Chinese Camp sawmill operating schedule to 1 shift.
- The quantity of logs required as raw materials for the manufacture of
plywood has been reduced roughly 50% by purchasing veneer core
material from outside suppliers, rather than manufacturing this
material, and increasing the percentage of non-veneer core materials
used in manufacturing.
The implementation of the above two items is expected to reduce
Fibreboard's annual log requirements to 110 million board feet by the
end of 1995.
- Fibreboard has aggressively pursued alternative sources of timber
supply. Examples include using cottonwood logs from the Pacific
Northwest in the manufacture of plywood, cutting logs imported from
New Zealand and Chile and securing cutting rights to 4,800 acres of
privately owned timberland in northern New Mexico. Fibreboard expects
to continue seeking alternative sources of timber supply in the
future.
- Fibreboard has implemented a "Land Owners Assistance Program" under
which its forestry staff assists private land owners in the management
of timber properties, including preparation of timber management
plans. The program
<PAGE>
results in Fibreboard having access to greater quantities of logs from
private lands than might otherwise be the case.
While Fibreboard believes it has adequate timber available under contract,
from its fee lands or expected through open market log purchases to meet its
needs for 1995 and well into 1996, it currently is unable to determine the
ultimate outcome of these timber supply issues. In the event there is
inadequate timber to support all existing manufacturing operations of Fibreboard
and its competitors, some facilities (potentially including Fibreboard
operations) may be forced to curtail operations or close. Fibreboard will
evaluate the need for such actions based on the quantity and characteristics of
available timber and existing market conditions for its products at the time
such decisions are required.
Fibreboard's remanufacturing operations purchase primarily industrial grade
pine lumber for value-added processing. Fibreboard sawmills supply more than
50% of these annual lumber requirements with the remainder purchased on the
open market. Fibreboard has not experienced any difficulties in procuring
adequate raw materials for these facilities, although a timber supply shortage
could result in lower volumes of industrial lumber available and/or higher
prices.
ENVIRONMENTAL POLICY
Fibreboard endeavors to adhere to sound environmental practices in both
management of its forest lands and facility operations. Fibreboard believes it
has been an industry leader in environmentally sound timber management.
Fibreboard timberlands are composed of multiple-aged stands. Fibreboard makes
optimal use of all fiber by (a) maximizing productivity by directing logs to the
conversion facility that can most efficiently and profitably convert those logs
to products and (b) processing waste materials formerly discarded in landfills
to lower costs and to generate additional sales.
BUYERS
Markets for Fibreboard's wood products are price sensitive. However,
industry pricing is supported by the general shortage of timber available for
harvest in California and the western states. Adverse effects of competing in
price sensitive markets are minimized by Fibreboard's integrated operations and
proximity to its primary markets.
<PAGE>
FACILITIES
LUMBER
Normal Annual
Production Capacity
Plant Location (thousand board feet) Production Schedule
-------------- --------------------- -------------------
Standard, CA 80,000 2 shifts-5 days/week
Chinese Camp, CA* 40,000 1 shift-5 days/week
-------
TOTAL 120,000
REMANUFACTURING
Normal Annual
Production Capacity
Plant Location (thousand board feet) Production Schedule
-------------- --------------------- -------------------
Red Bluff, CA 40,000 2 shifts-5 days/week
(millwork)
HARDWOOD PLYWOOD
Normal Annual
Production Capacity
Plant Location (thousand board feet) Production Schedule
-------------- --------------------- -------------------
Standard, CA 120,000 3 shifts-5 days/week
OTHER OPERATIONS
Plant Location Key Products
-------------- ------------
Keystone, CA Decorative bark
* Projected capacity on one shift after installation of optimization
equipment.
CAPITAL SPENDING
In recent years, Fibreboard has maintained a capital spending program at
each of its wood products facilities to lower manufacturing costs. Through
capital improvements, including significant enhancements to the Chinese Camp,
Standard Plywood and Red Bluff facilities, Fibreboard has enhanced the value of
its core business. Management anticipates wood products capital expenditures
should normally range from $2 to $3 million annually. Fibreboard has committed
to a $6.7 million capital expenditure program to install additional state of the
art optimization equipment in its two sawmills during 1995.
SEASONALITY
The wood products business is somewhat seasonal and usually experiences
increased levels of demand during the warm weather construction season. In
addition, wood products are significantly affected by economic cycles.
<PAGE>
OPERATING RESULTS - WOOD PRODUCTS GROUP
Historical Performance
(000's omitted)
1994 1993 1992
---- ---- ----
Sales $180,309 $190,494 $169,655
Pre-tax operating income 12,670 18,468 17,321
Depreciation, depletion
& amortization 4,307 6,340 7,031
Capital expenditures ( 2,426) ( 4,240) ( 2,969)
--------- --------- ---------
Operating cash flow 14,551 20,568 21,383
NORANDEX INC.
PRODUCTS
Norandex produces vinyl siding and accessories at its state-of-the-art
manufacturing facility in Claremont, NC. More than 90% of manufactured products
are sold through a 71 branch company-owned distribution network operating in 23
states. Norandex manufactured vinyl siding and accessories account for
approximately 35% of distribution sales. Purchased windows and doors make up an
additional 30% of sales. Other resale products include aluminum and steel
siding and other primarily exterior building products and installation supplies.
Norandex products are used in residential remodeling (60% to 65% of sales) and
new construction (35% to 40% of sales).
MARKET POSITION, COMPETITION AND ENTRY BARRIERS
Norandex is one of the top ten producers of vinyl siding in North America,
out of 28 producers which supply an overall vinyl siding market of approximately
28 million squares (a square is material sufficient to cover a 10 foot by 10
foot area). Fibreboard believes Norandex has a 5% to 6% market share in vinyl
siding. Fibreboard believes Norandex is among the industry's low cost producers
with production yields substantially higher than the industry average.
Norandex is one of four vinyl siding producers that has a captive
distribution network, and Fibreboard believes the Norandex distribution network
to be the most extensive. Norandex distribution competes regionally with many
privately-owned distribution companies which offer products manufactured by
Norandex's competitors.
Barriers to entry in the manufacture of vinyl siding are significant,
requiring a substantial investment in manufacturing equipment. By contrast,
barriers to entry in the distribution business are modest.
The principal means of competition are service and quality.
SUPPLIERS
The primary raw material used in the manufacture of vinyl siding is
polyvinyl chloride (PVC) resin. Norandex has supply agreements at current
market prices with two major
<PAGE>
manufacturers of PVC resin. Norandex has not experienced any difficulty in
securing sufficient raw material to meet its manufacturing needs. The price of
PVC resin is subject to price swings. Norandex has historically been able to
pass the impact of raw material price increases on through increased end product
prices.
BUYERS
Norandex's 71-branch distribution network covers 23 states, concentrated in
the mid-west, mid-Atlantic and northeast areas of the country. Buyers are
typically residential siding installation and construction and remodeling
contractors. Norandex believes its manufacturing flexibility and ability to
meet short back order delivery times provide it a competitive advantage.
FACILITIES
VINYL SIDING
Normal Annual
Production Capacity
Plant Location (squares) Production Schedule
-------------- ------------------- -------------------
Claremont, NC 1,650,000 3 shifts-7 days/week
BRANCH LOCATIONS
Norandex operates a company-owned distribution network of 71 branches
located in the following 23 states: Colorado (2), Delaware, Illinois (3),
Indiana (5), Iowa (2), Kansas, Kentucky (2), Maryland, Michigan (8), Minnesota
(2), Nebraska, New York (5), North Carolina (3), North Dakota, Ohio (8),
Pennsylvania (4), South Carolina (2), Tennessee (2), Utah (2), Vermont, Virginia
(7), West Virginia (4) and Wisconsin (4). Branches are typically 10,000 to
20,000 square feet in size.
CAPITAL SPENDING
Norandex historical capital expenditures have averaged $2 to $3 million per
year, primarily for maintenance and improvement of manufacturing and branch
equipment. Fibreboard has committed $1.2 million to increase the Claremont
plant manufacturing capacity by 22%. This project will be completed during the
first quarter of 1995. The increase in capacity is reflected above.
SEASONALITY
Norandex sales activity is tied to construction activity in its market
areas. Construction activity is seasonal and dependent on weather patterns.
Historically, sales are low in the first quarter of the year, before picking up
in the second and third quarters and falling off in the fourth quarter.
Manufacturing activity, while somewhat heavier during the high-activity summer
months, is more evenly spread throughout the year.
<PAGE>
OPERATING RESULTS - NORANDEX INC.
Historical Performance
(000's omitted)
1994* 1993* 1992*
----- ----- -----
Sales $85,607 NA NA
Pre-tax operating income 8,096 NA NA
Depreciation & amortization 1,815 NA NA
Capital expenditures** ( 585) NA NA
-------------
Operating cash flow 9,326 NA NA
* Operating results are since August 31, 1994, the date Norandex Inc.
was acquired. See Note 13 to Fibreboard's Consolidated Financial
Statements for further information.
** Capital expenditures do not include assets acquired on August 31,
1994.
INDUSTRIAL INSULATION PRODUCTS GROUP (PABCO)
PRODUCTS
Pabco produces molded industrial insulation, fireproofing board and metal
jacketing. Molded industrial insulation (calcium silicate - "CalSil") is
produced in a variety of standard sizes and configurations for use in industrial
construction and maintenance, primarily for high temperature piping and boiler
applications. The panel industrial fireproofing board (Super Firetemp(TM), also
a form of calcium silicate insulation) can be used in industrial and commercial
applications such as protecting columns, flues, cable trays, tanks, bulkheads,
etc.
Super Firetemp competes with a number of generic fireproofing products.
Super Firetemp retains its shape, size and strength under continuous service at
temperatures in excess of 2,000 DEG.F. and may be re-used after exposure to
extreme temperatures. Super Firetemp is exceptionally easy to cut and handle,
and can be applied directly to the surface it is protecting, unlike competing
products which require clearance space. Consequently, Super Firetemp's
durability, space efficiency and ease of application may provide greater cost
savings to users than competing products.
Pabco also manufactures metal jacketing and metal elbows used to cover and
protect insulation products after installation.
MARKETS
Nearly all of Pabco's products are sold into industrial markets, with a
small percentage sold into commercial markets. Approximately 90% of sales are
domestic, with the remainder primarily to South America and the Middle East.
MARKET POSITION, COMPETITION AND ENTRY BARRIERS
Fibreboard believes there are four significant producers of calcium
silicate industrial insulation used in North America. Pabco is the largest
producer of this specialized product
<PAGE>
category which directly competes with fiberglass, mineral wool, foam glass and
ceramic fibers in the industrial insulation market. Pabco's CalSil production
facilities are the largest, single product plants in its segment of the domestic
industrial insulation industry. Pabco's precision-molded, modular technology
allows for more efficient operation at a wider range of volumes than can be
achieved by major competitors. Pabco's key insulation and metal plants include
operations in the Gulf States region where buyers and sales are currently
concentrated. Pabco believes its products are preferred in construction
projects where ease of installation is paramount since Pabco's product is more
easily field fabricated. Each of Pabco's major competitors operates single-
facility, older plants located in the midwest and eastern states. Fibreboard
believes these may be higher-cost facilities, in areas of inherent labor cost
disadvantages.
Barriers to entry in CalSil production are significant due to capital
requirements. However, in certain applications, other types of insulation may
be substituted.
Fibreboard believes that there are only three major domestic producers of
metal elbows and jacketing material for insulation protection with each having a
roughly equal share of the domestic market. The three producers have
substantial excess capacity compared to market demand.
Pabco is the only North American producer of calcium silicate-based
industrial fireproofing board which it manufactures under an exclusive foreign
license. However, competing foreign products have been sold in the United
States with some limited success.
The principal means of competition are price, quality and service.
SUPPLIERS
The primary raw materials in calcium silicate insulation are diatomaceous
earth and limestone. There are several sources of supply of diatomaceous earth
of a quality which Pabco considers acceptable for production of calcium silicate
insulation. Pabco has entered into long term material supply contracts on
favorable terms. The raw materials for the metal operations are aluminum,
stainless steel, vinyl and paper materials. Pabco has not experienced any
difficulties in obtaining adequate supplies and does not anticipate any such
difficulties, although metal pricing has varied significantly over the last
three years. Depending on inventory positions and purchase commitments, metal
market price volatility can have a significant impact on operating profits.
BUYERS
A majority of Pabco's revenues are derived in the maintenance market.
Primary customers include insulation contractors and distributors concentrated
in the Gulf States region. Products are marketed by Pabco's sales force to
insulation distributors and contractors. Although industrial insulation sales
are price sensitive, Fibreboard believes Pabco's low-cost facilities, material
and energy costs give Pabco a significant cost advantage over competitors.
<PAGE>
FACILITIES
MOLDED INDUSTRIAL INSULATION
Normal Annual
Production Capacity
Plant Location (cubic feet) Production Schedule
-------------- ------------------- -------------------
Ruston, LA 2,300,000 3 shifts-7 days/week
Grand Junction, CO 2,300,000* 3 shifts-7 days/week
---------
TOTAL 4,600,000
* Facility was not operated during 1994 to match production with demand.
Facility was reopened in January 1995 and is expected to operate for
several months.
PANEL INDUSTRIAL FIREPROOFING BOARD
Normal Annual
Production Capacity
Plant Location (pounds) Production Schedule
-------------- ------------------- -------------------
Grand Junction, CO 7,500,000 3 shifts-7 days/week
METAL JACKETING
Plant Location Production Capacity Production Schedule
-------------- ------------------- -------------------
Palestine, TX (1) 1 shift-5 days/week
Poca, WV (1) 1 shift-5 days/week
Huntington Beach, CA (1) 1 shift-5 days/week
(1) Capacity cannot be expressed in a standard unit of measure.
CAPITAL SPENDING
The industrial insulation group requires minimal capital expenditures,
primarily for maintenance purposes, averaging less than $500,000 per year.
Fibreboard's management does not believe any significant capital expenditures
will be required for the foreseeable future.
SEASONALITY
Industrial insulation products are impacted by petrochemical and general
economic cycles affecting industrial capital expenditure programs. In general,
sales activity is not significantly impacted by seasonality.
<PAGE>
OPERATING RESULTS - INDUSTRIAL INSULATION PRODUCTS GROUP
<TABLE>
<CAPTION>
Historical Performance
(000's omitted)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Sales $56,376 $49,215 $49,701
Pre-tax operating income 6,452 5,382 6,138
Depreciation & amortization 788 1,041 1,810
Capital expenditures ( 327) ( 324) ( 114)
Operating cash flow 6,913 6,099 7,834
</TABLE>
RESORT OPERATIONS --
FACILITIES
Fibreboard is the owner, developer and operator of a 6,800 acre year-round
destination resort near the north shore of Lake Tahoe, California. The resort,
Northstar-at-Tahoe (Northstar), features extensive ski facilities located on an
8,600 foot mountain with a vertical ski trail drop of 2,200 feet. Facilities
include eight chair lifts and a high-speed gondola plus a day lodge, various
restaurants, shops, entertainment and group conference facilities. Summer
facilities include riding stables, mountain bike and hiking trails, an 18-hole
golf course, tennis courts, a swimming pool and other recreational amenities.
Northstar includes 598 building lots and 654 condominium units, all of
which have been sold. Participating owners may offer homes or condominiums for
rental through Northstar's rental management program. Northstar has significant
additional land which is suitable for real estate development. Northstar
anticipates developing a new subdivision consisting of 158 single family home
sites beginning in 1995. Northstar believes the average sales price of these
lots, once developed, will be $125,000 to $160,000 each. Northstar intends to
begin offering lots for sale on a phased basis over several years, beginning in
1995.
During 1993, Fibreboard purchased the assets of Sierra Ski Ranch, a day ski
area located near the south shore of Lake Tahoe in California. The ski area,
renamed Sierra-at-Tahoe (Sierra), features 44 ski trails located on an 8,900
foot mountain with a vertical drop of 2,200 feet. Facilities include nine
chairlifts, three restaurants and retail and ski rental shops.
Sierra is a day use only area, and has no lodging facilities. Lodging is
available in South Lake Tahoe, 14 miles away.
MARKETS
Northstar and Sierra are marketed through a variety of public media,
including magazines, newspapers, radio, television and outdoor advertising, as
well as through direct convention sales and contacts with business and trade
groups.
Northstar is located approximately 200 highway miles east of San Francisco
and approximately 40 miles west of Reno, Nevada, while Sierra is located
approximately 190
<PAGE>
highway miles east of San Francisco. The primary market area is the state of
California. Fibreboard estimates that approximately 60% of Northstar's skiers
are from northern California and 18% from southern California compared to
Sierra where an estimated 90% of skiers are from northern California.
Fibreboard believes Northstar's location, ease of access, quality of facilities,
service, amenities and image appeal directly to the family and high income skier
segments of its market while Sierra appeals primarily to the value-conscious day
skier.
MARKET POSITION AND COMPETITION
Northstar is one of the better known year-round destination resorts in the
Lake Tahoe vicinity. Northstar competes directly with other ski resorts in the
area as well as with major ski and year-round destination resorts throughout the
western United States. Sierra's competition is primarily limited to ski areas
located in the central Sierra Nevada mountains, although it does attract some
destination skiers from the South Lake Tahoe area.
CAPITAL SPENDING
Over the past several years, Northstar has made substantial capital
expenditures to improve efficiency and competitiveness. Major projects included
high speed quad chairlifts, additional snow making and a new mountaintop
restaurant. Northstar has expanded its snowmaking capability to reduce the
effect of weather patterns and add stability to the revenue stream. Snowmaking
also improves the attractiveness of the ski mountain to a broader as well as
more experienced range of skiers. Fibreboard anticipates that annual resort
operations capital expenditures, primarily for annual maintenance and additional
resort amenities, will approximate $3 million. Fibreboard expects an additional
$3 million will be spent in 1995 for real estate lot development.
SEASONALITY
Operations are highly seasonal with more than 75% of revenues realized
during the ski season from late November through early-April. The length of the
ski season and the profitability of operations are significantly affected by
weather. Although Northstar has snowmaking capacity to mitigate some of the
effects of adverse weather conditions, abnormally warm weather or lack of
adequate snowfall can materially reduce revenues. Sierra lacks significant
snowmaking capability but generally benefits from higher annual snowfall than
Northstar. Depending on the weather and other factors, annual skier visits have
varied from 265,000 to 420,000 at Northstar and 200,000 to 330,000 at Sierra
over the last decade.
<PAGE>
OPERATING RESULTS - RESORT OPERATIONS
<TABLE>
<CAPTION>
Historical Performance
(000's omitted)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Sales $41,413 $25,501 $20,361
Pre-tax Operating Income* 8,020 2,325 1,648
Depreciation & amortization 3,467 2,514 2,331
Capital expenditures** ( 6,229) ( 4,813) ( 2,966)
------- ------- -------
Operating cash flow 5,258 26 1,013
<FN>
* Includes negative impact of 1993 mid-year acquisition of Sierra which
had anticipated expenses in excess of revenues of approximately $1
million.
** Capital expenditures do not include acquired assets of Sierra-at-Tahoe in
1993.
</TABLE>
ENVIRONMENTAL MATTERS --
All of Fibreboard's production facilities are subject to regulation by
federal and state environmental agencies. Fibreboard believes its facilities
substantially meet applicable environmental requirements in all material
respects. Although compliance with environmental requirements is currently not
materially burdensome, given the uncertainties associated with environmental
matters generally, and with changing laws and regulations in particular, there
can be no assurance that continued compliance will not be materially burdensome
in the future.
Information concerning Fibreboard's involvement in landfill clean-ups is
incorporated herein by reference to Note 15 of Fibreboard's consolidated
financial statements, "Other Litigation and Contingencies," on page 43.
ITEM 3. LEGAL PROCEEDINGS
ASBESTOS-RELATED PERSONAL INJURY CLAIMS
At December 31, 1994, Fibreboard was a defendant in approximately 41,900
personal injury claims. Approximately 15,600 of these claims were filed on or
after August 27, 1993 and will be covered by the Global Settlement discussed
below, if approved. Additional claims are anticipated in the future. These
claims typically allege injury or death from asbestos exposure. Fibreboard is
generally only one of several defendants. These claims seek compensatory, and
in many cases, punitive damages in varying amounts depending on injury severity.
Claims are pending in federal and state courts throughout the United States.
During 1993 Fibreboard reached settlement agreements (the Global Settlement
and Insurance Settlement) with its insurers and plaintiff representatives which,
if approved by the courts, should resolve Fibreboard's existing and future
asbestos-related personal injury liabilities within insurance resources and
existing corporate reserves. These settlements require court approval. The
Global Settlement action is titled Gerald Ahearn, James Dennis and Charles W.
Jeep, on Behalf of Themselves and Others Similarly Situated, Plaintiffs, v.
<PAGE>
Fibreboard Corporation, Defendant, Continental Casualty Company and Pacific
Indemnity Company, Intervenors, Civil Action No. 6:93cv526, U.S. District Court
for the Eastern District of Texas, Tyler Division. The Insurance Settlement
action is titled Continental Casualty Company, CNA Casualty Company of
California, Columbia Casualty Company and Pacific Indemnity Company, Plaintiffs,
v. Daniel Herman Rudd, Jr., Beverly White and John Hansel, on Behalf of
Themselves and Others Similarly Situated, and Owens-Illinois, Inc., on Behalf of
Itself and Others Similarly Situated, and Penn Mutual Life Insurance Company,
Defendants, Civil Action No. 6:94cv458, U.S. District Court for the Eastern
District of Texas, Tyler Division.
Additional information concerning personal injury claims can be found in
Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related
Litigation," which begins on page 37.
ASBESTOS-IN-BUILDINGS CLAIMS
At December 31, 1994, Fibreboard was a defendant in 14 asbestos-in-
buildings claims pending in federal and state courts throughout the United
States. Fibreboard is typically only one of several defendants. These claims
involve many thousands of buildings and seek hundreds of millions of dollars in
compensatory damages for expenses incurred for locating, testing and monitoring
or removing asbestos-containing materials. Some claims also seek punitive
damages.
Additional information concerning Fibreboard's asbestos-in-buildings claims
can be found in Note 14 to Fibreboard's consolidated financial statements,
"Asbestos-Related Litigation," which begins on page 37.
INSURANCE COVERAGE FOR PERSONAL INJURY CLAIMS
Fibreboard is litigating with two insurers, Continental Casualty Company
and Pacific Indemnity Company, to determine the amount of insurance available to
Fibreboard under policies issued by these companies (In Re Asbestos Insurance
Coverage Cases, Judicial Council Coordination Proceeding No. 107). The
litigation has been completed at the trial court level, with judgments favoring
Fibreboard on all issues. These judgments were appealed to the California Court
of Appeal by the insurers. In November 1993, the Court of Appeal issued its
ruling on the trigger and scope of coverage issues which upheld the favorable
trial court judgments in these areas, except the court held the period for
coverage would begin at the time of exposure to Fibreboard's asbestos products
rather than at the time of exposure to any company's asbestos product, with the
presumption that those periods are the same. The insurers have filed petitions
for review with the California Supreme Court, which has granted review but not
yet scheduled any further activity.
At the request of Fibreboard, Continental and Pacific Indemnity, the Court
of Appeal withheld its ruling on certain issues which were unique between
Fibreboard and its insurers while the parties seek approval of the Global and
Insurance Settlements.
If the Global and/or Insurance Settlements are ultimately approved,
Fibreboard and its insurers will seek to dismiss the insurance coverage
litigation.
Further information concerning this litigation can be found in Note 14 to
Fibreboard's consolidated financial statements, "Asbestos-Related Litigation,"
which begins on page 37.
<PAGE>
INSURANCE COVERAGE FOR ASBESTOS-IN-BUILDINGS CLAIMS
Fibreboard believes the total limits of insurance policies in effect from
1932 to 1985 which may provide coverage for the asbestos-in-buildings claims
aggregated approximately $390 million (approximately $295 million of which has
been confirmed through settlements during 1994 and 1993), which is in addition
to the personal injury insurance coverage and does not include additional
policies which contain no aggregate limit. The remaining insurers dispute
coverage. Fibreboard is pursuing an insurance coverage suit (Fibreboard vs.
Continental Casualty, et al; Superior Court of the State of California for the
City and County of San Francisco). Trial in this action has been continued.
During the continuance, Fibreboard and its insurers are attempting to settle
their disputes.
Additional information concerning this litigation can be found in Note 14
to Fibreboard's consolidated financial statements, "Asbestos-Related
Litigation," which begins on page 37.
Other Litigation
Fibreboard has been named as a potentially responsible party in two
California landfill clean ups, the Operating Industries Inc. site in Monterey
Park and the GBF landfill in Pittsburg, and has been named as a defendant in a
private lawsuit related to the Acme landfill in Martinez, CA. Additional
information concerning Fibreboard's involvement can be found in Note 15 to
Fibreboard's consolidated financial statements, "Other Litigation and
Contingencies," on page 43.
In March 1994, two purported class action lawsuits were filed in Delaware
Chancery Court naming the Company and its directors as defendants (Sonem
Partners LTD., et al. v. Roach, et al., Civil Action No. 13411; Vogel v. Roach,
et al., Civil Action No. 13421). Both lawsuits alleged substantially similar
causes of actions for breach of fiduciary duty relating to the 1994 amendment of
Fibreboard's stockholder rights plan and Fibreboard's rejection of a March 1994
unsolicited proposal of a merger with or an acquisition of Fibreboard. These
lawsuits were dismissed without prejudice in February 1995 at no cost to
Fibreboard.
Fibreboard is involved in a number of additional disputes arising from its
operations. Fibreboard believes resolution of these disputes will not have a
material adverse impact on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers of Fibreboard follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
NAME AGE POSITION
--------------------------------------------------------------------
<S> <C> <C>
John D. Roach 51 Chairman, President and Chief
Executive Officer
James P. Donohue 54 Senior Vice President, Finance
and Administration and Chief
Financial Officer
Michael R. Douglas 41 Senior Vice President, General Counsel
and Secretary
James D. Costello 51 Vice President, Wood Products
Operations
Stephen L. DeMaria 54 Vice President, Corporate Relations
Herbert M. Elliott 56 Vice President, Industrial Insulation
Products
William A. Jensen 42 Vice President, Resort Operations
Robert W. Johnston 58 Vice President, Vinyl Products
Garold E. Swan 42 Vice President and Controller
</TABLE>
Officers serve at the discretion of the board of directors.
Mr. Roach was elected Chairman, President and Chief Executive Officer of
Fibreboard on July 2, 1991. Prior to his election, Mr. Roach was Executive Vice
President of Manville Corporation, where he served as President of its Mining
and Minerals Group and President of Celite Corporation, a wholly-owned Manville
subsidiary. In addition, Mr. Roach served as President of Manville Sales
Corporation, now known as Schuller International, from 1988 to 1989, and as
Chief Financial Officer of Manville Corporation from 1987 to 1988. Prior to
Manville, Mr. Roach was a strategy consultant and Vice Chairman of Braxton
Associates; Vice President and Managing Director of the Strategic Management
Practice for Booz, Allen, Hamilton; and Vice President and Director of The
Boston Consulting Group. Previous experience at Northrop Corporation included
Director of strategic planning, economic analysis, accounting, management
information systems and co-manager of a venture capital subsidiary.
Mr. Donohue was elected Senior Vice President, Finance and Administration and
Chief Financial Officer in October 1991. Prior to joining Fibreboard, he was an
Executive Vice President of Continental Bank in Chicago where he held a wide
variety of senior management positions during his 25 years with the bank.
Mr. Douglas became General Counsel to Fibreboard in September 1987 and was
elected Secretary in November 1990. He was elected Vice President in August
1991 and Senior Vice President in October 1993. From March 1986 to September
1987 he was employed by the Asbestos Claims Facility, of which Fibreboard was a
member, as Senior Legal Counsel and then as Director of Law-West Coast Region.
From 1982 to 1986 he was an attorney in the asbestos litigation group of Jim
Walter Corporation.
<PAGE>
Mr. Costello has been Vice President, Wood Products Operations since
December 1988. He previously was employed by Snider Lumber Products Co., Inc.
from December 1983 until December 1988. Prior to December 1983, he was employed
by Fibreboard for 14 years. Mr. Costello rejoined Fibreboard with the
acquisition of Snider in October 1988, at which time he was president of Snider.
Mr. Costello is First Vice Chairman of Western Wood Products Association, an
industry group.
Mr. DeMaria joined Fibreboard in May 1989 as Director-Corporate
Communications and Investor Relations and was elected Vice President, Corporate
Relations in August 1991. Prior to joining Fibreboard, he was Executive Vice
President of the California Forest Protective Association, an industry trade
association representing the interests of industrial timberland owners before
the California legislature and regulatory agencies.
Mr. Elliott was appointed General Manager of Pabco in October 1991 and was
elected Vice President, Industrial Insulation Products in February 1992. Prior
to joining Fibreboard, Mr. Elliott was a partner in Management Resource
Partners, a professional management firm advising corporations on financial and
operating matters and functioned as CEO, CFO or a director of companies with
sales from $5-$50 million. Mr. Elliott has been CFO of Consolidated Fibers and
Itel Corporation, Vice President Corporate Development of Alexander and Baldwin
and a consultant for A.T. Kearney.
Mr. Jensen joined Fibreboard in October 1991 as General Manager of
Northstar-at-Tahoe and was elected Vice President in June 1993. From 1989 to
1991, Mr. Jensen was Vice President of Marketing and Sales for Sunday River Ski
Resort in Bethel, Maine. From 1986 to 1989, Mr. Jensen was Vice President,
Tracked Vehicles for Kassbohrer of North America, a manufacturer of ski resort
snow grooming vehicles and equipment.
Mr. Johnston joined Fibreboard with the acquisition of Norandex Inc. on
August 31, 1994 at which time he was elected Vice President. Mr. Johnston has
been employed with Norandex Inc. for 19 years and has held the office of
President since 1985. He was formerly Vice President of Sales and Branch
Operations for Norandex. Mr. Johnston was previously employed by Kaiser
Aluminum Corporation and Reynolds Metals Company.
Mr. Swan has been Controller of Fibreboard since October 1988, and was
elected Vice President in October 1991. He previously was an Audit and
Financial Consulting Manager in the Portland, Oregon office of Arthur Andersen
LLP.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of March 17, 1994, there were 11,788 holders of record of Fibreboard
common stock. Fibreboard's common stock is traded on the American Stock
Exchange under the symbol FBD. Information with respect to the quarterly high
and low market sales prices for Fibreboard's common stock for 1994 and 1993,
based upon sales transactions reported by the American Stock Exchange, is
provided below.
Market Prices of Fibreboard Common Stock
<TABLE>
<CAPTION>
1994 1993
-------------- ------------
High Low High Low
---- --- ---- ---
For the quarters ended
----------------------
<S> <C> <C> <C> <C>
March 31 39 3/8 32 3/8 12 6 7/8
June 30 38 7/8 23 3/4 14 1/4 10
September 30 30 3/4 25 1/8 26 7/8 11 1/2
December 31 31 5/8 26 1/8 35 5/8 21 1/8
</TABLE>
The closing price of Fibreboard's common stock on March 17, 1995 was $31
1/2.
Since its spin-off from Louisiana-Pacific Corporation on June 6, 1988,
Fibreboard has not paid cash dividends. Fibreboard's Structured Settlement
Program contains restrictions on the amount of dividends or distributions to
shareholders. At December 31, 1994, $12.9 million was available for the payment
of dividends, share repurchases or other distributions.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Dollar amounts in thousands except per share)
<S> <C> <C> <C> <C> <C>
Net sales $363,705 $265,210 $239,717 $234,056 $244,609
Income (loss)
from continuing
operations (1) 27,035 11,713 9,432 (29,288) 3,269
Income (loss)
from continuing
operations per
share (fully diluted) (1) 6.01 2.62 2.30 (7.33) .84
Operating assets 373,636 261,359 223,590 226,205 281,939
Asbestos-related
assets 812,347 969,136 826,582 363,015 67,660
Total assets 1,185,983 1,230,495 1,050,172 589,220 349,599
Long-term debt (2) 101,293 23,539 13,306 17,508 27,914
<FN>
NOTES:
(1) Includes pre-tax $18,858 gain on sale of surplus timberlands in 1994; pre-
tax $3,762 gain on surplus real estate sales and reduced depreciation
expense of $1,437 reflecting adjustment of asset lives in 1993; pre-tax
$2,353 pension gain and $2,998 gain on surplus real estate sales in 1992;
cumulative effect of a change in accounting principle of $(1,954), net of
tax in 1991; pre-tax unusual items of $(13,912) in 1991 and $9,816 in
1990; and asbestos-related costs of $20,000 in 1991. See notes to
financial statements for additional information concerning these items.
(2) Does not include amounts for asbestos claims settlements. See Note 14 to
the financial statements, "Asbestos-Related Litigation," on Page 37 for
additional information. Also does not include asbestos-related long term
debt of $22,360 in 1994, $21,361 in 1993, $20,572 in 1992 and $19,726 in
1991. Does include $4,870, $5,905, $6,875, $7,785 and $10,997 of long-term
debt for which Fibreboard receives offsetting interest and principal
payments from notes receivable -- see Note 5, "Long-Term Debt."
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1994 VS. 1993
Net sales increased 37%. Of the increase, $85.6 million, or 87% of the
total, was due to the addition of Norandex Inc. on August 31, 1994. The
remaining increase resulted from increases in industrial insulation products and
resort operations, reduced by a decline in wood product sales. Income from
continuing operations was $27.0 million compared to
<PAGE>
$11.7 million in 1993. The 1994 amount includes a pre-tax gain of $18.9 million
($11.2 million after tax) from the sale of surplus timberlands in the third
quarter. Norandex contributed pre-tax operating income of $8.1 million for the
last four months of the year. Operating income increased for industrial
insulation products and resort operations, while wood products experienced a
decline.
BUILDING PRODUCTS
Wood products sales declined 5%. The majority of the decrease was due to
the early 1994 sale of the agricultural container business, which in 1993
generated sales of approximately $9.7 million. For 1994, lumber sales were
higher (increased volume reduced by slightly lower average product sales prices)
while decreases were experienced in plywood sales (lower shipment volume) and
moulding and millwork (lower volume and sales prices).
Wood products operating income declined from $18.5 million to $12.7 million
driven by higher log costs in 1994 and slightly lower product sales prices
compared to 1993. Higher log costs were caused by a 1993 decision to purchase
available open market logs, ensuring a raw material supply for 1994. However,
the incremental logs were purchased at high prices which drove up average log
cost for 1994. As a higher percentage of logs to be consumed in 1995 will come
from company owned lands, Fibreboard expects its average log cost in 1995 will
be significantly lower than in 1994.
Fibreboard believes it has adequate raw material on hand, under contract or
expected to become available through open market log purchases to operate its
primary converting facilities at scheduled production levels through 1995 and
into 1996. However, future timber supply remains a strategic concern.
Competition for the reduced timber available from the USFS has resulted in
higher prices for those contracts where Fibreboard has been the successful
bidder. Interim harvest rules announced in early 1993 for USFS timber in
California and the possible implementation of the DEIS recommended forest
management alternative could further reduce the quantity of timber available for
harvest. Fibreboard has responded to these concerns by pursuing non-traditional
sources of raw materials, such as imported logs from New Zealand and Chile and
the acquisition of timber cutting rights on 4,800 acres in northern New Mexico.
Fibreboard expects to continue pursuing alternative timber sources in the
future. In addition, Fibreboard has evaluated various operating configurations
available to respond most profitably to raw material constraints, and has
committed $6.7 million in 1995 to install additional sawmill optimization
technology which is expected to improve manufacturing yield and grade recovery.
In the past, timber supply concerns have resulted in increased sales prices
for Fibreboard's wood products. While there can be no assurance, Fibreboard
believes sales prices for its products may increase should timber supply be
further constrained. Continuing supply constraints should also enhance the
value of Fibreboard's fee-owned timberlands.
From its acquisition on August 31, 1994 through the end of the year,
Norandex generated sales of $85.6 million and operating income of $8.1 million.
Norandex sales activity is seasonal, and is driven by the weather and
construction activity in its primary market areas. Construction activity is
typically at a peak in June-October. Mild early winter weather in Norandex's
market areas extended the building season into December and increased Norandex
generated profits beyond expectations. Due to the seasonality of the business,
the results of the last four months of 1994 should not be considered indicative
of the results that would be achieved for a full year of Norandex operations.
<PAGE>
Industrial insulation products sales increased 15% due principally to
increased shipments and higher sales prices of metal products with some
improvement in molded industrial insulation sales.
Operating income increased to $6.5 million from $5.4 million in 1993.
Metal products profitability increased as average sales prices increased in
advance of corresponding raw material cost increases. However, this improvement
was offset somewhat by lower profits from molded insulation due to higher
material costs.
RESORT OPERATIONS
Resort revenues increased from $25.5 million to $41.4 million on a 100%
increase in skier visits. The increase in skier visits was a result of the
addition of Sierra-at-Tahoe (which operated only 23 days subsequent to its
acquisition in 1993), a heavy early season snow fall in the fourth quarter of
1994 and the inclusion of two high-volume Christmas to New Years weeks in 1994,
one as the first and one as the last week of the year, versus only one such week
in 1993's results.
Operating income improved from $2.3 million to $8.0 million driven
primarily by the revenue increase as well as aggressive cost controls.
Fibreboard believes Northstar's and Sierra's marketing campaigns have increased
their market share among Lake Tahoe ski resorts.
Northstar anticipates beginning development of a new subdivision of 158
single family home sites which will be offered for sale on a phased basis over
several years starting in 1995. Northstar believes this additional real estate
activity will add operating profit of $1.5 to $2.0 million per year.
GENERAL CORPORATE EXPENSES
Unallocated costs declined from $8.3 million to $7.4 million, reflecting
the 1994 resolution of a contingent liability related to post-retirement
benefits which resulted in a gain of $1.0 million.
ASBESTOS-RELATED COSTS
The 1994 and 1993 results of operations do not include any asbestos-related
costs. During 1994, $2.2 million of unreimbursed costs related to the asbestos
litigation were incurred and charged against the reserve established in prior
years.
As more fully discussed in Note 14 to the consolidated financial
statements, at December 31, 1991, Fibreboard estimated its potential liability
for asbestos-related personal injury claims to be received through the end of
the decade at $1,610 million and that it would ultimately receive insurance
proceeds of $1,584 million related to those claims. Although Fibreboard, its
insurers and plaintiffs' representatives entered into the Insurance and Global
Settlements discussed elsewhere, Fibreboard does not believe these settlements
impact its estimate of liability through the end of the decade, and no
additional events have transpired which indicate these estimates should be
changed. Consequently, no adjustment has been made to the estimated liability
for personal injury claims through the end of the decade or anticipated
insurance proceeds. Fibreboard will periodically evaluate its estimates and
make adjustments as circumstances and future developments dictate.
<PAGE>
OTHER ITEMS
Interest expense increased from $3.6 million to $4.9 million, as Fibreboard
had higher average borrowings (due to the Norandex purchase on August 31, 1994)
offset by lower rates under its new revolving credit facility.
Interest and other income increased to $22.6 million from $5.6 million.
Other income included gains from the sales of surplus real estate of $20.5
million in 1994 and $3.8 million in 1993. Interest income increased to $2.1
million from $1.8 million as additional amounts were available for investment
than in 1993.
Fibreboard's effective tax rate was 41% in 1994 and 1993.
LIQUIDITY AND CAPITAL RESOURCES
Fibreboard generated cash flows from operations (including gains on the
sale of assets) of $70.2 million in 1994, compared to a use of $1.4 million in
1993. The investment in working capital was reduced $31.4 million in 1994,
compared to an increased investment of $28.5 million in 1993. Fibreboard had an
abnormally high level of log inventories on hand at December 31, 1993, which was
reduced to a more normal level at year end 1994. Fibreboard believes it will
continue to generate substantial cash flows from operations in the future.
Fibreboard has a $175 million revolving credit facility which expires
September 30, 1997. At December 31, 1994, borrowings were $86.0 million and
$82.9 million remained available. Borrowings may be used for general corporate
purposes and acquisitions. Maximum availability decreases to $150 million at
September 30, 1995 and to $125 million at September 30, 1996. In addition,
Fibreboard's resort operations have two revolving credit facilities, a $5
million operating credit line which expires May 31, 1995 and a $8.1 million
reducing revolving line which expires May 31, 1998 and under which maximum
availability is reduced by $1.4 million in April of each year. Fibreboard is
negotiating with a bank to replace Resort Operations' two revolving credit
facilities and a $4.5 million term loan with a new $30 million revolving
facility. This new facility is expected to be in place by early in the second
quarter of 1995. Fibreboard believes these facilities, combined with cash
generated from on-going operations, will be adequate to fund existing operating
cash needs and acquisition activities.
In addition to working capital needs, Fibreboard anticipates primarily
discretionary capital expenditures of approximately $19 million to $20 million
during 1995. Major anticipated projects include $6.7 million to install
additional optimization equipment in two sawmills, $1.2 million to expand the
Norandex vinyl siding manufacturing plant capacity by 22% and infrastructure
development costs of approximately $3 million to support the lot sales program
at Northstar, as well as replacements and improvements of machinery and
equipment and additional ski area amenities. Capital expenditures will be
funded from operating cash flow and borrowings under Fibreboard's credit
facilities as needed.
Fibreboard has scheduled principal reductions of long-term debt due in 1995
of $2.0 million. Of this amount, Fibreboard will receive $1.0 million from
notes receivable which have interest and payment terms identical to a like
amount of Fibreboard's revenue bonds.
<PAGE>
In addition to cash needs related to continuing operations, Fibreboard must
fund its modest on-going asbestos-related costs. To date, substantially all
such costs, other than the cost of litigating insurance coverage issues, have
been funded from insurance resources. At December 31, 1994, Fibreboard had $1.9
million in cash on hand restricted for asbestos-related uses.
Fibreboard and Continental have entered into an interim agreement under
which Continental agreed to make certain funds available for defense and
indemnity costs associated with asbestos-related personal injury claims during
the period pending final approval of the Global and/or Insurance Settlements
discussed below, or if neither are approved, through the final conclusion of the
insurance coverage litigation, however long that may take. Fibreboard believes
the amounts to be paid by Continental under this interim agreement and amounts
available under settlements with asbestos-in-buildings insurers will be adequate
to satisfy its asbestos-related cash requirements as they come due.
During 1993, Fibreboard and its insurers entered into the Insurance
Settlement Agreement, and Fibreboard, its insurers and plaintiffs
representatives entered into the Global Settlement Agreement. These agreements
are interrelated. Final court approval of these agreements is required.
Fibreboard believes trial court approval will occur in the first half of 1995,
but if appealed, it may be 1996 or later before final court approval could be
obtained.
If both the Global and Insurance Settlement Agreements are approved,
Fibreboard believes its existing and future personal injury asbestos liabilities
will be resolved through insurance resources and existing corporate reserves.
If the Insurance Settlement is approved but the Global Settlement is not
approved, the insurers will provide Fibreboard with up to $2 billion to resolve
claims pending as of August 27, 1993 and all future claims, and will pay claims
settled but not yet paid as of August 27, 1993.
Fibreboard believes it is probable its insurance coverage for personal
injury claims will ultimately be confirmed on appeal or the settlements
discussed above will be approved by the court. However, if neither the Global
Settlement nor Insurance Settlement is approved and if the trial court decisions
in the insurance coverage litigation are subsequently overturned or
substantially modified on appeal, Fibreboard would not have adequate resources
to fund its asbestos personal injury liabilities.
1993 VS. 1992
Net sales increased 11%, reflecting increased wood products sales and
resort operations revenues while sales of industrial insulation products were
flat. Income from continuing operations was $11.7 million compared to $9.4
million in 1992. Operating profit increased in wood products and resort
operations, but declined slightly in insulation products.
BUILDING PRODUCTS
Wood products sales increased 12%, due principally to increased selling
prices in all three major product lines while shipment volumes declined in
lumber and plywood. Mill closures and manufacturing operations consolidations
accounted for the majority of the lumber volume decline while softer demand
impacted plywood shipments. Selling prices for many products reached record
highs during the second quarter, before falling during the third quarter.
<PAGE>
Wood products operating income increased from $17.3 million to $18.5
million. This improvement was due to price increases and manufacturing
improvements offset by increased log costs and volume decreases. Price
increases during the year were largely in response to timber and finished
product shortage concerns, as timber supply continued to be more restricted and
additional industry production capacity reductions were made during the year.
Industrial insulation products sales were nearly unchanged between years. A
lack of significant construction and maintenance activity in the petrochemical
and power generation industries was offset by a modest increase in export sales
activity.
Industrial insulation products operating income decreased to $5.4 million
from $6.1 million in 1992. The decrease was caused by reduced average sales
prices for molded insulation products, which were partially offset by continuing
manufacturing improvements and tighter margins on sales of metal products.
RESORT OPERATIONS
Resort revenues increased from $20.4 million to $25.5 million on a 16%
increase in skier visits. The increase in skier visits was a result of improved
snowfall in the Sierra during the first quarter of 1993 compared to 1992.
Northstar set records during 1993 in a number of areas, including skier days,
meals served and lodging room nights.
Operating income improved from $1.6 million to $2.3 million. This increase
understates the significant improvements achieved at Northstar-at-Tahoe during
the year, as the business unit operating income includes anticipated start-up
and operating expenses at Sierra since its July 1993 acquisition in excess of
revenues of approximately $1 million. The Northstar improvement was due to the
increase in skier visits, lower snowmaking costs due to increased snowfall,
aggressive marketing and cost controls.
GENERAL CORPORATE EXPENSES
Unallocated costs declined from $11.9 million to $8.3 million, reflecting
improvements resulting from the organizational restructuring completed during
1992 and reversal of certain contingency accruals no longer considered
necessary, offset by higher incentive compensation tied to stock performance.
In addition, 1992 costs include $1.0 million to increase the reserve for future
landfill cleanup costs.
ASBESTOS-RELATED COSTS
The 1993 and 1992 results of operations do not include any asbestos-related
costs. During 1993, $1.8 million of unreimbursed costs related to the asbestos
litigation were incurred and charged against the reserve established in prior
years.
OTHER ITEMS
Interest expense declined from $4.2 million to $3.6 million, due to lower
rates on variable rate debt and lower aggregate borrowings.
Interest and other income decreased from $7.7 million to $5.6 million.
Other income included $2.4 million in 1992 resulting from the freezing of a
defined benefit pension plan
<PAGE>
and gains from the sales of surplus real estate of $3.0 million in 1992 and $3.8
million in 1993. Interest income declined as lower amounts were available for
investment at lower rates than in prior years.
On July 1, 1993, Fibreboard adjusted the depreciable lives of its assets to
more closely approximate their economic useful lives, resulting in a reduction
of depreciation expense of $1.4 million during 1993. This expense reduction is
included in the segment results discussed above.
Fibreboard's effective tax rate was 41% in 1993 and 44% in 1992.
Fibreboard adopted Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES (SFAS 109) on January 1, 1993. SFAS 109 requires an
asset and liability approach for financial accounting and reporting for income
taxes, and requires the recognition of the tax impact of certain items for which
no income tax impact would have been provided in the past. Fibreboard recorded
no adjustment of its tax accounts as a result of adopting SFAS 109.
IMPACT OF INFLATION
Inflation has not had any significant impact on Fibreboard's operations
during the three years ended December 31, 1994.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
PAGE
Consolidated Statements of Income for 21
each of the three years in the period ended
December 31, 1994
Consolidated Balance Sheets as of December 31, 22
1994 and 1993
Consolidated Statements of Cash Flows for each 24
of the three years in the period ended
December 31, 1994
Consolidated Statements of Stockholders' Equity 26
for each of the three years in the period
ended December 31, 1994
Notes to Consolidated Financial Statements 27
Report of Independent Public Accountants 44
Report of Management 45
Supplementary Data (unaudited) -
Selected Quarterly Financial Data for each of the 46
two years in the period ended December 31, 1994
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net sales $363,705 $265,210 $239,717
Cost of sales 295,202 225,214 205,802
-------- -------- --------
Gross margin 68,503 39,996 33,915
Other expenses:
Selling and administrative 40,690 22,120 20,703
Asbestos-related costs (Note 14) -- -- --
-------- -------- --------
Income from operations 27,813 17,876 13,212
Interest expense, net of
capitalized interest (Note 1) (4,931) (3,575) (4,222)
Interest and other income 22,555 5,551 7,707
-------- -------- --------
Income before income taxes 45,437 19,852 16,697
Income taxes (18,402) (8,139) (7,265)
-------- -------- --------
Net income $ 27,035 $ 11,713 $ 9,432
-------- -------- --------
-------- -------- --------
Earnings per share:
Primary $6.02 $2.66 $2.30
Fully diluted 6.01 2.62 2.30
Weighted average shares outstanding (thousands):
Primary 4,493 4,396 4,101
Fully diluted 4,496 4,470 4,101
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1994 1993
---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) $ 8,842 $ 5,322
Receivables (Notes 2, 4 and 5) 40,412 16,268
Income tax refund receivable (Note 1) -- 3,500
Current portion of
notes receivable (Note 5) 1,317 988
Inventories (Notes 1, 4 and 5) 76,656 80,158
Prepaid expenses 1,836 1,373
Deferred income taxes (Note 1) 9,270 6,898
---------- ----------
Total current assets 138,333 114,507
Timber and timberlands, net (Notes 5 and 11) 30,305 35,564
Property, plant and equipment, at cost:
(Notes 1, 4 and 5)
Land and improvements 22,051 21,079
Buildings 37,121 25,569
Machinery and equipment 130,503 110,771
Construction in progress 1,142 1,198
---------- ----------
190,817 158,617
Accumulated depreciation (75,850) (69,121)
---------- ----------
Net property, plant and equipment 114,967 89,496
Notes receivable (Note 5) 12,451 11,432
Goodwill (Note 13) 64,623 --
Other assets 12,957 10,360
---------- ----------
Total operating assets 373,636 261,359
Cash restricted for asbestos costs 1,893 827
Asbestos costs to be reimbursed (Note 14) 810,454 968,309
---------- ----------
$1,185,983 $1,230,495
---------- ----------
---------- ----------
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1994 1993
---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable to banks (Note 4) $ -- $ 17,657
Current portion of long-term debt (Note 5) 2,045 4,764
Accounts payable and accrued liabilities 58,698 30,416
(Note 3)
Reserve for asbestos-related costs (Note 14) 2,700 2,700
---------- ----------
Total current liabilities 63,443 55,537
Long-term debt (Note 5) 101,293 23,539
Reserve for asbestos-related costs (Note 14) 14,584 16,795
Other long-term liabilities (Note 7 and 8) 24,109 21,412
Deferred income taxes (Note 1) 19,440 18,755
---------- ----------
Total operating liabilities 222,869 136,038
Asbestos claims settlements (Note 14)
Current 6,878 11,048
Long-term 788,487 941,880
---------- ----------
Total asbestos claims settlements 795,365 952,928
Long-term debt associated with asbestos 22,360 21,361
---------- ----------
(Note 5)
Total liabilities 1,040,594 1,110,327
Commitments & contingencies (Notes 11, 14 and 15)
Stockholders' equity (Notes 7, 9 and 10):
Preferred stock, $.01 par value, 3,000,000
shares authorized; none issued -- --
Common stock, $.01 par value, 15,000,000
shares authorized; 4,224,225 and
4,201,420 shares issued 42 42
Additional paid-in capital 76,166 75,836
Retained earnings 73,752 46,717
Minimum pension liability adjustment (Note 7) (4,571) (2,427)
---------- ----------
Total stockholders' equity 145,389 120,168
---------- ----------
$1,185,983 $1,230,495
---------- ----------
---------- ----------
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 27,035 $ 11,713 $ 9,432
Adjustments to reconcile income
to net cash provided (used) by
operating activities:
Depreciation, amortization
and depletion 11,134 10,517 11,998
Deferred income taxes 1,135 2,227 5,563
Deferred long term benefits (671) 1,606 (374)
Compensation for stock grants 129 1,039 517
Gain on sale of assets (21,270) (3,762) (2,998)
Change in working capital:
Receivables 5,522 (867) 3,500
Inventories 30,795 (27,799) (4,858)
Prepaid expenses 188 (578) 84
Accounts payable and
accrued liabilities (5,075) (1,414) (6,070)
Discontinued operations
net asset change -- 2,193 139
-------- -------- --------
Net cash provided (used) by
operations 48,922 (5,125) 16,933
Cash flows from investing activities:
Non-cash net assets of
acquired operations (119,894) (13,054) --
Proceeds from asset sales 26,023 5,313 4,066
Property, plant and equipment
additions (9,399) (9,815) (5,027)
Timber and timberlands
changes, net 1,901 (3,270) (344)
Reductions of notes
receivable 1,611 996 3,862
Decrease (increase) in
other assets (1,039) (517) 559
-------- -------- --------
Net cash provided (used) by
investing activities (100,797) (20,347) 3,116
</TABLE>
(continued)
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from financing activities:
New borrowings $ 93,000 $ 15,000 $ 7,560
Repayment of debt (35,622) (10,799) (10,403)
Employee stock plan transactions 201 534 44
-------- -------- --------
Net cash provided (used) by
financing activities 57,579 4,735 (2,799)
-------- -------- --------
Net cash provided (used) by
business activities 5,704 (20,737) 17,250
Cash flows from asbestos-
related activities:
Receipts from insurers 7,657 19,848 18,016
Structured settlement program
activity 476 (1,638) (10,167)
Other asbestos-related cash
transactions (9,251) (13,832) (18,865)
Change in cash restricted for
asbestos costs (1,066) 5,670 5,255
-------- -------- --------
Net cash provided (used) by
asbestos-related activities (2,184) 10,048 (5,761)
-------- -------- --------
Net increase (decrease) in cash 3,520 (10,689) 11,489
Cash at beginning of year 5,322 16,011 4,522
-------- -------- --------
Cash at end of year $ 8,842 $ 5,322 $ 16,011
-------- -------- --------
-------- -------- --------
Cash paid during the year for:
Interest (net of capitalized
interest) $ 2,986 $ 3,011 $ 4,112
Income taxes 12,718 5,538 7,138
Non-cash items:
Increase (decrease) in accrued asbestos -
related legal costs (198) (574) 846
Increase in asbestos
claims settlements 151,498 244,072 468,293
Payments made to claimants on
Fibreboard's behalf 309,537 88,230 --
Increase in receivables from sale
of surplus real estate 2,949 250 250
Acquisition of businesses
Fair value of assets acquired 155,440 13,954 --
Cash paid 119,894 13,054 --
-------- -------- --------
Liabilities assumed 35,546 900 --
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Common stock:
Beginning balance,
4,201,420, 4,142,300
and 4,052,213 shares issued $ 42 $ 41 $ 40
Shares issued under employee
stock plans, 22,805,
59,120 and 90,087 shares -- 1 1
-------- -------- --------
Ending balance,
4,224,225, 4,201,420
and 4,142,300 shares issued $ 42 $ 42 $ 41
-------- -------- --------
-------- -------- --------
Additional paid-in capital:
Beginning balance $ 75,836 $ 74,264 $ 73,246
Fair value in excess of par value
for shares issued under employee
stock plans 201 533 501
Compensation related to employee
stock plans 129 1,039 517
-------- -------- --------
Ending balance $ 76,166 $ 75,836 $ 74,264
-------- -------- --------
-------- -------- --------
Retained earnings:
Beginning balance $ 46,717 $ 35,004 $ 25,572
Net income 27,035 11,713 9,432
-------- -------- --------
Ending balance $ 73,752 $ 46,717 $ 35,004
-------- -------- --------
-------- -------- --------
Minimum pension liability:
Beginning balance $ (2,427) $ (1,439) $ --
Changes during the year (2,144) (988) (1,439)
-------- -------- --------
Ending balance $ (4,571) $ (2,427) $ (1,439)
-------- -------- --------
-------- -------- --------
</TABLE>
See attached notes to financial statements
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF PRESENTATION
The consolidated financial statements include the accounts of
Fibreboard Corporation, a Delaware Corporation, and all its wholly-owned
subsidiaries (collectively Fibreboard) after elimination of intercompany
balances and transactions.
Certain reclassifications of prior year amounts have been made to
conform with the current presentation.
EARNINGS PER SHARE
Earnings per common and common equivalent share are calculated using
the weighted average number of common shares outstanding during the year plus
the net additional number of shares which would be issuable upon the exercise of
stock options, assuming Fibreboard used the proceeds received to purchase
additional shares at market value. The effect of common stock equivalents was
not material in 1992.
CASH AND CASH EQUIVALENTS
Fibreboard utilizes a centralized cash management system to minimize
the amount of cash on deposit with banks and maximize interest income from
amounts not required for immediate disbursement. Cash includes cash on hand or
in banks available for immediate disbursal. Cash equivalents are short-term
investments that have an original maturity date of less than 90 days.
INVENTORY VALUATION
Inventories are valued at the lower of cost (first-in, first-out) or
market. Inventory costs include material, labor and operating overhead.
Operating supplies are priced at average cost. Inventories are valued as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1994 1993
---- ----
<S> <C> <C>
Finished goods $45,622 $21,833
Raw materials 29,182 56,649
Supplies 1,852 1,676
------- -------
Total inventories $76,656 $80,158
------- -------
------- -------
</TABLE>
TIMBER
Fibreboard follows an overall policy on fee timber that amortizes
timber costs over the total fiber available during the estimated growth cycle.
Timber carrying costs are expensed as incurred.
PROPERTY, PLANT AND EQUIPMENT
Fibreboard uses the units of production method of depreciation for
some of its machinery and equipment which depreciates cost over the estimated
number of units that the equipment will be able to produce during its useful
life.
Provisions for depreciation of buildings and the remaining machinery
and equipment have been computed using straight-line rates based upon the
estimated service lives (4-30 years).
<PAGE>
Fibreboard capitalizes interest on borrowed funds incurred during
construction periods. Capitalized interest is amortized over the lives of the
related assets. Interest capitalized in 1994, 1993 and 1992 was $0, $183 and
$142.
Fibreboard capitalizes logging road construction costs as part of
"Land and Improvements." These costs are amortized as the timber volume
adjacent to the road system is harvested.
On July 1, 1993, Fibreboard adjusted the depreciable lives of its
assets to more closely approximate their useful lives, resulting in a reduction
of depreciation expense of $1,437 in 1993.
INCOME TAX POLICIES
The income tax provision includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current income taxes $ 17,534 $ 8,579 $ 2,661
Benefit of operating loss carry forward -- (729) --
Deferred income taxes 868 289 4,604
-------- ------- -------
$ 18,402 $ 8,139 $ 7,265
-------- ------- -------
-------- ------- -------
</TABLE>
The following table summarizes the differences between the statutory
federal and effective tax rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal tax rate 35% 35% 34%
State income taxes 6 6 7
Book/tax basis differences -- -- 2
Other -- -- 1
--- --- ---
41% 41% 44%
--- --- ---
--- --- ---
</TABLE>
In 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into
law increasing the federal tax rate from 34% to 35%.
Effective January 1, 1993, the Company implemented the provisions of
Statement of Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). SFAS 109 utilizes the liability method and deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities given the provisions of the
enacted tax laws. The adoption of SFAS 109 had no effect on reported net
income.
<PAGE>
The tax effect of significant temporary differences representing
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets:
Accrued liabilities $ 5,344 $ 5,294
Current portion asbestos reserve 1,134 1,163
Alternative minimum tax credit carryover 1,258 --
Other 1,534 441
------- -------
Total deferred tax assets $ 9,270 $ 6,898
------- -------
------- -------
Deferred tax liabilities:
Property, plant and equipment 15,751 $12,088
Timber 8,230 9,740
Post retirement benefits (7,187) (7,124)
Long-term asbestos (144) (1,046)
State taxes (1,142) (476)
Other 3,932 5,573
------- -------
Total deferred tax liabilities $19,440 $18,755
------- -------
------- -------
</TABLE>
Prior to the implementation of SFAS 109, the Company accounted for
income taxes using Accounting Principles Board Opinion No. 11, Accounting for
Income Taxes (APB 11). The following table summarizes the major components of
the provision for deferred taxes under APB 11 which resulted from timing
differences in the recognition of income and expense for financial reporting and
tax purposes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1992
----
<S> <C>
Asbestos related costs $5,245
Depreciation (1,325)
Tax basis of inventories (139)
Income and expense affecting future years 516
Involuntary conversions (7)
Plant shut down costs 474
Post retirement benefits (160)
------
$4,604
------
------
</TABLE>
2. RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1994 1993
---- ----
<S> <C> <C>
Trade receivables $40,924 $16,166
Less reserves for bad debts (2,352) (702)
Other receivables 1,840 804
------- -------
$40,412 $16,268
------- -------
------- -------
</TABLE>
<PAGE>
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1994 1993
---- ----
<S> <C> <C>
Accounts payable $23,009 $ 9,077
Accrued pension costs 4,518 1,058
Asbestos-related legal costs 233 430
Salaries and wages payable 9,108 5,532
Taxes other than income taxes 3,175 1,978
Workers' compensation 6,330 4,339
Other 12,325 8,002
------- -------
$58,698 $30,416
------- -------
------- -------
</TABLE>
Fibreboard is self-insured for the majority of its workers compensation
benefits. Workers compensation expense was $2,356, $1,074 and $1,836 in 1994,
1993 and 1992 based on actual and estimated claims incurred.
4. NOTES PAYABLE
At December 31, 1993, Fibreboard had a $40,000 operating line of
credit facility, secured by a substantial majority of Fibreboard's receivables,
inventories and machinery and equipment. This facility was replaced during 1994
with the revolving credit facility described in Note 5.
Fibreboard has a $5,000 operating line of credit dedicated for the
seasonal cash needs of its resort operations. Borrowings under the facility
carry interest at the prime rate plus 1/4% (8-3/4% at December 31, 1994). The
facility expires May 31, 1995. At December 31, 1994, no amounts were
outstanding; however, $1,428 of availability under the facility was utilized to
secure standby letters of credit.
<PAGE>
5. LONG-TERM DEBT
Fibreboard's long-term debt not associated with asbestos consists of
the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1994 1993
---- ----
<S> <C> <C>
Revolving credit facility,interest at LIBOR plus 0.75%
to 1.0%(6.36% at December 31, 1994), secured by the
timberlands, machinery and equipment, receivables
and inventories of Fibreboard and its subsidiaries
other than the resort subsidiaries $ 86,000 $ --
Term loans, interest at 11.8% -- 6,164
Reducing revolving credit facility, interest
at prime plus 1/2% (9.0% at December 31, 1994),
maximum amount available reduces by $1,429 each
April with the balance due May 31, 1998 (maximum
amount available at December 31, 1994 was $8,069),
secured by the assets of a resort subsidiary 6,700 10,000
Term loan, interest at prime plus 1/2% (9.0%
at December 31, 1994), payable in varying
annual installments through 1998, secured
by the assets of a resort subsidiary 4,500 5,000
Pollution control project revenue bonds,
6.6%, payable annually through 1999, unsecured 5,905 6,875
Other debt--6.8% to 11.5% payable in
varying amounts 233 264
-------- --------
103,338 28,303
Less: Current portion (2,045) (4,764)
-------- --------
$101,293 $ 23,539
-------- --------
-------- --------
</TABLE>
Required repayment of long-term debt is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
-----------
<S> <C>
1995 $ 2,045
1996 3,759
1997 89,770
1998 6,429
1999 1,335
--------
$103,338
--------
--------
</TABLE>
<PAGE>
Fibreboard has notes receivable with terms and payment dates which are
substantially identical to $5,905 of revenue bonds included in the above table.
Payments under these notes are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
-----------
<S> <C>
1995 $ 1,035
1996 1,105
1997 1,175
1998 1,255
1999 1,335
--------
$ 5,905
--------
--------
</TABLE>
Fibreboard obtained a $175,000 revolving credit facility during 1994.
Initial borrowings were used to replace the credit facility described in Note 4,
repay the 11.8% term loans and fund a portion of the purchase of Norandex Inc.
(see Note 13). The maximum amount available reduces to $150,000 on September
30, 1995 and to $125,000 on September 30, 1996 with the balance due September
30, 1997, unless the maturity date is extended by Fibreboard and its lenders.
Proceeds of borrowings may be used for general corporate purposes and
acquisitions. Additional amounts available aggregated $82,904 at December 31,
1994.
Fibreboard's loan agreements contain various financial covenants, the
most restrictive of which impose limitations on dividends and other
distributions to stockholders, require the maintenance of minimum levels of net
worth, limit the ratio of consolidated funded debt to net worth and require
maintenance of certain coverage ratios. At December 31, 1994, these covenants
were met.
Fibreboard has entered into an interest rate swap to fix the interest
rate on $50,000 of borrowings under the revolving credit facility. Through
October 1995, Fibreboard will pay the intermediary interest at 6.41% and will
receive interest at LIBOR. In addition, Fibreboard has entered into an
agreement under which it will receive an interest payment on $50,000 to the
extent LIBOR exceeds 7.5% for the period November 1995 through October 1996. The
cost of this transaction will be recognized during 1996.
Fibreboard's asbestos related long-term debt consists of the following
and is due upon conclusion of the asbestos personal injury insurance coverage
litigation. In the event Fibreboard prevails in the insurance coverage
litigation, the amounts will be repaid from insurance proceeds.
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1994 1993
---- ----
<S> <C> <C>
Amounts advanced under reimbursement
agreement, interest at prime minus 2%
(6.5% at December 31, 1994) $22,360 $21,361
</TABLE>
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND SHORT-TERM INVESTMENTS
Carrying amount approximates fair value because of the short maturity of these
investments.
NOTES RECEIVABLE
Fair value of notes receivable is estimated by discounting future cash flows
using current rates at which similar loans would be made.
<PAGE>
NOTES PAYABLE TO BANKS
Carrying amount approximates fair value based on current rates offered to the
corporation for similar debt.
LONG-TERM DEBT
Fair market value is estimated by discounting the future cash flows using the
current rates at which similar debt could be placed.
INTEREST RATE INSTRUMENTS
Fair market value is based on market rates at the end of the period for similar
instruments.
The estimated fair values of financial instruments are as follows:
<TABLE>
<CAPTION>
1994 1993
------------------- ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 10,735 $ 10,735 $ 6,149 $ 6,149
Notes receivable 13,768 14,087 12,420 12,721
Interest rate instruments 350 841 -- --
Financial liabilities:
Notes payable to banks -- -- 17,657 17,657
Long-term debt 103,338 101,907 28,303 28,818
</TABLE>
Fibreboard's consolidated balance sheets include financial instruments
resulting from the asbestos-related litigation, asbestos costs to be reimbursed,
asbestos claims settlement obligations and asbestos-related long-term debt.
These are unique financial instruments. Consequently, these instruments are not
traded nor is it likely a willing buyer could be found. Therefore, it is not
practicable to estimate a market value. The balance sheets as of December 31,
1994 and 1993 reflects asbestos costs to be reimbursed of $810,454 and $968,309,
asbestos claims settlements of $795,365 and $952,928 and asbestos-related long-
term debt of $22,360 and $21,361.
7. PENSION PLANS
Fibreboard has pension plans covering substantially all employees.
Contributions to defined benefit plans are based on actuarial calculations of
amounts necessary to cover current cost and amortization of prior service costs.
Benefits for employees of the acquired Norandex operation continue to vest while
all other plan participants' benefits have vested and been frozen. Contributions
to defined contribution plans are nondiscretionary and based on varying
percentages of eligible compensation for the year.
<PAGE>
The status of Fibreboard's defined benefit pension plan at December
31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1994 1993
---- ----
<S> <C> <C>
Vested benefit obligation $ 73,674 $ 71,109
-------- --------
-------- --------
Accumulated benefit obligation $ 76,503 $ 73,612
-------- --------
-------- --------
Projected benefit obligations $ 80,977 $ 73,612
Plan assets 55,336 55,218
-------- --------
Projected benefit obligations
in excess of plan assets (25,641) (18,394)
Unrecognized obligation at transition 1,206 1,326
Unrecognized net loss in past service 7,318 4,113
Adjustment required to recognize
minimum liability (8,889) (5,439)
-------- --------
Net accrued pension expense $(26,006) $(18,394)
-------- --------
-------- --------
</TABLE>
Of the accrued expense, $4,518 and $1,058 is included in accounts
payable and accrued liabilities (Note 3).
The actuarial assumptions used to determine accrued pension expense
and the funded status of the plans for 1994 were: 7.5% discount rate (net
pension expense), 8.25% discount rate (funded status), 8% expected long-term
rate of return on plan assets and a 5% salary increase for active participants.
The assets of the plan at December 31, 1994 and 1993 consist of bonds, both
corporate and government, stocks, cash and cash equivalents.
As required by Statement of Accounting Standards No. 87, Employers'
Accounting for Pensions, Fibreboard has recognized a minimum pension liability
associated with its frozen defined benefit plan. As a result, Fibreboard
recorded an after tax reduction in equity of $4,571 at December 31, 1994 and
$2,427 at December 31, 1993.
Pension expense included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Benefits earned by employees $ 296 $ -- $ 878
Interest cost on projected
benefit obligation 5,774 5,489 5,739
Return on plan assets 433 (5,832) (3,655)
Net amortization and deferral (4,659) 1,729 (750)
Curtailment gain -- -- (2,353)
------- ------- ------
Net pension cost (income) of defined
benefit plans 1,844 1,386 (141)
Contributions to defined contribution
pension plans 2,262 2,033 730
------- ------- ------
Net pension expense $4,106 $3,419 $ 589
------- ------- ------
------- ------- ------
</TABLE>
<PAGE>
On December 31, 1992, a defined benefit pension plan with assets in
excess of obligations was frozen, resulting in a curtailment gain of $2,353.
The assets of the plan were merged with Fibreboard's other defined benefit
pension plan. The curtailment gain is reflected as a component of interest and
other income in the Consolidated Statements of Income.
8. NON-PENSION POST-RETIREMENT BENEFITS
Through 1992, Fibreboard provided post-retirement benefits to
employees who met certain requirements until they reached age 65. The benefits
provided were mainly health care and dental. This benefit was discontinued for
employees who retired after December 31, 1992. However, post-retirement
benefits are available to certain collective bargaining units of facilities
which have been sold.
<PAGE>
The status of Fibreboard's non-pension post retirement benefits at
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
-------------------
NET PERIODIC POST RETIREMENT BENEFIT COST 1994 1993
---- ----
<S> <C> <C>
Interest cost $ 176 $ 674
Net other (1,456) --
------ ------
Total $(1,280) $ 674
------ ------
------ ------
ACCRUED BENEFIT COST
Accumulated post retirement benefit obligation
Retirees $1,331 $3,647
Eligible actives 267 --
Other active plan participants 163 --
------ ------
1,761 3,647
Unrecognized net (gain) loss (360) 98
------ ------
Total $2,121 $3,549
------ ------
------ ------
</TABLE>
Amounts recorded as net other includes a gain of $1,164 from the
resolution of a post-retirement benefit obligation of facilities sold in 1988.
A 16% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1994. The cost trend rate was assumed to decrease
to 9% in 1995 and slightly thereafter until 2001 at which time the rate was
assumed to stabilize at 6%. Increasing the assumed health care cost trend rates
by 1% in each year would increase the accumulated post retirement benefit
obligation as of December 31, 1994 by $45 and the aggregate of the service and
interest cost components of net periodic post retirement cost for the year then
ended by $4. The weighted average discount rate used in determining the
accumulated post retirement benefits was 8.25% while 7.5% was used to determine
the 1994 post-retirement benefit cost.
9. STOCK OPTION AND STOCK PURCHASE PLANS
Fibreboard has a stock option and rights plan for certain officers,
directors and key employees. The plan provides for granting stock options,
stock appreciation rights, limited stock appreciation rights and restricted
stock awards. Awards under the plan are determined by the compensation
committee of the Board of Directors. The maximum number of shares available for
award under the plan is 800,000. Option prices are set by the committee.
Option prices for grants must be at least 85% of the fair market value on the
date of grant. The time limit within which options may be exercised and other
exercise terms are fixed by the committee.
When stock options are exercised, the proceeds (including any tax
benefits to Fibreboard resulting from the exercise) are credited to the
appropriate common stock and additional paid-in capital accounts. Compensation
related to restricted stock awards and certain option grants (measured at the
grant date) is recognized as expense over the term of the related award.
At December 31, 1994, options to purchase 503,650 shares at prices
from $2.83 to $25.38 were outstanding. Options exercised in 1994 were 4,750.
At December 31, 1994, options to purchase 491,650 shares were immediately
exercisable. Options becoming exercisable in 1995 are 12,000. Option awards
for 54,000 shares include limited stock appreciation rights for a like number of
shares. Each limited stock appreciation right entitles the holder, in certain
limited circumstances, to surrender the underlying option in exchange for cash
equal to the difference between fair market value at the date of surrender and
the option price for such shares.
At December 31, 1994, restricted stock awards of 35,000 shares were
outstanding. The shares awarded will be issued, 7,000 shares in 1995, 15,000 in
1996 and 13,000 in 1997 provided the grantee is employed continuously through
the issue date.
<PAGE>
In addition, Fibreboard had an employee stock purchase plan which was
suspended in 1992. The plan allowed employees to purchase Fibreboard stock with
an aggregate purchase price of up to 15% of the employee's base salary at the
beginning of each purchase period. The purchase price was the lesser of 85% of
fair market value at the beginning of each purchase period or 85% of fair market
value at the actual purchase date. The maximum number of shares issuable under
the plan was 250,000. During 1994, 1993 and 1992, 0, 0 and 17,360 shares of
Fibreboard stock were sold to employees under this plan.
Fibreboard has a long-term equity incentive plan, which provides for
awards of phantom stock units. Each phantom stock unit entitles the grantee to
a cash payment equal to the fair market value of one share of Fibreboard common
stock at the maturity date less the fair market value on the grant date. At
December 31, 1994, 235,400 phantom stock units had been awarded at fair market
value on the grant date from $27.50 to $30.00. These phantom stock units
mature 47,400 units in 1995, 79,000 units in 1996, and 109,000 units in 1997.
Compensation expense recognized for these plans was $129, $1,039 and
$517 in 1994, 1993 and 1992.
10. PREFERRED STOCK PURCHASE RIGHTS
In 1988, Fibreboard implemented a stockholder rights plan and
distributed to stockholders one preferred share purchase right for each share of
Fibreboard common stock then outstanding. Under the rights plan, as amended in
1994, each right entitles the registered holder to purchase from Fibreboard
1/100th of a share of Series A Junior Participating Preferred Stock at an
exercise price of $106 per 1/100th share, subject to adjustment. The rights
will not be exercisable until a party acquires beneficial ownership of 15% or
more of Fibreboard's then outstanding common shares. The rights, which do not
have voting rights, expire in February 2004 and may be redeemed in whole by
Fibreboard, at its option, at a price of $.01 per right prior to the expiration
or exercise of the rights.
In the event Fibreboard is acquired in an unsolicited merger or other
business combination transaction, each right will entitle the holder to receive,
upon exercise of the right, common stock of the acquiring company having a
market value of two times the then current exercise price of the right. In the
event a party acquires 15% or more of Fibreboard's outstanding common shares,
each right will entitle the holder to receive upon exercise Fibreboard common
shares having a market value of two times the exercise price of the right.
11. COMMITMENTS
Fibreboard is obligated to purchase timber under cutting contracts
with the U.S. Forest Service, which extend to 1996. The table below presents
Fibreboard's best estimate of its commitment under timber cutting contracts by
year of contract expiration:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31
-----------
<S> <C>
1995 $ 7,427
1996 2,015
-------
$ 9,442
-------
-------
</TABLE>
<PAGE>
Fibreboard leases certain office and warehouse space and machinery and
equipment under operating leases which expire within six years. Minimum lease
payments and subleases for the next five years are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
PAYMENTS SUBLEASES
-------- ---------
<S> <C> <C>
1995 $ 6,669 $443
1996 6,141 225
1997 4,796 --
1998 3,889 --
1999 2,906 --
------- ----
$24,401 $668
------- ----
------- ----
</TABLE>
In addition, the Company leases property from the U.S. Forest Service
for one of its resort operations. Lease payment terms are based on a percentage
of revenues. Total rent expense for all operating leases amounted to $4,979,
$2,194 and $1,753 in 1994, 1993 and 1992.
<PAGE>
12. INDUSTRY SEGMENT INFORMATION
Information about Fibreboard's industry segments is set forth below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Outside sales:
Building products
Wood Products $ 180,309 $ 190,494 $ 169,655
Norandex 85,607 -- --
Industrial Insulation Products 56,376 49,215 49,701
Resort operations 41,413 25,501 20,361
---------- ---------- ----------
Consolidated $ 363,705 $ 265,210 $ 239,717
---------- ---------- ----------
---------- ---------- ----------
Operating profit:
Building products
Wood Products $ 12,670 18,468 17,321
Norandex 8,096 -- --
Industrial Insulation Products 6,452 5,382 6,138
Resort operations 8,020 2,325 1,648
---------- ---------- ----------
Total Operations 35,238 26,175 25,107
Unallocated expense, net (7,425) (8,299) (11,895)
Interest expense (4,931) (3,575) (4,222)
Interest and other income 22,555 5,551 7,707
---------- ---------- ----------
Income before taxes $ 45,437 $ 19,852 $ 16,697
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
Building products
Wood Products $ 121,223 $ 165,023 $ 138,731
Norandex 147,066 -- --
Industrial Insulation Products 27,268 25,831 27,480
Resort operations 39,536 36,100 24,331
Discontinued operations -- -- 2,193
Unallocated assets 38,543 34,405 30,855
Asbestos-related assets 812,347 969,136 826,582
---------- ---------- ----------
Total assets $1,185,983 $1,230,495 $1,050,172
---------- ---------- ----------
---------- ---------- ----------
Depreciation, depletion and amortization:
Building products
Wood Products $ 4,307 $ 6,340 $ 7,031
Norandex 1,815 -- --
Industrial Insulation Products 788 1,041 1,810
Resort operations 3,467 2,514 2,331
Capital expenditures:
Building products
Wood Products 2,426 4,240 2,969
Norandex (1) 28,628 -- --
Industrial Insulation Products 327 324 114
Resort operations(2) 6,229 17,794 2,966
<FN>
(1) Includes acquired assets of $28,043 in 1994.
(2) Includes acquired assets of $12,981 in 1993.
</TABLE>
<PAGE>
13. ACQUISITIONS AND DISPOSITIONS
In July 1993, Fibreboard acquired the net assets of Sierra Ski Ranch,
a ski facility located in California, for $13,054. The acquisition was
accounted for as a purchase of assets. The ski area was subsequently renamed
Sierra-at-Tahoe.
On August 31, 1994, Fibreboard acquired the stock of Norandex Inc., a
manufacturer and distributor of residential exterior building products, for
$119,894 in cash including acquisition costs. The acquisition, which was
accounted for as a purchase, resulted in $65,332 of goodwill which will be
amortized over 30 years. Norandex operating earnings have been included in
Fibreboard's consolidated statement of income since the date of acquisition.
The following unaudited table presents the pro forma combined results of
Fibreboard and Norandex assuming the transaction took place at January 1, 1994
or 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
(unaudited)
1994 1993
---- ----
<S> <C> <C>
Net Sales $507,695 $457,841
Net Income 30,267 18,483
Earnings per share:
Primary 6.74 4.20
Fully diluted 6.73 4.13
</TABLE>
The pro forma results include only adjustments necessary to 1) reflect
the allocation of the purchase price resulting in changes in depreciation and
amortization; 2) recognize the interest cost associated with the purchase; and
3) recognize the income tax effects of these adjustments.
Because the pro forma results include only the adjustments indicated
above, they should not be considered indicative of the results that would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. No attempt has been made to quantify in the
pro forma results additional costs which may be incurred as a result of the
combination, even though certain costs are expected to increase. Furthermore,
the pro forma results include the effects of gains on asset sales and
restructuring costs which occurred during the periods and which may not reoccur.
In February 1994, Fibreboard sold its agricultural container
manufacturing facilities located in Fresno, CA in order to concentrate its
resources on the primary wood products and remanufacturing businesses. In July
1994, 8,900 acres of non-essential timberlands were sold for $21,500 and an
$18,858 pre-tax gain was recognized in interest and other income.
14. ASBESTOS-RELATED LITIGATION
CONTINGENT LIABILITY FOR ASBESTOS-RELATED CLAIMS
Overview:
Fibreboard's ability to continue to operate in the normal course of
business is dependent upon its ongoing capability to fund asbestos-related
defense and indemnity costs. Prior to 1972, Fibreboard manufactured insulation
products containing asbestos. Fibreboard has since been named as a defendant in
many thousands of personal injury claims for injuries allegedly caused by
asbestos exposure and in asbestos-in-buildings actions involving many thousands
of buildings.
Fibreboard believes it has unique insurance coverage for personal injury
claims, as the trial court has held (with the issue on appeal) that claims with
initial exposure to asbestos prior to 1959 are covered by two no-aggregate-limit
policies.
<PAGE>
During 1993, Fibreboard and its insurers entered into the Insurance
Settlement Agreement, and Fibreboard, its insurers and plaintiffs
representatives entered into the Global Settlement Agreement. These agreements
are interrelated. Final court approval of these agreements is required.
Fibreboard believes trial court approval could occur during the first half of
1995, but if appealed, it may be 1996 or later before final court approval could
be obtained.
If both the Global and Insurance Settlement Agreements are approved,
Fibreboard believes its existing and future personal injury asbestos liabilities
will be resolved through insurance resources and existing corporate reserves.
If the Insurance Settlement is approved but the Global Settlement is not
approved, the insurers will provide Fibreboard with up to $2,000,000 to resolve
claims pending as of August 27, 1993 and all future claims, and will pay claims
settled but not yet paid as of August 27, 1993.
Claims Activity:
Fibreboard has already resolved 147,400 personal injury claims for
approximately $1,654,400, not including legal defense costs. Substantially all
of the settlements have been achieved through 1) payments by Fibreboard's
insurers; 2) assignments of Fibreboard's rights to insurance payments, most of
which have been converted to three-party agreements among Fibreboard, its
insurer and plaintiffs; or 3) deferring payments pending resolution of the
personal injury insurance coverage litigation discussed below. An additional
26,800 claims have been disposed of at no cost to Fibreboard other than legal
defense costs. At December 31, 1994, Fibreboard estimates that approximately
41,900 claims have been filed against it which remain unresolved. Approximately
15,600 of these claims were initially filed against Fibreboard on or after
August 27, 1993 and will be covered by the Global Settlement, if approved.
Fibreboard is unable to determine the exact number of claims that may be filed
in the future, although the number is expected to be substantial.
Fibreboard has achieved excellent results in resolving asbestos-in-
buildings actions. At December 31, 1994, of the 152 actions served against it,
Fibreboard has been dismissed from 134 (31 of which joined the National Schools
class action), settled or agreed to settle five for $2,020, tried one to a
defense verdict and remains a defendant in 14 actions. In one of the remaining
actions, Fibreboard won a defense verdict on product identification and cost of
abatement issues, although further proceedings are scheduled.
<PAGE>
The following tables illustrate asbestos-related claims activity for the
last three years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Personal Injury Claims
----------------------
New claims received(1) 3,500 35,100 37,000
Claims disposed
Settled 15,185 27,907 54,137
Dismissed 2,685 2,716 1,898
"Green Card" settlements(2) 189 429 862
Judgments(3) 1 48 18
Adjustments(4) 1,366 2,300 1,900
Average settlement amount
per claim settled(5)--
pre-1959 claims $ 8 $ 12 $ 14
post-1959 claims $ 7 $ 4 $ 3
Claims pending at year end(6) 41,900 57,800 56,200
Asbestos-in-Buildings Claims
----------------------------
New actions received 1 -- 1
Actions disposed
Dismissed 8 7 12
Settled -- 1 --
Actions pending at year end 14 21 29
<FN>
1. Fibreboard believes new claims received increased during 1993 and 1992
in anticipation of the Global and Insurance Settlements in 1993 and due
to significant year end settlements of outstanding claims in 1992 that
included a significant number of unfiled claims incorporated into large
group settlements. Of the claims received in 1994 and 1993, 2,900 and
14,600 claims were filed on or after August 27, 1993, and will be
covered by the Global Settlement, if approved.
2. Under Green Card Settlements, there is no determination of liability by
Fibreboard to a claimant. Instead, Fibreboard waives the statute of
limitations should a claimant develop an asbestos-related impairment in
the future.
3. Judgments represent defense verdicts in favor of Fibreboard, or
plaintiff verdicts where the net amount payable by Fibreboard is zero
after applying prior settlement amounts or plaintiff verdicts where the
judgment has been paid. Since 1992, only 24 judgments have resulted in
monetary payments, aggregating $5,385. Additional judgments favoring
plaintiffs have been entered. Fibreboard is appealing these judgments.
The amount of such judgments is included in Fibreboard's overall
liability estimate discussed below.
4. Often, multiple claims are filed for the same injury. In addition,
Fibreboard's claims database was constructed by merging several third-
party databases in 1988. During 1992 and 1993, Fibreboard attempted to
identify duplicate claims and remove them from the database. It is
often not possible to fully identify duplicate claims until the claims
are prepared for trial. Fibreboard anticipates additional future
adjustments.
<PAGE>
5. These averages are for claims where the initial year of exposure is
known.
6. Of the claims pending at December 31, 1994, 15,600 were filed on or
after August 27, 1993, and will be covered by the Global Settlement, if
approved.
</TABLE>
--------------------------------------------------------------------------------
Insurance Coverage for Personal Injury Claims:
During 1993, Fibreboard entered into a settlement agreement with
Continental Casualty Company (Continental) and Pacific Indemnity Company
(Pacific) (the Insurance Settlement). In addition, Fibreboard, Continental,
Pacific and plaintiffs' representatives entered into a settlement agreement (the
Global Settlement). These agreements are interrelated. Final court approval of
the agreements is required. Fibreboard believes trial court approval could
occur during the first half of 1995, but if appealed, it may be 1996 or later
before final court approval could be obtained.
If both the Global Settlement and Insurance Settlement are approved,
Fibreboard believes its existing and future personal injury asbestos liabilities
will be resolved through insurance resources and existing corporate reserves.
Fibreboard will contribute $10,000 toward a $1,535,000 settlement trust, which
it will obtain from other remaining insurance sources and existing reserves.
The Home Insurance company paid $9,892 into the escrow account after December
31, 1994 on behalf of Fibreboard, in satisfaction of an earlier settlement
agreement. Fibreboard is obligated to pay $245, which includes interest from
the settlement date to December 31, 1994, into the escrow account if the Global
Settlement is approved. The remainder of the trust will be funded by
Continental and Pacific. The insurers have placed $1,525,000 in an escrow
account pending court approval of the settlements. The balance of the escrow
account was $1,560,633 at December 31, 1994 after payment of interim expenses
associated with the Global Settlement. The trust will be used to compensate
"future" plaintiffs, defined as those plaintiffs who had not filed a claim
against Fibreboard before August 27, 1993. Such future plaintiffs only source of
compensation will be the trust, as an injunction will be entered prohibiting
future claims against Fibreboard or the insurers.
If the Global Settlement is not approved, but the Insurance Settlement is
approved, the insurers will instead provide Fibreboard with up to $2,000,000 to
resolve pending and future claims and will pay the deferred payment portion of
existing settled claims.
While Fibreboard is optimistic, there is no assurance final court approval
of either the Global Settlement or the Insurance Settlement can be obtained. If
neither the Global Settlement nor the Insurance Settlement is approved, the
parties will be bound by the outcome of the insurance coverage litigation and
prior settlements with Continental and Pacific, unless other settlements are
reached. All insurance proceeds due from other insurers under previous
settlements have been received.
In the event the settlements discussed above are not approved, Fibreboard
believes it has substantial insurance coverage for asbestos-related defense and
indemnity costs. Fibreboard's disputes with Continental and Pacific have been
the subject of litigation which began in 1979. Trial court judgments rendered
in 1990 give Fibreboard virtually unlimited insurance coverage for asbestos-
related personal injury claims where the initial exposure to asbestos occurred
prior to March 1959. Under the judgments, these insurers can be required to pay
up to $500 for each occurrence (defined as each individual claim) with no
limitation on the aggregate number of occurrences.
The insurers appealed to the California Court of Appeal. Among other
issues, Continental disputed the definition of an occurrence under its policy as
well as the trigger and scope of coverage as determined by the trial court,
while Pacific argued that its policy contained an aggregate limit as well as
disputing the trigger and scope of coverage issues. In November 1993, the Court
of Appeal issued its ruling on the trigger and scope of coverage issues,
confirming the favorable trial court judgments, except the court held the period
for coverage would begin at the time of exposure to Fibreboard's asbestos
products rather than at the time of exposure to any company's asbestos product,
with the presumption that these periods are the same. The insurers have filed
petitions for review with the California Supreme Court, which has granted review
but not yet scheduled any further activity. At the request of Fibreboard,
Continental and Pacific, the Court of Appeal withheld its ruling on the
remaining
<PAGE>
issues while the parties seek approval of the Global and Insurance Settlements.
If the Global and/or Insurance Settlements are ultimately approved, Fibreboard
and its insurers will seek to dismiss the insurance coverage litigation.
Fibreboard has entered into an interim agreement with Continental under
which Continental agreed to provide a full defense to Fibreboard on pre-1959
claims and make certain funds available as needed to pay currently due
Structured Settlement Obligations and other personal injury defense costs for
which Fibreboard does not otherwise have insurance available during the period
pending final approval of the Global and/or Insurance Settlement, or if neither
is approved, through the ultimate conclusion of the insurance coverage appeal,
however long that may take. In exchange for the benefits provided under this
agreement, Fibreboard agreed not to settle additional pre-1959 personal injury
claims without Continental's consent.
If neither the Global Settlement nor the Insurance Settlement are approved
and Fibreboard prevails in the appeal of the insurance coverage litigation,
Continental has agreed to provide Fibreboard with $315,000 to $425,000 to
resolve personal injury claims alleging first exposure to asbestos after March
1959, less any amounts Fibreboard recovers from the Pacific settlement described
below. Continental would also continue to have responsibility for all pre-1959
personal injury claims against Fibreboard up to $500 per claim.
In March 1992, Fibreboard and Pacific entered into a settlement agreement
(the Pacific Agreement). If the Global Settlement or Insurance Settlement is
approved, the Pacific Agreement will be of no effect. If neither of the
settlements is approved, the Pacific Agreement establishes amounts payable to
Fibreboard if the trial court judgments are upheld. Fibreboard received $10,000
upon signing the agreement and received an additional $10,000 during 1993. In
addition, if the judgments are affirmed on appeal, Fibreboard will receive from
$80,000 to $105,000 to be used for claims costs for which it does not otherwise
have insurance.
In the event the trigger and scope of coverage judgments are reversed on
appeal, Pacific will owe Fibreboard nothing and will have a right to repayment
of interim funds previously advanced.
Fibreboard believes amounts available under the settlements discussed above
will be adequate to fund defense and indemnity costs until the insurance
coverage appeal is concluded, whether as a result of the final approval of the
Global and/or Insurance Settlements or the final resolution of the insurance
coverage litigation.
Liability Quantification:
At the end of 1991, Fibreboard attempted to quantify its liability for
asbestos-related personal injury claims then pending as well as anticipated to
be received through the end of the decade. There are many opportunities for
error in such an exercise. Assumptions concerning the number of claims to be
received, the disease mix of pending and future claims and projections of
defense and indemnity costs may or may not prove correct. Fibreboard's
assumptions are based on its historical experience, modified as appropriate for
anticipated demographic changes or changes in the litigation environment.
Notwithstanding the inherent risk of significant error in such a
calculation, Fibreboard estimated that the amount necessary to defend and
dispose of asbestos-related personal injury claims pending at December 31, 1991
and anticipated through the end of the decade plus the costs of prosecuting its
insurance coverage litigation would aggregate $1,610,000. Because of the
dynamic nature of this litigation, it is more difficult to estimate how many
personal injury claims will be received after 1999 as well as the costs of
defending and disposing of those future claims. Consequently, Fibreboard's
estimated liability contains no amounts for personal injury claims received
after the end of the decade, although it is likely additional claims will be
received thereafter.
Fibreboard determined it was probable that it would ultimately receive
insurance proceeds of $1,584,000 for the defense and disposition of the claims
quantified above. Fibreboard's opinion was based on its understanding of the
disputed issues, the financial strength of the insurers and the opinion of
outside legal counsel regarding the outcome of the insurance coverage
litigation.
<PAGE>
As a result, Fibreboard recorded a liability, net of anticipated insurance
proceeds, of $26,000 at December 31, 1991, representing its best estimate of the
unreimbursed cost of resolving personal injury claims then pending and
anticipated through the remainder of the decade as well as the costs of
prosecuting the insurance coverage litigation. Although there likely will be
claims filed beyond the end of the decade, these have not been estimated.
During 1994, 1993 and 1992, unreimbursed costs of $2,211, $1,802 and $4,729 were
charged against this reserve.
Fibreboard continues to believe it is probable that it will ultimately
receive insurance proceeds of $1,584,000 for the defense and disposition of the
asbestos-related personal injury claims quantified above. Although Fibreboard,
its insurers and plaintiffs' representatives entered into the Insurance and
Global Settlements discussed above, Fibreboard does not believe these
settlements impact its estimate of liability through the end of the decade, and
no additional events have transpired during 1994 which indicate the potential
liability and insurance proceeds estimates should be changed. Consequently, no
adjustment has been made to the estimated liability for personal injury claims
through the end of the decade or anticipated insurance proceeds. Fibreboard
will continue to reevaluate its estimates and will make adjustments to the
effect dictated by changes in the personal injury litigation.
Asbestos-in-Buildings Liabilities:
Fibreboard does not believe it is presently possible to reasonably estimate
potential liabilities for asbestos-in-buildings claims, if any. Fibreboard
believes that its asbestos-containing products, properly used, cause no damage
to buildings. Further, Fibreboard can frequently identify its asbestos-
containing products and aggressively pursues dismissals of claims where its
products are not identified. To date, Fibreboard has been very successful in
obtaining dismissals, and has won the only trial which went to verdict and won a
defense verdict on product identification and cost of abatement issues in
another trial in which further proceedings are scheduled.
Fibreboard has settled five asbestos-in-buildings claims, including
settlement agreements in the National Schools class action and another class
action, for $2,020. The class action settlements are subject to court approval.
Further, although personal injury claims have similar characteristics, the same
cannot be said for asbestos-in-buildings claims. Each claim can involve from
one to several thousand buildings, each of which may vary as to age, ability to
identify various producers products contained in the building as well as the
extent of a producer's product present, building use, difficulty of abatement
(if required) and so on. Thus, while extrapolation of personal injury claims
disposition experience may provide useful information for estimating future
personal injury liability, such an analysis cannot be applied to asbestos-in-
buildings claims.
Trials in some of the pending asbestos-in-buildings claims are likely to
occur over the next few years. To date Fibreboard has successfully defended
these claims, or settled the claims for nominal amounts compared to the damages
sought. Based on its experience to date, Fibreboard believes the ultimate
resolution of asbestos-in-buildings claims will not have a material adverse
effect on its financial condition.
Insurance for Asbestos-in-Buildings Claims:
Fibreboard has reached final settlements with four of its primary insurers
and several of its excess level insurers. The settlements confirm more than
$295,000 of insurance as needed to defend and dispose of asbestos-in-buildings
claims, of which $6,400 has been used through December 31, 1994.
Fibreboard is also litigating with its remaining insurance carriers and
believes the total limits of insurance policies in effect from 1932 to 1985
which may provide coverage for asbestos-in-buildings claims, aggregate
approximately $390,000 (including the $295,000 referred to in the prior
paragraph), which is in addition to the personal injury insurance coverage and
does not include additional policies which contain no aggregate limit. The
remaining insurers dispute coverage. To date substantially all of Fibreboard's
costs of defending asbestos-in-buildings claims have been paid by insurance.
Fibreboard is seeking a declaration that the underlying asbestos-in-
building claims are covered under various insurance policies. Barring
settlement, final resolution of the insurance available for asbestos-
<PAGE>
in-buildings claims may not be known for some time as an appeal of the trial
court decision is likely. The trial has been continued. No date has been set
for the trial to recommence. Fibreboard is continuing settlement discussions
with the remaining insurers.
EVENTS IMPACTING ASBESTOS-RELATED LIABILITIES
A number of events could impact Fibreboard's ability to continue to manage
its asbestos-related liabilities within available resources. The potential
impact of the personal injury issues which follow are largely dependent on
whether the Global and/or Insurance Settlements are approved.
Insurance Assignment Program:
During 1991, Fibreboard introduced its Insurance Assignment Program as a
settlement vehicle for large groups of claims. Under this program, the
plaintiffs accept an assignment of Fibreboard's right to insurance monies from
Continental as complete settlement of their claims against Fibreboard.
Consequently, these settlements involve no cash payments by Fibreboard. This
contrasts with settlements under Fibreboard's Structured Settlement Program, in
existence since 1988, wherein partial payments are made by Fibreboard using
insurance funds with the remainder of the settlement deferred pending resolution
of insurance coverage.
The settlement agreements entered into to date under the Insurance
Assignment Program do not require Fibreboard to pay cash unless insurance
proceeds are ultimately not available. Additional provisions of certain
settlement agreements provide that Fibreboard and the plaintiffs return to the
"status quo" existing prior to settlement if certain specified court actions are
not obtained. The plaintiffs have a right to return to the status quo should
Continental declare bankruptcy prior to the final resolution of the personal
injury insurance coverage litigation.
During 1992, Fibreboard obtained widespread acceptance of this program to
resolve large numbers of pending and not yet filed claims. Most of the
assignment agreements have subsequently been converted to three-party agreements
among Fibreboard, Continental and the plaintiffs. A 1992 judicial
determination in California state court supporting the right of Fibreboard to
settle claims via the Insurance Assignment Program was reversed by the appellate
court in 1994. Fibreboard does not believe this reversal will have an adverse
impact on the resolution of its asbestos-related personal injury liabilities.
Insurance Assignment Program and three-party settlements are recorded as a
liability when the settlement is executed. A corresponding asset for
anticipated insurance proceeds is also recorded. This accounting treatment
differs from the handling of unresolved claims, where no gross liability is
recorded until such time as the claim is settled.
Structured Settlement Program:
Beginning in 1988, Fibreboard has used its Structured Settlement Program
(SSP) to settle personal injury claims. Under the SSP, Fibreboard and the
plaintiff agree to a settlement amount. Fibreboard agrees to pay 40% of the
settlement amount of pre-1959 claims in cash, and the remainder is deferred
until September 1, 1996 or upon approval of the Global and/or Insurance
Settlements. Settlements of post-1959 claims result in deferring 100% of the
settlement amount.
As a consequence of the insurance settlements with Continental and Pacific
in 1993, the SSP now has been superseded by three-party agreements among
Continental, Fibreboard and the plaintiffs, whereby Continental or Fibreboard
agrees to pay certain amounts depending upon the resolution of the insurance
coverage case or the final approval or disapproval of the Global and Insurance
Settlements. These three-party agreements typically provide a partial cash
payment from Continental on pre-1959 claims.
<PAGE>
Oher Issues (Asbestos-in-Buildings Claims):
Many asbestos-in-buildings claims allege a conspiracy and/or concert of
action theory which assert, among other things, that the asbestos producers
withheld information regarding the potential danger of asbestos. If this theory
prevails at trial, it could eliminate the requirement that the plaintiff
positively identify Fibreboard's products as present in buildings in trials
where the conspiracy theory is alleged. The conspiracy theory has not yet been
tested in trial against Fibreboard, although Fibreboard believes it has
meritorious defenses.
Other Issues (Punitive Damage Claims):
Most of the personal injury claims and many of the asbestos-in-buildings
actions also seek punitive damages. Fibreboard has not paid any punitive
damages judgments except when funded by insurance. It is uncertain whether
punitive damages would be covered by insurance as the law in this area varies
from state to state. During 1991, Fibreboard received a ruling by the 9th
Circuit Court of Appeal that punitive damages awarded by the Cimino jury in
Texas and by a West Virginia jury in a consolidated trial similar to Cimino were
covered by insurance. However, this ruling may have limited applicability in
view of the varying state rules regarding punitive damage awards.
RESOURCES AVAILABLE FOR ASBESTOS-RELATED COSTS
Under the terms of the interim agreement, Continental will provide a full
defense to Fibreboard on pre-1959 claims and make certain funds available as
needed to pay currently due Structured Settlement obligations and other personal
injury defense costs for which Fibreboard does not have insurance available
during the period pending final approval of the Global and/or Insurance
Settlement, or if neither is approved, through the ultimate conclusion of the
insurance coverage appeal, however long that may take. At December 31, 1994,
Fibreboard had $1,062 in cash on hand restricted for asbestos-in-buildings-
related expenditures. At December 31, 1994, $6,878 was due in 1995 to asbestos
claimants who had accepted Structured Settlement Program obligations and will be
paid by Continental under the interim agreement. Fibreboard believes restricted
cash on hand, amounts available under the interim agreement with Continental and
amounts available under settlement agreements with Fibreboard's asbestos-in-
buildings insurers will be adequate to fund defense and indemnity costs of
personal injury and asbestos-in-buildings claims plus any amounts due under
current and future Structured Settlement Program settlements.
15. OTHER LITIGATION AND CONTINGENCIES
Fibreboard has been named as a potentially responsible party in two
separate landfill clean-ups in the state of California, the Operating
Industries, Inc. landfill in Monterey Park and the GBF landfill in Pittsburg.
In addition, Fibreboard has been named as a defendant in a private party lawsuit
seeking to recover costs of clean-up and remediation of the Acme landfill in
Martinez, California. In all cases, Fibreboard's former container products
division was responsible for materials deposited at the landfills. Fibreboard
is working with the steering committees of each site to determine Fibreboard's
allocable share of investigation and remediation costs. Fibreboard has
established a reserve against which the costs of study and cleanup, as well as
ongoing legal and steering committee administrative costs, will be charged. The
amount of the reserve was increased by $986 in 1992 to account for the addition
of the Acme landfill contingency and to reflect more current remediation cost
estimates for the GBF landfill. As of December 31, 1994, the reserve had a
remaining balance of $1,627. Fibreboard believes its litigation reserves will
be adequate to cover its remaining costs associated with these landfill sites.
Fibreboard is involved in a number of additional disputes arising from its
operations. Fibreboard believes resolution of these disputes will not have a
material adverse impact on its financial condition or results of operations.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Fibreboard Corporation:
We have audited the accompanying consolidated balance sheets of
Fibreboard Corporation (a Delaware corporation) and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Fibreboard
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in more detail in Note 14 to the accompanying financial
statements, Fibreboard has been subject to significant asbestos-related
litigation and claims allegedly caused by products that the Company manufactured
prior to 1972. The amounts involved are substantial. During 1993, Fibreboard,
its insurance carriers, and counsel for personal injury claimants entered into
agreements which, if finally approved by the court, would resolve the Company's
asbestos-related personal injury liabilities within available insurance and
existing reserves. However, if these agreements are not approved by the court,
the ultimate resolution of these claims and litigation could be materially
adverse to Fibreboard causing a substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements have been
prepared assuming that Fibreboard will continue as a going concern and do not
include any adjustments that might result from the final resolution of these
asbestos-related uncertainties.
Arthur Andersen LLP
San Francisco, California,
February 1, 1995.
<PAGE>
REPORT OF MANAGEMENT
The objectivity and integrity of the consolidated financial statements
are the responsibility of Fibreboard Corporation management. To discharge this
responsibility, management maintains a system of internal controls designed to
provide reasonable assurance that assets are safeguarded and that accounting
records are reliable. Management supports an internal audit program to provide
assurance that the system of internal controls is operating effectively. The
consolidated financial statements and notes thereto and other financial
information included in this annual financial report have been prepared by
management in accordance with generally accepted accounting principles, and by
necessity include some items determined using management's best judgment,
tempered by materiality.
The Board of Directors discharges its responsibility for reported
financial information through its Audit Committee. This Committee, composed of
all outside directors, meets periodically with management, the internal audit
department and Arthur Andersen LLP to review the activities of each.
John D. Roach James P. Donohue
Chairman, President and Senior Vice President,
Chief Executive Officer Finance and Administration
Garold E. Swan
Vice President and Controller
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
Gross Net Earnings Per Share
Quarter Net Sales Margin Income (Fully Diluted)
------- --------- ------ ------ ------------------
<S> <C> <C> <C> <C>
1994
----
1st $ 86,300 $19,526 $ 7,458 $1.66
2nd 59,608 6,935 2,105 .47
3rd 80,393 11,655 13,015(1,2) 2.90
4th 137,404 30,387 4,457(2) .99
-------- ------- -------
TOTAL $363,705 $68,503 $27,035 6.01
-------- ------- -------
-------- ------- -------
1993
----
1st $ 74,894 $16,741 $ 6,420 $1.47
2nd 65,021 10,617 3,370 .77
3rd 59,136 6,393 1,188 .26
4th 66,159 6,245 735 .16
-------- ------- -------
TOTAL $265,210 $39,996 $11,713 $2.62
-------- ------- -------
-------- ------- -------
<FN>
(1) Includes a pre-tax gain of $18,858 on the sale of non-essential
timberlands.
(2) Includes the results of operations of Norandex Inc. acquired on August 31,
1994.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors of Fibreboard is incorporated
herein by reference from "Election of Directors" and "Directors Not Standing for
Election" of Fibreboard Corporation's Proxy Statement to be filed pursuant to
Regulation 14A not later than April 30, 1995. See also "Executive Officers of
the Registrant" in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is incorporated herein
by reference from "Compensation of Directors" and "Executive Compensation" of
Fibreboard's Proxy Statement to be filed pursuant to Regulation 14A not later
than April 30, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference from "Security Ownership of
Management and Principal Stockholders" of Fibreboard's Proxy Statement to be
filed pursuant to Regulation 14A not later than April 30, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS FILED IN
THIS REPORT.
1. Index to Financial Statements and Supplementary Data. See page
20.
2. Index to Financial Statement Schedules. See page 51.
3. The following exhibits are filed as part of this Form 10-K:
<PAGE>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- ---------------------------------------------
3.1 Fibreboard's Restated Certificate of Incorporation (incorporated
herein by reference from Fibreboard Corporation's Registration
Statement on Form 10 dated May 23, 1988, as amended on June 28,
1988).
3.2 Fibreboard's Restated Bylaws as amended June 8, 1993 (incorporated
herein by reference from Fibreboard Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993).
4.1 Specimen Common Stock Certificate, $.01 par value (incorporated
herein by reference from Fibreboard Corporation's Registration
Statement on Form 10 dated May 23, 1988, as amended on June 28,
1988).
4.2 Rights Agreement dated as of August 25, 1988 between Fibreboard
Corporation and Bank of America, N.T.&S.A. as Rights Agent
(incorporated herein by reference from Fibreboard Corporation's
Current Report on Form 8-K dated August 25, 1988).
4.2.1 Amendment No. 1 to Rights Agreement, dated as of February 11, 1994,
between Fibreboard Corporation and The First National Bank of
Boston (incorporated herein by reference from Fibreboard
Corporation's Form 8-A/A dated February 15, 1994).
10.1* Form of Indemnification Agreement between Fibreboard Corporation
and each director and officer of Fibreboard Corporation
(incorporated herein by reference from Fibreboard Corporation's
Registration Statement on Form 10 dated May 23, 1988, as amended on
June 28, 1988).
10.2 Asset Purchase Agreement dated February 22, 1988, between
Fibreboard Corporation and Gaylord Container Corporation
(incorporated herein by reference from Fibreboard Corporation's
Registration Statement on Form 10 dated May 23, 1988, as amended on
June 28, 1988).
10.3 Fibreboard Corporation Restated 1988 Employee Stock Option and
Rights Plan (incorporated herein by reference from Fibreboard
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992).
10.3.1 Amendment No. 1 to Fibreboard Corporation Restated 1988 Employee
Stock Option and Rights Plan (incorporated herein by reference from
Fibreboard Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994).
10.4 Form of Fibreboard Corporation Profit Sharing 401(k) Plan
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1992).
47
<PAGE>
10.5 Fibreboard Corporation 1988 Employee Stock Purchase Plan
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1988).
10.5.1 Prospectus Supplement (Appendix) to Registration Statement on Form
S-8 No. 33-26449 for Shares issuable under the Fibreboard
Corporation 1988 Employee Stock Purchase Plan (incorporated herein
by reference from Fibreboard Corporation's Annual Report on Form
10-K for the year ended December 31, 1989).
10.6 Agreement of Compromise, Settlement and Release dated May 27, 1987,
between Fibreboard Corporation and The Home Insurance Company
(incorporated herein by reference from Fibreboard Corporation's
Registration Statement on Form 10 dated May 23, 1988, as amended on
June 28, 1988).
10.6.1 Agreement dated February 6, 1995 between Fibreboard Corporation and
The Home Insurance Company.
10.7 Fibreboard Corporation Structured Settlement Program Description
dated November 8, 1988 (incorporated herein by reference from
Fibreboard's Current Report on Form 8-K dated November 8, 1988).
10.8 Form of Structured Settlement Agreement (incorporated herein by
reference from Fibreboard's Current Report on Form 8-K dated
November 8, 1988).
10.9 Form of Stipulation Regarding Settlement Negotiations and Right to
Alternative Dispute Resolution (incorporated herein by reference
from Fibreboard's Current Report on Form 8-K dated November 8,
1988).
10.10 Amended and Restated Trust Agreement dated September 29, 1989 by
and among Fibreboard Corporation, the Trustees and the Directors
and Officers of Fibreboard (incorporated herein by reference from
Fibreboard Corporation's Annual Report on Form 10-K for the year
ended December 31, 1989).
10.11 Consulting/Sales Representation Agreement dated February 20, 1989
between Distribution International and Pabco Metals Corporation, a
wholly-owned subsidiary of Fibreboard Corporation (incorporated
herein by reference from Fibreboard Corporation's Current Report on
Form 8-K dated February 20, 1989).
10.12* Summary description of Fibreboard Corporation incentive
compensation arrangements (incorporated herein by reference from
Fibreboard Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993).
10.13* Amended and Restated Employment Agreement dated January 1, 1995
between Fibreboard Corporation and John D. Roach.
10.14 Amended and Restated Credit Agreement dated September 29, 1994
among Fibreboard Corporation, as Borrower, Certain Commercial
Lending Institutions and Bank of America National Trust and Savings
Association, as Administrative Co-Agent and Collateral Co-Agent
(incorporated herein by
48
<PAGE>
reference from Fibreboard Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994).
10.14.1 First Amendment to Amended and Restated Credit Agreement, dated as
of March 10, 1995, among Fibreboard Corporation, Bank of America
National Trust and Savings Association, as administrative co-agent
for the Lenders and as collateral co-agent for the Lenders, and the
several financial institutions party to the Credit Agreement.
10.15 Stock Purchase Agreement among Noranda Aluminum, Inc., Norandex
Inc. and Fibreboard Corporation dated as of August 31, 1994
(incorporated herein by reference from Fibreboard Corporation's
Current Report on Form 8-K dated August 31, 1994).
10.16* Form of Severance Agreement dated January 1, 1992 between
Fibreboard Corporation and Messrs. Donohue, Costello, Douglas,
DeMaria, Elliott and Swan (incorporated herein by reference from
Fibreboard Corporation's Annual Report on Form 10-K for the year
ended December 31, 1991).
10.17 Agreement and related documents dated March 27, 1992 between
Fibreboard Corporation and Pacific Indemnity Company (incorporated
herein by reference from Fibreboard Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991).
10.18 Rescission of Insurance Policies dated March 27, 1992 between
Fibreboard Corporation and Pacific Indemnity Company (incorporated
herein by reference from Fibreboard Corporation's Annual Report on
Form 10-K for the year ended December 31, 1991).
10.19* Amended and Restated Fibreboard Corporation Supplemental Retirement
Plan.
10.20 Settlement Agreement dated January 1, 1993 between Fibreboard
Corporation and Continental Casualty Company (incorporated herein
by reference from Fibreboard Corporation's Annual Report on Form
10-K for the year ended December 31, 1992).
10.21 Settlement Agreement dated January 1, 1993 between Fibreboard
Corporation and Fireman's Fund Insurance Company, Insurance Company
of North America and Royal Insurance Company (incorporated herein
by reference from Fibreboard Corporation's Annual Report on Form
10-K for the year ended December 31, 1992).
10.22 Settlement Agreement between Fibreboard Corporation and American
Home Assurance Company, et al (incorporated herein by reference
from Fibreboard Corporation's Annual Report on Form 10-K for the
year ended December 31, 1992).
10.23 Agreement of Purchase and Sale between Fibreboard Corporation and
Sierra Ski Ranch, Inc. dated as of June 11, 1993 (incorporated
herein by reference from Fibreboard Corporation's Quarterly Report
on Form 10-Q for the period ended June 30, 1993).
49
<PAGE>
10.24 Settlement Agreement among Fibreboard Corporation, Continental
Casualty Company and Ness, Motley, Loadholt, Richardson & Poole and
certain affiliated law firms dated as of August 5, 1993
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the period ended June 30, 1993).
10.25 Agreement between Fibreboard Corporation and Continental Casualty
Company dated April 9, 1993 (incorporated herein by reference from
Fibreboard Corporation's Current Report on Form 8-K dated April 9,
1993).
10.26 Loan Agreement dated May 3, 1993 between First Interstate Bank of
Nevada, N.A. and Trimont Land Company (incorporated herein by
reference from Fibreboard Corporation's Quarterly Report on Form
10-Q for the period ended September 30, 1993).
10.27 Loan Agreement dated September 17, 1993 between First Interstate
Bank of Nevada, N.A. and Sierra-at-Tahoe and Trimont Land Company
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the period ended September 30,
1993).
10.28 Settlement Agreement dated October 12, 1993 among Fibreboard
Corporation, Continental Casualty Company, CNA Casualty Company of
California, Columbia Casualty Company and Pacific Indemnity Company
(incorporated herein by reference from Fibreboard Corporation's
Quarterly Report on Form 10-Q for the period ended September 30,
1993).
10.29 Supplemental Agreement dated October 12, 1993 between Fibreboard
Corporation and Continental Casualty Company (pursuant to Rule 24b-
2 promulgated under the Securities Exchange Act of 1934, as
amended, confidential treatment has been requested for this
exhibit. This agreement has been placed under court seal.)
10.30 Global Settlement Agreement among Fibreboard Corporation,
Continental Casualty Company, CNA Casualty Company of California,
Columbia Casualty Company, Pacific Indemnity Company and The
Settlement Class, together with Exhibits A-E (incorporated herein
by reference from Fibreboard Corporation's Current Report on Form
8-K dated December 23, 1993).
10.30.1 Amendment No. 1 to the Global Settlement Agreement, dated December
15, 1994, by and among The Settlement Class, Fibreboard
Corporation, Continental Casualty Company, CNA Casualty Company of
California, Columbia Casualty Company, Pacific Indemnity Company
and the Trustees of the Fibreboard Asbestos Compensation Trust.
10.30.2 Amendment No. 2 to the Global Settlement Agreement, dated February
6, 1995, by and among the Settlement Class, Fibreboard Corporation,
Continental Casualty Company, CNA Casualty Company of California,
Columbia Casualty Company and Pacific Indemnity Company.
50
<PAGE>
10.30.3 Amendment No. 1 to the Escrow Agreement, dated February 6, 1995, by
and among Continental Casualty Company, Pacific Indemnity Company,
Fibreboard Corporation and The First National Bank of Chicago.
10.31 Agreement dated March 1994 among Representative Plaintiffs,
Fibreboard Corporation, Continental Casualty Company, CNA Casualty
Company of California, Columbia Casualty Company and Pacific
Indemnity Company (incorporated herein by reference from Fibreboard
Corporation's Quarterly Report on Form 10-Q for the period ended
June 30, 19943).
10.32 Settlement Agreement dated October 28, 1994 between Fibreboard
Corporation, CIGNA Specialty Insurance Company, Central National
Insurance Company of Omaha, Century Indemnity Company, CIGNA
Property and Casualty Insurance Company and Insurance Company of
North America (pursuant to Rule 24b-2 promulgated under the
Securities Exchange Act of 1934, as amended, confidential treatment
has been requested for this exhibit).
10.33* Fibreboard Corporation Long-Term Equity Incentive Plan
(incorporated herein by reference from Fibreboard Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993).
21. Fibreboard Corporation Subsidiaries.
23. Consent of Arthur Andersen LLP
* Denotes management contract or compensation plan identified
pursuant to Item 14(a)(3) of Form 10-K.
(b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the period October 1, 1994 to
December 31, 1994.
INDEX TO FINANCIAL STATEMENT SCHEDULES
TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994
Schedule Page
-------- ----
III Valuation and qualifying accounts for each 52
of the three years in the period ended
December 31, 1993
Report of independent public accountants on 53
financial statement schedules.
51
<PAGE>
FIBREBOARD CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31
(000'S Omitted)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO UNCOLLECTIBLE BALANCE
BEGINNING COSTS AND ACCOUNTS AT END
DESCRIPTION OF PERIOD EXPENSES WRITTEN OFF OTHER(A) OF PERIOD
----------- --------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
1992
----
Reserve for:
Doubtful accounts 687 225 (287) -- 625
Asbestos-related costs 26,026 -- -- (4,729) 21,297
1993
----
Reserve for:
Doubtful accounts 625 615 (538) -- 702
Asbestos-related costs 21,297 -- -- (1,802) 19,495
1994
----
Reserve for:
Doubtful accounts 702 569 (310) 1,391 2,352
Asbestos-related costs 19,495 -- -- (2,211) 17,284
<FN>
(a) Consists of reserve for doubtful accounts of acquired company and asbestos-
related payments.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Stockholders of
Fibreboard Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Fibreboard Corporation included in this
Form 10-K, and have issued our report thereon dated February 1, 1995. Our
report on the consolidated financial statements includes an explanatory
paragraph with respect to the significant uncertainty surrounding the asbestos
claims that have been filed against the Company as discussed in Note 14 to the
financial statements. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. Schedule II, Valuation and
Qualifying Accounts, is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
February 1, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIBREBOARD CORPORATION
----------------------
(Registrant)
Dated: March 24, 1995 By: /s/ John D. Roach
--------------------
John D. Roach
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated:
Name Title Date
------------------------- ----------------- -----------
/s/ John D. Roach Chairman, President, March 24, 1995
------------------------- Chief Executive Officer
John D. Roach and Director (Principal
Executive Officer)
/s/ James P. Donohue Senior Vice President, March 24, 1995
------------------------- Finance and Adminis-
James P. Donohue tration and Chief
Financial Officer
(Principal Financial Officer)
/s/ Garold E. Swan Vice President and March 24, 1995
------------------------- Controller (Principal
Garold E. Swan Accounting Officer)
/s/ Philip R. Bogue Director March 24, 1995
-------------------------
Philip R. Bogue
<PAGE>
Name Title Date
------------------------- ----------------- -----------
/s/ William D. Eberle Director March 24, 1995
-------------------------
William D. Eberle
/s/ G. Robert Evans Director March 24, 1995
-------------------------
G. Robert Evans
/s/ George B. James Director March 24, 1995
-------------------------
George B. James
/s/ John W. Koeberer Director March 24, 1995
-------------------------
John W. Koeberer
/s/ James F. Miller Director March 24, 1995
-------------------------
James F. Miller
<PAGE>
EXHIBIT 10.6.1
AGREEMENT
This Agreement is entered into as of February 6, 1995 between
Fibreboard Corporation ("Fibreboard") and The Home Insurance Company ("Home")
(collectively the "Parties").
WHEREAS, under date of May 27, 1987, the Parties entered into an
"Agreement of Compromise, Settlement and Release" relating to asbestos personal
injury claims; and
WHEREAS, under date of December 23, 1993, Fibreboard entered into a
"Global Settlement Agreement" with Continental Casualty Company, CNA Casualty
Company of California, Columbia Casualty Company, Pacific Indemnity Company and
a Settlement Class relating to asbestos personal injury claims; and
WHEREAS, in connection with the Global Settlement Agreement the
settling parties established an escrow pursuant to an "Escrow Agreement"; and
WHEREAS, the Global Settlement Agreement and Escrow Agreement have
been recently amended in the form attached hereto as Exhibit 1:
NOW THEREFORE, the Parties agree as follows:
1. On or before February 10, 1995, Home will pay into the Escrow
Account the amount of $9,892,223 (the "Principal Amount") together with simple
interest on said amount at the rate of 3.085% from and after January 1, 1994
until the date of payment as a separate escrow fund ("New Escrow Fund").
1.
<PAGE>
2. In accordance with the Escrow Agreement, as amended, the
amounts paid by Home into the New Escrow Fund will be held as a separate fund in
the Escrow Account and will earn interest in accordance with the terms of the
Escrow Agreement. Neither the amounts paid into the New Escrow Fund nor any
interest earned thereon shall be used to make any of the distributions permitted
under Section 5(b) of the Escrow Agreement.
3. At such time as the Escrow Account terminates, the amounts held
in the New Escrow Fund by Home and interest thereon will be paid as follows:
a. In the event of a Global Approval Judgment as
defined in the Global Settlement Agreement, the amounts in the New
Escrow Fund will be paid to the Trust established under Article 5 of
the Global Settlement Agreement.
b. In the event of Global Court Disapproval as defined
in the Global Settlement Agreement, the amount in the New Escrow Fund
will be paid to Home.
4. The payments by Home pursuant to this Agreement shall be
deemed to be payments under the Parties' May 27, 1987 agreement. In the event
of Global Approval Judgment, Home's obligations under the May 27, 1987 agreement
shall be deemed satisfied. In the event amounts are paid back to Home under
paragraph 3.b above, any portion of the Principal Amount repaid to Home will be
made available to Fibreboard under and in accordance with the terms of the May
27, 1987 agreement.
2.
<PAGE>
5. Fibreboard will cause to be entered a dismissal without prejudice
as against The Home Insurance Company in FIBREBOARD V. CONTINENTAL CASUALTY
COMPANY, No. 844903, pending in the Superior Court of the State of California,
County of San Francisco.
FIBREBOARD CORPORATION
Dated: 2/6 , 1995 By /s/ Michael R. Douglas
----------- ---------------------------
Michael R. Douglas
Senior Vice President
and General Counsel
THE HOME INSURANCE COMPANY
Dated: 3/1 , 1995 By /s/ James F. Duhig
----------- ---------------------------
James F. Duhig
Assist. Vice President
3.
<PAGE>
EXHIBIT 10.13
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made
effective as of January 1, 1995 by and between FIBREBOARD CORPORATION, a
Delaware corporation (the "Company"), and John D. Roach ("Executive").
WHEREAS, the parties hereto have entered into an Employment Agreement
dated July 2, 1991; and
WHEREAS, the parties hereto desire to amend and restate the Employment
Agreement on the terms set forth herein.
IN CONSIDERATION of the terms and mutual covenants contained herein, the
parties hereto agree as follows:
1. CONTINUING EMPLOYMENT. The Company agrees to employ Executive, and
Executive agrees to continue in the employ of the Company on the terms and
conditions hereinafter set forth.
2. TERM.
A. This Agreement, as amended and restated, shall take effect as of
January 1, 1995 (the "Effective Date") and shall continue until
December 31, 1996, unless extended under the provisions of
Subsection 2(B).
B. This Agreement shall automatically be renewed for a two-year term at
the expiration of each calendar month after the Effective Date,
unless the Board of Directors of the Company or Executive provides
notice to the other party at least sixty (60) days prior to the end
of any month that the Agreement will not be renewed. If such notice
is given, the term of employment under this Agreement shall end two
(2) years following the expiration of the first calendar month that
ends at least sixty (60) days following the date of such notice. In
such event, Executive's reasonable efforts during the remaining term
of this Agreement to obtain other employment effective upon the end
of the term of this Agreement shall not be deemed to violate the
requirements of Section 4 hereof. The terms and conditions of
Executive's employment during such extended term shall remain as set
forth herein.
3. POSITION. Executive shall hold the positions of Chairman of the
Board, President and Chief Executive Officer of the Company, and shall
have the powers and responsibilities consistent with such positions.
Executive will have general charge of the day-to-day management and
operations of the Company. Executive shall also perform all duties which
from time to time are assigned to him by the Company's Board of
<PAGE>
Directors, and shall provide the Board with periodic reports upon request.
Executive's services shall be performed at the location of the Company's
corporate headquarters immediately preceding the Effective Date ("current
location") or at a location within a fifty (50) mile radius of the current
location, unless otherwise mutually agreed upon by the parties. At the
pleasure of the Company's shareholders, Executive agrees to serve as a
Director on the Company's Board of Directors at no additional
compensation.
4. DUTIES. During the period of employment with the Company, Executive
shall faithfully perform the duties of his position and devote full time,
attention, skill and best efforts to such duties. Such duties are to be
conducted in accordance with generally accepted prudent business practices
and in compliance with the business policies of the Company. Executive
shall not engage in any other employment (including consulting services)
during the term of this Agreement, without the specific written consent of
the Company. Notwithstanding the foregoing, Executive may serve as a
non-employee director of other public or private companies or other
entities provided that such service does not violate the requirements of
Section 8 of this Agreement.
5. COMPENSATION. For all services rendered by Executive under this
Agreement, the Company shall compensate Executive as described below:
A. BASE SALARY. Executive's current Base Salary is $410,000 per
annum. Executive's Base Salary may increase from time to time as
determined by the Company's Board of Directors. Any such increase
in Executive's Base Salary shall be reflected in an appendix to this
Agreement signed by Executive and the Chairman of the Company's
Compensation Committee. Executive shall receive his Base Salary in
equal installments in accordance with the Company's current payroll
practices.
B. BONUS AND INCENTIVE PROGRAMS. Executive shall participate in
(i) the Company's Annual Cash Incentive Program, or other bonus
program which shall offer Executive the opportunity to earn an
annual bonus of up to 130% of his Base Salary, based on performance
criteria mutually set by Executive and the Board of Directors of the
Company, and (ii) any other bonus or incentive programs or
arrangements provided by the Company from time to time to senior
executive officers, on such terms as may be determined by the Board
of Directors of the Company.
C. EMPLOYEE BENEFITS AND PERQUISITES. Executive shall be entitled
to and shall receive all other benefits and conditions of
employment, including health, life and
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<PAGE>
disability insurance, generally available to the senior officers of
the Company, provided that Executive's entitlement to severance and
other benefits in the event of the termination of his employment
shall be governed by Section 6 of this Agreement. Executive shall
also be entitled to such perquisites (other than those the subject
of which is expressly addressed herein) as are provided to the other
senior officers of the Company and/or are provided to chief
executive officers of comparable companies.
D. VACATION. Executive shall be entitled to paid vacation during
the term of this Agreement in accordance with the Company's vacation
policy for senior executives, subject to a minimum of four (4) weeks
paid vacation per year.
6. CONSEQUENCES OF TERMINATION OF EMPLOYMENT BEFORE END OF TERM.
A. DEATH OR DISABILITY. If Executive's employment is terminated by
reason of death or Permanent Total Disability (as defined below),
Executive, or Executive's estate, as the case may be, shall be
entitled to (i) the full compensation which Executive would have
received hereunder up to the date of such termination by reason of
death or Permanent Total Disability, including the bonus payments
provided for under Subsection 6C(4) below, and (ii) such benefits as
are determined in accordance with the Company's employee benefit
plans. As used herein, "Permanent Total Disability" is defined as
follows:
If at the end of any month Executive then is, and has been for
six (6) consecutive full calendar months then ending, or
eighty (80) or more of the normal working days during the
twelve (12) consecutive full calendar months then ending,
unable to perform his duties under this Agreement in the
normal and regular manner due to mental or physical illness or
injury, Executive will be deemed to be in a state of Permanent
Total Disability. Any determination of such inability to
perform shall be made only by the Board of Directors of the
Company with such professional advice as they deem
appropriate. Such determinations shall be final and
conclusive.
B. TERMINATION BY THE COMPANY FOR CAUSE. Nothing herein shall
prevent the Company from terminating Executive's employment for
Cause. In such event, Executive shall be
3
<PAGE>
entitled to no further compensation hereunder and shall be entitled
only to such benefits as are determined in accordance with the
Company's employee benefit plans. As used herein, "Cause" shall
mean (i) any act of fraud in the performance of Executive's duties
hereunder, (ii) conviction of any felony, (iii) engaging in any
action with the intention of causing serious detriment to any of the
operations of the Company or to any of its subsidiaries, or (iv)
willful and continued failure of Executive to substantially perform
his duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness (habitual drunkenness
or abuse of drugs or controlled substances not being considered a
physical or mental illness for purposes of this paragraph)).
C. TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE; CHANGE OF
CONTROL.
(1) TERMINATION OTHER THAN FOR CAUSE. The Company may terminate
Executive's employment prior to the end of the term of this
Agreement for any reason. If before the end of the term of
this Agreement, either (i) Executive's employment is
terminated by the Company for reasons other than Permanent
Total Disability (as defined in Subsection 6 A) or Cause (as
defined in Subsection 6 B), or (ii) Executive voluntarily
terminates his employment for Good Reason (as defined in
Subsection 6 C (6) below), the Company agrees
(a) to pay Executive a severance payment equal to (i) One
Year's Compensation, as defined below and (ii) the bonus
payments provided for under Subsection 6 C(4) below.
Payment will be made in a single lump sum within thirty
(30) days following the date of termination of
employment;
(b) to retain Executive to provide, and Executive agrees to
provide, services as a consultant to the Company during
the twelve month period following the date of
termination of employment ("Consulting Period"), in
consideration for which services Executive shall be
entitled to receive One Year's Compensation, payable in
monthly installments;
(c) to continue Executive's participation and coverage for a
period of two years from the date of termination under
all of the Company's life, medical, dental, and
disability plans, and all fringe benefit plans and
programs in
4
<PAGE>
which Executive is participating immediately prior to
such date of termination ("Insurance Benefits"), under
the same coverages and on the same terms as in effect
immediately prior to the date of termination, provided
that if his continued participation is not possible
under the general terms and provisions of such plans and
programs, the Company shall arrange to provide him with
substantially similar benefits; and
(d) that (i) any outstanding options to purchase shares of
Company stock, related stock appreciation rights and
phantom stock units will vest immediately and become
immediately exercisable, and the Company shall issue
stock to Executive pursuant to any previously awarded
restricted share rights, and (ii) all of Executive's
non-qualified deferred compensation or retirement
benefits, including benefits accrued under the Company's
Supplemental Retirement Plan, if any, will vest and be
paid out immediately to the extent permitted by the
relevant plan documents and related award documents with
respect thereto.
During the Consulting Period, Executive shall be reasonably available to
the executive officers of the Company for consultation on any and all
policy or technical questions within his knowledge and experience. It is
understood that Executive shall be obligated to devote to such
consultation only a portion of his time, which shall not be so great as to
preclude him from engaging in other business activities or employment.
Notwithstanding Section 4 hereof, Executive is specifically permitted to
engage in other employment, subject, however, to Section 8 of this
Agreement, which shall remain in force during the period in which
Executive is available as a consultant pursuant to this subsection. The
Board of Directors in its discretion may at any time accelerate the
monthly payments for consulting services, in which case Executive's
obligation to provide consulting services shall cease. Executive and
Company agree that Executive's services as a consultant are, by reason of
his extensive technical and managerial skill and experience with the
Company's business and in the field in which the Company operates, of a
special, unique, extraordinary and intellectual character, the loss of
which by the Company would not be capable of adequate compensation in
damages. The severance benefits and consulting compensation payable
hereunder will be in lieu of all other severance payments and other
benefits to which Executive might otherwise be entitled from the Company.
5
<PAGE>
(2) TERMINATION AFTER CHANGE OF CONTROL. If either (i)
Executive's employment is terminated by the Company for any
reason, other than Permanent Total Disability or Cause, within
two (2) years following a Change of Control, or (ii) Executive
voluntarily terminates his employment for any reason within
two (2) years following a Change of Control:
(a) The Company will pay Executive a severance payment, in
lieu of the severance payment and consulting arrangement
described in Section 6 C (1), equal to (i) two times One
Year's Compensation and (ii) the bonus payments provided
for under Subsection 6 C(4) below. Payment will be made
in a single lump sum within thirty (30) days following
the date of termination;
(b) The Company will provide to Executive the benefits set
forth in Sections 6 C (1) (c) and (d) above; and
(c) The foregoing severance benefits will be in lieu of all
other severance payments and other benefits to which
Executive might otherwise be entitled from the Company.
(3) ONE YEAR'S COMPENSATION. For purposes of this Agreement,
"One Year's Compensation" shall mean the sum of (i)
Executive's current annual Base Salary immediately before such
termination (or, in the case of a termination by Executive for
Good Reason, his Annual Base Salary in effect immediately
before the event constituting Good Reason) and (ii) an amount
equal to the product of such Base Salary multiplied by the
Average Yearly Bonus Ratio. The "Average Yearly Bonus Ratio"
shall be a percentage equal to the average percentage that
Executive's bonus for each full calendar year of employment
with the Company (commencing January 1, 1992) represents of
his annual Base Salary for that year. The Average Yearly
Bonus Ratio calculation, as in effect from time to time, shall
be set forth in Appendix A.
(4) BONUS PAYMENTS FOR YEAR OF TERMINATION AND YEAR PRECEDING
TERMINATION. In the event that Executive's employment is
terminated by the Company for any reason other than for Cause,
or if Executive voluntarily terminates his employment for any
reason, the Company shall make the following payments to
Executive in addition to any applicable severance benefits
provided for hereunder:
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<PAGE>
(a) The Company shall pay Executive a bonus payment equal to
the amount determined by multiplying (i) Executive's
then current Base Salary, prorated for the number of
months during the calendar year of termination actually
employed, by (ii) the Average Yearly Bonus Ratio. See
Appendix A.
(b) If Executive's employment is terminated subsequent to
the end of a calendar year but prior to the date that
the Board of Directors has determined to award bonuses
for such calendar year, the Company shall pay Executive
a bonus payment for services provided during such prior
calendar year in an amount determined by multiplying
Executive's Base Salary for such prior calendar year by
the Average Yearly Bonus Ratio. See Appendix A.
(5) CHANGE OF CONTROL. For purposes of this Agreement, "Change
of Control" shall have the following meaning:
(a) The holders of the voting securities of the Company
approve a merger or consolidation of the Company with
any other entity, other than a merger or consolidation
which would result in the voting securities of the
Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the surviving
entity) at least 50% of the total voting power
represented by the voting securities of the Company or
such surviving entity outstanding immediately after such
merger or consolidation; or
(b) A plan of complete liquidation of the Company is adopted
or the holders of voting securities of the Company
approve an agreement for the sale or disposition by the
Company (in one transaction or a series of transactions)
of all or substantially all of the Company's assets; or
(c) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 ("1934
Act")) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly,
of 15% or more of the combined voting power of the
Company's then outstanding shares, unless,
7
<PAGE>
within 30 business days after notice to the Company of
such event, the Board of Directors (as constituted
immediately prior to such event) adopts a resolution
that for purposes of this Agreement no Change in Control
shall have occurred (which resolution may be revoked by
the Board of Directors at any time, in which case a
Change in Control will be deemed to have occurred as of
the date such revocation becomes effective); or
(d) During any period of two consecutive years beginning
after the date of execution of this Agreement, members
who at the beginning of such period constitute the Board
of Directors cease for any reason to constitute a
majority thereof, unless the election, or nomination for
election by the Company's stockholders, of each director
is approved by the vote of at least two-thirds of the
directors then still in office and who were directors at
the beginning of such period; or
(e) The occurrence of any other change of control of a
nature that would be required to be reported in
accordance with Item 1(a) of Form 8-K pursuant to
Sections 13 or 15(d) of the 1934 Act or in the Company's
proxy statement in accordance with Item 6(e) of Schedule
14A of Regulation 14A promulgated under the 1934 Act, or
in any successor forms or regulations to the same
effect; unless, within 30 business days after notice to
the Company of such events, the Board of Directors (as
constituted immediately prior to such event) adopts a
resolution that for purposes of this Agreement no Change
in Control has occurred (which resolution may be revoked
at any time, in which case a Change in Control will be
deemed to have occurred on the date such revocation
becomes effective.)
(6) GOOD REASON. For purposes of this Agreement, "Good Reason"
shall include any of the following changes which are effected
without Executive's written consent: (i) a material change in
Executive's titles, responsibilities, authority, duties,
status or reporting level, (ii) a reduction in Executive's
salary or bonus opportunity, or (iii) a change in Executive's
place of employment which is more than 50 miles from
Executive's place of employment prior to the change.
8
<PAGE>
D. VOLUNTARY TERMINATION BY EXECUTIVE. If Executive terminates his
employment of his own volition (whether by retirement or otherwise)
other than for Good Reason or as described in Section 6 C above,
Executive shall not be entitled to any severance or further
compensation hereunder, except that Executive shall receive the
compensation provided for under this Agreement through the date of
termination, including the bonus payments provided for under Section
6C(4), together with such benefits as are determined in accordance
with the Company's employee benefit plans.
E. PROFIT SHARING PLAN FORFEITURES. In the event that Executive
terminates employment before he is fully vested in his accounts
under the Company's qualified profit sharing plan or successor plan,
he shall be entitled to a payment equal to the amount of his
accounts that he forfeits under such plan by reason of such
termination, payable within thirty (30) days of such termination.
F. EXCESS PARACHUTE PAYMENTS. If the Internal Revenue Service
asserts or proposes to assert that any compensation payable
hereunder, alone or when aggregated with other compensation payable
to Executive, would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code") and/or would subject Executive to a tax
under Section 4999 of the Code (or successor or similar provisions),
Executive shall have the right to contest, at the Company's expense
and using counsel acceptable to Executive and the Company, the
assertion of such an excise tax. If as a result of such contest, or
if it is determined by counsel acceptable to Executive and the
Company that, an excise tax shall be imposed on Executive under
Section 4999 of the Code (or successor or similar provision) the
Company shall promptly pay Executive such additional amount or
amounts as shall be necessary to reimburse Executive for (i) such
excise tax and (ii) any income, employment and excise taxes incurred
by Executive which are attributable to the reimbursement of such
excise tax payment(s).
7. IRREVOCABLE TRUST. The Company has previously established an
irrevocable trust for purposes of funding the benefits payable to
Executive pursuant to subsections 6 C and 6 E of this agreement. The
Company shall make cash contributions to such trust at such time or times
as shall be necessary to maintain a balance in such trust at least equal
to the amount that would be payable under subsections 6 C and 6 E, were
Executive to be qualified for such payments. Payments for which Executive
becomes qualified under this Agreement shall be made directly from the
trust. The trust will guarantee the
9
<PAGE>
payments provided for herein, and will be primarily liable for such
payments.
Such trusts shall be maintained until Executive has terminated employment
and no further amounts are owed to Executive pursuant to subsection 6 C or
6 E. The trustee of said trust shall be acceptable to, but independent
of, the Company and Executive and shall be empowered to pay the amount to
which Executive becomes entitled according to the terms of subsection 6 C
or 6 E. Any earnings on the principal held in such trust shall be paid
annually to the Company to the extent not necessary to maintain the trust
balance at the level required above. Payments made to Executive from such
trust shall, to the extent of such payments, satisfy the Company's
obligations under subsection 6 C and 6 E.
8. NONCOMPETITION AGREEMENT. Executive agrees that during the term of
this Agreement and during the Consulting Period, he will not engage,
directly or indirectly (including, by way of example only, as a director,
principal, partner, venturer, employee or agent), nor have any direct or
indirect interest, in any business similar to or competitive to the
business then being carried on by the Company or its parent or any of its
divisions or subsidiaries ("Fibreboard companies"), in any area of the
world where any of the Fibreboard companies is or has been selling its
products or otherwise carrying on its business or selling activities.
Included within the meaning of an indirect interest for purposes of this
Section 8 would be, by way of example only, an interest in a trust,
corporation, venture or partnership, which, in turn, owns an interest in
any such business, or an interest in any such business through a nominee,
agent, option or other device. It is agreed that the foregoing provisions
do not apply to an investment by Executive in stock (provided the
ownership interest of said investment at any time or when bought does not
exceed five percent (5%) of the outstanding shares of any enterprise whose
business is similar to or competitive to the business then being carried
on by the Fibreboard companies) or an investment by Executive in a mutual
fund.
If any of the provisions of this Section 8 shall contravene or be invalid
under the laws of the State of California, such contravention or
invalidity shall not invalidate all of the provisions of this Section 8,
but rather this Section 8 shall be construed insofar as the laws of the
State of California are concerned as not containing the particular
provision or provisions held to be invalid in said state and the rights
and obligations shall be construed and enforced accordingly. Nothing in
this Agreement shall prohibit Executive from serving, with the consent of
the Board of Directors of the Company, as a nonemployee director of a
public company that is not a competitor of the Company.
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9. DISCLOSURE OF INFORMATION. Executive shall not, during the term of
this Agreement, or at any time thereafter, divulge, furnish or make
accessible to anyone, except in the performance of the duties of the
office or in the regular course of business of the Company, any knowledge
or information with respect to any confidential or secret aspect of the
business of the Company, including any confidential or secret information
relating to the customers or suppliers of the Company.
10. MODIFICATION AND WAIVER OF BREACH. No waiver or modification of this
Agreement shall be binding unless it is in writing and signed by the
parties hereto. No waiver of a breach hereof shall be deemed to
constitute a waiver of a further breach, whether of a similar or
dissimilar nature.
11. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of any successors of the Company. As used herein, "successors"
shall include any person, firm, corporation or other business entity which
at any time, whether by merger, purchase or otherwise, acquires
substantially all of the assets or business of the Company.
12. NOTICE. Any written notice to be given hereunder to Executive may be
delivered to him personally or shall be deemed to have been given upon
deposit thereof in the U.S. mail, certified mail, postage prepaid,
addressed to Executive at the address as it shall appear on the records of
the Company.
13. CONSTRUCTION OF AGREEMENT. This Agreement is made and entered into in
the State of California and shall be construed under the laws of the State
of California.
14. ATTORNEYS' FEES. The Company will pay the attorneys' fees of
Executive that were incurred by him in enforcing his rights under this
Agreement if Executive subsequently obtains any benefits under this
Agreement, whether by way of settlement or litigation.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between the parties with respect to Executive's employment with the
Company during the term set forth in Section 2 above, superseding all
negotiations, prior discussions and preliminary agreements, written or
oral, concerning said employment. This Agreement may not be amended
except in writing by the parties hereto.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written. This Agreement may be executed in
counterparts.
/s/ John D. Roach
--------------------------------
John D. Roach
FIBREBOARD CORPORATION
By: /s/ G. Robert Evans
------------------------------
G. Robert Evans
Chairman - Fibreboard
Compensation Committee
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<PAGE>
APPENDIX A
SECTION 6C(3)
AVERAGE YEARLY BONUS RATIO
1992 148.13%
1993 148.13%
1994 130.00% (estimated)
Average Yearly
Bonus Ratio 142.09% (estimated)
SECTION 6 C(3) AND (4) - EXAMPLES
1. EXAMPLE 1 - If Executive's employment is terminated by the Company on
November 30, 1995 for any reason other than Permanent Total Disability,
Cause or Change of Control, Executive shall be entitled to receive the
following compensation:
(a) One Year's Compensation.
(b) One Year's Consulting Services.
(c) A bonus payment equal to the product obtained by multiplying (i) an
amount equal to 11 months of Executive's 1995 base salary by (ii)
the average yearly bonus percentage that Executive earned over the
1992/1994 period.
(d) For purposes of calculating "One Year's Compensation" in this
example (which includes a full one-year bonus payment), the Average
Yearly Bonus Ratio calculation would cover the 1992/1994 period.
2. EXAMPLE 2 - If Executive's employment is terminated by the Company on
January 31, 1996 for any reason other than Permanent Total Disability,
Cause or Change of Control, Executive shall receive the following
compensation:
(a) One Year's Compensation.
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(b) One Year's Consulting Services.
(c) In the event that the Board of Directors has not yet determined
bonuses for 1995, a bonus for the 1995 calendar year, in an amount
determined by multiplying Executive's 1995 base salary by the
average yearly bonus percentage that Executive earned over the
1992/1994 period.
(d) An additional bonus payment for the 1996 stub period equal to the
product determined by multiplying (i) an amount equal to one month
of Executive's 1996 base salary by (ii) the 1992/1995 average yearly
bonus ratio.
(e) For purposes of calculating "One Year's Compensation" in this
example (which includes a full one-year bonus payment), the Average
Yearly Bonus Ratio calculation would cover the 1992/1995 period.
3. EXAMPLE 3 - If Executive's employment terminates as a result of a Change
of Control, Executive receives two times One Year's Compensation in lieu
of the One Year's Compensation and One Year's Consulting Services provided
for above. Executive would also receive the bonus payments described in
Examples 1 and 2 above, as applicable.
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EXHIBIT 10.14.1
FIRST AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"AMENDMENT"), dated as of March 10, 1995, is entered into by and among
FIBREBOARD CORPORATION (the "BORROWER"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as administrative co-agent for the Lenders (the
"ADMINISTRATIVE AGENT") and as collateral co-agent for the Lenders (the
"COLLATERAL AGENT") (in such capacities, the "AGENT"), and the several financial
institutions party to the Credit Agreement (collectively, the "LENDERS").
RECITALS
A. The Borrower, Lenders, and Agent are parties to an Amended and Restated
Credit Agreement dated as of September 29, 1994 (the "CREDIT AGREEMENT")
pursuant to which the Agent and the Lenders have extended certain credit
facilities to the Borrower.
B. The Borrower has requested that the Lenders agree to certain
amendments of the Credit Agreement.
C. The Lenders are willing to amend the Credit Agreement, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT.
(a) The following additional definitions shall be inserted in Section
1.1(a) of the Credit Agreement in appropriate alphabetical order:
"'EXCHANGED TIMBERLAND' is defined in CLAUSE (e) of SECTION 8.2.8."
"'MAJOR EXCHANGE' is defined in CLAUSE (e) of SECTION 8.2.8."
(b) Clause (e) of Section 8.2.8 of the Credit Agreement shall be
amended and restated in its entirety to read as follows:
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"(e) exchanges of Timberlands for other timberlands to become subject to
the Lien of the Deeds of Trust hereunder pursuant to CLAUSE (d) of SECTION 10.10
(the "EXCHANGED TIMBERLAND"), and exchanges of timberland not constituting
Collateral hereunder for other timberland, in each case in the ordinary course
of business, with Persons who are not Affiliates of the Borrower, if:
(i) the aggregate fair market value of all Timberland so
exchanged by the Borrower and its Subsidiaries does not exceed on a
cumulative basis $100,000,000 during the term of this Agreement;
(ii) the Exchanged Timberland or other timberland to be received
in exchange is of at least an equivalent fair market value to the
Timberland or other timberland to be exchanged or, if such Exchanged
Timberland or other timberland is not of at least an equivalent fair
market value, the amount of any shortfall otherwise constitutes a
permitted disposition under this SECTION 8.2.8;
(iii) at the time of such exchange, no Default exists or shall
result from such exchange;
(iv) in the case of Timberland, the Collateral Agent has
received copies of appraisals or valuations for the Timberlands to be
exchanged and for the Exchanged Timberland to be received in the
exchange, which appraisals or valuations shall, (x) in the case of any
exchange where the Borrower is transferring properties (in one or a
series of related transactions) having a fair market value in excess
of $10,000,000 (a "MAJOR EXCHANGE"), be in form and substance
satisfactory to the Collateral Agent and the Required Lenders, and be
prepared by Mason, Bruce & Girard or other timber appraisers of
recognized standing satisfactory to the Collateral Agent and the
Required Lenders, and (y) in all other cases, shall be in form and
substance satisfactory to the Collateral Agent and may be prepared by
the Borrower or any of its Subsidiaries in such form and content as is
usual and customary in accordance with past practices of the Borrower
and its Subsidiaries; and
(v) in the case of Timberland, the requirements of CLAUSE (d) of
SECTION 10.10 shall have been complied with; and"
(c) Subclause (iii) of clause (f) of Section 8.2.8 of the Credit
Agreement shall be amended by deleting the words "and the Required Lenders" in
the third line of such subclause.
2
<PAGE>
(d) Clause (d) of Section 10.10 shall be amended and restated in its
entirety as follows:
"(d) In connection with a proposed release of Collateral under CLAUSES (e)
or (f) of SECTION 8.2.8, the requirements set forth below shall apply in respect
of such contemplated release:
(i) The Borrower shall deliver the following items to the Collateral
Agent, in form and substance satisfactory to the Collateral Agent, and, in
the case of a Major Exchange, the Required Lenders:
(A) a Collateral release notice or request, as applicable,
including (1) a brief narrative description of the transaction, and
(2) as applicable, for the specific transaction and on a cumulative
basis since the Original Effective Date, the values of all Collateral
released and summary of the terms thereof;
(B) in respect of releases under CLAUSE (e) of SECTION 8.2.8,
(1) evidence of recordation (or recordation instructions) of Deeds of
Trust (or amendments to any existing Deeds of Trust, as applicable)
with respect to the Exchanged Timberland being received in exchange
for the Timberland being released, such Deeds of Trust or amendments
to be recorded substantially concurrently with any full or partial
reconveyances of the Timberland being released, together with ALTA
policies of title insurance, and including such endorsements and
reinsurance as may be required by the Collateral Agent and, in the
case of a Major Exchange, the Required Lenders, insuring the Liens
created by such Deeds of Trust or amendments as being a perfected Lien
against the Collateral described therein and subject only to such
exceptions as are acceptable to the Collateral Agent and, in the case
of a Major Exchange, the Required Lenders, and other Liens permitted
by SECTION 8.2.3; (2) such consents, estoppels, tenant subordination
agreements and other documents and instruments in connection with such
Deeds of Trust or amendments as shall reasonably be deemed necessary
by the Collateral Agent and, in the case of a Major Exchange, the
Required Lenders; and (3) evidence that all other actions reasonably
necessary or, in the opinion of the Collateral Agent and, in the case
of a Major Exchange, the Required Lenders, desirable to perfect and
protect the priority of the Lien created by such Deeds of Trust or
amendments, and to enhance the Collateral Agent's ability to preserve
and protect its interests in and access to such Exchanged Timberland,
have been taken;
3
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(C) any title insurance endorsements that the Collateral Agent
and, in the case of a Major Exchange, the Required Lenders, may
reasonably require, in respect of each release of Collateral; and
(D) such other items as the Collateral Agent and, in the case of
a Major Exchange, the Required Lenders, may reasonably determine to be
necessary, including certificates or other evidence of compliance with
the provisions of this Agreement."
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Agent and the Lenders as follows:
(a) No Default or Event of Default has occurred and is continuing as
of the date hereof.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with its respective terms, except as such
enforceability thereof may be limited by (i) bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) The representations and warranties set forth in Article VII
(excluding, however, those contained in Section 7.7) of the Credit Agreement are
true and correct as of the date hereof (unless stated to relate solely to an
earlier date, in which case such representations and warranties are true and
correct as of such earlier date); PROVIDED that Section 7.5 of the Credit
Agreement shall be deemed to refer to the most recent date of the delivery of
the financial statements referred to therein. Except as disclosed by the
Borrower to the Administrative Agent and the Lenders pursuant to Section 7.7 of
the Credit Agreement, the statements set forth in Section 6.2.1(b) of the Credit
Agreement are true and correct as of the date hereof.
(d) The Borrower is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent and
the Lenders or any other Person.
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4. EFFECTIVE DATE. This Amendment will become effective as of March 10,
1995 (the "EFFECTIVE DATE"), PROVIDED that the Agent has received from the
Borrower and the Required Lenders a duly executed counterpart of this Amendment,
together with a duly executed Guarantor Acknowledgment and Consent in the form
attached hereto (the "CONSENT").
5. RESERVATION OF RIGHTS. The Borrower acknowledges and agrees that the
execution and delivery by the Agent and the Lenders of this Amendment shall not
be deemed to create a course of dealing or otherwise obligate the Agent or the
Lenders to forbear or execute similar amendments under the same or similar
circumstances in the future.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an executed
original or an executed original sent by facsimile transmission to be followed
promptly by mailing of a hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the signature of a Lender or
the Borrower shall bind such Lender or the Borrower, respectively, with the same
force and effect as the delivery of a hard copy original. Any failure by the
Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and
5
<PAGE>
therein. This Amendment supersedes all prior drafts and communications with
respect thereto. This Amendment may not be amended except in accordance with
the provisions of Section 11.1 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Borrower covenants to pay to or reimburse the Agent, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
FIBREBOARD CORPORATION
By: /s/ Garold E. Swan
---------------------------
Title: Vice President &
Controller
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent and as
Collateral Agent
By: /s/ Ivo Bakovic
---------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Lender
By: /s/ Michael J. Dasher
----------------------------
Title: Vice President
6
<PAGE>
ABN AMRO BANK N.V.
By: /s/ W. J. Millen
--------------------------
Title: Vice President, GVP
By: /s/ Larry Osborne
--------------------------
Title: Group Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Michael Tousignant
---------------------------
Title: Assistant Vice President
CORESTATES BANK N.A.
By: /s/ Robert Krant
-------------------------
Title: Vice President
FIRST INTERSTATE BANK OF
CALIFORNIA
By: /s/ Joellen Ademski
--------------------------
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Joe Alexis
--------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Maarten Van Otterloo
---------------------------
Title: Senior Relationship Manager
SANWA BANK CALIFORNIA
By: /s/ Dan Stevens
---------------------------
Title: Vice President
7
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a guarantor or third party pledgor with
respect to the Borrower's obligations to the Agent and the Lenders under the
Credit Agreement, each hereby (i) acknowledges and consents to the execution,
delivery and performance by Borrower of the foregoing First Amendment to Credit
Agreement (the "AMENDMENT"), and (ii) reaffirms and agrees that the respective
guaranty, third party pledge or security agreement to which the undersigned is
party and all other documents and agreements executed and delivered by the
undersigned to the Agent and the Lenders in connection with the Credit Agreement
are in full force and effect, without defense, offset or counterclaim. Each of
the undersigned hereby represents to the Agent and the Lenders that the
execution, delivery and performance by such Person of this Consent have been
duly authorized by all necessary corporate and other action and do not and will
not require any registration with, consent or approval of, notice to or action
by, any Person (including any Governmental Authority) in order to be effective
and enforceable. (Capitalized terms used herein have the meanings specified in
the Amendment.)
FIBREBOARD BOX & MILLWORK CORPORATION
Dated: March 10, 1995 By: /s/ Garold E. Swan
----------------------------------
Title: Controller/Treasurer
PABCO METALS CORPORATION
Dated: March 10, 1995 By: /s/ Garold E. Swan
---------------------------------
Title: Controller/Treasurer
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<PAGE>
SNIDER LUMBER PRODUCTS CO. INC.
Dated: March 10, 1995 By: /s/ Garold E. Swan
--------------------------------
Title: Controller/Treasurer
NORANDEX INC.
Dated: March 10, 1995 By: /s/ Garold E. Swan
--------------------------------
Title: Vice President & Treasurer
9
<PAGE>
EXHIBIT 10.19
FIBREBOARD CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
(AS RESTATED JANUARY 1, 1994)
PREAMBLE
Effective December 14, 1992, Fibreboard Corporation established the
Fibreboard Corporation Supplemental Retirement Plan to provide a supplemental
non-qualified benefit to certain of the Company's key employees whose ability to
accrue benefits under the Company's qualified retirement plans is constrained
due to age and statutory limitations. Effective January 1, 1994, this document
constitutes a complete amendment and restatement of the Plan as approved by the
Board of Directors of Fibreboard Corporation on November 29, 1994.
SECTION I
DEFINITIONS AND CONSTRUCTION
1.1 "ACCOUNT" shall mean an account maintained for each
Participant to which all Contribution Credits and Earnings Credits shall be
allocated in accordance with Section III.
1.2 "BOARD OF DIRECTORS" shall mean the Board of Directors of
Fibreboard Corporation.
1.3 "COMPANY" shall mean Fibreboard Corporation, a Delaware
corporation.
1.4 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
1.5 "COMMITTEE" shall mean as defined in Section 6.1.
1.6 "COMPENSATION" shall mean a Participant's base salary and
incentive bonus.
1.7 "CONTRIBUTION CREDITS" shall mean as defined in Section 3.2.
1.8 "EARNINGS CREDITS" shall mean as defined in Section 3.3.
1.9 "FINAL AVERAGE COMPENSATION" shall mean the average of the
Participant's Compensation for the Participant's final three years of employment
with the Company assuming retirement at age 65.
<PAGE>
1.10 "PARTICIPANT" shall mean an individual designated by the
Board of Directors to participate in the Plan.
1.11 "PLAN" shall mean the Fibreboard Corporation Supplemental
Retirement Plan as set forth herein and as may be amended from time to time.
1.12 "RETIREMENT BENEFIT" shall mean the total benefits that a
Participant (i) has received or is entitled to receive from all qualified plans,
whether maintained by the Company or sourced from another employer, (ii) is
entitled to receive under any insurance annuity contracts purchased by the
Company for the benefit of the Participant under the terms of this Plan and (ii)
is entitled to receive pursuant to the federal Social Security Act. For the
purposes of determining the amount of a Participant's Retirement Benefit for
purposes of this Plan, any lump-sum distribution under a qualified plan shall be
deemed to be distributed to a Participant in equal annual installments over a 14
year period commencing at age 65. The Committee may make such other assumptions
or adjustments as it deems appropriate as to the form and commencement date of
benefits under any of the programs described in (i), (ii) or (iii).
1.13 "SPECIFIED EARNINGS RATE" shall mean as defined in
Section 3.3.
1.14 "TARGET BENEFIT" shall mean, with respect to each
participant, an annual benefit payable for 14 years beginning on the date the
Participant attains age 65 equal to 60% of the Participant's Final Average
Compensation less the Participant's Retirement Benefit; provided, however, that
if a Participant would complete less than 15 years of employment with the
Company at age 65, the Participant's Target Benefit shall be reduced by 4% for
each such year of employment under 15 years. For purposes of determining a
Participant's Target Benefit as of the end of any year, Final Average
Compensation and Retirement Benefits shall be estimated based on assumptions
determined by the Committee from time to time.
SECTION II
PARTICIPATION
The persons entitled to participate in this Plan shall be selected
by the Board of Directors. The initial Participants are John D. Roach, James P.
Donohue, Herbert M. Elliott, Stephen L. DeMaria and James D. Costello. The
Board of Directors may select additional Participants who are key employees of
the Company or one of its subsidiaries or affiliates with significant
responsibility for the growth and long-term profitability of the Company or such
subsidiary or affiliate and who shall attain at least age 50 in the calendar
year in which Contribution Credits are credited to such key employee under this
Plan.
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SECTION III
ACCOUNTS
3.1 ACCOUNTS. There shall be established on behalf of each
Participant an Account which shall be credited with Contribution Credits and
Earning Credits as set forth below. Accounts shall be established for the sole
purpose of computing the amount of benefits payable to such Participant under
the Plan for services rendered after December 31, 1993. The balance of an
Account as of any date shall be the value of such account as of the end of the
calendar quarter coincident with or immediately preceding such date.
3.2 CONTRIBUTION CREDITS. As of the end of each calendar year
ending after December 31, 1993, the Account of each Participant for such year
shall, unless the Committee determines otherwise, be credited with a
Contribution Credit ("Contribution Credit") calculated based on assumptions
determined by the Committee from time to time. The annual Contribution Credit
shall be an amount equal to the level annual deposit required each year until
attainment of age 65 that would, when combined with assumed earnings thereon,
provide a lump sum at age 65 equal to the net present value on that date of the
Target Benefit less the projected future value at age 65 of the previous years'
Contribution Credits. The Committee shall determine, in its sole discretion,
whether or not to make a Contribution Credit with respect to a Participant for
any year. If a Contribution Credit is not made for any year, the Committee may,
in its sole discretion, determine future Contribution Credits as if such earlier
Contribution Credit had been made.
3.3 EARNINGS CREDITS. The Account of each Participant shall be
credited with earnings ("Earnings Credits"), at periodic intervals determined by
the Committee, at a rate (the "Specified Earnings Rate") equal to the actual
rate of return for such period of an investment vehicle selected by that
Participant from a range of investment vehicles authorized by the Committee.
The rate of return on investment vehicles shall be tracked solely for the
purpose of computing the amount of benefits payable to Participants under the
Plan. The Company shall not be obligated to make any actual investment.
SECTION IV
PAYMENT OF BENEFITS
4.1 NORMAL PAYMENT METHOD. Within thirty (30) days following
the earlier of the date a Participant attains age sixty-five (65) or termination
of employment with the Company, its subsidiaries and affiliates, for any reason
other than death, the Company shall pay the balance of the Participant's Account
to the Participant in a single lump sum payment, which shall be in full
satisfaction of his or her rights under the Plan.
4.2 DEATH. In the event of a Participant's death prior to
distribution of his or her Account under this Plan, the Company shall pay the
balance of the Participant's Account to the beneficiary designated by the
Participant in accordance with procedures established by the Committee. If a
Participant does not designate a beneficiary or the designated beneficiary dies
prior to distribution of the portion of a Participant's Account to
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<PAGE>
which the beneficiary was entitled, the balance of the Participant's Accounts
will be paid to the Participant's estate in the form of a single lump sum
payment.
SECTION V
AMENDMENT AND TERMINATION
This Plan may be amended or terminated at any time by action of the
Board of Directors at its sole discretion without prior notice to any person.
Members of the Board who are Participants are precluded from voting on any
action to terminate this Plan. No amendment shall operate to reduce
Participants' benefits accrued to the date of such amendment. Upon termination
of this Plan, the rights of all affected Participants in benefits credited to
their Accounts shall be nonforfeitable; provided that upon such termination, the
Company may elect to pay each Participant the then balance of his or her Account
in a single sum payment in full satisfaction of his or her rights under the
Plan.
SECTION VI
MISCELLANEOUS PROVISIONS
6.1 ADMINISTRATION. The general administration of this Plan
shall be the responsibility of the Compensation Committee of the Board of
Directors (the "Committee"). The day-to-day implementation of the Plan shall be
the responsibility of the Company's Chief Executive Officer.
6.2 NATURE OF OBLIGATION. No amount payable to or in respect of
any Participant under this Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the participant or the participant's beneficiary,
and any attempt to do so will be void. A Participant's or beneficiary's rights
to receive payments under this Plan are merely those of an unsecured general
creditor of the Company. Such rights constitute a mere promise by the Company
to make payments to Participants and their beneficiaries in the future. Any
trust created by the Company and any assets held by such trust to assist it in
meeting its obligations under the Plan will conform to the terms of the model
trust described in Revenue Procedure 92-64 and any payment made from such a
trust to a Participant or beneficiary shall, to the extent thereof, be in
satisfaction of such person's right to payment under the Plan. It is the
intention of all of the parties to this agreement that the Plan be unfunded for
federal tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
6.3 NO EMPLOYMENT RIGHTS. Nothing contained herein shall confer
on any Participant the right to be retained in the service of the Company, nor
shall it interfere with the right of the Company to discharge or otherwise deal
with Participants without regard to the existence of this Plan.
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EXHIBIT 10.30.1
AMENDMENT TO GLOBAL SETTLEMENT AGREEMENTS
This Amendment to Global Settlement Agreements is made and entered
into as of December__, 1994, by and among the Representative Plaintiffs as
representatives of the Settlement Class, acting by and through Class Counsel;
Fibreboard Corporation, a Delaware corporation; Continental Casualty Company, an
Illinois corporation; CNA Casualty Company of California, a California
corporation; Columbia Casualty Company, an Illinois corporation; Pacific
Indemnity Company, a California corporation, and Henry Ramsey, Charles Renfrew,
and Francis E. McGovern as Trustees of the Fibreboard Asbestos Compensation
Trust, together the "Parties."
RECITALS
Whereas, certain of the Parties have entered into a Global Settlement
Agreement dated as of August 27, 1993 ("Global Settlement Agreement") which
contains as Exhibit A a Glossary of Terms ("Glossary of Terms"). Pursuant to
the Global Settlement Agreement the Parties entered into the Fibreboard Asbestos
Compensation Trust Agreement ("Trust Agreement") which contains as Annex A the
Trust Distribution Process ("Trust Distribution Process" and together with the
Global Settlement Agreement, Glossary of Terms, Trust Agreement and Trust
Distribution Process, the "Global Settlement Agreements"); and
Whereas, the Parties desire to amend several of the Global Settlement
Agreements to, among other things, increase the membership of the Select Counsel
for the Beneficiaries from five to seven members, offer an expedited payment
option to the Trustees along with the already existing expedited review option
and create additional flexibility in the spendthrift provisions of the Trust
Distribution Process;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the Parties hereby agree as follows:
SECTION I
AMENDMENTS TO THE GLOSSARY OF TERMS
1.1 The definition of "Earnings Amount" shall be amended to read in
full as follows:
30. "EARNINGS AMOUNT" means, with respect to Fund I, Fund II or
Fund III, as the case may be, all elements of current periodic income from such
Fund (other than any such income on the amounts in the Reserve Account),
including interest, periodic dividends (but not special, liquidating or wasting
dividends), rent, royalty and other similar payments which represent earnings or
profit on an asset, and do not
1.
<PAGE>
represent elements of appreciation or gain or depreciation or loss (whether
realized or unrealized) on an asset, all determined on an accrual basis, in
accordance with generally accepted accounting principles; provided however the
term "Earnings Amount" for Fund I beginning the fifth Fiscal Year after Global
Approval Judgment shall mean Earnings Amount for such year with respect to Fund
I determined as provided above plus 80% of Earnings Amount for such year with
respect to Fund II determined as provided above if the conditions set forth in
Appendix 1 Section 3 to the Trust Distribution Process are met.
1.2 The definition of "Increased Principal Amount" shall be amended
to read in full as follows:
52. "INCREASED PRINCIPAL AMOUNT," (i) for any of the third
through the twelfth Fiscal Years after Global Approval Judgment, means 125% of
the Principal Amount for such Fiscal Year and (ii) for any of Fiscal Years 2009
through 2013, means 112.5% of the Principal Amount for such Fiscal year. In the
event both clause (i) and (ii) apply to an individual year Increased Principal
Amount means clause (i).
1.3 The definition of "Principal Amount" shall be amended to read
in full as follows:
76. "PRINCIPAL AMOUNT" means, for any Fiscal Year after Global
Approval Judgment:
(i) (a) (X) the aggregate fair market value of all of the investment
assets contained in the Fund for which the Distributable Amount is
being determined (excluding the then outstanding balance of the
Reserve Account) at the close of business on the last business day of
the Fiscal Year for which the calculation is made, MINUS (Y) the
Earnings Amount for such Fiscal Year, PLUS (Z) all amounts, if any,
paid during such Fiscal Year for Trust Expenses, Class Member Claims,
Third Party Claims and payments made pursuant to Section 7.16 of the
Trust Agreement, in each case for such Fiscal Year (other than any
such payments made out of the Reserve Account), MINUS
(b) for any Fiscal Year prior to Fiscal Year 2014, the greater of
(i) Zero and (ii) the lesser of (Y) the aggregate Surplus for all
prior Fiscal Years and (Z) Zero minus Unreimbursed Borrowings;
MULTIPLIED BY
(ii) a fraction, the numerator of which is one and the denominator of which
is the number of Fiscal Years that will occur from the beginning of
the Fiscal Year for which the calculation is made through and
including the end of Fiscal Year 2018 in the case of Fund I, the 20th
Fiscal Year after the end
2.
<PAGE>
of Fund I (or, if the Trustees have determined to delay the transfer
of the remaining balance in Fund II beyond the twentieth Fiscal Year
after the end of Fund I pursuant to Section E.2.c(ii) of the Trust
Distribution Process, the end of Fund II so determined by the
Trustees) in the case of Fund II and the 15th Fiscal Year after the
end of Fund II in the case of Fund III (so that, for example, for the
Principal Amount applicable to Fiscal Year 2003, the fifteenth year
before the last year of Fund I, such denominator would be 15);
provided, however, that
(1) for the first Fiscal Year after Global Approval Judgment (a) the
numerator in the fraction stated in clause (ii) above shall be the number
of full calendar years completed after December 31, 1993 through the end of
the Fiscal Year in which Global Approval Judgment occurs and (b) the
denominator in the fraction stated in clause (ii) above shall be 25; and
(2) for each of Fiscal Years 2014 through 2018, the Distributable Amount
may be increased by the Trustees up to an amount not in excess of the
Principal Amount and the Earnings Amount that was in effect for Fiscal Year
2013.
1.4 The definition of "Select Counsel for the Beneficiaries" or
"SCB" shall be amended to read in full as follows:
85. "SELECT COUNSEL FOR THE BENEFICIARIES" or "SCB" means seven
lawyers, initially: Joseph B. Cox, Jr., Steven Kazan, Joseph F. Rice, Harry F.
Wartnick, Gary Galiher, Wayne Hogan and Robert J. Connerton (the designee of the
AFL-CIO) and their successors to be selected as provided in Section 6.3 of the
Trust Agreement.
3.
<PAGE>
SECTION II
AMENDMENTS TO TRUST AGREEMENT
2.1 Section 2.4 of the Trust Agreement shall be amended to read in
full as full follows:
2.4 ACCEPTANCE OF ASSETS AND ASSUMPTION OF LIABILITIES. In
connection with and in furtherance of its purposes, and subject to Section 5.4,
the Trustees hereby agree to accept on behalf of the Trust the transfer of the
assets described in Section 2.3 above and hereby further expressly agree on
behalf of the Trust to assume liability or undertake responsibility for all
Class Member Claims and those Third Party Claims for which the Trust is
responsible under the Global Settlement Agreement and Trust Distribution
Process. Except as otherwise provided in the Trust Distribution Process and
in the following sentence, the Trust shall have all defenses, cross claims, and
rights to liens, offsets and recoupment that Fibreboard or any other Trustor
would have had under applicable law with respect to the Class Member Claims and
Third Party Claims to be assumed by the Trust. The Trust shall not assert as a
defense to any claim against the Trust any statute of limitations or repose
which had not expired as of August 27, 1993 with respect to Fibreboard.
2.2 Section 3.1(a)(1) of the Trust Agreement shall be amended by
adding the following subsection (xiv) to the end thereof:
(xiv) Approval of an Expedited Payment Option pursuant to
Section B.2.b. of the Trust Distribution Process, or the making of the
determinations set forth in Section 3(ii) of Appendix 1 to the Trust
Distribution Process.
4.
<PAGE>
2.3 Section 6.1 of the Trust Agreement shall be amended to read in
full as follows:
6.1 FORMATION; DUTIES. The SCB shall consist of seven lawyers
chosen to represent the interests of the Beneficiaries. The initial seven SCB
lawyers shall be Joseph B. Cox, Jr.; Steven Kazan; Joseph F. Rice; Harry F.
Wartnick; Gary Galiher; Wayne Hogan; and Robert J. Connerton (the designee of
the AFL-CIO). In giving their approval or in acting pursuant to this Agreement
the members of the SCB shall act in the best interest of the Beneficiaries and
consistent with the purposes of the Trust. The SCB shall hold an annual meeting
to which all lawyers who have submitted a Class Member Claim to the Trust during
the past five years shall be invited and be entitled to be present. The SCB
shall give a report to the annual meeting describing the activities of the Trust
for the prior year, including any approvals given by the SCB pursuant to this
Agreement and/or the Trust Distribution Process and all matters on which the
Trustees have indicated that they intend to seek the approval of the SCB during
the following year. In giving approval to the Trustees, the SCB shall consider
in good faith all recommendations made at such annual meeting. The Trustees
shall consult with the SCB on the implementation and administration of the Trust
Distribution Process. The Trustees may consult with the SCB on any matter
affecting the Trust, and, as provided in Section 3.1(a), certain actions by the
Trustees shall require the prior approval of the SCB. All approvals of the SCB
shall be by majority vote.
2.4 Section 6.3(b) of the Trust Agreement shall be amended to read in
full as follows:
5.
<PAGE>
(b) In the event of a vacancy in the membership of the SCB
other than one caused by resignation as aforesaid, the vacancy shall be filled
by the unanimous vote of the remaining member(s) of the SCB. If the vacancy is
in the position originally held by Robert J. Connerton, the vacancy shall be
filled by a person nominated by the AFL-CIO.
SECTION III
AMENDMENTS TO THE TRUST DISTRIBUTION PROCESS
3.1 Section A of the Trust Distribution Process shall be amended by
adding the following sentence to the end thereof:
The Trust may elect to offer an Expedited Review Claims option and Expedited
Payment Option which would allow a Class Member Claim or Third Party Claim to be
paid at an earlier date for a lesser amount than would result from waiting for
payment in the order set forth above.
3.2 Section B.2 of the Trust Distribution Process shall be amended to
read in full as follows:
2. EXPEDITED REVIEW OPTION AND EXPEDITED PAYMENT OPTION.
A. EXPEDITED REVIEW OPTION. The Trust may establish a
process for expedited review of ALD-2 claims by persons desiring an accelerated
settlement of their claim at a fixed amount ("Expedited Review Claims"). A
Beneficiary seeking such expedited review shall submit an abbreviated proof of
claim for expedited review by the Trust. The abbreviated proof of claim shall
provide the following
6.
<PAGE>
information concerning the Exposed Person: name, address, social security
number, date of birth, date of death (if applicable), marital status, spouse's
name and social security number, occupation, the Scheduled Disease for which the
Beneficiary believes the claim qualifies, the work sites where the Exposed
Person was exposed to asbestos or to Fibreboard asbestos and such information
requested by the Trust that adequately demonstrates exposure to asbestos or
asbestos-containing products and to Fibreboard asbestos or asbestos-containing
products. In addition, the Beneficiary shall supply the Trust with a Medical
Report. The Trust will expeditiously review the abbreviated proof of claim and
may, but is not required to, offer to settle such Expedited Review Claims for a
single fixed cash payment of an amount and on a time schedule established from
time to time by the Trust. If the Trust determines not to offer to settle an
Expedited Review Claim, the Beneficiary may submit a proof of claim as set forth
in Section B.1.
The Trust may establish additional categories of
Expedited Review Claims with differing fixed cash payments and differing
information requirements. In addition, the Trust may eliminate or suspend the
Expedited Review Claim option for one or more categories of Class Member Claims
if it determines that such option is encouraging the filing of claims that would
not otherwise be eligible for payment under these procedures or is using a
disproportionate share of the Trust's assets.
b. EXPEDITED PAYMENT OPTION. If on any Distribution Date
any single payment with respect to Liquidated Class Member Claims or Liquidated
Third Party Claims in the first two Schedule Categories or the first payment on
7.
<PAGE>
Liquidated Class Member Claims or Liquidated Third Party Claims in the third
Schedule Category, in either case, were due and unpaid on four or more
consecutive Distribution Dates, the Trust may offer an expedited payment option
("Expedited Payment Option") to Claimants in one or more categories of
Liquidated Class Member Claims or Liquidated Third Party Claims. The Expedited
Payment Option shall consist of a payment in cash in an amount determined by the
Trust, but no more than 50% of the unpaid Liquidated amount of the Claim.
c. EFFECT OF PAYMENTS. Amounts paid in respect of the
Expedited Review Claims or the Expedited Payment Option shall not be subject to
the payment order rules set forth in Section F.2 of this Trust Distribution
Process but shall be limited to the Distributable Amount for the Fiscal Year in
which the Expedited Review Claims or the Expedited Payment Option are paid,
along with payments for Trust Expenses, other Class Member Claims and Third
Party Claims, whether paid during such Fiscal Year or on the Distribution Date
immediately following such Fiscal Year.
3.3 Section B.3. of the Trust Distribution Process shall be amended
to read in full as follows:
3. ORDERING OF CLAIMS FOR PROCESSING. Claims shall be ordered
for processing by the Trust in the manner described in this Section. As a
general practice, the Trust shall review its claims files on a regular basis and
notify all Beneficiaries whose claims are likely to be processed in the near
future. A Beneficiary's position in the FIFO queue for processing will be
determined by the date of receipt by
8.
<PAGE>
the Trust of a properly completed proof of claim form, and among claims received
the same day, by the date of diagnosis of the disease on which the claim is
based. All claims filed on or before Global Approval Judgment shall be deemed
filed on the date of Global Approval Judgment. Where the Beneficiary has filed
an incomplete proof of claim, the Trust shall notify the Beneficiary of the need
for additional information and shall not process the claim until the file is
complete. A Beneficiary shall not receive a position in the FIFO processing
queue until his or her proof of claim is properly completed.
3.4 Section D.2.c. of the Trust Distribution Process shall be amended
to read in full as follows:
c. The Trust may assert any and all defenses available to it or
which would have been available to any Trustor against which the claim could
have been asserted absent Global Approval Judgment with respect to Beneficiaries
who elect to resolve their claims through the tort system, except that the Trust
shall not assert as a defense to any claim against the Trust any statute of
limitations or repose which had not expired as of August 27, 1993 with respect
to Fibreboard.
3.5 Section E. of the Trust Distribution Process shall be amended
to read in full as follows:
E. FUNDS FOR PAYMENT OF CLAIMS.
As set forth in the Trust Agreement, the Trust shall administer three
funds, for payment of Trust Expenses, Class Member Claims and Third Party
Claims, to be known as "Fund I," "Fund II," and "Fund III." Fund I is primarily
intended to pay
9.
<PAGE>
expenses of, and claims against, the Trust prior to Fiscal Year 2019. Fund II
is primarily intended to pay expenses of, and claims against, the Trust
commencing Fiscal Year 2019, although 80% of the annual Earnings Amount on Fund
II is available to pay claims commencing in the fifth Fiscal Year after Global
Approval Judgment and the principal of Fund II is available to pay expenses and
claims commencing Fiscal Year 2014, if Fund I is insufficient for that purpose.
Fund III is primarily intended to pay any expenses and claims not paid from Fund
I or Fund II, commencing Fiscal Year 2039, although it is available to pay
expenses and claims commencing Fiscal Year 2034 if Fund II is exhausted prior to
Fiscal Year 2039.
In order to assure that, to the maximum extent feasible, Trust
resources are preserved and fairly allocated among all Beneficiaries (i.e.,
those who will have claims in the future as well as those who have claims now)
Appendix 1 describes in detail how Trust surpluses realized in any Fiscal Year
are to be preserved and limits amounts that can be spent in any Fiscal Year to
pay claims from Funds I, II or III. In general, Appendix 1 specifies that
payments for Trust Expenses, Class Member Claims and Third Party Claims may not
exceed annual earnings on the assets within the relevant Fund plus a portion of
the remaining principal (calculated by allocating remaining Fund principal
equally over the years remaining in the Fund then in use). If any
Surplus remains after payment of all Trust Expenses, Class Member Claims and
Third Party Claims and certain indemnity expenses for a Fiscal Year (and after
restoration of any increases in Principal Amount used in prior years as
described below), such Surplus will either increase the Reserve Account or build
Trust principal. This Reserve Account will
10.
<PAGE>
be used to pay expenses or claims for any later year before Trustees may access
any Increased Principal Amount to be used in that year. If, however, in any of
the Fiscal Years 3 through 12 after Global Approval Judgment or Fiscal Years
2009 through 2013, the Earnings Amount and Principal Amount together with the
funds contained in the Reserve Account in excess of $10,000,000 are not
sufficient to pay Trust Expenses and to make all payments with respect to Class
Member Claims or Third Party Claims for the first two Schedule Categories that
are due or all payments with respect to Class Member Claims or Third Party
Claims for the third Schedule Category that were due and unpaid on four
consecutive prior Distribution Dates, the Trust may increase the usable portion
of the Fund principal by up to 25% for any of Fiscal Years 3 through 12 after
Global Approval Judgment or 12.5% for any of Fiscal Years 2009 through 2013. In
addition, if any Class Member Claims or Third Party Claims are unpaid in any
Fiscal Year beginning with the fifth Fiscal Year after Global Approval Judgment,
the Trust may also use 80% of that year's Earnings Amount from Fund II.
1. FUND I.
a. COMMENCEMENT OF PAYMENTS. The Trust shall not pay any Class
Member Claim or Third Party Claim (other than Extreme Hardship Claims and
Expedited Review Claims) from Fund I until the Distribution Date first occurring
after the end of the first Fiscal Year after Global Approval Judgment.
b. DISTRIBUTABLE AMOUNT. Total cash payments for Trust Expenses,
Class Member Claims and Third Party Claims made from Fund I for any Fiscal Year
(i.e., payments for Trust Expenses, Extreme Hardship Claims and Expedited Review
11.
<PAGE>
Claims, and pursuant to an Expedited Payment Option made during that Fiscal
Year, together with payments for Class Member Claims and Third Party Claims for
that Fiscal Year made on the Distribution Date immediately following that Fiscal
Year) (other than any payments made from the Reserve Account) shall not exceed
the Distributable Amount for that Fiscal Year. For the first Fiscal Year after
Global Approval Judgment the Earnings Amount for Fund I shall be calculated from
the date of Global Approval Judgment.
c. DISTRIBUTION OF REMAINING BALANCE. The transfer from Fund I to
Fund II of any remaining balance in Fund I shall occur on the earlier of (i) the
day after the Distribution Date for Fiscal Year 2018, or (ii) the day before the
Distribution Date for the first Fiscal Year occurring after Fiscal Year 2013 in
which the maximum possible Distributable Amount is less than the Earnings Amount
and the Principal Amount that were in effect for Fund I for Fiscal Year 2013,
the Trust shall transfer such remaining balance and the remaining balance of the
Reserve Account to Fund II, at which time payments out of Fund II shall commence
as provided in Section E.2.
2. FUND II.
a. COMMENCEMENT OF PAYMENTS. No payments shall be made from
Fund II until the Distribution Date for Fiscal Year 2014, except as permitted by
Appendix 1. If at that time Fund I still has money left to pay Trust Expenses,
Class Member Claims or Third Party Claims, no payments shall be made from Fund
II until the earlier of: (1) the day after the Distribution Date for Fiscal
Year 2018; or (2) the Fiscal Year in which the Distribution Date referred to in
Section E.1.c. (ii) occurs.
12.
<PAGE>
b. DISTRIBUTABLE AMOUNT. The total amount of payments for Trust
Expenses, Class Member Claims and Third Party Claims made from Fund II for any
Fiscal Year is limited to the Distributable Amount for that Fiscal Year.
c. DISTRIBUTION OF REMAINING BALANCE. The transfer from Fund II to
Fund III of any remaining balance in Fund II shall occur on (i) the day after
the Distribution Date for the twentieth Fiscal Year after the transfer of the
balance in Fund I to Fund II pursuant to Section E.1.c, or (ii) such later date
as the Trustees determine would be in the best interests of all Beneficiaries,
both present and future (but in no event later than the day after the
Distribution Date for Fiscal Year 2038); at which time payments out of Fund III
shall commence as provided in Section E.3.
3. FUND III.
a. COMMENCEMENT OF PAYMENTS. No payments shall be made from
Fund III until the Distribution Date for Fiscal Year 2034. If at that time Fund
II still has money left to pay Trust Expenses, Class Member Claims or Third
Party Claims, no payments shall be made from Fund III until the date Fund II is
exhausted or the balance of Fund II has been transferred into Fund III pursuant
to Section E.2.c.
b. DISTRIBUTABLE AMOUNT. The total amount of payments for Trust
Expenses, Class Member Claims and Third Party Claims made from Fund III for any
Fiscal Year is limited to the Distributable Amount for that Fiscal Year.
c. DISTRIBUTION OF REMAINING BALANCE. If there is a remaining
balance in Fund III on the day after the Distribution Date for Fiscal Year 2054,
and there are then, or are anticipated by the Trustees to be in the future, any
Trust Expenses, Class
13.
<PAGE>
Member Claims, Third Party Claims and other obligations of the Trust which have
not yet been liquidated and/or fully paid, the Trust shall use the remaining
balance of Fund III to pay such Trust Expenses, Class Member Claims, Third Party
Claims and other obligations of the Trust. Upon the occurrence of the
Termination Date, the Trust shall apply any remaining balance of Fund III to
such charitable purposes as the Trustees in their reasonable discretion, after
consultation with the SCB, shall determine, which charitable purposes, if
practicable, shall be related to occupational health.
4. DETERMINATION OF DISTRIBUTABLE AMOUNT FOR EACH FUND. Within 90 days
following the end of each Fiscal Year after Global Approval Judgment, the Trust
shall determine the Distributable Amount for such Fiscal Year, which
Distributable Amount (after payment of Trust Expenses, Extreme Hardship Claims
and Expedited Review Claims, and pursuant to an Expedited Payment Option for
such Fiscal Year) shall be distributed to pay Class Member Claims and Third
Party Claims, in the order set forth in Section F.2, on a date, no later than
120 days following the end of each such Fiscal Year, chosen by the Trust (the
"Distribution Date").
SECTION IV
TRUST DISTRIBUTION PROCESS
4.1 Appendix 1 to the Trust Distribution Process shall be amended to
read in full as follows:
1. INCREASED PRINCIPAL AMOUNT. The Trustees may increase the Principal
Amount for any of the third Fiscal Year through the twelfth Fiscal Year after
Global
14.
<PAGE>
Approval Judgment or Fiscal Years 2009 through 2013 up to the Increased
Principal Amount for that year, if
(i) the Distributable Amount (if not increased as provided in this
sentence) for that Fiscal Year, plus the amount, if any, by which the balance
(on the last business day of that Fiscal Year) of the Reserve Account exceeds
$10 million, is insufficient to pay all Trust Expenses for such Fiscal Year plus
all Class Member Claims and Third Party Claims included in any of the first two
Schedule Categories due and payable on the Distribution Date immediately
following that Fiscal Year, or any payments with respect to Class Member Claims
or Third Party Claims included in the third Schedule Category that were due and
unpaid on four or more consecutive Distribution Dates prior to the Distribution
Date immediately following that Fiscal Year, and
(ii) the Trustees conclude that under the circumstances, and after
examination and in light of other options available under the Trust Distribution
Process, increasing the Principal Amount would be in the best interests of all
Beneficiaries, both present and future, and that the sum of the Earnings Amount
for Fund I, such amount in the Reserve Account in excess of $10 million and the
amount of the Increased Principal Amount does not exceed the amount required to
pay all such Trust Expenses and Class Member Claims and Third Party Claims
included in the first two Schedule Categories and any payments with respect to
Class Member Claims or Third Party Claims included in the third Schedule
Category that were due and unpaid on four or more consecutive Distribution Dates
prior to such Distribution Date.
15.
<PAGE>
2. RESERVE ACCOUNT. The Reserve Account shall initially be credited with
the full amount transferred to the Trust pursuant to Section 2.3(B) of the
Global Settlement Agreement, minus the sum of
(a) $1.340 billion of the starting balance of Fund I,
(b) $200 million, the starting balance of Fund II, and
(c) $10 million, the starting balance of Fund III.
The Reserve Account is part of Fund I.
The Reserve Account shall be increased on each Distribution Date by
(x) 100%, until the balance of the Reserve Account equals $25
million,
(y) 50%, after the balance of the Reserve Account equals $25 million
and until the balance of the Reserve Account equals the sum of
the Principal Amount and Earnings Amount for the prior
Fiscal Year, and
(z) 0%, after the balance of the Reserve Account equals the sum of
the Principal Amount and Earnings Amount for the prior Fiscal
Year,
of either
(i) if the Unreimbursed Borrowings as of such date is zero or a
positive number, then the Surplus as of such date, or
(ii) if the Unreimbursed Borrowings as of such date is a negative
number, but such Unreimbursed Borrowings plus the Surplus as
of such date is a positive number, then such positive
number, or
16.
<PAGE>
(iii)if Unreimbursed Borrowings as of such date plus the Surplus
as of such date is zero or a negative number, then zero (so
that this calculation shall not result in a decrease in the
Reserve Account).
The Reserve Account shall be used to pay all Trust Expenses, Class
Member Claims, Third Party Claims and payments made pursuant to Section 7.16 of
the Trust Agreement (it being understood that such payments pursuant to Section
7.16 shall not be limited by the amounts in the Reserve Account) for any Fiscal
Year in which the Principal Amount and the Earnings Amount is insufficient for
such purpose; provided, that the provisions of this sentence shall not be
applied to require the reduction of the balance of the Reserve Account below $10
million. Notwithstanding the foregoing, during the first Fiscal Year after
Global Approval Judgment, the Trustees shall create and thereafter maintain an
appropriate reserve (to be taken out of the amounts otherwise included in the
Reserve Account) for required payments in later Fiscal Years for Class Member
Claims and Third Party Claims presented in such first Fiscal Year or before,
which reserve shall not be otherwise available for the purposes of the
immediately preceding sentence. The Trustees shall have the discretion to
utilize any and all amounts in the Reserve Account to pay Trust Expenses, Class
Member Claims, Third Party Claims and payments pursuant to Section 7.16 of the
Trust Agreement.
3. FUND II EARNINGS AMOUNT. The Trustees may use up to 80% of the
Earnings Amount on Fund II as part of the Earnings Amount in any Fiscal Year
beginning with the fifth Fiscal Year after Global Approval Judgment, if
17.
<PAGE>
(i) the Distributable Amount (if not increased as provided in this
sentence) for that Fiscal Year, plus the amount, if any, by which the balance
(on the last business day of that Fiscal Year) of the Reserve Account exceeds
$10 million, is insufficient to pay all Trust Expenses for such Fiscal Year plus
all Class Member Claims and Third Party Claims that would be due and unpaid on
the Distribution Date immediately following that Fiscal Year, and
(ii) the Trustees conclude that, under the circumstances and after
examination and in light of other options available under the Trust Distribution
Process, using Fund II Earnings Amount during Fund I would be in the best
interests of all Beneficiaries, both present and future, and that the sum of the
Earnings Amount for Fund I, the portion of the Earnings Amount for Fund II
proposed to be so used, such amount in the Reserve Account in excess of $10
million and the amount of the Principal Amount or the Increased Principal
Amount, as the case may be, does not exceed the amount required to pay all such
Trust Expenses and Class Member Claims and Third Party Claims that would
otherwise be due and unpaid on such Distribution Date.
SECTION V
MISCELLANEOUS
5.1 EFFECTIVENESS. This Amendment shall be effective upon:
(i) Approval of the Court; and
(ii) Receipt by Fibreboard and the Insurers of a supplemental
ruling from the Internal Revenue Service ("IRS") to the effect that the
amendments do
18.
<PAGE>
not alter the IRS's conclusions stated in its ruling dated November 21, 1994
unless waived in writing by each of Fibreboard and the Insurers.
5.2 MISCELLANEOUS. This Amendment shall be construed in accordance with
and governed by the provisions of each Agreement it amends.
19.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written by the undersigned, thereunto duly authorized.
On behalf of the Representative Plaintiffs and as the Select Counsel for the
Beneficiaries
By: /s/ Joseph Rice
------------------------------------
Joseph Rice, Esq.
By: /s/ Joseph B. Cox
------------------------------------
Joseph B. Cox, Jr., Esq.
By: /s/ Harry Wartnick
------------------------------------
Harry Wartnick, Esq.
By: /s/ Steven Kazan
------------------------------------
Steven Kazan, Esq.
FIBREBOARD CORPORATION
By: /s/ Michael R. Douglas
------------------------------------
Title: Sr. V.P. and General Counsel
---------------------------------
CONTINENTAL CASUALTY COMPANY
By: /s/ Laurens F. Terry
------------------------------------
Title: Vice President
---------------------------------
<PAGE>
CNA CASUALTY COMPANY OF CALIFORNIA
By: /s/ Laurens F. Terry
------------------------------------
Title: Vice President
---------------------------------
COLUMBIA CASUALTY COMPANY
By: /s/ Laurens F. Terry
------------------------------------
Title: Vice President
---------------------------------
PACIFIC INDEMNITY COMPANY
By: /s/ Malcolm B. Burton
------------------------------------
Title: Vice President
---------------------------------
Trustees of the Fibreboard Asbestos Compensation Trust
By: /s/ Henry Ramsey
------------------------------------
Henry Ramsey
By: /s/ Charles Renfrew
------------------------------------
Charles Renfrew
By: /s/ Francis E. McGovern
------------------------------------
Francis E. McGovern
<PAGE>
EXHIBIT 10.32
SETTLEMENT AGREEMENT
1. PARTIES
1.1. This Settlement Agreement ("Agreement") is entered by and between
Fibreboard Corporation ("Fibreboard," defined below); and CIGNA Specialty
Insurance Company (formerly known as California Union Insurance Company) ("Cal
Union" or "CIGNA Specialty"), Central National Insurance Company of Omaha
("Central National"), Century Indemnity Company ("Century"), CIGNA Property and
Casualty Insurance Company ("CIGNA P&C") and Insurance Company of North America
("INA")(collectively "Settling Insurers").
2. DEFINITIONS
2.1. "Allocated Expense" means all reasonable fees, expenses and other
costs, including bonding costs pending appeal, reasonably incurred by or on
behalf of Fibreboard in connection with the defense and disposition of
Asbestos-Related Building Claims for Fibreboard, but does not include any
expenses of Fibreboard or compensation for time or fees for Fibreboard
personnel, except for reasonable travel costs incurred directly for Fibreboard's
defense of the Asbestos-Related Building Claims, does not include fees or
expenses at rates above those normally charged under similar circumstances to
clients or customers of the firms or vendors employed, or any fees, expenses and
other costs incurred by Fibreboard in connection with its efforts to obtain or
enforce settlements or judgments determining the obligations of Fibreboard's
insurers with respect to the Asbestos-Related Building Claims.
2.2. "Asbestos-Related Building Claim" or "Claim" means claims or suits
brought against Fibreboard alleging injury or damage to buildings and property
caused by asbestos-containing products or materials ("Asbestos-Related Building
Claims"). For purposes of this Agreement, all Asbestos-Related Building Claims
brought by one building owner within one state or all Claims brought by or on
behalf of the government of the United States or one of its agencies anywhere
shall be treated as a single Claim.
2.3. "Fibreboard" means Fibreboard Corporation and includes without
limitation any agents, employees, officers, assigns, subsidiaries, successors-
or predecessors-in-interest, and, to the extent that Fibreboard Corporation
exercises or has exercised or may exercise control or authority over them, means
the following: corporations or unincorporated business entities affiliated with
Fibreboard Corporation, including without limitation any employee, officer or
agent of such affiliated entity, and all persons acting by, through, under or in
concert with Fibreboard Corporation, and each of them, and specifically
including without limitation any person or entity purporting to be an insured
under one or more of the Policies.
<PAGE>
2.4. "Indemnity" means any sums paid as damages or otherwise in
settlement or satisfaction of judgment of Asbestos-Related Building Claims.
2.5. "Party" means Fibreboard or any Settling Insurer (collectively, the
"Parties").
2.6. "Policy" or "Policies" means liability insurance policies or
certificates issued by one of the Settling Insurers which insures Fibreboard,
including without limitation the following policies identified in the Coverage
Action:
SETTLING INSURER POLICY NO. PERIOD
---------------------------------------------------------
Central National CNU 126573 7/1/77-6/1/78
Cal Union ZCX 004028 4/1/80-4/1/81
Cal Union ZCX 004437 4/1/81-4/1/82
Cal Union ZCX 006186 4/1/82-4/1/83
Cal Union ZCX 006526 4/1/83-4/1/84
Century CIZ 425553 4/1/82-4/1/84
Central National CNZ 006802 4/1/82-4/1/84
Central National CNZ 006802 4/1/84-4/1/85
CIGNA P&C EX 09-1011 4/1/84-4/1/85
INA XCP 144849 4/1/84-85
3. RECITALS
3.1. Fibreboard has been, is, and expects to be in the future named in
multiple Asbestos-Related Building Claims.
3.2. Disputes have arisen between Fibreboard and the Settling Insurers as
to their respective rights and obligations relating to the Asbestos-Related
Building Claims.
3.3. Fibreboard and the Settling Insurers are parties to the action
entitled FIBREBOARD CORPORATION V. CONTINENTAL CAS. CO., ET AL., No. 844903, In
the Superior Court of the State of California for the City and County of San
Francisco (the "Coverage Action"), which concerns, INTER ALIA, the nature and
extent of coverage available, if any, under the policies for matters raised in,
arising out of or relating to the Asbestos-Related Building Claims.
<PAGE>
3.4. Without waiver of their respective positions in relation thereto,
the Parties desire to settle any and all past, present and potential future
disputes between them regarding the nature and extent of coverage available, if
any, under the Policies for any and all matters raised in, arising out of or
relating to the Asbestos-Related Building Claims and the Coverage Action in
accordance with the terms of this Agreement.
4. PAYMENT OF ASBESTOS-RELATED BUILDING CLAIMS
4.1. Fibreboard may from time to time request, and Settling Insurers
shall in response to such request timely make, in the sequence set forth in
paragraph 4.2, payments of Allocated Expense or Indemnity under the Policies for
any Asbestos-Related Building Claim in which it is reasonably determined from
available information that a Policy was in effect for any of the period of time
between the date, with respect to each Claim, of [ * ]
of [ * ] or [ * ] at [ *]
] the [ * ] Fibreboard [ * ] the [ * ]
the [ * ] of [ * ] or []
* ] or []
* ] at [ * ]. If insufficient information is
available to determine the date of first installation, this date will be
presumed to [ * ] until information as to another date is
developed.
4.2. Payments of Allocated Expense or Indemnity may be requested by
Fibreboard and shall be made by Settling Insurers in the following sequence (and
not concurrently):
4.2.1. Payment of $[ *]
] Dollars) under policies in effect [ * ] by []
* ] (or, if [ *]
] of [ * ] the [ * ] of
[ * ] under those policies to [ *]
* ] of [ * ] amount);
4.2.2. Payment of $[ * ] Dollars)
under [ * ]
(for the [ * ];
4.2.3. Payment of $[ * ] Dollars)
under policies in effect [ * ] by []
* ] (or, if [ *]
] of [ * ] the [ * ] of []
* ] under those policies to [ *]
] of [ * ] amount);
4.2.4. Payment of $[ * ]
Dollars) under [ * ] policy
[ * ] (or, if []
* ] of [ * ] the [ *]
3
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
] of [ * ] under those policies to [ *]
] of [ * ] amount);
4.2.5. Payment of $[ * ] Dollars)
under policies in effect [ * ] by []
* ] (or, if [ * ] of
[ *]
] under those policies to []
* ] of [ * ] amount);
4.2.6. Payment of $[ * ]
Dollars) under [ * ] policy []
* ] (or, if [ * ] of []
* ] the [ * ] of []
* ] under those policies to [ *]
] of [ * ] amount);
4.2.7. Payment of $[ *]
] Dollars) under policies in effect [ * ]
by [ * ] (or, if []
* ] of [ * ] the [ *]
] of [ * ] under those policies to []
* ] of [ * ] amount);
4.2.8. Payment of $[ * ] Dollars)
[ * ]
under [ *]
] and []
* ] all [ *]
] from [ * ] from [ *]
] or [ * ]
(under policies in which the [ *]
] to [ * ] a [ * ]
in [ * ]), subject to the following conditions:
4.2.8.1. Fibreboard [ * ]
with the [ *]
] the following [ * ]
of [ * ] or [ * ] to
[ * ] of [ * ]:
4.2.8.1.1. [ * ] is []
* ] among [ * ]
participants in [ * ] ;
4.2.8.1.2. [ *]
] are [ *]
] among [ * ] participants
in [ * ];
4
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
4.2.8.1.3. [ *]
] are []
* ] among [ * ]
participants [ * ];
4.2.8.1.4. [ *]
] and []
* ] are []
* ];
4.2.8.1.5. Provided that the [ *]
] to [ * ]
Fibreboard in [ * ] the
[]
*
] Dollars); and
4.2.8.1.6. Provided further that [ * ]
Fibreboard shall not [ *]
] the Settling Insurers under paragraph 4.2.8.
4.2.8.2. If [ *]
] begin [ *]
] after [ *]
] until [ * ] by []
* ] or [ * ] or
[ * ] an [ * ] the [ *]
] the [ * ] as the []
* ] by each in the []
* ];
4.2.8.3. Settling Insurers shall at their option []
* ] in [ * ]
the [ * ] or
[ * ] are []
* ] the Settling Insurers [ *]
] which shall be amended in accordance therewith; provided
that [ *]
] Fibreboard reasonably [ *]
];
4.2.9. Payment of $[ * ]
Dollars) each, for a [ *]
] under [ * ] (for the
[ *]
] (for the [ *]
] (for the []
* ] (for the []
* ] subject to the following condition:
4.2.9.1. Fibreboard shall contemporaneously []
* ] of [ *]
] allocated to the [ * ]
policies;
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4.2.10. Payment of $[ *]
] Dollars) under [ *]
] (for the [ * ], subject to the
following condition:
4.2.10.1. Fibreboard shall contemporaneously []
* ] of [ *]
] allocated to this [ *]
];
4.2.11. Payment of [ * ] to
Fibreboard;
4.2.12. Payment of $[ * ]
Dollars) under [ *]
], subject to the following condition:
4.2.12.1. Fibreboard shall contemporaneously []
* ] of [ * ]
allocated to this [ * ].
4.2.13. [ * ] pursuant to paragraphs
4.2.9.1, 4.2.10.1 or 4.2.12.1 [ *]
] the Settling Insurers under paragraphs 4.2.9, 4.2.10 and
4.2.12.
4.3. Payment []
*
] (the [ * ] consistent with the
Settlement Agreement, dated January 1993 between Fibreboard and the AIG
companies, except that [ *]
] under the policies [ * ] in accordance
with section 4 of this Agreement.
4.4. If payment for an Asbestos-Related Building Claim is made
simultaneously under more than one Policy, payment shall be made equally under
each such Policy to the extent that limits of liability remain unconsumed
thereunder in accordance with this Agreement.
4.5. The Settling Insurers will not be charged with punitive or exemplary
damages or conspiracy or concert of action judgments, where the substantive law
of the jurisdiction under whose law the judgment arises holds that such awards
are not covered by insurance because of public policy or contract
interpretation. The Settling Insurers will not be charged with fines or
penalties, or the multiple portion of damages which are doubled or trebled under
any deceptive trade practices act or consumer protection statute, where the
substantive law of the jurisdiction under whose law the judgment arises holds
that such awards are not covered by insurance because of public policy or
contract interpretation; if such law holds that such an award is covered,
Settling Insurers shall pay it; and if such law is unsettled, Fibreboard shall
have the
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right to seek to require payment of such award either, at the option of Settling
Insurers, by submitting the issue for resolution under section 13 or by bringing
legal action in a court of law, but Settling Insurers shall not be required to
pay such award pending such resolution or action, subject to the right of
Fibreboard to an expedited determination under section 13, not to be resorted to
routinely, that the probability of success on the merits and/or the threat of
substantially harmful consequences to Fibreboard justify requiring the Settling
Insurers to advance as much as 50% of the payment of such award, subject to
reimbursement upon the conclusion of such resolution or action.
4.6. Payments for Indemnity for Asbestos-Related Building Claims shall be
paid by Settling Insurers, at Fibreboard's request, directly to the person
asserting a Claim. Payments by the Settling Insurers for Allocated Expenses
shall be made, at Fibreboard's request, directly to counsel or other persons
responsible for providing Allocated Expenses. Such payments will be timely made
by Settling Insurers, and all reasonable efforts will be made to accomplish
payment within thirty (30) days of receipt of billings therefor by Settling
Insurers.
4.7. If a Settling Insurer disputes its obligation with respect to a
payment for Indemnity or Allocated Expenses, the Insurer will nevertheless make
the payment and submit the issue for resolution under section 13. Payments
which are disputed by Settling Insurers shall be promptly reimbursed by
Fibreboard to Settling Insurers in the event of a determination pursuant to the
dispute resolution procedures that such payments, or portions thereof, were not
required to be made in accordance with this Agreement. If such reimbursement is
not made, the amount thereof may be offset against any Indemnity or Allocated
Expense payments thereafter required of any of the Settling Insurers.
4.8. As a means of minimizing, reducing or delaying the overall payment
of Asbestos-Related Building Claims by Settling Insurers under the Policies,
Settling Insurers may at their option make payments for the purpose of gaining
access to policies issued by other insurers, whether or not in the sequence set
forth in this section, so long as this does not result in prejudice to
Fibreboard or Settling Insurers.
4.9. The Settling Insurers shall have no obligation of any kind under the
Policies with respect to any and all matters raised in, arising out of or
relating to the Asbestos-Related Building Claims or any products claims except
as provided in this Agreement; provided, that this Agreement does not modify any
obligation of INA under the January 1, 1993 Settlement Agreement between INA and
Fibreboard.
5. CLAIM HANDLING
5.1. The Settling Insurers shall have no obligation to assume charge of
the defense or handling of Asbestos-Related Building Claims.
7
<PAGE>
5.2. Fibreboard shall keep the Settling Insurers (through the person or
persons designated as recipients of notice under this Agreement) reasonably
informed, as far in advance as feasible, of significant developments in the
Asbestos-Related Building Claims, including but not limited to upcoming or
ongoing trials, class certification proceedings, serious settlement discussions
and evaluations of general strategies or policies of Fibreboard in relation to
Asbestos-Related Building Claims.
5.2.1. Fibreboard shall provide periodic reports containing a
summary of the current status of each Asbestos-Related Building Claim and shall
report AD HOC on the disposition of pending claims and the filing of new Claims,
receipt of which by the Settling Insurers shall be satisfactory acknowledgement
thereof and reservation of all rights and fulfillment of all duties other than
those created by this Agreement with respect thereto.
5.2.2. Before such time as Settling Insurers are called upon to make
payments hereunder, the provisions of this paragraph 5.2 shall not require
Fibreboard to provide information in a manner different from, or more burdensome
than, Fibreboard's obligations under other settlements relating to the Asbestos-
Related Building Claims.
5.3. At such time as Settling Insurers are called upon to make payments
hereunder, the Settling Insurers shall have the reasonable right to participate
in decisions with respect to the defense, handling or settling of
Asbestos-Related Building Claims, subject to the ultimate reasonable control of
Fibreboard. Fibreboard shall exercise its reasonable best judgment in
defending, handling and settling Asbestos-Related Building Claims and shall do
so acting in good faith and engaging in fair dealing insofar as the interests
of either Settling Insurers or Fibreboard may be implicated.
5.3.1. With respect to any Asbestos-Related Building Claim as to
which Fibreboard reasonably expects it may request payment of Indemnity under
this Agreement by a Settling Insurer, Fibreboard shall keep the Settling
Insurers (through the person or persons designated as recipients of notice under
this Agreement) reasonably informed, in advance where feasible, of settlement
negotiations in the Asbestos-Related Building Claim in question, and shall give
notice thereto of its intent to settle such Claim, unless the amount of such
settlement is smaller than $[ * ] for a Claim or $[ * ] for a group of
Claims in which the average of each Claim settled is not more than $[ * ].
Such information and notice shall be reasonably sufficient to enable the
Settling Insurer in question to review and make timely objection with respect to
Fibreboard's intent to settle.
5.3.2. At such time as Settling Insurers are called upon to make
payments hereunder, Fibreboard shall provide quarterly reports providing a
detailed identification of payments made by it of Allocated Expense and
Indemnity in connection with the Asbestos-Related Building Claims. Such reports
shall identify each Policy
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<PAGE>
under which such payment is made and the amount of coverage or limits of
liability that remain unconsumed thereunder.
5.3.3. At such time as Settling Insurers are called upon to pay
Allocated Expenses hereunder, the Settling Insurers shall have the reasonable
right to consult with counsel for Fibreboard concerning the handling of
Asbestos-Related Building Claims at any time for informational purposes and
Fibreboard shall instruct its counsel to cooperate fully with Settling Insurers
for this purpose and, at the reasonable request of Settling Insurers, provide
reports as to the current status of Asbestos-Related Building Claims being
handled by such counsel. Neither Fibreboard nor its counsel shall assert the
attorney-client privilege or the work product rule or similar rules or
privileges as a basis for withholding information relating to the defense of the
Asbestos-Related Building Claims which is in the possession or control of
counsel handling Asbestos-Related Building Claims on behalf of Fibreboard.
5.4. The Settling Insurers shall have the right reasonably to inspect
and, at their expense, copy any documentation relating to billings or payments
for Allocated Expense and Indemnity under this Agreement and Fibreboard shall
provide all reasonable assistance in providing access thereto.
5.5. At such time as the Settling Insurers begin making payment pursuant
to paragraph 4.2.9., after written notice has been given to Fibreboard of the
intent to do so, the Settling Insurers shall, at their option, have the right
to assume charge of the defense or handling of Asbestos-Related Building Claims
while making payments under this Agreement. [ *]
], Fibreboard [ * ] of the []
* ] of payments []
* ] allocated to [ *]
] of the Settling Insurers pursuant to paragraphs 4.2.9.1., 4.2.10.1. or
4.2.12.1; Fibreboard shall have reasonable rights of consultation and
information and the defense shall be conducted consistent with Fibreboard's
reasonable interests.
6. LIMITS OF LIABILITY AND INDEMNIFICATION
6.1. Payment under this Agreement of Allocated Expenses or Indemnity
under any Policy and/or payment, even though not under this Agreement, of claims
other than Asbestos-Related Building Claims to which aggregate limits are
applicable under any Policy shall be deemed to erode the aggregate limits of
such Policy.
6.2. Payment under this Agreement of Allocated Expenses or Indemnity
under any Policy and/or payment, even though not under this Agreement, of
Fibreboard claims other than Asbestos-Related Building Claims to which aggregate
limits are applicable under any Policy of an amount equal to the total amount
required by section 4 of this Agreement to be paid under such Policy shall be
deemed complete and final exhaustion of the aggregate limits of such Policy and
the Settling Insurers shall have
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<PAGE>
no obligation to anyone in a greater amount for any Fibreboard claims as to
which aggregate limits are applicable.
6.2.1. The payment of the aggregate limit of a Policy as provided by
this paragraph 6.2 shall constitute exhaustion of the aggregate limit of that
Policy for purposes of calculating the attachment of a policy that is excess to
said Policy.
6.3. The amount required by this Agreement to be paid under any Policy
shall be deemed the per occurrence limit of liability of such Policy with
respect to payment under this Agreement of Allocated Expenses or Indemnity
under any Policy and/or payment, even though not under this Agreement, of
Fibreboard claims other than Asbestos-Related Building Claims, []
* ] of liability of []
* ].
6.3.1. The payment of such per occurrence limit as provided
by this paragraph 6.3. shall constitute exhaustion of the per
occurrence limit of liability of that Policy for purposes of
calculating the attachment of a policy that is excess to said Policy.
6.4. Fibreboard and the Settling Insurers agree that the aggregate
limits stated in the Policies described in this Agreement apply only once with
respect to claims which impact those limits, and that the Settling Insurers
shall not be obligated to make payments in regard to any such claims in excess
of the aggregate limits described in said Policies. Fibreboard agrees that it
shall defend, indemnity and hold harmless the Settling Insurers for any amounts
the Settling Insurers may have to pay by reason of any claims relating to
whether the Policies' limits are depleted by payments under the provisions of
this Agreement.
6.4.1. Any such litigation brought against the Settling Insurers
shall be conducted in the mutual interest of Fibreboard and the Settling
Insurers.
6.4.1.1. In connection with such litigation, Fibreboard
shall not, without the prior written consent of the Settling Insurers,
retain as counsel any firm engaged in coverage litigation with one of
the Settling Insurers.
6.4.1.2. In such litigation, at Settling Insurers'
reasonable request, Fibreboard shall make reasonably clear and
conspicuous that Fibreboard is the real party in interest for purposes
of coverage positions being taken therein nominally in behalf of the
Settling Insurer in question.
6.4.1.3. The Settling Insurers may, at their option and
expense, engage counsel to appear on their behalf in such litigation,
provided that the conduct of such litigation shall be subject to the
ultimate reasonable control of Fibreboard.
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<PAGE>
6.4.2. If Fibreboard fails to defend or indemnify Settling Insurers
under paragraph 6.4., and Fibreboard is unable to provide reasonable and
adequate assurance to the Settling Insurers of prompt future performance, any
further performance by the Settling Insurers under this Agreement shall
thereafter be permanently excused and payments theretofore made to Fibreboard
under this Agreement under any Policies shall be deemed to have been made in
consideration of a full and complete release of all obligations of the Settling
Insurers with respect to Fibreboard under said Policies, such that the Settling
Insurers shall have no further obligation with respect to any claims by or
against Fibreboard thereunder.
7. MUTUAL RELEASE REGARDING ASBESTOS-RELATED BUILDING CLAIMS
7.1. In consideration for the execution of this Agreement, the Parties
release and forever discharge each other, together with their respective
attorneys, agents, employees, officers, directors, shareholders, assigns,
successors- or predecessors-in-interest, subsidiaries, parents or other
affiliates, from any and all claims, demands, liens, agreements, contracts,
covenants, actions, suits, causes of action, obligations, debts, expenses,
attorneys' fees, damages, judgments, orders and liabilities of whatever kind or
nature in contract, tort, law, equity or otherwise, whether arising in common
law or statute, whether now known or unknown, suspected or unsuspected, and
whether or not concealed or hidden, past, existing, potential, or future, by
each other (including without limitation any claim or obligation, actual or
potential, with respect to the indemnification and/or defense of under any
policy of insurance issued by a Settling Insurer and any and all claims for
unfair or deceptive trade or insurance practices, violation of section 790.03 of
the Insurance Code of the State of California or any similar or related statute
or regulation, violation of section 17200 ET SEQ. of the Business and
Professions Code of the State of California or any similar or related statute or
regulation, bad faith, punitive damages, breach of contract, breach of the
implied covenant of good faith and fair dealing or extra-contractual damages or
remedies of any type) for or arising from or related in any way to the
Asbestos-Related Building Claims, including without limitation those alleged or
set forth, or which could have been alleged or set forth, in the pleadings or
other documents filed or served in the Coverage Action, arising out of, related
directly or indirectly to or connected with acts, omissions, transactions,
occurrences or events which form the basis of the Coverage Action; arising
directly or indirectly from acts, omissions, transactions, occurrences or events
relating in any way to the Coverage Action; or arising directly or indirectly
from the negotiation, terms or implementation of this Agreement (the "Released
Claims").
7.2. It is the intention of the Parties that the foregoing release shall
be effective as a bar to all Released Claims. In furtherance, and not in
limitation, of such intention, the releases described herein shall be, and shall
remain in effect as, full and complete releases of the Released Claims,
notwithstanding the discovery or existence of any additional or different facts
or claims. It is expressly understood and agreed that this
11
<PAGE>
Agreement is intended to cover and does cover not only all known facts and/or
claims, but also any further facts and/or claims within the scope of the
Released Claims, not now known or anticipated, but which may later develop or be
discovered, including all the effects and consequences thereof.
7.2.1. The Parties hereby acknowledge that they are familiar with
California Civil Code section 1542, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Each Party hereby waives and relinquishes all rights and benefits which it has
or may have under California Civil Code section 1542 and any statute, rule and
legal doctrine in this or any other jurisdiction to the same or similar effect
as section 1542 to the full extent that it may lawfully waive such rights and
benefits. In making this waiver, each Party acknowledges that it may hereafter
discover facts in addition to or different from those which it now believes to
be true with respect to the subject matter of the disputes and other matters
released herein, but agrees that it has taken that possibility into account in
reaching this Agreement and that the releases given herein shall be and remain
in effect as full and complete releases notwithstanding the discovery or
existence of any such additional or different facts, as to which each Party
expressly assumes the risk.
7.3. Each Party hereto acknowledges and represents that it (a) has fully
and carefully read this Agreement prior to execution; (b) has been fully
apprised by its attorneys of the legal effect and meaning of this document and
all terms and conditions hereof; (c) has had the opportunity to make whatever
investigation or inquiry it deemed necessary or appropriate in connection with
the subject matter of this Agreement; (d) has been afforded the opportunity to
negotiate as to any and all terms hereof; and (e) is executing this Agreement
voluntarily, free from any undue influence, coercion, duress or menace of any
kind.
7.4. Each Party agrees to bear its own costs and attorneys' fees with
respect to the Coverage Action, the negotiation and drafting of this Agreement
and the settlement which led to it.
7.5. Settling Insurers hereby release and waive any and all past, present
and future claims, whether for subrogation, contribution, indemnity or other
legal or equitable relief, against American Home Assurance Company, Granite
State Insurance Company, Insurance Company of the State of Pennsylvania,
Lexington Insurance Company and New Hampshire Insurance Company arising out of
or relating to Asbestos-Related Building Claims.
12
<PAGE>
8. DISMISSAL
8.1. Within five (5) days of the effective date of this Agreement ,
Fibreboard shall deliver to counsel for the Settling Insurers an executed
request for dismissal from the Coverage Action of each Settling Insurer with
prejudice, each Party to bear its own attorney fees and costs.
9. SEPARATE CLAIMS OF INA
9.1. Whereas Fibreboard has agreed to make payment to INA and other
insurers in resolution of certain claims against Fibreboard arising from
payments made on behalf of Fibreboard under the separate Agreement Concerning
Asbestos-Related Claims, commonly known as the "Wellington Agreement," for
asbestos-related bodily injury claims; in consideration for the execution of
this Agreement, Fibreboard shall accelerate all such future payments due INA and
such other insurers, paying them in full within 30 days of the effective date
of this Agreement.
9.2. Whereas INA, Fidelity & Casualty Company of New York ("F&C") and
Royal Insurance Company ("Royal") have asserted certain claims against Pacific
Indemnity Company ("Pacific") and Continental Casualty Company ("Continental")
arising from payments made on behalf of Fibreboard under the Wellington
Agreement for asbestos-related bodily injury claims (the "Wellington IDP
claims") and have asserted the Wellington IDP claims in an action entitled ROYAL
INDEMNITY CO., ET AL. V. CONTINENTAL CASUALTY CO., ET AL., No. 926327, in the
Superior Court of the State of California for the City and County of San
Francisco (the "Royal Action"); and whereas Fibreboard has entered into
settlements relating to asbestos-related bodily injury claims with (1) Pacific,
Continental and a purported class of asbestos-related bodily injury claimants,
court approval for which is being sought in the class action entitled AHEARN,
ET AL. V. FIBREBOARD CORPORATION, No. 6:93cv526, in the United States District
Court for the Eastern District of Texas, Tyler Division ("the Global Settlement
Agreement") and (2) Pacific and Continental, court approval for which is being
sought in the class action entitled CONTINENTAL CASUALTY CO., ET AL. V. RUDD, ET
AL., No. 6:94cv458, in the United States District Court for the Eastern District
of Texas, Tyler Division ("the Trilateral Settlement Agreement"); in
consideration for the execution of this Agreement, the Parties agree as follows:
9.2.1. Settling Insurers agree and shall secure the agreement
of INA, F&C and Royal not to oppose court approval of the Global
Settlement Agreement or the Trilateral Settlement Agreement or
challenge any judgment approving either agreement;
13
<PAGE>
9.2.2. In the event, and within 30 days, of final court
approval of the Global Settlement Agreement, Fibreboard shall pay to
INA the sum of $1,100,000.00 (One Million One Hundred Thousand
Dollars);
9.2.3. In the event Fibreboard receives or becomes entitled to
receive any funds under the Trilateral Settlement Agreement, or any
modification thereof, pursuant to final court approval of that
agreement, within 30 days thereafter Fibreboard shall pay to INA the
sum of $3,000,000.00 (Three Million Dollars);
9.2.4. Settling Insurers shall secure the agreement of INA,
F&C and Royal to dismiss the Royal Action, including all appellate
proceedings therein, with prejudice, and to release all claims against
Pacific and Continental that would otherwise be extinguished or
diminished by court approval of the Global Settlement Agreement or the
Trilateral Settlement Agreement, including without limitation the IDP
Wellington claims, such dismissals and releases conditioned, and to
take effect only, upon the receipt by INA of either the payment
required by paragraph 9.2.2. or the payment required by paragraph
9.2.3. herein;
9.2.5. Fibreboard shall endeavor reasonably and in good faith
to obtain the agreement of Continental and Pacific to a stay of the
appeal of the Royal Action pending final court approval or disapproval
of the Global Settlement Agreement and Trilateral Settlement
Agreement.
9.2.6. In the event that neither the Global Settlement
Agreement nor the Trilateral Settlement Agreement receives final court
approval and INA does not receive either of the payments under
paragraphs 9.2.2 or 9.2.3., INA, F&C and Royal reserve the right to
proceed with their Wellington IDP claims, including the appeal in the
Royal Action and, to the extent consistent with its contractual or
other legal obligations and without prejudice to Fibreboard,
Fibreboard shall not oppose the prosecution of these claims.
9.3. It is a condition to the effectiveness of this Agreement that
Settling Insurers secure the written agreement of INA, F&C and Royal to the
provisions of this section 9.
10. OTHER INSURANCE
10.1. Fibreboard shall endeavor in good faith to secure the execution by
American Home Assurance Company, Granite State Insurance Company, Insurance
Company of the State of Pennsylvania, Lexington Insurance Company and New
Hampshire Insurance Company of a release and waiver of any and all claims,
whether
14
<PAGE>
for subrogation, contribution, indemnity or other legal or equitable relief
against Settling Insurers arising out of payment of Asbestos-Related Building
Claims to or on behalf of Fibreboard. Fibreboard agrees that it shall defend,
indemnify and hold harmless the Settling Insurers for any amounts the Settling
Insurers are required to pay with respect to a Fibreboard claim, directly or
indirectly, in a sequence different from that provided for in Section 4 of this
Agreement by reason of a claim made by one of the aforesaid insurers; provided,
however, that the reimbursement of any such payment to Settling Insurers shall
not relieve Settling Insurers of any obligation to make payments in accordance
with Section 4 of this Agreement at a later time.
10.1.1. Fibreboard represents that it is not presently aware of any
potential claims, other than Asbestos-Related Building Claims, that are
reasonably likely to lead to the exhaustion of aggregate limits of liability of
the policies of aforesaid insurers.
10.2. Fibreboard shall endeavor in good faith to obtain, as part of any
settlement agreement it enters with any of its other insurers after the date of
this Agreement, a release and waiver of claims such other insurers may have or
assert against Settling Insurers in connection with the Policies as regards
Asbestos-Related Building Claims.
10.3. Fibreboard will use its reasonable best efforts, including the
pursuit of litigation, to obtain and enforce settlements or judgments
determining the obligations of Fibreboard's other insurers with respect to the
Asbestos-Related Building Claims. Fibreboard will retain the right to determine
the terms on which it will settle with other insurers; provided, however, that
Fibreboard shall not enter into any future settlement determining the
obligations of Fibreboard's other insurers with respect to the Asbestos-Related
Building Claims without the express written approval, not unreasonably to be
withheld, of the Settling Insurers.
10.3.1. Fibreboard shall give the Settling Insurers reasonable
advance notice of its participation in negotiations relating to such settlement
with Fibreboard's other insurers and inform Settling Insurers of the settlement
terms under consideration in such negotiations and shall provide copies or, if
not available, the material terms of any such settlement negotiated;
10.3.2. Settling Insurers' [ *]
] any [ * ] Fibreboard []
* ] of
payments of [ * ] to particular []
* ] the Settling Insurers pursuant to paragraphs 4.2.8.1.,
4.2.9.1., 4.2.10.1. or 4.2.12.1.
10.4. To the extent that Fibreboard obtains a judgment that Employers
Reinsurance, ESLIC or Lloyd's of London is obligated to make payments of
Allocated Expense or Indemnity under policies in effect in 1956-62, Fibreboard
shall, at Settling
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Insurers' request and if otherwise necessary, make payments, not more than
$50,000 per Claim, for the purpose of gaining access to such policies, thereby
requiring them to pay in such manner as shall defer payments to be made by the
Settling Insurers pursuant to section 4 herein, and it is the intent of this
Agreement that the aforenamed insurers shall have no right of reimbursement,
set-off, contribution, indemnity, subrogation or otherwise against the Settling
Insurers arising from payments made by them and Fibreboard shall cooperate
reasonably with the Settling Insurers in seeking to enforce such intent.
11. CONFIDENTIALITY AND NONWAIVER
11.1. In consideration of the mutual promises set forth in this
Agreement, the Parties have agreed to settle such claims as are enumerated
herein strictly as a business accommodation unrelated to the merits of the
respective claims of the Parties and without prejudice to their respective
positions. Nothing herein shall be construed as a waiver, estoppel or
invalidation of any position the Parties may take in the future with respect to
any claims or defenses other than the Released Claims. Neither execution nor
performance under this Agreement is intended as, nor shall it be construed or
referred to in any way as, an admission of the truth of the claims or
contentions of any other Party or the existence of any liability or
responsibility at any time or for any purpose, or of the violation of federal,
state or local law, ordinance or regulation or of any liability or wrongdoing.
11.2. The terms and conditions of this Agreement shall remain
confidential and shall not hereafter be disclosed to any person or entity not a
Party to the Agreement. Notwithstanding the provisions of this paragraph, this
Agreement may be disclosed to attorneys, partners, assignees, reinsurers and
their retrocessionaires or to financial auditors and accountants of any Party,
and as required by law in public filings or otherwise, and to the extent
reasonably necessary for legitimate business purposes; for purposes of obtaining
settlements determining the obligations of other insurers of Fibreboard, to such
other insurers (on a confidential basis only); or otherwise as compelled against
a Party by legal process over the diligent objection and opposition of such
Party after reasonable notice to the other Parties.
11.3. This Agreement, and the acts, errors and omissions of the Parties
leading up to and including its negotiation and execution constitute the
compromise of disputed claims, are subject to the protection afforded by
sections 1152 and 1152.5 of the California Evidence Code and Rule 408 of the
Federal Rules of Evidence and similar statutes and rules, are without prejudice
or value as precedent and shall not be used or referred to or cited in any way
in any communication, proceeding or hearing for the purpose of creating,
proving, modifying or interpreting obligations of any of the Parties under, or
terms and conditions of, any other agreement or any policy.
16
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12. INTERPRETATION
12.1. It is acknowledged that each Party, with the assistance of
competent counsel, has participated in the negotiation and drafting of this
Agreement and that any ambiguity should not be construed for or against any
Party on account of such drafting. This Agreement is not an insurance contract
and shall not be construed in favor of any Party by virtue of that Party's
status as the drafter of language herein. The Parties agree that this Agreement
has been negotiated at arm's length by parties of equal bargaining power, each
of which was represented by competent counsel of its own choosing. The Parties
further acknowledge that the obligations and releases herein described are in
good faith and are reasonable in the context of the matters released.
12.2. This Agreement has been negotiated and entered into in the State of
California and shall in all respects be governed, enforced and construed in
accordance with the laws of the State of California.
13. DISPUTE RESOLUTION
13.1. In event of any disputes arising under this Agreement (including
without limitation its interpretation, application or implementation) which the
Parties cannot resolve by negotiations, the Parties will submit the dispute to a
mediator mutually agreed on by the Parties and paid equally by each side. If
the dispute is not resolved by mediation, it shall be submitted to binding and
final arbitration, without right of appeal, or to another form of binding
alternative dispute resolution ("ADR") of the interested Parties' choosing. In
the event the Parties cannot agree on arbitration or another form of ADR, the
dispute will be submitted for binding arbitration by the American Arbitration
Association pursuant to its rules.
13.1.1. In the event that a Party has demonstrated a pattern of
noncompliance with the terms or intendment of this Agreement and that it is
reasonably likely to continue to do so, the Party aggrieved thereby shall have
the right to the appointment, pursuant to the preceding section, of a single
arbitrator or mediator or panel of arbitrators or mediators to sit from time to
time in supervision of the future performance of this Agreement by the
noncomplying Party until such pattern is reasonably determined to have ended.
14. NOTICE
14.1. All notices, bills, demands, payments, accounting or other
communications which any Party desires or is required to give, shall be given in
writing and shall be deemed to have been given if hand delivered, sent by
facsimile or by United States Mail, to the Party or Parties at the address
noticed below or such other address as a Party may designate in writing from
time to time:
17
<PAGE>
Fibreboard Corporation Mr. Irwin A. Bobrin
Attention: Michael R. Douglas, Esq. Account Specialist
California Plaza Building CIGNA Companies
2121 N. California Blvd., Suite 560 Asbestos Claims Management
Walnut Creek, California 94596 1601 Chestnut Street - TLP 15
Facsimile No. (510) 274-0714 Philadelphia, Pennsylvania 19192-2151
Facsimile No. (215) 761-5475
15. OTHER TERMS AND CONDITIONS
15.1. This Agreement is not intended to confer rights or benefits on any
person or entity other than a Party.
15.2. Neither this Agreement nor any of the rights, benefits or
obligations arising under this Agreement may be assigned by any Party without
the prior written consent of the other Parties, which consent shall not be
unreasonably withheld.
15.3. Each Party represents, warrants and agrees that it has not assigned
or transferred or purported to or attempted to assign or transfer to any person
or entity any right, claim or matter released herein. Each Party shall defend,
indemnify and hold the other Parties harmless from any and all claims arising
out of or relating to any assignment or transfer and any purported or attempted
assignment or transfer contrary to the terms of this paragraph.
15.4. Each Party represents, warrants and agrees that (a) no promises or
agreements not expressed herein have been made to it; (b) this Agreement
contains the entire agreement between the Parties, that it supersedes any and
all prior agreements or understandings between the Parties and that its terms
are contractual and not a mere recital; (c) in executing this Agreement, neither
Party has relied on any statements or representations made by the other Party or
the other Party's agents, servants or attorneys concerning the subject matter,
basis or effect of this Agreement other than as set forth herein; and (d) each
Party is relying solely on its own judgment and knowledge and the advice of its
counsel.
15.5. Any party adjudicated to be in breach of the terms of this
Agreement pursuant to an arbitration or other form of ADR proceeding under
paragraph 13.1 shall, subject to the reasonable discretion of the arbitrator or
adjudicator, be required to pay to the non-breaching party costs and expenses,
including reasonable attorneys' fees, incurred by such non-breaching party in
connection with the enforcement of this Agreement.
15.6. In the event of the bankruptcy or insolvency or similar proceeding
of Fibreboard or an entity including Fibreboard, Fibreboard shall notify the
Bankruptcy Court and the Trustee in Bankruptcy or similar officer of the Court
of the existence of
18
<PAGE>
this Agreement and the Settling Insurers shall thereafter respond to any
billings in the manner ordered by the Trustee in Bankruptcy or similar officer
of the Court.
15.7. The Parties agree to do all things reasonable to implement this
Agreement. The Parties will reasonably assist and cooperate, each with the
other, to effectuate the purposes of this Agreement, protect and defend its
integrity (including testifying as to its provisions, operations and bona fides)
and to do what may be necessary to verify its existence and operation in such
matters as may be relevant. To the extent reasonable and practical, each Party
shall cooperate and assist the other by providing any information and witnesses
reasonably necessary to secure recoveries from other Fibreboard insurers for
Asbestos-Related Building Claims.
15.8. The Parties agree that, except as otherwise set forth herein, they
have not and will not commence, maintain, initiate or prosecute, or cause,
encourage, assist, advise or cooperate with any other person or entity to
commence, maintain, initiate or prosecute, any action, suit, proceeding or claim
before any court or administrative agency (whether state, federal or otherwise)
against any other Party arising from, concerned with, or otherwise related to,
in whole or in part, any of the Released Claims.
15.9. The representations, warranties, agreements, and promises made by
each Party to this Agreement and contained herein shall survive the execution of
this Agreement.
15.10. No amendment, modification, addendum or revision of this Agreement
shall be valid unless it is in writing and signed by the Party or Parties to be
bound, in which event there need be no separate consideration therefor.
15.11. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed one and the same instrument. This Agreement is not and shall not be
effective, however, unless and until each Party executes the original or a
counterpart.
15.12. This Agreement shall become effective (the "Effective Date") as to
each Party from and after the later of the date the last Party shall have
executed this Agreement or the date the conditions of section 9 are satisfied.
WHEREFORE, the Parties execute this Agreement as follows:
[Signature pages follow]
19
<PAGE>
Dated: October 28 1994 FIBREBOARD CORPORATION
By /s/ Michael R. Douglas
-------------------------
Dated: October 28, 1994 CALIFORNIA UNION INSURANCE COMPANY
By /s/ Irwin A. Bobrin
-------------------------
Dated: October 28, 1994 CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA
By /s/ Irwin A. Bobrin
-------------------------
Dated: October 28, 1994 CENTURY INDEMNITY COMPANY
By /s/ Irwin A. Bobrin
-------------------------
Dated: October 28, 1994 CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY
By /s/ Irwin A. Bobrin
-------------------------
20
<PAGE>
Dated: October 28, 1994 INSURANCE COMPANY OF NORTH AMERICA
By /s/ Irwin A. Bobrin
--------------------------
APPROVED AS TO FORM:
Dated: October 28, 1994 BROBECK, PHLEGER & HARRISON
By /s/ William R. Irwin
--------------------------
William R. Irwin
Attorneys for Fibreboard Corporation
Dated: October 31, 1994 O'MELVENY & MYERS
By /s/ Martin S. Checov
--------------------------
Martin S. Checov
Attorneys for California Union Insurance Company,
Central National Insurance Company of Omaha, Century
Indemnity Company, CIGNA Property and Casualty
Insurance Company and Insurance Company of North
America
21
<PAGE>
EXHIBIT 10.30.3
Amendment to Escrow Agreement
This Amendment to Escrow Agreement is made this 6 day of February
1995, by and among Continental Casualty Company, an Illinois corporation
("Continental"), Pacific Indemnity Corporation, a California corporation
("Pacific"), Fibreboard Corporation, a Delaware corporation ("Fibreboard"), and
The First National Bank of Chicago ("Escrow Agent").
WHEREAS, Continental, Pacific and the Escrow Agent previously entered
into the Escrow Agreement dated as of December 23, 1993; and
WHEREAS, the parties wish to provide for the deposit of funds provided
on behalf of Fibreboard by The Home Insurance Company ("Home") into the Escrow
Account created thereunder and make arrangements relating thereto;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. CREATION OF NEW ESCROW FUND. A separate escrow under the Escrow
Agreement called the "New Escrow Fund" shall be created as follows:
a. On or before February 10, 1995, Home, on behalf of
Fibreboard shall pay into the Escrow Account the New Escrow Fund which shall
consist of the amount of $9,892,223 together with simple interest on said amount
at the rate of 3.085% from and after January 1, 1994 until the date of payment.
b. The New Escrow Fund shall be maintained as a separate fund
as part of the Escrow Account by the Escrow Agent subject to the terms and
conditions of the Escrow Agreement, provided however that the limitations on
investment of the Escrow Assets set forth in Section 3(c) shall apply separately
to the Escrow Fund and the New Escrow Fund and the New Escrow Fund may not be
used for payments pursuant to Section 5(b).
2. AMENDMENT OF SECTION 5(c). Section 5(c) of the Escrow Agreement
shall be amended to read in full as follows:
(c) Notwithstanding any contrary provision of this Escrow
Agreement, within the 30-day period following the end of each calendar
quarter, Escrow Agent shall pay to Continental 64.71% and to Pacific
35.29% of 5% of the income earned by the Escrow Fund and to Home 5% of
the income earned by the New Escrow Fund during such calendar quarter.
1.
<PAGE>
3. AMENDMENT OF SECTION 12. Section 12 of the Escrow Agreement
shall be amended to read in full as follows:
12. IRS FILINGS AND EXAMINATIONS:
(a) For federal income tax purposes, the parties expect that
Continental will be allocated 64.71% and Pacific will be allocated 35.29% of the
income, gains and deductions with respect to the amount of the Escrow Fund and
that Continental and Pacific will each be required to include those items of
taxable income, gains and deductions of the Escrow Fund which are attributable
to them in computing their separate taxable income. The parties further expect
that Home will be allocated all the income, gains and deductions with respect to
the New Escrow Fund. This Escrow Agreement shall be construed accordingly.
Notwithstanding the foregoing, Escrow Agent shall timely file such tax and other
returns and statements for the Escrow Account (collectively "Returns"), and
shall provide for and pay such taxes, as are required to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended, and of
any state or local law and the regulations promulgated thereunder. The Escrow
Agent shall provide all completed Returns to Continental, Pacific and Home at
least ten days in advance of the due date for such Returns and shall obtain the
consent of Continental, Pacific and Home to all Returns before they are filed.
The Escrow Agent is authorized to employ such agents and independent contractors
as it deems necessary in its best judgement in order to perform the federal and
state tax reporting required by this paragraph. Continental, Pacific and Home
will advise the Escrow Agent of the party who will sign the required federal and
state tax returns on behalf of the Escrow Account.
(b) The Escrow Agent agrees that Continental, Pacific and Home
shall have the sole and exclusive responsibility for handling any income tax
examinations relating to the Escrow Fund and the New Escrow Fund. All costs and
expenses of any income tax examination relating to potential tax liability of
the Escrow Fund or the New Escrow Fund, including the expense of defending any
adjustments or proposed adjustments shall be charged to the Escrow Fund, the New
Escrow Fund or both as the case may be.
(c) The Escrow Agent agrees that it will inform Continental,
Pacific and Home promptly of all questions raised by agents conducting an income
tax examination of the Escrow Account and shall cooperate with accountants, tax
advisors and counsel retained by Continental, Pacific and Home in working with
the income tax agents and in responding to any questions and proposed tax
adjustments.
2.
<PAGE>
4. Any notice or other communication under the Escrow Agreement to
Home must be given in writing and either (a) delivered in person, (b)
transmitted by telex, telefax or other telecopy mechanism, provided that notice
so given is also mailed as provided in clause (c), or (c) mailed, postage
prepaid, receipt requested, as follows:
Addressed to:
James F. Duhig
Assistant Vice President
The Home Insurance Company
59 Maiden Lane, 22nd Floor
New York, NY 10038
or to such other address or to such other person as Home shall have
last designated by notice to the other parties. Each such notice or
communication shall be effective (i) if given by telecommunication,
when transmitted to the appropriate number so specified in (or
pursuant to) this Section and an appropriate answer back is received,
(ii) if given by mail, three business days after such communication
is deposited in the mail with first class postage prepaid, addressed
as aforesaid, or (iii) if given by any other means, when actually
delivered to such address.
All other terms of the Escrow Agreement shall remain in full force and
effect.
////
////
////
////
////
////
////
////
////
////
3.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Escrow Agreement to be executed on the day and year first above
written.
CONTINENTAL CASUALTY COMPANY
By /s/ Laurens F. Terry
------------------------------------
Title Vice President
---------------------------------
PACIFIC INDEMNITY CORPORATION
By /s/ Malcolm B. Burton
------------------------------------
Title Vice President
---------------------------------
FIBREBOARD CORPORATION
By /s/ Michael R. Douglas
------------------------------------
Title Sr. V.P. & General Counsel
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ J. Cahill
------------------------------------
Title Trust Officer
---------------------------------
AGREED TO:
CLASS COUNSEL
By /s/ Joseph Rice
-----------------------------------
Joseph Rice, Esq.
By /s/ Joseph Cox
-----------------------------------
Joseph Cox, Esq.
By /s/ Harry Wartnick
-----------------------------------
Harry Wartnick, Esq.
By /s/ Steven Kazan
-----------------------------------
Steven Kazan, Esq.
4.
<PAGE>
EXHIBIT 10.32
SETTLEMENT AGREEMENT
1. PARTIES
1.1. This Settlement Agreement ("Agreement") is entered by and between
Fibreboard Corporation ("Fibreboard," defined below); and CIGNA Specialty
Insurance Company (formerly known as California Union Insurance Company) ("Cal
Union" or "CIGNA Specialty"), Central National Insurance Company of Omaha
("Central National"), Century Indemnity Company ("Century"), CIGNA Property and
Casualty Insurance Company ("CIGNA P&C") and Insurance Company of North America
("INA")(collectively "Settling Insurers").
2. DEFINITIONS
2.1. "Allocated Expense" means all reasonable fees, expenses and other
costs, including bonding costs pending appeal, reasonably incurred by or on
behalf of Fibreboard in connection with the defense and disposition of
Asbestos-Related Building Claims for Fibreboard, but does not include any
expenses of Fibreboard or compensation for time or fees for Fibreboard
personnel, except for reasonable travel costs incurred directly for Fibreboard's
defense of the Asbestos-Related Building Claims, does not include fees or
expenses at rates above those normally charged under similar circumstances to
clients or customers of the firms or vendors employed, or any fees, expenses and
other costs incurred by Fibreboard in connection with its efforts to obtain or
enforce settlements or judgments determining the obligations of Fibreboard's
insurers with respect to the Asbestos-Related Building Claims.
2.2. "Asbestos-Related Building Claim" or "Claim" means claims or suits
brought against Fibreboard alleging injury or damage to buildings and property
caused by asbestos-containing products or materials ("Asbestos-Related Building
Claims"). For purposes of this Agreement, all Asbestos-Related Building Claims
brought by one building owner within one state or all Claims brought by or on
behalf of the government of the United States or one of its agencies anywhere
shall be treated as a single Claim.
2.3. "Fibreboard" means Fibreboard Corporation and includes without
limitation any agents, employees, officers, assigns, subsidiaries, successors-
or predecessors-in-interest, and, to the extent that Fibreboard Corporation
exercises or has exercised or may exercise control or authority over them, means
the following: corporations or unincorporated business entities affiliated with
Fibreboard Corporation, including without limitation any employee, officer or
agent of such affiliated entity, and all persons acting by, through, under or in
concert with Fibreboard Corporation, and each of them, and specifically
including without limitation any person or entity purporting to be an insured
under one or more of the Policies.
<PAGE>
2.4. "Indemnity" means any sums paid as damages or otherwise in
settlement or satisfaction of judgment of Asbestos-Related Building Claims.
2.5. "Party" means Fibreboard or any Settling Insurer (collectively, the
"Parties").
2.6. "Policy" or "Policies" means liability insurance policies or
certificates issued by one of the Settling Insurers which insures Fibreboard,
including without limitation the following policies identified in the Coverage
Action:
SETTLING INSURER POLICY NO. PERIOD
---------------------------------------------------------
Central National CNU 126573 7/1/77-6/1/78
Cal Union ZCX 004028 4/1/80-4/1/81
Cal Union ZCX 004437 4/1/81-4/1/82
Cal Union ZCX 006186 4/1/82-4/1/83
Cal Union ZCX 006526 4/1/83-4/1/84
Century CIZ 425553 4/1/82-4/1/84
Central National CNZ 006802 4/1/82-4/1/84
Central National CNZ 006802 4/1/84-4/1/85
CIGNA P&C EX 09-1011 4/1/84-4/1/85
INA XCP 144849 4/1/84-85
3. RECITALS
3.1. Fibreboard has been, is, and expects to be in the future named in
multiple Asbestos-Related Building Claims.
3.2. Disputes have arisen between Fibreboard and the Settling Insurers as
to their respective rights and obligations relating to the Asbestos-Related
Building Claims.
3.3. Fibreboard and the Settling Insurers are parties to the action
entitled FIBREBOARD CORPORATION V. CONTINENTAL CAS. CO., ET AL., No. 844903, In
the Superior Court of the State of California for the City and County of San
Francisco (the "Coverage Action"), which concerns, INTER ALIA, the nature and
extent of coverage available, if any, under the policies for matters raised in,
arising out of or relating to the Asbestos-Related Building Claims.
<PAGE>
3.4. Without waiver of their respective positions in relation thereto,
the Parties desire to settle any and all past, present and potential future
disputes between them regarding the nature and extent of coverage available, if
any, under the Policies for any and all matters raised in, arising out of or
relating to the Asbestos-Related Building Claims and the Coverage Action in
accordance with the terms of this Agreement.
4. PAYMENT OF ASBESTOS-RELATED BUILDING CLAIMS
4.1. Fibreboard may from time to time request, and Settling Insurers
shall in response to such request timely make, in the sequence set forth in
paragraph 4.2, payments of Allocated Expense or Indemnity under the Policies for
any Asbestos-Related Building Claim in which it is reasonably determined from
available information that a Policy was in effect for any of the period of time
between the date, with respect to each Claim, of [ * ]
of [ * ] or [ * ] at [ *]
] the [ * ] Fibreboard [ * ] the [ * ]
the [ * ] of [ * ] or []
* ] or []
* ] at [ * ]. If insufficient information is
available to determine the date of first installation, this date will be
presumed to [ * ] until information as to another date is
developed.
4.2. Payments of Allocated Expense or Indemnity may be requested by
Fibreboard and shall be made by Settling Insurers in the following sequence (and
not concurrently):
4.2.1. Payment of $[ *]
] Dollars) under policies in effect [ * ] by []
* ] (or, if [ *]
] of [ * ] the [ * ] of
[ * ] under those policies to [ *]
* ] of [ * ] amount);
4.2.2. Payment of $[ * ] Dollars)
under [ * ]
(for the [ * ];
4.2.3. Payment of $[ * ] Dollars)
under policies in effect [ * ] by []
* ] (or, if [ *]
] of [ * ] the [ * ] of []
* ] under those policies to [ *]
] of [ * ] amount);
4.2.4. Payment of $[ * ]
Dollars) under [ * ] policy
[ * ] (or, if []
* ] of [ * ] the [ *]
3
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
] of [ * ] under those policies to [ *]
] of [ * ] amount);
4.2.5. Payment of $[ * ] Dollars)
under policies in effect [ * ] by []
* ] (or, if [ * ] of
[ *]
] under those policies to []
* ] of [ * ] amount);
4.2.6. Payment of $[ * ]
Dollars) under [ * ] policy []
* ] (or, if [ * ] of []
* ] the [ * ] of []
* ] under those policies to [ *]
] of [ * ] amount);
4.2.7. Payment of $[ *]
] Dollars) under policies in effect [ * ]
by [ * ] (or, if []
* ] of [ * ] the [ *]
] of [ * ] under those policies to []
* ] of [ * ] amount);
4.2.8. Payment of $[ * ] Dollars)
[ * ]
under [ *]
] and []
* ] all [ *]
] from [ * ] from [ *]
] or [ * ]
(under policies in which the [ *]
] to [ * ] a [ * ]
in [ * ]), subject to the following conditions:
4.2.8.1. Fibreboard [ * ]
with the [ *]
] the following [ * ]
of [ * ] or [ * ] to
[ * ] of [ * ]:
4.2.8.1.1. [ * ] is []
* ] among [ * ]
participants in [ * ] ;
4.2.8.1.2. [ *]
] are [ *]
] among [ * ] participants
in [ * ];
4
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
4.2.8.1.3. [ *]
] are []
* ] among [ * ]
participants [ * ];
4.2.8.1.4. [ *]
] and []
* ] are []
* ];
4.2.8.1.5. Provided that the [ *]
] to [ * ]
Fibreboard in [ * ] the
[]
*
] Dollars); and
4.2.8.1.6. Provided further that [ * ]
Fibreboard shall not [ *]
] the Settling Insurers under paragraph 4.2.8.
4.2.8.2. If [ *]
] begin [ *]
] after [ *]
] until [ * ] by []
* ] or [ * ] or
[ * ] an [ * ] the [ *]
] the [ * ] as the []
* ] by each in the []
* ];
4.2.8.3. Settling Insurers shall at their option []
* ] in [ * ]
the [ * ] or
[ * ] are []
* ] the Settling Insurers [ *]
] which shall be amended in accordance therewith; provided
that [ *]
] Fibreboard reasonably [ *]
];
4.2.9. Payment of $[ * ]
Dollars) each, for a [ *]
] under [ * ] (for the
[ *]
] (for the [ *]
] (for the []
* ] (for the []
* ] subject to the following condition:
4.2.9.1. Fibreboard shall contemporaneously []
* ] of [ *]
] allocated to the [ * ]
policies;
5
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
4.2.10. Payment of $[ *]
] Dollars) under [ *]
] (for the [ * ], subject to the
following condition:
4.2.10.1. Fibreboard shall contemporaneously []
* ] of [ *]
] allocated to this [ *]
];
4.2.11. Payment of [ * ] to
Fibreboard;
4.2.12. Payment of $[ * ]
Dollars) under [ *]
], subject to the following condition:
4.2.12.1. Fibreboard shall contemporaneously []
* ] of [ * ]
allocated to this [ * ].
4.2.13. [ * ] pursuant to paragraphs
4.2.9.1, 4.2.10.1 or 4.2.12.1 [ *]
] the Settling Insurers under paragraphs 4.2.9, 4.2.10 and
4.2.12.
4.3. Payment []
*
] (the [ * ] consistent with the
Settlement Agreement, dated January 1993 between Fibreboard and the AIG
companies, except that [ *]
] under the policies [ * ] in accordance
with section 4 of this Agreement.
4.4. If payment for an Asbestos-Related Building Claim is made
simultaneously under more than one Policy, payment shall be made equally under
each such Policy to the extent that limits of liability remain unconsumed
thereunder in accordance with this Agreement.
4.5. The Settling Insurers will not be charged with punitive or exemplary
damages or conspiracy or concert of action judgments, where the substantive law
of the jurisdiction under whose law the judgment arises holds that such awards
are not covered by insurance because of public policy or contract
interpretation. The Settling Insurers will not be charged with fines or
penalties, or the multiple portion of damages which are doubled or trebled under
any deceptive trade practices act or consumer protection statute, where the
substantive law of the jurisdiction under whose law the judgment arises holds
that such awards are not covered by insurance because of public policy or
contract interpretation; if such law holds that such an award is covered,
Settling Insurers shall pay it; and if such law is unsettled, Fibreboard shall
have the
6
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
right to seek to require payment of such award either, at the option of Settling
Insurers, by submitting the issue for resolution under section 13 or by bringing
legal action in a court of law, but Settling Insurers shall not be required to
pay such award pending such resolution or action, subject to the right of
Fibreboard to an expedited determination under section 13, not to be resorted to
routinely, that the probability of success on the merits and/or the threat of
substantially harmful consequences to Fibreboard justify requiring the Settling
Insurers to advance as much as 50% of the payment of such award, subject to
reimbursement upon the conclusion of such resolution or action.
4.6. Payments for Indemnity for Asbestos-Related Building Claims shall be
paid by Settling Insurers, at Fibreboard's request, directly to the person
asserting a Claim. Payments by the Settling Insurers for Allocated Expenses
shall be made, at Fibreboard's request, directly to counsel or other persons
responsible for providing Allocated Expenses. Such payments will be timely made
by Settling Insurers, and all reasonable efforts will be made to accomplish
payment within thirty (30) days of receipt of billings therefor by Settling
Insurers.
4.7. If a Settling Insurer disputes its obligation with respect to a
payment for Indemnity or Allocated Expenses, the Insurer will nevertheless make
the payment and submit the issue for resolution under section 13. Payments
which are disputed by Settling Insurers shall be promptly reimbursed by
Fibreboard to Settling Insurers in the event of a determination pursuant to the
dispute resolution procedures that such payments, or portions thereof, were not
required to be made in accordance with this Agreement. If such reimbursement is
not made, the amount thereof may be offset against any Indemnity or Allocated
Expense payments thereafter required of any of the Settling Insurers.
4.8. As a means of minimizing, reducing or delaying the overall payment
of Asbestos-Related Building Claims by Settling Insurers under the Policies,
Settling Insurers may at their option make payments for the purpose of gaining
access to policies issued by other insurers, whether or not in the sequence set
forth in this section, so long as this does not result in prejudice to
Fibreboard or Settling Insurers.
4.9. The Settling Insurers shall have no obligation of any kind under the
Policies with respect to any and all matters raised in, arising out of or
relating to the Asbestos-Related Building Claims or any products claims except
as provided in this Agreement; provided, that this Agreement does not modify any
obligation of INA under the January 1, 1993 Settlement Agreement between INA and
Fibreboard.
5. CLAIM HANDLING
5.1. The Settling Insurers shall have no obligation to assume charge of
the defense or handling of Asbestos-Related Building Claims.
7
<PAGE>
5.2. Fibreboard shall keep the Settling Insurers (through the person or
persons designated as recipients of notice under this Agreement) reasonably
informed, as far in advance as feasible, of significant developments in the
Asbestos-Related Building Claims, including but not limited to upcoming or
ongoing trials, class certification proceedings, serious settlement discussions
and evaluations of general strategies or policies of Fibreboard in relation to
Asbestos-Related Building Claims.
5.2.1. Fibreboard shall provide periodic reports containing a
summary of the current status of each Asbestos-Related Building Claim and shall
report AD HOC on the disposition of pending claims and the filing of new Claims,
receipt of which by the Settling Insurers shall be satisfactory acknowledgement
thereof and reservation of all rights and fulfillment of all duties other than
those created by this Agreement with respect thereto.
5.2.2. Before such time as Settling Insurers are called upon to make
payments hereunder, the provisions of this paragraph 5.2 shall not require
Fibreboard to provide information in a manner different from, or more burdensome
than, Fibreboard's obligations under other settlements relating to the Asbestos-
Related Building Claims.
5.3. At such time as Settling Insurers are called upon to make payments
hereunder, the Settling Insurers shall have the reasonable right to participate
in decisions with respect to the defense, handling or settling of
Asbestos-Related Building Claims, subject to the ultimate reasonable control of
Fibreboard. Fibreboard shall exercise its reasonable best judgment in
defending, handling and settling Asbestos-Related Building Claims and shall do
so acting in good faith and engaging in fair dealing insofar as the interests
of either Settling Insurers or Fibreboard may be implicated.
5.3.1. With respect to any Asbestos-Related Building Claim as to
which Fibreboard reasonably expects it may request payment of Indemnity under
this Agreement by a Settling Insurer, Fibreboard shall keep the Settling
Insurers (through the person or persons designated as recipients of notice under
this Agreement) reasonably informed, in advance where feasible, of settlement
negotiations in the Asbestos-Related Building Claim in question, and shall give
notice thereto of its intent to settle such Claim, unless the amount of such
settlement is smaller than $[ * ] for a Claim or $[ * ] for a group of
Claims in which the average of each Claim settled is not more than $[ * ].
Such information and notice shall be reasonably sufficient to enable the
Settling Insurer in question to review and make timely objection with respect to
Fibreboard's intent to settle.
5.3.2. At such time as Settling Insurers are called upon to make
payments hereunder, Fibreboard shall provide quarterly reports providing a
detailed identification of payments made by it of Allocated Expense and
Indemnity in connection with the Asbestos-Related Building Claims. Such reports
shall identify each Policy
8
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
under which such payment is made and the amount of coverage or limits of
liability that remain unconsumed thereunder.
5.3.3. At such time as Settling Insurers are called upon to pay
Allocated Expenses hereunder, the Settling Insurers shall have the reasonable
right to consult with counsel for Fibreboard concerning the handling of
Asbestos-Related Building Claims at any time for informational purposes and
Fibreboard shall instruct its counsel to cooperate fully with Settling Insurers
for this purpose and, at the reasonable request of Settling Insurers, provide
reports as to the current status of Asbestos-Related Building Claims being
handled by such counsel. Neither Fibreboard nor its counsel shall assert the
attorney-client privilege or the work product rule or similar rules or
privileges as a basis for withholding information relating to the defense of the
Asbestos-Related Building Claims which is in the possession or control of
counsel handling Asbestos-Related Building Claims on behalf of Fibreboard.
5.4. The Settling Insurers shall have the right reasonably to inspect
and, at their expense, copy any documentation relating to billings or payments
for Allocated Expense and Indemnity under this Agreement and Fibreboard shall
provide all reasonable assistance in providing access thereto.
5.5. At such time as the Settling Insurers begin making payment pursuant
to paragraph 4.2.9., after written notice has been given to Fibreboard of the
intent to do so, the Settling Insurers shall, at their option, have the right
to assume charge of the defense or handling of Asbestos-Related Building Claims
while making payments under this Agreement. [ *]
], Fibreboard [ * ] of the []
* ] of payments []
* ] allocated to [ *]
] of the Settling Insurers pursuant to paragraphs 4.2.9.1., 4.2.10.1. or
4.2.12.1; Fibreboard shall have reasonable rights of consultation and
information and the defense shall be conducted consistent with Fibreboard's
reasonable interests.
6. LIMITS OF LIABILITY AND INDEMNIFICATION
6.1. Payment under this Agreement of Allocated Expenses or Indemnity
under any Policy and/or payment, even though not under this Agreement, of claims
other than Asbestos-Related Building Claims to which aggregate limits are
applicable under any Policy shall be deemed to erode the aggregate limits of
such Policy.
6.2. Payment under this Agreement of Allocated Expenses or Indemnity
under any Policy and/or payment, even though not under this Agreement, of
Fibreboard claims other than Asbestos-Related Building Claims to which aggregate
limits are applicable under any Policy of an amount equal to the total amount
required by section 4 of this Agreement to be paid under such Policy shall be
deemed complete and final exhaustion of the aggregate limits of such Policy and
the Settling Insurers shall have
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THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
no obligation to anyone in a greater amount for any Fibreboard claims as to
which aggregate limits are applicable.
6.2.1. The payment of the aggregate limit of a Policy as provided by
this paragraph 6.2 shall constitute exhaustion of the aggregate limit of that
Policy for purposes of calculating the attachment of a policy that is excess to
said Policy.
6.3. The amount required by this Agreement to be paid under any Policy
shall be deemed the per occurrence limit of liability of such Policy with
respect to payment under this Agreement of Allocated Expenses or Indemnity
under any Policy and/or payment, even though not under this Agreement, of
Fibreboard claims other than Asbestos-Related Building Claims, []
* ] of liability of []
* ].
6.3.1. The payment of such per occurrence limit as provided
by this paragraph 6.3. shall constitute exhaustion of the per
occurrence limit of liability of that Policy for purposes of
calculating the attachment of a policy that is excess to said Policy.
6.4. Fibreboard and the Settling Insurers agree that the aggregate
limits stated in the Policies described in this Agreement apply only once with
respect to claims which impact those limits, and that the Settling Insurers
shall not be obligated to make payments in regard to any such claims in excess
of the aggregate limits described in said Policies. Fibreboard agrees that it
shall defend, indemnity and hold harmless the Settling Insurers for any amounts
the Settling Insurers may have to pay by reason of any claims relating to
whether the Policies' limits are depleted by payments under the provisions of
this Agreement.
6.4.1. Any such litigation brought against the Settling Insurers
shall be conducted in the mutual interest of Fibreboard and the Settling
Insurers.
6.4.1.1. In connection with such litigation, Fibreboard
shall not, without the prior written consent of the Settling Insurers,
retain as counsel any firm engaged in coverage litigation with one of
the Settling Insurers.
6.4.1.2. In such litigation, at Settling Insurers'
reasonable request, Fibreboard shall make reasonably clear and
conspicuous that Fibreboard is the real party in interest for purposes
of coverage positions being taken therein nominally in behalf of the
Settling Insurer in question.
6.4.1.3. The Settling Insurers may, at their option and
expense, engage counsel to appear on their behalf in such litigation,
provided that the conduct of such litigation shall be subject to the
ultimate reasonable control of Fibreboard.
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THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
6.4.2. If Fibreboard fails to defend or indemnify Settling Insurers
under paragraph 6.4., and Fibreboard is unable to provide reasonable and
adequate assurance to the Settling Insurers of prompt future performance, any
further performance by the Settling Insurers under this Agreement shall
thereafter be permanently excused and payments theretofore made to Fibreboard
under this Agreement under any Policies shall be deemed to have been made in
consideration of a full and complete release of all obligations of the Settling
Insurers with respect to Fibreboard under said Policies, such that the Settling
Insurers shall have no further obligation with respect to any claims by or
against Fibreboard thereunder.
7. MUTUAL RELEASE REGARDING ASBESTOS-RELATED BUILDING CLAIMS
7.1. In consideration for the execution of this Agreement, the Parties
release and forever discharge each other, together with their respective
attorneys, agents, employees, officers, directors, shareholders, assigns,
successors- or predecessors-in-interest, subsidiaries, parents or other
affiliates, from any and all claims, demands, liens, agreements, contracts,
covenants, actions, suits, causes of action, obligations, debts, expenses,
attorneys' fees, damages, judgments, orders and liabilities of whatever kind or
nature in contract, tort, law, equity or otherwise, whether arising in common
law or statute, whether now known or unknown, suspected or unsuspected, and
whether or not concealed or hidden, past, existing, potential, or future, by
each other (including without limitation any claim or obligation, actual or
potential, with respect to the indemnification and/or defense of under any
policy of insurance issued by a Settling Insurer and any and all claims for
unfair or deceptive trade or insurance practices, violation of section 790.03 of
the Insurance Code of the State of California or any similar or related statute
or regulation, violation of section 17200 ET SEQ. of the Business and
Professions Code of the State of California or any similar or related statute or
regulation, bad faith, punitive damages, breach of contract, breach of the
implied covenant of good faith and fair dealing or extra-contractual damages or
remedies of any type) for or arising from or related in any way to the
Asbestos-Related Building Claims, including without limitation those alleged or
set forth, or which could have been alleged or set forth, in the pleadings or
other documents filed or served in the Coverage Action, arising out of, related
directly or indirectly to or connected with acts, omissions, transactions,
occurrences or events which form the basis of the Coverage Action; arising
directly or indirectly from acts, omissions, transactions, occurrences or events
relating in any way to the Coverage Action; or arising directly or indirectly
from the negotiation, terms or implementation of this Agreement (the "Released
Claims").
7.2. It is the intention of the Parties that the foregoing release shall
be effective as a bar to all Released Claims. In furtherance, and not in
limitation, of such intention, the releases described herein shall be, and shall
remain in effect as, full and complete releases of the Released Claims,
notwithstanding the discovery or existence of any additional or different facts
or claims. It is expressly understood and agreed that this
11
<PAGE>
Agreement is intended to cover and does cover not only all known facts and/or
claims, but also any further facts and/or claims within the scope of the
Released Claims, not now known or anticipated, but which may later develop or be
discovered, including all the effects and consequences thereof.
7.2.1. The Parties hereby acknowledge that they are familiar with
California Civil Code section 1542, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Each Party hereby waives and relinquishes all rights and benefits which it has
or may have under California Civil Code section 1542 and any statute, rule and
legal doctrine in this or any other jurisdiction to the same or similar effect
as section 1542 to the full extent that it may lawfully waive such rights and
benefits. In making this waiver, each Party acknowledges that it may hereafter
discover facts in addition to or different from those which it now believes to
be true with respect to the subject matter of the disputes and other matters
released herein, but agrees that it has taken that possibility into account in
reaching this Agreement and that the releases given herein shall be and remain
in effect as full and complete releases notwithstanding the discovery or
existence of any such additional or different facts, as to which each Party
expressly assumes the risk.
7.3. Each Party hereto acknowledges and represents that it (a) has fully
and carefully read this Agreement prior to execution; (b) has been fully
apprised by its attorneys of the legal effect and meaning of this document and
all terms and conditions hereof; (c) has had the opportunity to make whatever
investigation or inquiry it deemed necessary or appropriate in connection with
the subject matter of this Agreement; (d) has been afforded the opportunity to
negotiate as to any and all terms hereof; and (e) is executing this Agreement
voluntarily, free from any undue influence, coercion, duress or menace of any
kind.
7.4. Each Party agrees to bear its own costs and attorneys' fees with
respect to the Coverage Action, the negotiation and drafting of this Agreement
and the settlement which led to it.
7.5. Settling Insurers hereby release and waive any and all past, present
and future claims, whether for subrogation, contribution, indemnity or other
legal or equitable relief, against American Home Assurance Company, Granite
State Insurance Company, Insurance Company of the State of Pennsylvania,
Lexington Insurance Company and New Hampshire Insurance Company arising out of
or relating to Asbestos-Related Building Claims.
12
<PAGE>
8. DISMISSAL
8.1. Within five (5) days of the effective date of this Agreement ,
Fibreboard shall deliver to counsel for the Settling Insurers an executed
request for dismissal from the Coverage Action of each Settling Insurer with
prejudice, each Party to bear its own attorney fees and costs.
9. SEPARATE CLAIMS OF INA
9.1. Whereas Fibreboard has agreed to make payment to INA and other
insurers in resolution of certain claims against Fibreboard arising from
payments made on behalf of Fibreboard under the separate Agreement Concerning
Asbestos-Related Claims, commonly known as the "Wellington Agreement," for
asbestos-related bodily injury claims; in consideration for the execution of
this Agreement, Fibreboard shall accelerate all such future payments due INA and
such other insurers, paying them in full within 30 days of the effective date
of this Agreement.
9.2. Whereas INA, Fidelity & Casualty Company of New York ("F&C") and
Royal Insurance Company ("Royal") have asserted certain claims against Pacific
Indemnity Company ("Pacific") and Continental Casualty Company ("Continental")
arising from payments made on behalf of Fibreboard under the Wellington
Agreement for asbestos-related bodily injury claims (the "Wellington IDP
claims") and have asserted the Wellington IDP claims in an action entitled ROYAL
INDEMNITY CO., ET AL. V. CONTINENTAL CASUALTY CO., ET AL., No. 926327, in the
Superior Court of the State of California for the City and County of San
Francisco (the "Royal Action"); and whereas Fibreboard has entered into
settlements relating to asbestos-related bodily injury claims with (1) Pacific,
Continental and a purported class of asbestos-related bodily injury claimants,
court approval for which is being sought in the class action entitled AHEARN,
ET AL. V. FIBREBOARD CORPORATION, No. 6:93cv526, in the United States District
Court for the Eastern District of Texas, Tyler Division ("the Global Settlement
Agreement") and (2) Pacific and Continental, court approval for which is being
sought in the class action entitled CONTINENTAL CASUALTY CO., ET AL. V. RUDD, ET
AL., No. 6:94cv458, in the United States District Court for the Eastern District
of Texas, Tyler Division ("the Trilateral Settlement Agreement"); in
consideration for the execution of this Agreement, the Parties agree as follows:
9.2.1. Settling Insurers agree and shall secure the agreement
of INA, F&C and Royal not to oppose court approval of the Global
Settlement Agreement or the Trilateral Settlement Agreement or
challenge any judgment approving either agreement;
13
<PAGE>
9.2.2. In the event, and within 30 days, of final court
approval of the Global Settlement Agreement, Fibreboard shall pay to
INA the sum of $1,100,000.00 (One Million One Hundred Thousand
Dollars);
9.2.3. In the event Fibreboard receives or becomes entitled to
receive any funds under the Trilateral Settlement Agreement, or any
modification thereof, pursuant to final court approval of that
agreement, within 30 days thereafter Fibreboard shall pay to INA the
sum of $3,000,000.00 (Three Million Dollars);
9.2.4. Settling Insurers shall secure the agreement of INA,
F&C and Royal to dismiss the Royal Action, including all appellate
proceedings therein, with prejudice, and to release all claims against
Pacific and Continental that would otherwise be extinguished or
diminished by court approval of the Global Settlement Agreement or the
Trilateral Settlement Agreement, including without limitation the IDP
Wellington claims, such dismissals and releases conditioned, and to
take effect only, upon the receipt by INA of either the payment
required by paragraph 9.2.2. or the payment required by paragraph
9.2.3. herein;
9.2.5. Fibreboard shall endeavor reasonably and in good faith
to obtain the agreement of Continental and Pacific to a stay of the
appeal of the Royal Action pending final court approval or disapproval
of the Global Settlement Agreement and Trilateral Settlement
Agreement.
9.2.6. In the event that neither the Global Settlement
Agreement nor the Trilateral Settlement Agreement receives final court
approval and INA does not receive either of the payments under
paragraphs 9.2.2 or 9.2.3., INA, F&C and Royal reserve the right to
proceed with their Wellington IDP claims, including the appeal in the
Royal Action and, to the extent consistent with its contractual or
other legal obligations and without prejudice to Fibreboard,
Fibreboard shall not oppose the prosecution of these claims.
9.3. It is a condition to the effectiveness of this Agreement that
Settling Insurers secure the written agreement of INA, F&C and Royal to the
provisions of this section 9.
10. OTHER INSURANCE
10.1. Fibreboard shall endeavor in good faith to secure the execution by
American Home Assurance Company, Granite State Insurance Company, Insurance
Company of the State of Pennsylvania, Lexington Insurance Company and New
Hampshire Insurance Company of a release and waiver of any and all claims,
whether
14
<PAGE>
for subrogation, contribution, indemnity or other legal or equitable relief
against Settling Insurers arising out of payment of Asbestos-Related Building
Claims to or on behalf of Fibreboard. Fibreboard agrees that it shall defend,
indemnify and hold harmless the Settling Insurers for any amounts the Settling
Insurers are required to pay with respect to a Fibreboard claim, directly or
indirectly, in a sequence different from that provided for in Section 4 of this
Agreement by reason of a claim made by one of the aforesaid insurers; provided,
however, that the reimbursement of any such payment to Settling Insurers shall
not relieve Settling Insurers of any obligation to make payments in accordance
with Section 4 of this Agreement at a later time.
10.1.1. Fibreboard represents that it is not presently aware of any
potential claims, other than Asbestos-Related Building Claims, that are
reasonably likely to lead to the exhaustion of aggregate limits of liability of
the policies of aforesaid insurers.
10.2. Fibreboard shall endeavor in good faith to obtain, as part of any
settlement agreement it enters with any of its other insurers after the date of
this Agreement, a release and waiver of claims such other insurers may have or
assert against Settling Insurers in connection with the Policies as regards
Asbestos-Related Building Claims.
10.3. Fibreboard will use its reasonable best efforts, including the
pursuit of litigation, to obtain and enforce settlements or judgments
determining the obligations of Fibreboard's other insurers with respect to the
Asbestos-Related Building Claims. Fibreboard will retain the right to determine
the terms on which it will settle with other insurers; provided, however, that
Fibreboard shall not enter into any future settlement determining the
obligations of Fibreboard's other insurers with respect to the Asbestos-Related
Building Claims without the express written approval, not unreasonably to be
withheld, of the Settling Insurers.
10.3.1. Fibreboard shall give the Settling Insurers reasonable
advance notice of its participation in negotiations relating to such settlement
with Fibreboard's other insurers and inform Settling Insurers of the settlement
terms under consideration in such negotiations and shall provide copies or, if
not available, the material terms of any such settlement negotiated;
10.3.2. Settling Insurers' [ *]
] any [ * ] Fibreboard []
* ] of
payments of [ * ] to particular []
* ] the Settling Insurers pursuant to paragraphs 4.2.8.1.,
4.2.9.1., 4.2.10.1. or 4.2.12.1.
10.4. To the extent that Fibreboard obtains a judgment that Employers
Reinsurance, ESLIC or Lloyd's of London is obligated to make payments of
Allocated Expense or Indemnity under policies in effect in 1956-62, Fibreboard
shall, at Settling
15
* CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION
THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION
<PAGE>
Insurers' request and if otherwise necessary, make payments, not more than
$50,000 per Claim, for the purpose of gaining access to such policies, thereby
requiring them to pay in such manner as shall defer payments to be made by the
Settling Insurers pursuant to section 4 herein, and it is the intent of this
Agreement that the aforenamed insurers shall have no right of reimbursement,
set-off, contribution, indemnity, subrogation or otherwise against the Settling
Insurers arising from payments made by them and Fibreboard shall cooperate
reasonably with the Settling Insurers in seeking to enforce such intent.
11. CONFIDENTIALITY AND NONWAIVER
11.1. In consideration of the mutual promises set forth in this
Agreement, the Parties have agreed to settle such claims as are enumerated
herein strictly as a business accommodation unrelated to the merits of the
respective claims of the Parties and without prejudice to their respective
positions. Nothing herein shall be construed as a waiver, estoppel or
invalidation of any position the Parties may take in the future with respect to
any claims or defenses other than the Released Claims. Neither execution nor
performance under this Agreement is intended as, nor shall it be construed or
referred to in any way as, an admission of the truth of the claims or
contentions of any other Party or the existence of any liability or
responsibility at any time or for any purpose, or of the violation of federal,
state or local law, ordinance or regulation or of any liability or wrongdoing.
11.2. The terms and conditions of this Agreement shall remain
confidential and shall not hereafter be disclosed to any person or entity not a
Party to the Agreement. Notwithstanding the provisions of this paragraph, this
Agreement may be disclosed to attorneys, partners, assignees, reinsurers and
their retrocessionaires or to financial auditors and accountants of any Party,
and as required by law in public filings or otherwise, and to the extent
reasonably necessary for legitimate business purposes; for purposes of obtaining
settlements determining the obligations of other insurers of Fibreboard, to such
other insurers (on a confidential basis only); or otherwise as compelled against
a Party by legal process over the diligent objection and opposition of such
Party after reasonable notice to the other Parties.
11.3. This Agreement, and the acts, errors and omissions of the Parties
leading up to and including its negotiation and execution constitute the
compromise of disputed claims, are subject to the protection afforded by
sections 1152 and 1152.5 of the California Evidence Code and Rule 408 of the
Federal Rules of Evidence and similar statutes and rules, are without prejudice
or value as precedent and shall not be used or referred to or cited in any way
in any communication, proceeding or hearing for the purpose of creating,
proving, modifying or interpreting obligations of any of the Parties under, or
terms and conditions of, any other agreement or any policy.
16
<PAGE>
12. INTERPRETATION
12.1. It is acknowledged that each Party, with the assistance of
competent counsel, has participated in the negotiation and drafting of this
Agreement and that any ambiguity should not be construed for or against any
Party on account of such drafting. This Agreement is not an insurance contract
and shall not be construed in favor of any Party by virtue of that Party's
status as the drafter of language herein. The Parties agree that this Agreement
has been negotiated at arm's length by parties of equal bargaining power, each
of which was represented by competent counsel of its own choosing. The Parties
further acknowledge that the obligations and releases herein described are in
good faith and are reasonable in the context of the matters released.
12.2. This Agreement has been negotiated and entered into in the State of
California and shall in all respects be governed, enforced and construed in
accordance with the laws of the State of California.
13. DISPUTE RESOLUTION
13.1. In event of any disputes arising under this Agreement (including
without limitation its interpretation, application or implementation) which the
Parties cannot resolve by negotiations, the Parties will submit the dispute to a
mediator mutually agreed on by the Parties and paid equally by each side. If
the dispute is not resolved by mediation, it shall be submitted to binding and
final arbitration, without right of appeal, or to another form of binding
alternative dispute resolution ("ADR") of the interested Parties' choosing. In
the event the Parties cannot agree on arbitration or another form of ADR, the
dispute will be submitted for binding arbitration by the American Arbitration
Association pursuant to its rules.
13.1.1. In the event that a Party has demonstrated a pattern of
noncompliance with the terms or intendment of this Agreement and that it is
reasonably likely to continue to do so, the Party aggrieved thereby shall have
the right to the appointment, pursuant to the preceding section, of a single
arbitrator or mediator or panel of arbitrators or mediators to sit from time to
time in supervision of the future performance of this Agreement by the
noncomplying Party until such pattern is reasonably determined to have ended.
14. NOTICE
14.1. All notices, bills, demands, payments, accounting or other
communications which any Party desires or is required to give, shall be given in
writing and shall be deemed to have been given if hand delivered, sent by
facsimile or by United States Mail, to the Party or Parties at the address
noticed below or such other address as a Party may designate in writing from
time to time:
17
<PAGE>
Fibreboard Corporation Mr. Irwin A. Bobrin
Attention: Michael R. Douglas, Esq. Account Specialist
California Plaza Building CIGNA Companies
2121 N. California Blvd., Suite 560 Asbestos Claims Management
Walnut Creek, California 94596 1601 Chestnut Street - TLP 15
Facsimile No. (510) 274-0714 Philadelphia, Pennsylvania 19192-2151
Facsimile No. (215) 761-5475
15. OTHER TERMS AND CONDITIONS
15.1. This Agreement is not intended to confer rights or benefits on any
person or entity other than a Party.
15.2. Neither this Agreement nor any of the rights, benefits or
obligations arising under this Agreement may be assigned by any Party without
the prior written consent of the other Parties, which consent shall not be
unreasonably withheld.
15.3. Each Party represents, warrants and agrees that it has not assigned
or transferred or purported to or attempted to assign or transfer to any person
or entity any right, claim or matter released herein. Each Party shall defend,
indemnify and hold the other Parties harmless from any and all claims arising
out of or relating to any assignment or transfer and any purported or attempted
assignment or transfer contrary to the terms of this paragraph.
15.4. Each Party represents, warrants and agrees that (a) no promises or
agreements not expressed herein have been made to it; (b) this Agreement
contains the entire agreement between the Parties, that it supersedes any and
all prior agreements or understandings between the Parties and that its terms
are contractual and not a mere recital; (c) in executing this Agreement, neither
Party has relied on any statements or representations made by the other Party or
the other Party's agents, servants or attorneys concerning the subject matter,
basis or effect of this Agreement other than as set forth herein; and (d) each
Party is relying solely on its own judgment and knowledge and the advice of its
counsel.
15.5. Any party adjudicated to be in breach of the terms of this
Agreement pursuant to an arbitration or other form of ADR proceeding under
paragraph 13.1 shall, subject to the reasonable discretion of the arbitrator or
adjudicator, be required to pay to the non-breaching party costs and expenses,
including reasonable attorneys' fees, incurred by such non-breaching party in
connection with the enforcement of this Agreement.
15.6. In the event of the bankruptcy or insolvency or similar proceeding
of Fibreboard or an entity including Fibreboard, Fibreboard shall notify the
Bankruptcy Court and the Trustee in Bankruptcy or similar officer of the Court
of the existence of
18
<PAGE>
this Agreement and the Settling Insurers shall thereafter respond to any
billings in the manner ordered by the Trustee in Bankruptcy or similar officer
of the Court.
15.7. The Parties agree to do all things reasonable to implement this
Agreement. The Parties will reasonably assist and cooperate, each with the
other, to effectuate the purposes of this Agreement, protect and defend its
integrity (including testifying as to its provisions, operations and bona fides)
and to do what may be necessary to verify its existence and operation in such
matters as may be relevant. To the extent reasonable and practical, each Party
shall cooperate and assist the other by providing any information and witnesses
reasonably necessary to secure recoveries from other Fibreboard insurers for
Asbestos-Related Building Claims.
15.8. The Parties agree that, except as otherwise set forth herein, they
have not and will not commence, maintain, initiate or prosecute, or cause,
encourage, assist, advise or cooperate with any other person or entity to
commence, maintain, initiate or prosecute, any action, suit, proceeding or claim
before any court or administrative agency (whether state, federal or otherwise)
against any other Party arising from, concerned with, or otherwise related to,
in whole or in part, any of the Released Claims.
15.9. The representations, warranties, agreements, and promises made by
each Party to this Agreement and contained herein shall survive the execution of
this Agreement.
15.10. No amendment, modification, addendum or revision of this Agreement
shall be valid unless it is in writing and signed by the Party or Parties to be
bound, in which event there need be no separate consideration therefor.
15.11. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed one and the same instrument. This Agreement is not and shall not be
effective, however, unless and until each Party executes the original or a
counterpart.
15.12. This Agreement shall become effective (the "Effective Date") as to
each Party from and after the later of the date the last Party shall have
executed this Agreement or the date the conditions of section 9 are satisfied.
WHEREFORE, the Parties execute this Agreement as follows:
[Signature pages follow]
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Dated: October 28 1994 FIBREBOARD CORPORATION
By /s/ Michael R. Douglas
-------------------------
Dated: October 28, 1994 CALIFORNIA UNION INSURANCE COMPANY
By /s/ Irwin A. Bobrin
-------------------------
Dated: October 28, 1994 CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA
By /s/ Irwin A. Bobrin
-------------------------
Dated: October 28, 1994 CENTURY INDEMNITY COMPANY
By /s/ Irwin A. Bobrin
-------------------------
Dated: October 28, 1994 CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY
By /s/ Irwin A. Bobrin
-------------------------
20
<PAGE>
Dated: October 28, 1994 INSURANCE COMPANY OF NORTH AMERICA
By /s/ Irwin A. Bobrin
--------------------------
APPROVED AS TO FORM:
Dated: October 28, 1994 BROBECK, PHLEGER & HARRISON
By /s/ William R. Irwin
--------------------------
William R. Irwin
Attorneys for Fibreboard Corporation
Dated: October 31, 1994 O'MELVENY & MYERS
By /s/ Martin S. Checov
--------------------------
Martin S. Checov
Attorneys for California Union Insurance Company,
Central National Insurance Company of Omaha, Century
Indemnity Company, CIGNA Property and Casualty
Insurance Company and Insurance Company of North
America
21
<PAGE>
Exhibit 21
FIBREBOARD CORPORATION SUBSIDIARIES
As of December 31, 1994
Subsidiary State of Incorporation
--------------------- ----------------------
Trimont Land Company, doing
business as Northstar-at-
Tahoe California
Snider Lumber Products Co., Inc. Delaware
Pabco Metals Corporation Delaware
Fibreboard Box & Millwork Corporation Delaware
Sierra-at-Tahoe, Inc. Delaware
Norandex Inc. Delaware
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into Fibreboard
Corporation's previously filed Registration Statements on Form S-8, File No. 33-
60412, No. 33-26449 and No. 33-26450.
ARTHUR ANDERSEN & CO.
San Francisco, California,
March 24, 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Fibreboard's
audited financial statements for the year ended December 31, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 8842
<SECURITIES> 0
<RECEIVABLES> 42764
<ALLOWANCES> 2352
<INVENTORY> 76656
<CURRENT-ASSETS> 138333
<PP&E> 190817
<DEPRECIATION> 75850
<TOTAL-ASSETS> 1185983
<CURRENT-LIABILITIES> 63443
<BONDS> 101293
<COMMON> 42
0
0
<OTHER-SE> 145347
<TOTAL-LIABILITY-AND-EQUITY> 1185983
<SALES> 363705
<TOTAL-REVENUES> 363705
<CGS> 295202
<TOTAL-COSTS> 295202
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 569
<INTEREST-EXPENSE> 4931
<INCOME-PRETAX> 45437
<INCOME-TAX> 18402
<INCOME-CONTINUING> 27035
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27035
<EPS-PRIMARY> 6.02
<EPS-DILUTED> 6.01
</TABLE>
