FIBREBOARD CORP /DE, 10-Q, 1995-08-14

FIBREBOARD CORP /DE
10-Q, 1995-08-14
SAWMILLS & PLANTING MILLS, GENERAL

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
______________

COMMISSION FILE NO. 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 North California Blvd., Suite 560, Walnut Creek, CA 94596
---------------------------------------------------------------
(Address of principal executive offices)

(510) 274-0700
--------------
(Registrant's telephone number, including area code)

Not Applicable
--------------
(Former name, former address or former fiscal year,
if changed since last report)

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 .
------------ ------------

As of the close of business on August 8, 1995, the registrant had
outstanding 8,547,285 shares of common stock.

<PAGE>

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The following unaudited financial statements are filed as part of this
report:

Financial Statement Title Page
------------------------- ----

Consolidated statements of income for the three and six
month periods ended June 30, 1995 and 1994 3

Consolidated balance sheets as of June 30, 1995
and December 31, 1994 4

Consolidated statements of cash flows for the six
months ended June 30, 1995 and 1994 6

Notes to consolidated financial statements 7

<PAGE>

FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands Except Per Share))
(Unaudited)

Quarter Six Months
Ended June 30 Ended June 30
----------------------- -----------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $124,146 $ 59,608 $253,190 $145,908
Cost of sales 98,099 52,673 197,356 119,447
-------- -------- -------- --------
Gross margin 26,047 6,935 55,834 26,461

Selling and administrative expenses 21,225 3,869 40,134 10,648
Asbestos-related items (4,000) -- (4,000) --
-------- -------- -------- --------

Income from operations 8,822 3,066 19,700 15,813
Interest expense (2,033) (553) (3,929) (1,533)
Interest and other income 458 1,025 884 1,792
-------- -------- -------- --------
Income before income taxes 7,247 3,538 16,655 16,072
Income taxes (2,897) (1,433) (6,660) (6,509)
-------- -------- -------- --------
Net income $ 4,350 $ 2,105 $ 9,995 $ 9,563
-------- -------- -------- --------
-------- -------- -------- --------

Earnings per share:
Primary 0.48 0.23 1.11 1.06
Fully diluted 0.48 0.23 1.10 1.06

Common equivalent shares (thousands)
(Weighted average)
Primary 9,042 8,980 9,026 8,984
Fully diluted 9,055 8,980 9,050 8,984

</TABLE>

<PAGE>

FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)

June 30 December 31
1995 1994
------------ ------------
(UNAUDITED)

ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ (1,515) $ 8,842
Receivables 51,237 40,412
Current portion of notes receivable 6,247 1,317
Inventories 80,610 76,656
Prepaid expenses 3,009 1,836
Deferred income taxes 9,293 9,270
---------- ----------
Total current assets 148,881 138,333

Timber and timberlands, net 31,095 30,305
Property, plant and equipment, at cost:
Land and improvements 21,637 22,051
Buildings 37,252 37,121
Machinery and equipment 131,406 130,503
Construction in progress 5,713 1,142
---------- ----------
196,008 190,817
Accumulated depreciation (81,425) (75,850)
---------- ----------
Net property, plant and equipment 114,583 114,967
Notes receivable 6,301 12,451
Goodwill 67,600 64,623
Other assets 14,748 12,957
---------- ----------
Total operating assets 383,208 373,636

Cash restricted for asbestos costs 3,631 1,893
Asbestos costs to be reimbursed 832,115 810,454
---------- ----------
Total assets $1,218,954 $1,185,983
---------- ----------
---------- ----------
</TABLE>

<PAGE>

FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)

JUNE 30 DECEMBER 31
1995 1994
----------- -----------
(UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
<S> <C> <C>
Current portion of long-term debt $ 2,105 $ 2,045
Accounts payable and accrued liabilities 64,385 58,698
Reserve for asbestos-related costs 2,700 2,700
---------- ----------
Total current liabilities 69,190 63,443

Long-term debt 99,988 101,293
Reserve for asbestos-related costs 9,620 14,584
Other long-term liabilities 23,758 24,109
Deferred income taxes 19,395 19,440
---------- ----------
Total operating liabilities 221,951 222,869

Asbestos claims settlements:
Current -- 6,878
Long-term 818,184 788,487
---------- ----------
Total asbestos claims settlements 818,184 795,365

Long-term debt associated with asbestos 23,041 22,360
---------- ----------
Total liabilities 1,063,176 1,040,594

Commitments & contingencies

Stockholders' equity:
Preferred stock, $.01 par value, 3,000,000
shares authorized; none issued -- --
Common stock, $.01 par value, 15,000,000
shares authorized; 8,495,574 and
4,224,225 shares issued 85 42
Additional paid-in capital 76,517 76,166
Retained earnings 83,747 73,752
Minimum pension liability adjustment (4,571) (4,571)
---------- ----------
Total stockholders' equity 155,778 145,389
---------- ----------
Total liabilities and stockholders' equity $1,218,954 $1,185,983
---------- ----------
---------- ----------

</TABLE>

<PAGE>

FIBREBOARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
(Unaudited)

Six Months ended June 30
-------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 9,995 $ 9,563
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation, amortization, and depletion 8,768 5,107
Deferred income taxes (68) 168
Deferred long term benefits 1,384 (130)
Compensation for stock grants 142 76
Gain on sale of assets (529) (1,690)
Asbestos-related reserve (4,000) --
Change in working capital (3,310) 17,027
--------- --------
Net cash provided by operations 12,382 30,121

Cash Flows From Investing Activities:
Non-cash net assets of acquired operations (13,896) --
Proceeds from asset sales 625 3,698
Property, plant and equipment changes (6,529) (1,964)
Timber & timberland changes, net (846) 1,609
Reduction in notes receivable 1,220 1,025
Decrease (increase) in other assets (1,332) (82)
--------- --------
Net cash provided (used) by investing activities (20,758) 4,286

Cash Flows From Financing Activities:
New borrowings 15,000 --
Repayment of debt (16,245) (26,262)
Employee stock plan transactions 252 35
--------- --------
Net cash used by financing activities (993) (26,227)

Net cash provided (used) by business activities (9,369) 8,180

Cash Flows From Asbestos Related Activities:
Receipts from insurers 3,247 5,081
Structured settlement program activity 4 349
Other asbestos-related cash transactions (2,501) (3,789)
Change in cash restricted for asbestos costs (1,738) (2,848)
--------- --------
Net cash used by asbestos-related activities (988) (1,207)
--------- --------
Net increase (decrease) in cash (10,357) 6,973
Cash at beginning of period 8,842 5,322
--------- --------
Cash at end of period $ (1,515) $ 12,295
--------- --------
--------- --------

Cash Paid During the Period For:
Interest $ 3,729 $ 1,866
Income taxes 4,944 5,396

Non-Cash Items:
Increase in asbestos claims settlements 71,194 104,367
Payments made to asbestos claimants on Fibreboard's behalf 48,379 174,607
Increase in receivables from sales of surplus real estate -- 2,949

</TABLE>

<PAGE>

FIBREBOARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts in Thousands)
(Unaudited)

1. The interim financial statements included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although Fibreboard management believes that
the disclosures are adequate to make the information presented not
misleading. These interim financial statements and notes should be read in
conjunction with the financial statements and the notes thereto included in
Fibreboard's 1994 Annual Report and Form 10-K.

Interim financial statements are by necessity somewhat tentative.
Judgments are used to estimate the amounts recorded each quarter for items
that are normally determinable only on an annual basis. For example,
numerous items relating to employee benefits are determined annually, with
hours worked determining pension plan contributions for the year,
eligibility for vacations, etc. Further, all inventory quantities are
verified by physically counting the units on hand at least once a year.
For those inventories not counted at the end of the quarter, quantities are
determined using measured sales and production data for the period.

The interim period financial information included herein reflects all
adjustments of a normal and recurring nature which are, in the opinion of
Fibreboard management, necessary for a fair presentation of the results of
the respective interim periods. Results of operations for interim periods
are not necessarily indicative of results to be expected for an entire
year.

2. Net earnings per common and common equivalent share are calculated using
the weighted average number of common shares outstanding during the period
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. All per share amounts have
been restated to reflect the impact of a two-for-one common stock split on
May 19, 1995.

3. 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 as follows:

June 30 December 31
1995 1994
---------- ----------
<S> <C> <C>
Finished Goods $58,278 $45,622
Raw Materials 20,429 29,182
Supplies 1,903 1,852
--------- ----------
Total Inventories
$80,610 $76,656
--------- ----------
--------- ----------
</TABLE>

4. 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.

<PAGE>

The following tables illustrate asbestos-related personal injury
claims activity for the periods indicated:

Six Months ended June 30
------------------------
1995 1994
---- ----
<S> <C> <C>
New claims received 9,700 3,100
Claims disposed
Settled 8,617 13,009
Dismissed 3,311 385
"Green Card" settlements(1) 60 83
Judgments(2) -- 3
Adjustments(3) -- --

Average settlement amount per claim settled-(4)
pre-1959 claims $ 10 $ 8
post-1959 claims 8 7

Claims pending at end of period (5) 39,600 47,400

<FN>
1. 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.

2. Judgments represent defense verdicts in favor of Fibreboard, 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. 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.

3. Often, multiple claims are filed for the same injury. It is often not
possible to fully identify duplicate claims until the claims are
prepared for trial. Fibreboard has an ongoing program to identify
duplicate claims and remove them from the claims database, and
anticipates additional future adjustments.

4. For claims where the initial year of exposure is known.

5. Of the claims pending at June 30, 1995 20,000 were filed on or after
August 27, 1993, and will be covered by the Global Settlement if
approved.
</TABLE>

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

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. The
trial court proceeding to determine the reasonableness and fairness of the
settlements has concluded in the United States District Court for the
Eastern District of Texas with the court entering judgments approving both
settlements in July, 1995. An appeal of the Global Settlement has been
filed. Fibreboard cannot determine whether an appeal of the Insurance
Settlement will be filed. The appeal could delay final approval of the
Global Settlement and, if appealed, the Insurance Settlement until 1996 or
later.

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
an escrow account on behalf of Fibreboard during the first quarter of 1995,
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

<PAGE>

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, unless other settlements are reached.

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
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 agreements 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

<PAGE>

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.

At June 30, 1995, Fibreboard was a defendant in 11 asbestos-in-buildings
claims. Trials in some of these claims are likely to occur over the next
few years. To date, Fibreboard has successfully defended these claims or
settled the claims for modest 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.

Fibreboard is also litigating with its 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 $390,000
(including the settlements discussed below), which is in addition to the
personal injury insurance coverage and does not include additional policies
which contain no aggregate limit. The insurers dispute coverage, although
to date substantially all of Fibreboard's costs of defending asbestos-in-
buildings claims have been paid by its primary carriers.

Fibreboard has reached final settlements with four of its primary insurers
and several of its excess level insurers. The final settlements confirm
more than $295,000 of insurance as needed to defend and dispose of
asbestos-in-buildings claims. Substantially all of the confirmed insurance
remains available.

The asbestos-in-buildings insurance coverage trial has been continued. No
date has been set for the trial to recommence. Fibreboard is continuing
settlement discussions with the remaining insurers. Fibreboard cannot
predict whether such discussions will result in settlements.

At the end of 1991, Fibreboard attempted to quantify its liability for
asbestos-related personal injury claims then pending and 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 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. In addition, the
projected liability does not include any liability for asbestos-in-
buildings claims, if any, as Fibreboard believes that any liability for
such claims is not subject to reasonable estimation.

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 litigation. 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. The balance of the net liability was $12,320 at June 30, 1995
after a $4,000 adjustment discussed below.

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

<PAGE>

settlements impact its estimate of liability through the end of the decade.
However, during the second quarter of 1995, Fibreboard recorded a $4,000
reversal of previously established reserves for anticipated unreimbursable
costs as a result of a reduction in its estimate of the amounts which will
be needed for such purpose in the event neither the Global nor Insurance
Settlements are finally approved. Fibreboard will continue to reevaluate
its estimates and will make adjustments to the extent dictated by changes
in the personal injury litigation.

5. Information about Fibreboard's industry segments is set forth below:

QUARTER SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------- -----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outside sales
Building products:
Wood products $ 36,204 $ 43,951 $ 77,834 $ 92,031
Norandex 71,354 -- 116,399 --
Industrial insulation products 12,352 12,537 30,074 26,965
-------- -------- -------- --------
Total building products 119,910 56,488 224,307 118,996
Resort operations 4,236 3,120 28,883 26,912
-------- -------- -------- --------
Consolidated $124,146 $ 59,608 $253,190 $145,908
-------- -------- -------- --------
-------- -------- -------- --------
Operating profit (loss)
Building products:
Wood products $ 1,514 $ 2,761 $ 4,472 $ 7,635
Norandex 5,739 -- 5,605 --
Industrial insulation products 1,986 1,402 4,798 3,608
-------- -------- -------- --------
Total building products 9,239 4,163 14,875 11,243
Resort operations (219) (569) 7,644 7,927
-------- -------- -------- --------

Total operations 9,020 3,594 22,519 19,170

Unallocated expense (4,198) (528) (6,819) (3,357)
Asbestos-related costs 4,000 -- 4,000 --
Interest expense (2,033) (553) (3,929) (1,533)
Interest and other income 458 1,025 884 1,792
-------- -------- -------- --------
Income before income taxes $ 7,247 $3,538 $16,655 $16,072
-------- -------- -------- --------
-------- -------- -------- --------

<FN>
6. On April 4, 1995, Fibreboard acquired eight building products distribution
centers to enhance Norandex's market presence in Texas, Nebraska and
Colorado for $13,448.

7. On May 31, 1995, Fibreboard replaced Resort Operation's two revolving
credit facilities and term loan with a $30 million reducing revolving
facility with interest at LIBOR plus 1.00% to 1.25%. Proceeds may be used
for operating purposes and acquisitions. Maximum availability reduces
annually and matures on May 31, 2000.

8. In June 1995, Fibreboard announced it had signed a Letter of Intent to sell
substantially all of its wood products operations. The estimated purchase
price after certain adjustments at closing is between $240,000 to $250,000.
After-tax cash proceeds are estimated at $170,000 to $180,000 with an after-tax
gain for financial reporting purposes estimated in the range of $75,000 to
$80,000. Fibreboard expects it will report the wood products operations as
a discontinued operation upon completion of the sale, which is expected to
take several months to complete.
</TABLE>

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

Quarter ended June 30, 1995 vs. 1994

Net sales increased 108% from $59.6 million in 1994 to $124.1 million in
1995. Norandex, acquired August 31, 1994, contributed sales of $71.4 million,
while wood products sales declined. Pre-tax income increased from $3.5 million
to $7.2 million, including the 1995 reversal of $4.0 million of previously
established reserves for anticipated asbestos-related costs not covered by
insurance.

Building Products--

Wood products sales declined 18% compared to 1994, as lumber, millwork and
plywood sales were all lower due primarily to reduced shipment volumes and to
lower prices. Wood products operating profit decreased from $2.8 million to
$1.5 million, reflecting the impact of lower production volumes, particularly in
plywood, and higher raw material costs for millwork relative to sales prices.

In June 1995, Fibreboard announced it had signed a letter of intent to sell
substantially all the assets of its wood products operations to Sierra Pacific
Industries. The sale is expected to take several months to close. Once the
sale is completed, Fibreboard expects it will report the wood products
operations as a discontinued operation.

For the second quarter of 1995, Norandex contributed $71.4 million in net
sales and $5.7 million in operating profit. Prior to its acquisition by
Fibreboard, Norandex had pro forma sales of $62.0 million in the second quarter
of 1995. Because of the limited nature of pro forma adjustments, Fibreboard
does not believe pro forma operating earnings comparisons between periods are
meaningful.

Industrial insulation products sales declined 1%. Improved sales of metal
products resulting from higher unit sales prices were offset by reductions in
the sales of calcium silicate molded insulation and fireproofing board due to
lower shipment volume. Operating profit increased from $1.4 million during 1994
to $2.0 million resulting primarily from improved margins on metals sales.

Resort Operations--
Resort operations revenues increased 36% to $4.2 million on higher skier
days at both resorts resulting from the excellent skiing conditions through mid-
April. The seasonal operating loss declined slightly from $0.57 million to
$0.22 million as a result of higher revenues and a smooth transition from the
ski season to the low activity spring shoulder season.

General Corporate Expenses--
Unallocated costs increased from $0.5 million to $4.2 million. In the
second quarter of 1995, Fibreboard recorded $2.5 million of expense for a stock
price based incentive compensation plan reflecting the increase in the market
price of Fibreboard's common stock during the quarter. In the 1994 period, this
plan resulted in a reduction of expense of $0.3 million. In addition, the
second quarter of 1994 included the resolution of a contingent liability related
to post-retirement benefits which resulted in a gain of $1.0 million.

<PAGE>

Other Items--
Interest expense increased from $0.6 million to $2.0 million, reflecting
higher borrowings from the third quarter 1994 purchase of Norandex. Interest
and other income decreased from $1.0 million to $0.5 million. The sale of
surplus property resulted in pre-tax gains of $0.7 million in 1994 versus zero
in 1995.

During the second quarter of 1995, Fibreboard recorded a $4.0 million
reversal of reserves previously established for anticipated unreimbursable
asbestos-related costs as a result of a reduction in its current estimate of the
amounts which will be needed for such purpose. Fibreboard will continue to
evaluate its reserve for future unreimbursable costs, and will make adjustments
as required as additional information becomes available.

Six months ended June 30, 1995 vs 1994

Net sales increased 74% from $145.9 million in 1994 to $253.2 million.
Norandex contributed sales of $116.4 million. Increases in industrial
insulation products and resort operations revenues were more than offset by
reductions in wood products sales. Pre-tax income increased from $16.1 million
to $16.7 million in 1995.

Building Products--
Wood products sales declined 15% compared to 1994 as all three major
product lines incurred lower shipment volumes and lower sales prices, except for
a modest increase in average plywood sales price due to mix changes. Wood
products operating profit decreased from $7.6 million to $4.5 million,
reflecting lower sales and the impact of lower production volumes.

For the six months, Norandex sales were $116.4 million with operating
income of $5.6 million. Norandex is a seasonal business, with the majority of
its sales and profits generated during the second and third quarters, when
construction activity is at its highest in Norandex's primary market areas. Pro
forma sales for the first six months of 1994 were $96.7 million.

Industrial insulation products sales increased 12%. Improved sales of
metal products resulting from higher unit sales prices and fireproofing board
due to higher shipment volumes were offset by reductions in the shipment volumes
of calcium silicate molded insulation. Operating profit increased from $3.6
million during 1994 to $4.8 million. Improved operating profit resulted
primarily from improved margins on metals sales.

Resort Operations--
Resort operations revenues increased 7% to $28.9 million on increased skier
days at both resorts. Operating profit declined from $7.9 million to $7.6
million. In 1994, the high volume, high profit week between Christmas and New
Years was the first week of the first quarter and the last week of the fourth
quarter and thus was not included in the first six months of 1995. Fibreboard
believes the operating results for the first six months of 1994 would have been
at least $1 million lower had it not included the week between Christmas and New
Years.

General Corporate Expenses--
Unallocated costs increased from $3.4 million to $6.8 million. In 1995,
Fibreboard recorded $2.9 million of expense for a stock price based incentive
compensation plan reflecting the increase in the market price of Fibreboard's
common stock during the first six months, whereas this plan resulted in a modest
expense reduction in the same period of 1994. In addition, the

<PAGE>

first six months of 1994 included the resolution of a contingent liability
related to post-retirement benefits which resulted in a gain of $1.0 million.

Other Items--
Interest expense increased from $1.5 million to $3.9 million reflecting
higher borrowing levels in 1995 resulting from the August 1994 purchase of
Norandex. Interest and other income declined from $1.8 million to $0.9 million.
The sale of surplus property resulted in pre-tax gains of $0.9 million in 1994
versus zero in 1995.

FINANCIAL CONDITION

Cash generated from operations decreased from $30.1 million in 1994 to
$12.4 million in 1995. The 1994 amount includes reductions of non-cash working
capital of $17.0 million whereas net working capital increased $3.3 million in
1995. This change between years resulted primarily from the 1994 liquidation of
abnormally high year-end inventories, as well as the 1995 build-up of accounts
receivable and inventories of Norandex reflecting normal seasonal activity
(Norandex was acquired August 31, 1994, so was not included in the 1994
results). Cash flow from operations in 1995 was used to reduce outstanding
borrowings by approximately $16.2 million. At June 30, 1995, $101.8 million was
available for borrowing under Fibreboard's revolving credit facilities.

During the second quarter of 1995, Fibreboard replaced its resort
operations' revolving credit facility and term loan with a new $30 million
credit facility. At June 30, 1995, $21.8 million was available under this
facility (this amount is included in aggregate availability in the preceding
paragraph). The new facility matures on May 31, 2000, with reductions in
availability beginning in April 1996. Interest on borrowings will range from
100 to 125 basis points above LIBOR.

On May 1, 1995, Fibreboard completed the purchase of the assets of Almar
Corporation (dba Aluminum Supply), Cornhusker Siding Supply, Inc. and Texas
Siding Supply, Inc. These companies operate eight exterior building product
distribution locations in Colorado, Texas and Nebraska, which concentrate on
vinyl siding and associated products. Purchased assets consist of accounts
receivable, inventories, fixed assets and intangibles. No liabilities were
assumed in the transaction. The total purchase price was $13.4 million, which
was funded under Fibreboard's revolving credit facility.

On June 20, 1995, Fibreboard announced it had entered into a letter of
intent to sell substantially all the assets of its Wood Products Group to Sierra
Pacific Industries. The estimated sales price, subject to certain adjustments
at closing, is between $240 and $250 million. After-tax cash proceeds to
Fibreboard are estimated at $170 to $180 million with an after-tax gain for
financial reporting purposes estimated in the range of $75 to $80 million.
Proceeds from the transaction, upon completion, will be used to repay borrowings
under Fibreboard's revolving line of credit. The transaction, which is subject
to execution of a definitive purchase agreement and approval of the parties'
boards of directors, is expected to take several months to close. The waiting
period under U.S. antitrust laws has expired.

Fibreboard anticipates primarily discretionary capital expenditures of
approximately $12 to $15 million during 1995. Major anticipated projects
include $2.8 million to install additional optimization equipment in the Chinese
Camp small log sawmill, $1.2 million to expand the Norandex vinyl siding
manufacturing plant capacity by 22% and infrastructure development

<PAGE>

costs of approximately $3 million to support the residential lot sales program
at Northstar, with the remainder for replacements and improvements of machinery
and equipment and additional ski area amenities. Through the second quarter,
Fibreboard has expended approximately $6.8 million on these projects. Given the
pending sale of the wood products operations, an additional $3.4 million in mill
optimization projects have been deferred.

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 June 30, 1995, Fibreboard had $3.6
million in cash on hand restricted for asbestos-related costs.

Fibreboard and Continental Casualty 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
(which are more fully discussed in Fibreboard's Annual Report on Form 10-K for
the year ended December 31, 1994), 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 prior settlements with asbestos-in-
buildings insurers will be adequate to satisfy its asbestos-related cash
requirements as they come due.

On July 27, 1995, the federal district court in Texas entered judgments
approving both the Global and Insurance Settlements. The Global Settlement has
been appealed. Fibreboard cannot predict whether or not the Insurance
Settlement will also be appealed.

Additional information regarding the asbestos-related litigation can be
found in Note 4 to the consolidated financial statements beginning on page 7.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Material developments, if any, in the asbestos-related litigation are
described in Note 4 to the consolidated financial statements beginning on page
7.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The annual meeting of Fibreboard Corporation stockholders was held June 6,
1995, for the purpose of electing two (2) directors and to ratify the selection
of Arthur Andersen LLP as independent public accountants for the 1995 fiscal
year. No other business was conducted at the annual meeting.

<PAGE>

The following table presents the results of the voting for the directors
elected at the annual meeting and the ratification of the selection of Arthur
Andersen LLP:

Director or Issue Votes For Votes Withheld Abstentions
----------------- --------- -------------- -----------

William D. Eberle 7,773,226 82,482 0

G. Robert Evans 7,780,976 74,732 0

Selection of Arthur
Andersen LLP 7,806,254 19,062 30,392

Note: There were no broker non votes.

All voting in the above table has been adjusted to reflect a 2-for-1 stock split
effective May 19, 1995.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following exhibits are filed as part of this Form 10-Q:

Exhibit No. Description
----------- -----------------------------------------
10.32 Amendment No. 2 to the Fibreboard Corporation Restated 1988
Employee Stock Option and Rights Plan, dated as of May 19,
1995.

10.33 Amendment No. 1 to the Fibreboard Corporation 1988 Employee
Stock Purchase Plan, dated as of May 19, 1995.

10.34 Amendment No. 1 to the Fibreboard Corporation Long-Term Equity
Incentive Plan, dated as of May 19, 1995.

10.35 Agreement to Amend, Consolidate and Lend dated May 31, 1995 by
and between First Interstate Bank of Nevada, N.A., as lender,
and Trimont Land Company and Sierra-at-Tahoe, Inc. as
borrowers.

99.1 Press release dated June 20, 1995 relating to Fibreboard's
signing of a letter of intent to sell its Wood Products Group
to Sierra Pacific Industries.

99.2 Press release dated July 28, 1995 relating to the approval of
Fibreboard's asbestos Global and Insurance Settlement
Agreements by a federal district trial court in Texas.

(b) No Current Reports on Form 8-K were filed during the period April 1, 1995
to June 30, 1995.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

FIBREBOARD CORPORATION
----------------------
(Registrant)

Dated: August 11, 1995 By: /s/ James P. Donohue
----------------------
James P. Donohue
Senior Vice President,
Finance and Administration and
Chief Financial Officer

Dated: August 11, 1995 By: /s/ Garold E. Swan
----------------------
Garold E. Swan
Vice President and Controller

<PAGE>
EXHIBIT 10.32

AMENDMENT NO. 2 TO THE FIBREBOARD CORPORATION RESTATED
1988 EMPLOYEE STOCK OPTION AND RIGHTS PLAN

1. Section 2(a) of the Fibreboard Corporation Restated 1988 Employee
Stock Option and Rights Plan (the "Plan") has been amended to read as
follows:

"The stock subject to option and other provisions of the
Plan shall be shares of the Corporation's authorized but
unissued, or reacquired, common stock, $.01 par value per
share ("Common Stock"). The aggregate maximum number of
shares of Common Stock issuable under the Plan pursuant to
options, stock appreciation rights, limited stock
appreciation rights and restricted stock awards granted
hereunder shall not exceed in the aggregate 1,600,000
shares; provided, that such aggregate number of shares shall
be subject to adjustment in accordance with the provisions
of Section 9(c)."

2. The first sentence of Section 5(e) of the Plan has been amended
to read as follows:

"On July 13, 1988 and the July 1 of each year after 1988
that the Plan is in effect, each individual serving as a
non-employee member of the Board of Directors shall
automatically be granted a Non-Statutory Option to purchase
4,000 shares of Common Stock (subject to adjustment under
Section 9(c) hereof) (the "Automatic Option Grant")."

3. Section 8(c) of the Plan has been amended to read as follows:

"Each non-employee director serving as such on July 13, 1988
is awarded 4,000 restricted stock rights, which shall be
forfeitable until the director serves three years from the
date of this grant as a director, or, if sooner, until the
occurrence of a Change of Control as described in Section
10(b), without regard to whether the Board adopts a
resolution determining that no Change of Control has
occurred. If the non-employee director resigns, is removed
or is not re-nominated to the Board at the expiration of the
director's term of office, a portion of the restricted stock
rights will be nonforfeitable according to the number of
whole years served as a

<PAGE>

non-employee director as follows: 40% of the restricted shares after
one year; an additional 30% of the restricted shares after two years;
and an additional 30% of the restricted shares after three years.
Shares of Common Stock will be issued pursuant to the restricted stock
rights when the restricted stock rights become nonforfeitable. In
addition, each individual who becomes a non-employee director after
April 7, 1994, during the term of this Plan, will automatically
receive an award of 2,000 restricted stock rights effective as of the
date on which such individual becomes a non-employee director, subject
to the conditions set forth in this subparagraph."

4. All other terms and provisions of the Plan shall remain in full force
and effect.

<PAGE>

EXHIBIT 10.33

AMENDMENT NO. 1 TO THE FIBREBOARD CORPORATION
1988 EMPLOYEE STOCK PURCHASE PLAN

1. Section 6(a) of the Fibreboard Corporation 1988 Employee Stock
Purchase Plan (the "Plan") has been amended to read as follows:

"The Stock purchasable by Participants under the Plan shall,
solely in the Board's discretion, be made available from
either authorized but unissued Stock or from reacquired
Stock, including shares of Stock purchased on the open
market. The total number of shares which may be issued
under the Plan shall not exceed 500,000 shares (subject to
adjustment under subparagraph (b) below)."

2. All other terms and provisions of the Plan shall remain in full force
and effect.

<PAGE>

EXHIBIT 10.34

AMENDMENT NO. 1 TO THE FIBREBOARD CORPORATION
LONG-TERM EQUITY INCENTIVE PLAN

1. Article 3 of the Fibreboard Corporation Long-Term Equity Incentive
Plan (the "Plan") has been amended to read as follows:

"The number of Phantom Stock Units that may be awarded under the
Plan in any fiscal year of the Company shall not exceed 300,000,
and any available Phantom Stock Units that were not used in a
fiscal year shall be carried over and be available for additional
Awards in any subsequent fiscal year. The limitation of this
Article 3 shall be subject to adjustment pursuant to Article 6.
If Phantom Stock Units are forfeited or terminate for any other
reason, then such Phantom Stock Units shall again become
available for Awards under the Plan."

2. All other terms and provisions of the Plan shall remain in full force
and effect.

<PAGE>

AGREEMENT TO AMEND, CONSOLIDATE AND LEND

dated May, 31, 1995,

by and between

FIRST INTERSTATE BANK OF NEVADA, N.A., as lender,

and

TRIMONT LAND COMPANY, a California corporation, doing
business as Northstar-At-Tahoe and
SIERRA-AT-TAHOE, INC., a Delaware corporation,
as Borrowers

<PAGE>

TABLE OF CONTENTS

ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing of Loan . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Use of Proceeds; Permitted Acquisitions . . . . . . . . . . . . 6
1.5 Notice of Advances . . . . . . . . . . . . . . . . . . . . . . 7
1.6 Reserve Requirements; Change in Circumstances . . . . . . . . . 7
1.7 Change in Legality . . . . . . . . . . . . . . . . . . . . . . 8
1.8 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.9 Repayment; Reduction in Facility; Right of Prepayment . . . . . 10
1.10 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . 11
1.11 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.12 Security of Loan . . . . . . . . . . . . . . . . . . . . . . . 11
1.13 Non-use Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.14 Letter of Credit Issuing Fee . . . . . . . . . . . . . . . . . 13
1.15 Costs of Loan . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
CONDITIONS TO OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Title Insurance Policy . . . . . . . . . . . . . . . . . . . . 13
2.3 Financial Information . . . . . . . . . . . . . . . . . . . . . 14
2.4 No Adverse Changes in Financial Condition . . . . . . . . . . . 14
2.5 Representations and Warranties True and Correct . . . . . . . . 14
2.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 14
2.7 Corporate Resolutions . . . . . . . . . . . . . . . . . . . . . 14
2.8 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
LOAN ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Procedures for Advances . . . . . . . . . . . . . . . . . . . . 15
3.2 Conditions to Advances . . . . . . . . . . . . . . . . . . . . 15
3.3 Advances or Amounts Outstanding in Excess of Maximum
Permissible Loan Balance . . . . . . . . . . . . . . . . . . 15

ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 16
4.1 Litigation Affecting Borrowers . . . . . . . . . . . . . . . . 16
4.2 Litigation Affecting the Collateral . . . . . . . . . . . . . . 16
4.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . 16
4.4 Contingent Obligations; Material Adverse Changes . . . . . . . 16
4.5 Information Furnished Regarding Loan . . . . . . . . . . . . . 16
4.6 Title to Collateral . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Intangible Personal Property . . . . . . . . . . . . . . . . . 17
4.8 Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 17
4.9 No Subsidiaries of Borrowers . . . . . . . . . . . . . . . . . 17

<PAGE>

4.10 Representations Regarding Certain Extensions of Credit . . . . 17
4.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 17
4.12 Inapplicability of Certain Laws . . . . . . . . . . . . . . . . 18
4.13 No Defaults By this Agreement . . . . . . . . . . . . . . . . . 18

ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Punctual Payments . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Other Payments . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Maintenance of Existence and Rights; Conduct of Business . . . 18
5.5 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 19
5.6 Compliance with Material Agreements . . . . . . . . . . . . . . 19
5.7 Authorization and Approvals . . . . . . . . . . . . . . . . . . 19
5.8 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . 19
5.9 Liquidations, Mergers, Consolidations and Disposition of
Substantial Assets . . . . . . . . . . . . . . . . . . . . . 19
5.10 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Operations and Properties . . . . . . . . . . . . . . . . . . . 20
5.12 Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . 20
5.13 Borrowers' Financial Information . . . . . . . . . . . . . . . 20
5.14 Parent Financial Information . . . . . . . . . . . . . . . . . 21
5.15 Parent SEC and Other Reports . . . . . . . . . . . . . . . . . 21
5.16 Restrictions on Dividends . . . . . . . . . . . . . . . . . . . 21
5.17 Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.18 Minimum Tangible Net Worth . . . . . . . . . . . . . . . . . . 22
5.19 Net Cash Flow to Fixed Charges Ratio . . . . . . . . . . . . . 22
5.20 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . 23
5.21 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . 23
5.22 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . 23
5.23 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . 24
5.24 Compliance Certificate . . . . . . . . . . . . . . . . . . . . 24
5.25 Notice to Bank . . . . . . . . . . . . . . . . . . . . . . . . 25
5.26 Restrictions on Real Estate Development Expenditures . . . . . 25

ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Default Remedies . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . 30
7.6 Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . 30

<PAGE>

7.7 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.9 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 32
7.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.12 Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.13 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . 32
7.14 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . 32
7.15 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . 32
7.16 Right to Act . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.17 "Tombstone" Advertisements; Bound Volumes . . . . . . . . . . . 33
7.18 Effect of this Agreement . . . . . . . . . . . . . . . . . . . . 33
7.19 Obligations of Borrowers Joint and Several . . . . . . . . . . . 33
7.20 Assignability of Bank's Rights . . . . . . . . . . . . . . . . . 33
7.21 Incorporation of Recitals . . . . . . . . . . . . . . . . . . . 34

INDEX OF DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . . 35

LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

iii

<PAGE>

AGREEMENT TO AMEND, CONSOLIDATE AND LEND

THIS AGREEMENT TO AMEND, CONSOLIDATE AND LEND ("Agreement") is entered into
this 31st day of May 1995, by and between FIRST INTERSTATE BANK OF NEVADA,
N.A., as lender ("Bank"), and TRIMONT LAND COMPANY, a California corporation,
doing business as Northstar-At-Tahoe ("Trimont"), and SIERRA-AT-TAHOE, INC.,
a Delaware corporation ("Sierra") as co-borrowers (jointly with Trimont,
"Borrowers;" without distinguishing, each may be referred to as a
"Borrower"), with reference to the following facts and circumstances:

RECITALS:

A. Borrowers wish to obtain financing (such financing as is provided for
hereunder, the "Loan") in the form of a reducing revolving line of credit
consolidating a loan from Bank to Borrowers (the "Sierra Loan") with a loan
from Bank to Trimont (the "Trimont Loan"), and providing additional credit
for, among other things, the purpose of allowing Borrowers to acquire other
resort properties. The Sierra Loan is a reducing revolving line of credit
with original credit availability in the amount of TEN MILLION AND NO/100
DOLLARS ($10,000,000.00) and is documented in a Loan Agreement ("Sierra Loan
Agreement") and a Secured Reducing Revolving Line of Credit Promissory Note
(the "Sierra Note"), both of which are dated September 17, 1993. The Trimont
Loan is documented by a Term Note in the principal amount of FIVE MILLION AND
NO/100 DOLLARS ($5,000,000.00), a Secured Revolving Credit Note
(collectively, the "Trimont Notes") with FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00) original available credit, both of which are dated May 3,
1993, and by a Loan Agreement of the same date which sets up certain
Sub-Credit Facilities in the original cumulative principal amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00) as modified by the Addendum to
Loan Agreement also dated May 3, 1993 ("Trimont Loan Agreement," collectively
with Sierra Loan Agreement, "Loan Agreements").

B. It is the intent of Borrowers that in consolidating the above loans,
that Sierra become a co-borrower on all obligations under this Agreement with
Trimont.

C. Bank agrees to amend and consolidate the Sierra Loan and the Trimont
Loan and to extend credit to Borrowers, in the form of a reducing revolving
line of credit, in the cumulative amount of THIRTY MILLION AND NO/100 DOLLARS
($30,000,000.00), documented by a Secured Reducing Revolving Line of Credit
Promissory Note and by this Agreement.

NOW THEREFORE, in consideration of the foregoing and other considerations
hereinafter set forth, the parties hereto agree as follows:

<PAGE>

ARTICLE I
TERMS

1.1 GENERAL. Bank agrees to lend to either Borrower, and issue letters of
credit for the account of either Borrower, up to an aggregate principal
amount not to exceed the Maximum Permissible Loan Balance, subject to terms
and conditions as set forth herein.

The Bank agrees to make advances from time to time on any Business Banking
Day occurring prior to the Maturity Date equal to the amount of the advance
requested by a Borrower to be made on such day. On the terms and subject to
the conditions hereof, a Borrower may from time to time borrow, prepay and
reborrow such advances.

On the terms and conditions hereinafter set forth, Bank hereby agrees from
time to time on any Business Banking Day occurring prior to the Maturity Date
to issue standby or documentary letters of credit for the account of a
Borrower in accordance with the terms hereof, and to amend or renew letters
of credit previously issued by it, in accordance with the terms hereof, in an
aggregate amount not to exceed at any time the maximum aggregate L/C
Exposure, which is TWO MILLION AND NO/100 DOLLARS ($2,000,000.00). Within
the foregoing limits, and subject to the other terms and conditions hereof, a
Borrower's ability to obtain letters of credit shall be fully revolving and,
accordingly, a Borrower may, during the foregoing period, obtain letters of
credit to replace letters of credit which have expired or which have been
drawn upon and reimbursed.

The "L/C Exposure" shall mean, at any time, the sum of (i) the aggregate
undrawn amount of all outstanding letters of credit issued hereunder, plus
(ii) the aggregate principal amount of all payments and disbursements made by
the Bank under such letters of credit that have not yet been reimbursed at
such time.

a. Notice to Bank of Issuance Request. Each letter of credit shall be
issued upon the submission of a completed application of a Borrower received
by the Bank, subject to the Bank's normal underwriting procedures.

b. Issuance of Letters of Credit. Subject to the terms and conditions
hereof, the Bank shall, on the requested date, issue a letter of credit for
the account of a Borrower or amend or renew a letter of credit, as the case
may be, in accordance with the Bank's usual and customary business practices.

c. Notice to Bank of Amendment Request. From time to time while a
letter of credit is outstanding and prior to the Maturity Date, the Bank
shall, upon the written request of a Borrower received by the Bank, amend any
letter of credit issued by it. Each such request for amendment of a letter
of credit shall be made in writing, and shall specify in form and detail
reasonably satisfactory to the Bank: (i) the letter of credit to be amended;
(ii) the proposed date of amendment of the letter of credit (which shall be a

<PAGE>

Business Banking Day); (iii) the nature of the proposed amendment; and (iv)
such other matters as the Bank may require.

The Bank shall be under no obligation to amend any letter of credit, and
shall not permit the amendment of any letter of credit, if: (i) the Bank
would have no obligation at such time to issue such letter of credit in its
amended form under the terms of this Agreement; (ii) the beneficiary of any
such letter of credit does not accept the proposed amendment to the letter of
credit; or (iii) any other party to such letter of credit does not accept the
proposed amendment to the letter of credit

d. Notice to Bank of Renewal Request. The Bank shall, while a letter
of credit is outstanding and prior to the expiry date, at the option of a
Borrower and upon the written request of a Borrower, authorize the renewal of
any letter of credit issued by it. Each such request for renewal of a letter
of credit shall be made in writing and shall specify in a form and detail
reasonably satisfactory to the Bank: (i) the letter of credit to be renewed;
(ii) the proposed date of notification of renewal of the letter of credit
(which shall be a Business Banking Day); (iii) the revised expiry date of the
letter of credit; and (iv) such other matters as the Bank may require.

The Bank shall be under no obligation to renew any letter of credit, and
shall not permit any renewal (including any automatic renewal) of a letter of
credit, if the Bank would have no obligation at such time to issue or amend
such letter of credit in its renewed form under the terms of this Agreement,
or the beneficiary of any such letter of credit does not accept the proposed
renewal of the letter of credit. If any outstanding letter of credit shall
provide that it shall be automatically renewed unless the beneficiary thereof
receives notice from the Bank that such letter of credit shall not be
renewed, and if at the time of renewal the Bank would be entitled to
authorize the automatic renewal of such letter of credit in accordance with
this subsection (d) upon the request of a Borrower but the Bank shall not
have received a request therefor from a Borrower with respect to such renewal
or other written direction by a Borrower with respect thereto, the Bank shall
nonetheless be permitted to allow such letter of credit to renew, and the
Borrowers hereby authorize such renewal and, accordingly, the Bank shall be
deemed to have received a notice from a Borrower requesting such renewal.

e. Expiry of Letters of Credit. The Bank may, at its election, deliver
any notices of termination or other communications to any letter of credit
beneficiary or transferee, or take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such letter of credit to be a date not later than the Maturity Date.

f. Certain Fees and Charges. A Borrower shall pay to the Bank, from
time to time, on demand, the normal issuance, presentation, amendment and
other processing fees and other standard costs and charges of the Bank
relating to letters of credit as from time to time in effect.

<PAGE>

g. Uniform Customs and Practices. The Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber
of Commerce shall in all respects be deemed a part of this Article I as if
incorporated herein and shall apply to the letters of credit.

The Loan shall be evidenced by a promissory note in the form of the Secured
Reducing Revolving Line of Credit Promissory Note attached hereto as Exhibit
"A" (the "Note"). The Loan and the Note shall be secured by the security
documents described in Paragraph 1.12 below (the "Security Documents," and
collectively with the Note, this Agreement, and all other documents required
or provided for hereunder, the "Loan Documents"). Execution of the Note and
the other Loan Documents by Borrowers and delivery of the Note and other Loan
Documents to Bank shall constitute approval by Borrowers of all of the terms
and conditions contained in the Note and other Loan Documents. The Loan is
not assumable except as otherwise contemplated in Section 5.9 hereof.

1.2 CLOSING OF LOAN. The closing of the Loan (the "Closing") shall be the
earlier of the date on which all of the conditions of the Bank's obligations,
as set forth in Article II hereinbelow, have been satisfied (the "Closing
Date"), or May 31, 1995 (the "Scheduled Closing Date"); provided, however,
that if the conditions to Bank's obligations have not been satisfied or
waived on or before the Scheduled Closing Date, then neither Bank nor
Borrowers shall have any obligations hereunder except that Borrowers shall be
required to pay all sums due under Paragraph 1.14 below and shall have no
right to any refund of sums paid under Paragraph 1.14 below.

1.3 INTEREST RATE. Interest shall be calculated by applying a margin to the
LIBOR Rate corresponding to the Borrowers' Funded Debt-to-Cash Flow Ratio
defined as: consolidated interest-bearing indebtedness of the Borrowers
determined as of each fiscal quarter end in accordance with GAAP, including
(a) the daily average of capitalized lease liabilities, (b) the daily average
of the outstanding principal owing under this Agreement for the ninety- (90-)
day period immediately preceding each fiscal quarter end, and (c) the daily
average of all other interest-bearing indebtedness as of the end of the
applicable fiscal period under review, DIVIDED BY the sum of (x) earnings
before interest, taxes, depreciation and amortization for the Borrowers on a
consolidated basis ("EBITDA") for the four consecutive fiscal quarters ending
on such date and (y) with respect to each acquisition, merger or other
business combination made by a Borrower during the four consecutive fiscal
quarters of such Borrower immediately preceding the fiscal quarter end for
which the ratio is then being calculated, the aggregate amount of earnings
before interest, taxes, depreciation and amortization of the assets, capital
stock, division or business group acquired in such acquisition, merger or
other business combination (as reasonably allocable thereto) for the period
beginning four fiscal quarters before the fiscal quarter end for which the
ratio is then being calculated and ending on the date such acquisition,
merger or other business combination was made, as follows:

<PAGE>

DEBT-TO-CASH FLOW RATIO: LIBOR MARGIN:
less than 1.5:1.0 1.00%
1.5:1.0 - 2.0:1.0 1.125%
more than 2.0:1.0 - 3.25:1.0 1.25%

In the alternative, Borrowers may choose to calculate interest based on the
"Reference Rate" which is the higher of Bank's Prime lending rate or the
Federal Funds rate plus one-half of one percent (0.5%). Any change in the
Reference Rate due to a change in the Bank's Prime lending rate or the
Federal Funds rate, shall be effective on the effective date of such change
in such Prime lending rate or Federal Funds rate, respectively. However,
Borrowers' interest rate shall never be less than 25 basis points over
Parent's applicable interest rate (as set out in the Quarterly Compliance
Certificate, a sample of which is attached hereto as Exhibit "L-1" and is, by
this reference incorporated herein) for two (2) consecutive quarters as
certified on the Quarterly Compliance Certificate. Should the LIBOR Rate plus
the applicable margin for any Interest Period be determined to be less than
25 basis points over Parent's applicable interest rate for two (2)
consecutive quarters, as reported on the most recent Quarterly Compliance
Certificate delivered prior to the determination of such LIBOR Advance, then
the Borrowers' interest rate for the Interest Period of such LIBOR Advance
shall be equal to 25 basis points over Parent's applicable interest rate
calculated as described above. Should the Reference Rate be determined to be
less than 25 basis points over Parent's applicable interest rate for two (2)
consecutive quarters, as reported on the most recent Quarterly Compliance
Certificate delivered prior to the determination of such Reference Rate
Advance, then the Borrowers' interest rate for such Reference Rate Advance
shall be equal to 25 basis points over Parent's applicable interest rate,
calculated as described above.

LIBOR Rates (adjusted for reserves, if incurred) will be available for
periods of one, two, three or six months ("Interest Period").

"LIBOR" shall mean, with respect to any LIBOR loan for any Interest Period,
the rate per annum as published on the applicable Business Banking Day in
"Telerate Systems Reports" by the British Bankers Association for interest
settlement rates relating to the London interbank offerings as of 11:00 a.m.,
London, England, time on the date that is four (4) Business Banking Days
prior to the commencement of the applicable Interest Period or, if not
published on that date, then on the next published date, for the number of
months comprised to which rate shall be added the appropriate LIBOR margin.
The LIBOR Rate shall be adjusted for Eurocurrency reserves, if incurred.

"LIBOR Rate" is calculated by dividing LIBOR by the difference of one (1)
minus the Eurocurrency reserve requirement, if applicable.

The Borrowers shall have the right at any time upon prior irrevocable notice
to the Bank (i) not later than 11:00 a.m., San Francisco time, on the date of
conversion, to convert all or any portion of any LIBOR Advance into a
Reference Rate Advance, (ii) not later than

<PAGE>

11:00 a.m., San Francisco time, on the date that is four (4) Business Banking
Days prior to the date of conversion, to convert all or any portion of any
Reference Rate Advance into a LIBOR Advance, and (iii) not later than 11:00
a.m., San Francisco time, on the date that is four (4) Business Banking Days
prior to conversion, to convert all or any portion of the Interest Period
with respect to any LIBOR Advance to another permissible Interest Period, as
described in such notice. If the Borrowers have not given notice in
accordance with this paragraph 1.3 to continue any LIBOR Advance into a
subsequent Interest Period (and shall not have given notice to convert such
Advance), such Advance shall, at the end of the Interest Period applicable
thereto (unless repaid pursuant to the terms hereof), automatically be
converted into a Reference Rate Advance.

In the event and on each occasion that on the day two (2) "Business Banking
Days" (a Business Banking Day is any day (other than a Saturday or Sunday) in
which the Bank is open to the public to conduct its business) prior to the
commencement of any Interest Period for a LIBOR Advance as defined in Section
1.5 below, the Bank shall have determined that dollar deposits in the
principal amounts of the LIBOR Advance are not generally available in the
London interbank market, or that the rates at which such dollar deposits are
being offered will not adequately and fairly reflect the cost to Bank of
making or maintaining its LIBOR Advance during such Interest Period, or that
reasonable means do not exist for ascertaining the LIBOR Rate, the Bank
shall, as soon as practicable thereafter, give written, faxed or telexed
notice of such determination to the Borrowers. In the event of any such
determination, any request by the Borrowers for a LIBOR Advance shall, until
the Bank shall have advised the Borrowers that the circumstances giving rise
to such notice no longer exist, be deemed to be a request for a draw under
the Reference Rate. Each determination by the Bank hereunder shall be
conclusive absent manifest error.

1.4 USE OF PROCEEDS; PERMITTED ACQUISITIONS. Unless the Bank has agreed
otherwise in a writing provided by it to the Borrowers, the Loan proceeds may
only be used for or with respect to: (i) non-hostile acquisitions, mergers or
other business combinations by a Borrower or an affiliate of a Borrower of an
existing ski resort or golf course, provided that the aggregate purchase
price for each such acquisition, merger or other business combination is less
than or equal to TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) or, if the
purchase price exceeds such amount, the Bank has consented thereto (which
consent will be reasonably granted) prior to the closing of such transaction
(in connection therewith, the Bank agrees to use its best efforts to respond
to such request within ten (10) Business Banking Days following the date of
such request); and (ii) general working capital purposes of the Borrowers and
their subsidiaries provided that the aggregate outstanding principal amount
of advances used for working capital purposes shall not at any time exceed
FIFTEEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($15,500,000.00)
absent written approval of Bank to do otherwise.

<PAGE>

Once an acquisition, merger or other business combination is completed, any
acquired entity which remains intact shall sign the Note as an additional
maker and its stock shall be hypothecated to Bank at Bank's discretion.

If a Borrower wishes to acquire, merge with or enter into another business
combination with any other Person, such Borrower will deliver to the Bank,
prior to the closing of any such transaction, a written notice thereof,
containing a description in detail reasonably satisfactory to the Bank of the
businesses, Persons and assets proposed to be acquired and the terms and
conditions of such proposed transaction. In the case where the aggregate
purchase price for any such transaction exceeds TEN MILLION AND NO/100
DOLLARS ($10,000,000.00), then such notice shall also include (i) such
financial statements for the prior fiscal year for the Persons, businesses or
other assets which such Borrower proposes to acquire as may be reasonably
requested by the Bank, and (ii) PRO FORMA financial statements of such
Borrower and a Compliance Certificate substantially in the form of Exhibit
"L-1" or "L-2," as the case may be, demonstrating to the reasonable
satisfaction of the Bank that, immediately upon the consummation of such
transaction, the Borrower is in compliance with the terms hereof.

1.5 NOTICE OF ADVANCES. Borrowers shall give Bank written or faxed notice
(or telephone notice promptly confirmed in writing or by fax) (a) in the case
of a LIBOR Advance, not later than 11:00 a.m., San Francisco time, four (4)
Business Banking Days before a proposed draw and (b) in the case of a
Reference Rate Advance, not later than 11:00 a.m., San Francisco time, on the
date of a proposed draw. Such notice shall be irrevocable and shall, in each
case, refer to this Agreement and specify (a) the date of such draw (which
shall be a Business Banking Day); (b) the amount thereof; (c) whether such
draw shall apply the Reference Rate ("Reference Rate Advance") or the LIBOR
Rate ("LIBOR Advance"); and (d) the Interest Period, if the draw is a LIBOR
Advance.

1.6 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.

a. Notwithstanding any other provision herein, if after the date of
this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not
having the force of law) shall change the basis of taxation of payments to
Bank or the principal of or interest on any LIBOR Advance made by Bank (other
than changes in respect of taxes imposed on the overall net income of Bank),
or shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets or, deposit with or for the account of or
credit extended by Bank (except any such reserve requirement which is
reflected in the LIBOR Rate) or shall impose on Bank or the London interbank
market any other condition affecting this Agreement or LIBOR Advances made by
Bank, and the result of any of the foregoing shall be to increase the cost to
Bank of making or maintaining any LIBOR Advance or to reduce the amount of
any sum received or receivable by Bank hereunder or under the Note (whether
of principal, interest or otherwise) by an amount deemed by Bank to be

<PAGE>

material, then the Borrowers will pay to Bank upon demand such additional
amount or amounts as will compensate Bank for such additional costs incurred
or reduction suffered.

b. If Bank determines that the applicability of any law, rule,
regulation, agreement or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and
Supervisory Practices entitled "International Convergence of Capital
Measurement and Capital Standards," or the adoption after the date hereof of
any other law, rule, regulation, agreement or guideline regarding capital
adequacy, or any change in the any of the foregoing or in the interpretation
or administration of any of the foregoing or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Bank (or any lending office of Bank) or Bank's
holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank
of comparable agency, has or would have the effect of reducing the rate of
return on Bank's capital or on the capital of Bank's holding company as a
consequence of this Agreement or the LIBOR Advances made by Bank pursuant
hereto to a level below that which Bank or Bank's holding company could have
achieved but for such applicability, adoption, change or compliance (taking
into consideration Bank's policies and the policies of Bank's holding company
with respect to capital adequacy) by an amount deemed by Bank to be material,
then from time to time upon demand, the Borrowers shall pay to Bank such
additional amount or amounts as will compensate Bank or Bank's holding
company for any such reduction suffered.

c. A certificate of Bank setting forth such amount or amounts as shall
be necessary to compensate Bank or its holding company as specified in
paragraph (a) or (b) above, as the case may be, shall be delivered to the
Borrowers and shall be conclusive absent manifest error. The Borrowers shall
pay Bank the amount shown as due on any such certificate delivered by it
within ten (10) days after its receipt of the same.

d. Failure on the part of Bank to demand compensation for any increased
costs or reduction in amounts received or receivable or reduction in return
on capital with respect to any period shall not constitute a waiver of Bank's
right to demand compensation with respect to such period or any other period.
The protection of this Section shall be available to Bank regardless of any
possible contention of the invalidity or inapplicability or the law, rule,
regulation, guideline or other change or condition which shall have occurred
or been imposed.

1.7 CHANGE IN LEGALITY.

a. Notwithstanding any other provision herein, if any change in any law
or regulation or in the interpretation thereof by any governmental authority
charged with the administration or interpretation thereof shall make it
unlawful for Bank to make or maintain

<PAGE>

any LIBOR Advance or to give effect to its obligations as contemplated hereby
with respect to any LIBOR Advance, then, by written notice to the Borrowers,
Bank may:

(i) declare that LIBOR Advances will not thereafter be made by Bank
hereunder, whereupon any request by the Borrowers for a LIBOR Advance
shall be deemed a request for a Reference Rate Advance unless such
declaration shall be subsequently withdrawn; and

(ii) require that all outstanding LIBOR Advances made by it be
converted to Reference Rate Advances, in which event all such LIBOR
Advances shall be automatically converted to Reference Rate Advances as
of the effective date of such notice as provided in paragraph (b) below.

In the event Bank shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the LIBOR Advances that would have been made by Bank or the
converted LIBOR Advances of Bank shall instead be applied to repay the
Reference Rate Advances made by Bank in lieu of, or resulting from the
conversion of, such LIBOR Advances.

b. For purposes of this Section 1.7, a notice to Borrowers by Bank shall
be effective as to each LIBOR Advance, if lawful, on the last day of the
Interest Period currently applicable to such LIBOR Advance; in all other
cases such notice shall be effective on the date of receipt by the Borrowers.

1.8 INDEMNITY. The Borrowers shall indemnify Bank against any loss or
expense which Bank may sustain or incur as a consequence of

a. any failure by the Borrowers to fulfill on the date of any advance
hereunder the applicable conditions set forth in Article II,

b. any failure by the Borrowers to borrow hereunder after irrevocable
notice of such advance or refinancing has been given pursuant to Section 1.5,

c. any prepayment of a LIBOR Advance required by any other provision of
this Agreement or otherwise made or deemed made on a date other than
quarterly or on the last day of the Interest Period applicable thereto, as
required by Article I hereof,

d. any default in payment or prepayment of the principal amount of the
outstanding balance or any part thereof or interest accrued thereon, as and
when due and payable (at the due date thereof, whether by scheduled maturity,
acceleration, irrevocable notice of prepayment or otherwise), or

e. the occurrence of any Event of Default, including, in each such case,
any loss or reasonable expense sustained or incurred in liquidating or
employing deposits from third parties acquired to affect or maintain the Loan
or any part thereof as a LIBOR

<PAGE>

Advance. Such loss or reasonable expense shall include an amount equal to
the excess, if any, as reasonably determined by Bank, of

(i) its cost of obtaining the funds for the outstanding balance or
the portion thereof being paid, prepaid or not borrowed (assumed to be
the LIBOR Rate applicable thereto) for the period from the date of such
payment, prepayment or failure to borrow to the last day of the Interest
Period for a LIBOR Advance (or, in the case of a failure to borrow, the
Interest Period for a LIBOR Advance which would have commenced on the
date of such failure) over

(ii) the amount of interest (as reasonably determined by Bank) that
would be realized by Bank in reemploying the funds so paid, prepaid or
not borrowed for such period or Interest Period, as the case may be. A
certificate of Bank setting forth any amount or amounts which Bank is
entitled to receive pursuant to this Section 1.8 shall be delivered to
the Borrowers and shall be conclusive absent manifest error.

1.9 REPAYMENT; REDUCTION IN FACILITY; RIGHT OF PREPAYMENT. Borrowers shall
pay all accrued interest upon Reference Rate Advances quarterly in arrears on
the last day of each January, April, July and October (or, if Bank is not
open for business on that day, the next succeeding day on which Bank is open
for business). Interest on LIBOR loans is payable on the last day of the
applicable Interest Period, but in no case less frequently than quarterly.

The outstanding principal balance of each LIBOR Advance shall be payable on
the last day of the Interest Period applicable to such LIBOR Advance and on
the Maturity Date.

Subject to the provisions of the next succeeding paragraph, the Maximum
Permissible Loan Balance shall be reduced as follows:

PERIOD ENDING: REDUCTION AMONT:
April 30, 1996 $2,528,571.00
April 30, 1997 $2,528,571.00
October 30, 1997 $2,071,428.00
April 30, 1998 $4,599,999.00
April 30, 1999 $4,599,999.00

If an initial advance hereunder for purposes of an acquisition permitted
hereby is made prior to October 30, 1997, then (i) the Maximum Permissible
Loan Balance shall be reduced on April 30 of each year by an amount equal to
FOUR MILLION FIVE HUNDRED NINETY-NINE THOUSAND NINE HUNDRED NINETY NINE AND
NO/100 DOLLARS ($4,599,999.00) commencing on the April 30 next occurring
thereafter (or the date of such acquisition, if it occurs on April 30) and
(ii) the commitment reduction schedule set forth in the immediately preceding
paragraph shall no longer be applicable.

<PAGE>

All remaining principal and accrued interest shall be due and payable on the
Maturity Date.

The Maximum Permissible Loan Balance will be reduced each period by the
required principal reductions set forth above.

Any amount outstanding under the Note may be prepaid at any time, without
penalty, but no such prepayment shall modify, reduce, or delay the repayment
obligations hereof. Borrowers may, from time to time in their discretion,
seek advances under the Loan in accordance with the provisions of Article III
hereinbelow; provided, however, that, except to the extent of accrued
interest not yet due for payment, the amount outstanding under the Loan may
at no time exceed the Maximum Permissible Loan Balance. The "Maximum
Permissible Loan Balance" shall initially be THIRTY MILLION AND NO/100
DOLLARS ($30,000,000.00), but the Maximum Permissible Loan Balance then in
effect shall be subject to reduction in accordance with the terms of this
Paragraph 1.9.

Prepayment may be made upon at least three (3) Business Banking Days' prior
written or faxed notice (or telephone notice promptly confirmed by written or
faxed notice) to the Bank; PROVIDED, HOWEVER, that each partial prepayment
shall be in an amount which is an integral multiple of ONE MILLION AND NO/100
DOLLARS ($1,000,000.00) and not less than ONE MILLION AND NO/100 DOLLARS
($1,000,000.00). Each notice of prepayment shall specify the prepayment date
and the principal amount to be prepaid, shall be irrevocable and shall commit
the Borrowers to prepay such amount stated therein on the date stated
therein. All prepayments shall include accrued interest on the principal
amount being prepaid to the date of payment and shall be applied to payment
of interest before application to principal.

On the date of any termination or reduction of the Maximum Permissible Loan
Balance pursuant to this Section 1.9, the Borrowers shall pay or prepay so
much of the outstanding balance as shall be necessary in order that the
aggregate principal amount of the outstanding balance will not exceed the
Maximum Permissible Loan Balance after giving effect to such termination or
reduction.

1.10 PLACE OF PAYMENT. Payments under the Note shall be made to the Bank at
First Interstate Bank of Nevada, N.A., Corporate Banking Division, #727-R,
One East First Street, Reno, Nevada, 89501, or at such other place and/or
person as Bank may designate in writing. Wire transfers may be sent using
ABA #121200019 or to such other number as Bank may designate in writing.

1.11 TERM. The Maturity Date of the Note and of this Loan is May 31, 2000.

1.12 SECURITY FOR LOAN. The Loan and all advances thereunder shall be
secured by a Deed of Trust and Assignment of Rents, Issues and Profits (the
"Deed of Trust"), as amended, upon the property described therein (including
any and all water rights and leasehold estates) or in any exhibit(s) thereto
(the "Real Property"), a Special Covenants

<PAGE>

and Agreements Regarding Ski Permits (the "Special Covenants"), as amended,
an Agreement Concerning First Interstate Bank Nevada Loan for Holder Term
Special Use Permit No. 4185 (the "Ski Permit Agreement"), a Security
Agreement from each of Sierra and Trimont (the "Security Agreements"), as
amended, upon the property described therein or in any exhibit(s) thereto
including fixtures (the "Personal Property"), an Assignment of Permits,
Licenses, Variances, Approvals, Plans and Specifications (the "Assignment of
Permits"), as amended, from each of Sierra and Trimont, an Environmental
Indemnity from each of Sierra and Trimont (the "Indemnities"), as amended, on
or with respect to the Real Property and the real property which is the
subject to the Ski Permit Agreement, and a Pledge Agreement (the "Pledge
Agreement"), as amended, from Parent over all of the outstanding capital
stock in Sierra and Trimont. Bank's rights under the Loan shall further be
supported by the subordination (pursuant to the "Subordination Agreement") by
Parent to Bank of all amounts owed to Parent by either of Borrowers other
than in the ordinary course of business. Copies of the forms of Deed of
Trust, Ski Permit Agreement, Special Covenants, Security Agreements,
Assignment of Permits, Indemnities, Pledge Agreement and amendments thereto,
together with the Subordination Agreement are attached hereto as Exhibits
"B", "C," "D," "E-1," "E-2," "F-1," "F-2," G-1," "G-2," "H" and "I,"
respectively. The Deed of Trust and all amendments thereto, together with the
Assignment of Permits and all amendments thereto, have been or shall be
recorded with the County Recorder of the appropriate county in California.
Financing Statements on Form UCC-1 ("UCC-1s") to perfect the Security
Agreement have been recorded with the County Recorder of the appropriate
county in California, and with the Secretary of State of the State of
California. Copies of the UCC-1s are attached hereto as Exhibits "J-1,"
"J-2," "J-3" and "J-4." Original certificates (the "Stock Certificates")
evidencing all of the capital stock of Sierra and Trimont have been delivered
to the Pledgeholder under the Pledge Agreement. Upon acquisition of an entity
by either or both of the Borrowers, the assets of that entity shall, at
Bank's sole discretion, become collateral for the Loan. The interests, title
and property identified in Exhibits "B" through "J," together with the assets
of any entity acquired in the future which become collateral for this Loan
are, collectively, the "Collateral."

1.13 NON-USE FEE. Borrowers shall pay to Bank non-use fees in respect to the
Loan calculated on the daily average unfunded availability (based on the
then-applicable Maximum Permissible Loan Balance in effect from time to time)
for the ninety- (90-) day period immediately preceding each such fiscal
quarter end, payable quarterly in arrears, and on the Maturity Date, and will
be based upon the Borrowers' Funded Debt-to-Cash Flow Ratio and will be
tiered as follows:

DEBT-TO-CASH FLOW RATIO FEE
(PER ANNUM)
Less than 1.5:1.0 0.1875%
1.5:1.0 to 2.0:1.0 0.25%
More than 2.0:1.0 to 3.25:1.0 0.3125%

No commitment fee will be charged.

<PAGE>

1.14 LETTER OF CREDIT ISSUING FEE. The Borrowers agree to pay to the Bank an
issuing fee for each letter of credit, for the period from and including the
date of issuance of such letter of credit to (but not including) the date
upon which such letter of credit expires, based upon the percentage set forth
below (which is a percentage of the face amount of the letter of credit then
being issued) that corresponds to the Borrowers' Funded Debt to Cash Flow
Ratio as follows:

DEBT-TO-CASH FLOW RATIO LETTER OF CREDIT FEE
(PER ANNUM)
(SET AT ISSUANCE OF CREDIT)
Less than 1.5:1.0 1.1875%
1.5:1.0 to 2.0:1.0 1.25%
More than 2.0:1.0 to 3.25:1.0 1.3125%

The letter of credit fee shall be payable on date of issuance .

1.15 COSTS OF LOAN. Borrowers agree to pay any and all reasonable
out-of-pocket costs and expenses of Bank incurred in connection with the
Loan, including, without limitation, those in respect of appraisals,
environmental audits, title insurance, legal fees (not to exceed TWELVE
THOUSAND FIVE HUNDRED AND N0/100 DOLLARS ($12,500.00)), recording fees and
escrow fees.

ARTICLE II
CONDITIONS TO OBLIGATIONS

Bank's obligations hereunder are subject to and conditioned upon satisfaction
of each of the following conditions:

2.1 LOAN DOCUMENTS. Bank shall have received fully executed and completed,
to its satisfaction, originals of all Loan Documents, and all recordings,
filings, and other deliveries necessary to the perfection of each of Bank's
security interest shall have been duly completed.

2.2 TITLE INSURANCE POLICY. Borrowers shall have received an endorsement of
the ALTA Policy of title insurance (the "ALTA Title Insurance Policy") issued
by Stewart Title Insurance Company in the amount of THIRTY MILLION AND NO/100
DOLLARS ($30,000,000.00), insuring Bank without exception, further insuring
against loss or change in priority as a result of the filing of any lien or
special assessment for material or work under construction or completed, and
containing full coverage against mechanics' liens, insuring that buildings
and foundations on the Real Property do not encroach upon any easement or
upon property not owned by Trimont, except as shown in said policy as
exceptions approved by Bank, and otherwise in form and substance and of
coverage content, as Bank may require.

<PAGE>

2.3 FINANCIAL INFORMATION. Bank shall have received from Borrowers such
financial information concerning Borrowers and FIBREBOARD Corporation, a
Delaware corporation ("Parent") as Bank may reasonably require (including
consolidating work papers with respect to Borrowers and Parent) and such
financial information shall have been acceptable to Bank in form and
substance. Further, Borrowers shall have each furnished to Bank a
certificate (the "Closing Certificates," which shall be executed by each of
the Borrowers' chief financial officers and shall be substantially in the
form of Exhibits "K-1," "K-2," and "K-3" attached hereto), certifying (a)
that all financial statements provided to the Bank have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") and , subject to any adjustments which may be required as a result
of an audit of Parent's 1995 consolidated financial statements, fairly
present the financial position and results of operations of Borrowers and/or
Parent for the periods presented or, as the case may be, at the dates thereof
and (b) as to such other matters as are provided for in this Agreement and
such other matters as Bank may reasonably require.

2.4 NO ADVERSE CHANGES IN FINANCIAL CONDITION. No material adverse change
shall have occurred in either of the Borrowers' financial conditions from the
date of its most recent financial statements through the Closing Date, and
Borrowers shall have each furnished to Bank certification to such effect in
the Closing Certificates.

2.5 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. Each of the
representations and warranties contained in Article IV below shall be true
and correct in all material respects and Borrowers shall have furnished to
Bank a certificate dated the Closing Date, from a senior officer of each
Borrower, to such effect.

2.6 OPINION OF COUNSEL. Borrowers shall have furnished or caused to be
furnished to Bank one or more opinions of Borrowers' and/or Parent's
counsel(s) which counsel(s) shall be acceptable to Bank and Bank's counsel,
which opinions shall be in form and substance acceptable to Bank and Bank's
counsel, which opinion(s) shall provide that (a) Trimont and Sierra are
California and Delaware corporations, respectively, duly organized and
existing pursuant to the laws of the States of California and Delaware,
respectively, and both are presently in good standing and authorized to do
business in the State of California, and (b) the Loan, if enforced according
to its terms as expressed in the Note, is not usurious under the existing
applicable laws of the State of California.

2.7 CORPORATE RESOLUTIONS. Bank shall have received copies, certified by
the corporate secretary of Borrowers and of Parent, as the case may be, as
true, complete and in full force and effect as of the Closing Date, and
authorizing (a) with respect to Borrowers, their receipt of the Loan and
execution and delivery of each of the Loan Documents and any related
documents which such Borrowers are required to execute and deliver hereunder
or otherwise in connection with the Loan and (b) with respect to Parent, its
execution and delivery of the Pledge Agreement, the Subordination Agreement,
and any related documents which it is required to execute and deliver
hereunder or otherwise in

<PAGE>

connection with the Loan, and its delivery of the Certificates in order to
perfect the Pledge Agreement.

2.8 OTHER MATTERS. Bank shall have received such further instruments,
agreements and documents of any kind or nature as it may require and/or
certificates or other affirmation(s) of such other factual matters as it may
require.

ARTICLE III
LOAN ADVANCES

Advances in respect of the Loan shall be made in accordance with the
following terms and conditions:

3.1 PROCEDURES FOR ADVANCES. Advances under the Loan shall be made after
(a) Bank's receipt of a Loan Disbursement Instructions Form to be supplied by
Bank (the "Loan Disbursement Instructions Form," which may be modified from
time to time by Bank) executed by a Borrower and designating the account(s)
to which such advances shall be made and (b) satisfaction of each of the
conditions to Advances set forth in Paragraph 3.2 hereinbelow.

3.2 CONDITIONS TO ADVANCES. The obligations of Bank to make any advances
under the Loan is subject to the satisfaction prior to funding any such
advance request of Borrowers of each of the following conditions: (a) the
outstanding balance on the Loan shall not at such time exceed the amount
permitted under this Agreement; (b) the representations and warranties
contained in Article IV of this Agreement and in each of the other Loan
Documents is correct as of the date of each advance, no Event of Default
hereunder or under any of the other Loan Documents shall have occurred and be
continuing as of the date of each advance, Borrowers shall not otherwise be
in breach hereof or of any of the other Loan Documents as of the date of each
advance, no material adverse change shall have occurred in Borrowers'
financial condition from the most recent date for which financial statements
were provided by Borrowers to Bank to the date of such advance, and Bank
shall have received, dated as of the date of each advance, a certificate to
the foregoing effects and otherwise in form and of substance established by
Bank signed by representatives of Borrowers; (c) Bank shall have received
such other instruments, agreements, documents, certifications, and
affirmations as it may require; and (d) the Maturity Date shall not have
occurred.

3.3 ADVANCES OR AMOUNTS OUTSTANDING IN EXCESS OF MAXIMUM PERMISSIBLE LOAN
BALANCE. If, for any reason, Bank determines and notifies Borrowers that the
amount outstanding on the Loan exceeds the Maximum Permissible Loan Balance,
or that any other monetary deficiency exists hereunder, and Bank demands that
Borrowers deposit with Bank an amount equal to such deficiency as determined
by Bank, then Borrowers shall comply with such demand within twenty (20) days
from the date thereof and the judgment of Bank shall be final and conclusive
in all such respects. Failure by Borrowers

<PAGE>

to comply with this Paragraph shall constitute an Event of Default under the
terms of this Agreement and under the other Loan Documents.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

For the express purpose of inducing Bank to enter into this Agreement,
Borrowers represent and warrant, which representations and warranties shall
be true and correct as of the Closing and shall survive the execution of this
Agreement and the Closing Date, that except as set forth on schedules
delivered by Borrowers to the Bank on or prior to the Closing Date:

4.1 LITIGATION AFFECTING BORROWERS. To the best of each Borrowers'
knowledge, there are not proceedings, pending or threatened, before any court
or agency which may affect in a material adverse manner the financial
condition of either of Borrowers.

4.2 LITIGATION AFFECTING THE COLLATERAL. There is no pending litigation
that currently or, to the best of each of Borrowers' knowledge, in the future
will materially adversely affect the value of the Collateral. Borrowers
shall indemnify and hold Bank harmless from any claim or damage which Bank
may sustain in connection with any claim being made against Bank or against
the Collateral, including all reasonable legal fees and other expenses
incurred by Bank in connection with the defense of any such claim or the
protection of its interest in the Collateral.

4.3 FINANCIAL STATEMENTS. All financial statements submitted by Borrowers
and by Parent have been prepared in accordance GAAP and, subject to any
adjustments which may be required as a result of an audit of Parent's
consolidated financial statements, fairly present the financial position and
results of operations of Borrowers and/or Parent for the periods presented
or, as the case may be, at the dates thereof.

4.4 CONTINGENT OBLIGATIONS; MATERIAL ADVERSE CHANGES. Borrowers do not have
any material contingent obligations, contingent liabilities, liabilities for
taxes, long-term leases, or unusual forward or long-term commitments not
disclosed by, or reserved against in the financial statements submitted to
Bank. At the present time, there are no material unrealized or unanticipated
losses from any unfavorable commitments of either of Borrowers. Since the
date of the latest of such statements, there has been no material adverse
change in the financial condition of either of Borrowers from that set forth
in the financial statements.

4.5 INFORMATION FURNISHED REGARDING LOAN. All written information
(including any financial information) furnished by either of Borrowers or by
Parent to Bank in connection with the Loan is true and accurate in all
material respects.

4.6 TITLE TO COLLATERAL. Borrowers have good and clear title to the
property constituting Collateral and the same is not subject to any
mortgages, deeds of trust, pledges, security

<PAGE>

interests, or other encumbrances other than those permitted by this
Agreement (including current operating leases) or title insurance or, in the
reasonable discretion of Bank, minor defects in the title that do not
interfere with the ability to conduct business as presently conducted.

4.7 INTANGIBLE PERSONAL PROPERTY. Borrowers, as of the date hereof, each
possess all necessary trademarks, trade names, copyrights, patents, patents
rights and licenses to conduct their respective businesses as now operated
without any known conflict with the trademarks, trade names, copyrights,
patents, patent rights and licenses of others except as set forth in the
Closing Certificates and except as otherwise could not reasonably be expected
to result in a Material Adverse Effect.

4.8 TAX LIABILITIES. Borrowers have filed all applicable state and federal
tax returns through the taxable year ended December 31, 1993. All applicable
state and federal tax returns for the taxable year ended December 31, 1994,
have been either filed or properly extended and each Borrower shall file such
returns on of before the extension due dates. Borrowers have paid all
applicable state and federal taxes, except such as either of the Borrowers
may in good faith contest or as to which a BONA FIDE dispute may arise;
provided, however, that provision is made to the reasonable satisfaction of
Bank for eventual payment thereof in the event that it is found that the same
is a lawful obligation of either Borrower.

4.9 NO SUBSIDIARIES OF BORROWERS. There is no Subsidiary of Borrowers
except as a result of an acquisition not prohibited hereby. "Subsidiary"
refers to any entity as to which either of the Borrowers hold a majority of
the voting power with respect to any series of class of securities.

4.10 REPRESENTATIONS REGARDING CERTAIN EXTENSIONS OF CREDIT. Borrowers are
not engaged, nor during the term of the Loan will be engaged principally or
as one of their important activities, in the business of extending credit for
the purpose of purchasing or carrying any margin stock (as defined within
Regulations G, T and U of the Board of Governors of the Federal Reserve
System).

4.11 ENVIRONMENTAL MATTERS. Except as disclosed in that certain Report on
Water Supply and Wastewater Treatment Facilities Sierra Ski Ranch,
Environmental Site Assessment Sierra Ski Ranch -- Phase I Investigation,
Environmental Site Assessment Phillips Property -- Phase I Investigation, and
Environmental Site Assessment Huckleberry Property -- Phase I Investigation,
each dated July 9, 1993, and each prepared by Roy C. Hampson & Associates
(collectively, the "Environmental Reports"), and except as otherwise could
not reasonably be expected to result in a Material Adverse Effect, Borrowers
have, to their best respective knowledge, each complied with all applicable
state and federal laws and regulations relating to environmental quality with
respect to the Collateral. Neither of Borrowers is aware that it
(respectively) is under investigation by any state or federal agency designed
to enforce said laws and regulations with respect to a material violation.

<PAGE>

4.12 INAPPLICABILITY OF CERTAIN LAWS. Neither of the Borrowers nor Parent
nor any affiliate of any of them is subject to the Investment Company Act of
1940, the Public Utility Holding Company Act of 1935, the Interstate Commerce
Act or any other statute or regulation restricting the execution or
performance of this Agreement or any performance in connection therewith by
any of either of Borrowers, Parent or any affiliate thereof.

4.13 NO DEFAULTS BY THIS AGREEMENT. The making and performance by Borrowers
of this Agreement does not violate any provision of law, or result in a
breach of or constitute a default under any agreement, indenture or other
instrument to which either of Borrowers are a party or by which either of
them may be bound, which, in any such case, could reasonably be expected to
result in a Material Adverse Effect.

ARTICLE V
COVENANTS

5.1 VALIDITY. This Agreement has been duly authorized, executed and
delivered by each of the Borrowers, and is a valid and binding agreement of
each of them, and this Agreement, the Note and the other Loan Documents will,
upon execution and delivery thereof, be binding obligations of Borrowers (to
the extent a party thereto) in accordance with their respective terms.

5.2 PUNCTUAL PAYMENTS. Borrowers shall punctually pay the interest and
principal of the Loan and any other sums due hereunder at the times and
place(s) and in the manner(s) specified herein.

5.3 OTHER PAYMENTS. Borrowers shall pay and discharge when due any and all
material Indebtedness (which is defined as interest-bearing debt),
obligations, assessments, taxes, real and personal, including federal and
state income taxes, except such as either of the Borrowers may in good faith
contest or as to which a BONA FIDE dispute may arise; provided, however, that
provision is made to the reasonable satisfaction of Bank for eventual payment
thereof in the event that it is found that the same is a lawful obligation of
either Borrower.

5.4 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS. Borrowers
shall preserve and maintain their respective corporate existences and all of
their respective rights, privileges and franchises necessary or desirable in
the normal conduct of their respective businesses, and conduct their
respective businesses in an orderly and efficient manner consistent with good
business practices and in accordance with all valid regulations and orders of
any Governmental Authority, a breach of which could reasonably be expected to
have a Material Adverse Effect. "Governmental Authority" shall mean any
government (or any political subdivision or jurisdiction thereof), court,
bureau, agency or other governmental authority having jurisdiction over
Borrowers, or any of their respective businesses, operations or properties.
"Material Adverse Effect" means any (a) material adverse effect whatsoever
upon the validity, performance or

<PAGE>

enforceability of any Loan Documents, (b) material adverse effect upon the
financial condition or business operations of either of the Borrowers, (c)
material adverse effect upon the ability of either of the Borrowers to
fulfill its obligations under the Loan Documents, or (d) event or other
matter which causes an Event of Default or any event or other matter which,
with notice or lapse of time or both, could reasonably be expected to become
an Event of Default.

5.5 COMPLIANCE WITH LAW. Borrowers shall, where a Material Adverse Effect
could be reasonably expected to result, comply with all applicable laws,
rules, regulations, and all orders of any Governmental Authority applicable
to any of them or any of them or affecting any of their respective properties
or businesses.

5.6 COMPLIANCE WITH MATERIAL AGREEMENTS. Borrowers shall comply in all
material respects with all material agreements, indentures, mortgages or
documents binding on any of them or affecting any of their respective
properties or businesses.

5.7 AUTHORIZATION AND APPROVALS. Borrowers shall promptly obtain, from time
to time at their own expense, all such governmental licenses, authorizations,
consents, permits and approvals as may be required to enable them to comply
with their obligations hereunder and the other Loan Documents.

5.8 ISSUANCE OF SHARES. Borrowers shall not sell or otherwise dispose of,
any shares of their capital stock or other securities, rights, warrants or
options to purchase or acquire any of either Borrower's shares.

5.9 LIQUIDATIONS, MERGERS, CONSOLIDATIONS AND DISPOSITION OF SUBSTANTIAL
ASSETS. Except as provided in paragraph 1.4 herein, Borrowers shall not
dissolve or liquidate, or become a party to any merger or consolidation, or
acquire by purchase, lease or otherwise all or substantially all of the
assets or capital stock of any Person, or sell, transfer, lease or otherwise
dispose of all or any substantial part of their respective property or assets
or business (except, in the ordinary course of business, to sell or otherwise
dispose of obsolete equipment); provided, however, that the foregoing shall
not operate to prevent a merger, acquisition or other business combination of
any Person with either Borrower if Borrowers shall be the surviving or
continuing corporation and, after giving effect to such merger, acquisition
or other business combination: (a) Borrowers or their successors shall be in
full compliance with the terms of this Agreement and (b) the management of
such Borrower shall be substantially unchanged. "Person" shall include an
individual, a corporation, a joint venture, a general or limited partnership,
a limited liability company, a trust, an unincorporated organization, or a
government or any agency or political subdivision thereof; the term
"substantial part" as used in this Paragraph only shall mean ten percent
(10%) or more of such property or assets of either of the Borrowers.

<PAGE>

5.10 NO SUBSIDIARIES. Neither of Borrowers shall, at any time, have or
maintain any Subsidiaries, except in connection with an acquisition, merger
or other business combination not prohibited hereby or upon prior written
consent of Bank.

5.11 OPERATIONS AND PROPERTIES. Borrowers shall act prudently and in
accordance with customary industry standards in managing or operating their
respective assets and properties which are necessary to the conduct of their
respective businesses.

5.12 INSURANCE COVERAGE. Borrowers shall at all times maintain the following
policies of insurance coverage (or self-insurance in accordance with industry
practices): (a) policies of fire, flood (if the Property is located in a
Flood Hazard Zone A or, if it is not, a statement verifying the fact that
Flood Insurance is not required), and hazard insurance (the "Property Damage
Insurance Policies") with extended coverage, insuring (including for property
damages) all Collateral that now exists or is hereafter constructed in an
amount equal to all sums owing Bank or the maximum full insurable value of
such buildings, improvements, furnishings, other contents, fixtures, and
equipment, whichever is less (which policies shall not contain a co-insurance
provision whereby Borrowers, in the event of loss, become a co-insurer), (b)
policies of public liability insurance (the "Public Liability Insurance
Policies"), in the amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00)
per occurrence with a self-insured retention of up to ONE HUNDRED THOUSAND
AND NO/100 DOLLARS ($100,000.00) per occurrence and a FIVE HUNDRED THOUSAND
AND NO/100 DOLLARS ($500,000.00) aggregate amount, (c) qualified workers'
compensation coverage against liability arising from claims of workers in
respect of and during the period of any work on or about the Real Property,
Borrowers also agree to require any subcontractors that may be employed to
perform work on or about the Real Property to furnish certificates of
workers' compensation insurance prior to the commencement of any work), and
(d) policies for such other insurance coverage as Bank may reasonably
require. All policies shall be in forms approved by Bank from time to time
(such approval not to be unreasonably withheld), shall be issued by a company
or companies authorized to issue such insurance within the State of
California and reasonably acceptable to Bank, and shall provide that the
insurer shall notify Bank in writing not less than twenty (20) days prior to
the cancellation of any such policy. The Public Liability Insurance Policies
and the Property Damage Insurance Policies shall be delivered to and held by
Bank and shall contain a loss payable endorsement naming Bank as additional
insured.

5.13 BORROWERS' FINANCIAL INFORMATION. Borrowers shall each furnish to Bank
such financial information as Bank may from time to time reasonably request.
Borrowers shall each furnish to Bank monthly, not more than thirty (30) days
after the end of each month, internally prepared consolidated financial
statements and financial statements of each of the Borrowers individually,
prepared in accordance with GAAP (excluding footnotes thereto and subject to
year-end adjustments) and in forms reasonably acceptable to Bank.

<PAGE>

5.14 PARENT FINANCIAL INFORMATION. Borrowers shall cause Bank to be
furnished annually, not more than one hundred twenty (120) days after the end
of each fiscal year of Parent, audited consolidated fiscal year-end financial
statements of Parent in respect of its most recently completed fiscal year,
which financial statements shall include (a) in each case, a balance sheet,
income statement and statement of cash flows, changes in stockholders equity
with an opinion of independent public accounts acceptable to Bank that does
not contain a limitation of the scope of their examination, a departure from
GAAP or an adverse opinion or a disclaimer of opinion (except for a
disclaimer of opinion due to certain asbestos litigation against Parent) and
(b) as supplementary information, consolidating balance sheets and statements
of operations, and cash flows for Parent and each of its subsidiaries,
including Borrowers, including a report of the independent public accountants
which expressly notes that "the schedules, although prepared by management,
have been subjected to audit procedures applied in the audit of the basic
financial statements and fairly state in all material respects, the financial
data set forth therein."

5.15 PARENT SEC AND OTHER REPORTS. Promptly upon its becoming available, and
in any case, not later than forty-five (45) days after each fiscal quarter
with respect to Quarterly Reports on Form 10-Q and not later than ninety (90)
days after each fiscal year with respect to Annual Reports on Form 10-K,
Borrowers shall cause Bank to be furnished one copy of each financial
statement, report, notice or proxy statement sent by Parent to stockholders
generally and of each regular or periodic report, registration statement, or
prospectus filed by Parent with any securities exchange or the Securities and
Exchange Commission or any successor agency. If Parent at any time ceases to
be a company whose securities are registered under Section 12 of the
Securities Exchange Act of 1934, as amended, the substance of the same
information as would be required hereunder shall nonetheless be furnished to
Bank in full accordance with the time frames hereof.

5.16 RESTRICTIONS ON DIVIDENDS. Neither of Borrowers shall directly or
indirectly declare or make, or incur any liability to make, any Dividend,
except that, during any fiscal year either or both of the Borrowers may make
tax distributions to their Parent at the maximum taxable rate to satisfy tax
obligations. Further, Borrowers may declare and make Dividends in an amount
up to fifty percent (50%) of their pre-distribution available cash flow
("ACF"). ACF is defined as the sum of (x) EBITDA, less amounts to be
required to be repaid pursuant to scheduled facility reductions hereunder (if
any) from and after the date of such dividend declaration, less taxes, less
cash interest expenses, less principal and interest expenses on other
Indebtedness for the four consecutive fiscal quarters ending immediately
prior thereto and (y) with respect to each acquisition, merger or other
business combination made by a Borrower during the four consecutive fiscal
quarters of such Borrower immediately prior thereto, the aggregate amount of
earnings before interest, taxes, depreciation and amortization of the assets,
capital stock, division or business group acquired in such acquisition,
merger or other business combination (as reasonably allocable thereto) for
the period beginning four fiscal quarters before the fiscal quarter end for
which the ratio is then being calculated and ending on the date such
acquisition, merger or other business combination was made. "Dividends"
shall mean (a)

<PAGE>

cash distributions or any other distributions on, or in respect of, any class
of capital stock or such corporation, except for distributions made solely in
shares of stock of the same class, (b) any and all funds, cash or other
payments made in respect of the redemption, repurchase or acquisition of such
stock, unless such stock shall be redeemed or acquired through the exchange
of such stock with stock of the same class, and (c) any other distributions
of cash or other property or assets for any reason whatsoever to or for the
benefit of Parent or to or for the benefit of any entity which is a direct or
indirect subsidiary of Parent other than either of Borrowers; provided,
however, that payments by either of the Borrowers to Parent in reimbursement
of payments by Parent in respect of either of the Borrowers' allocable shares
of expenses paid by Parent in the ordinary course of business, including for
payroll expenses, workers' compensation expenses and insurance expenses,
shall not be treated as Dividends hereunder.

5.17 LEVERAGE. Borrowers will maintain a maximum consolidated Debt-to-EBITDA
Ratio of 3.70:1.0, calculated on a rolling four-quarter basis, defined as the
previous ninety- (90-) day average of (a) the maximum availability under this
Agreement, plus (b) "Other Permitted Indebtedness" (defined as
interest-bearing debt), plus (c) outstanding letters of credit divided by the
sum of (x) EBITDA for the four consecutive fiscal quarters ending immediately
prior thereto and (y) with respect to each acquisition, merger or other
business combination made by a Borrower during the four consecutive fiscal
quarters of such Borrower immediately prior thereto, the aggregate amount of
earnings before interest, taxes, depreciation and amortization of the assets,
capital stock, division or business group acquired in such acquisition,
merger or other business combination (as reasonably allocable thereto) for
the period beginning four fiscal quarters before the fiscal quarter end for
which the ratio is then being calculated and ending on the date such
acquisition, merger or other business combination was made, less (d) capital
expenditures (acquisitions excluded).

5.18 MINIMUM TANGIBLE NET WORTH. Borrowers shall not permit their
consolidated Tangible Net Worth to be less than NINETEEN MILLION SEVEN
HUNDRED FIFTY ONE THOUSAND AND NO/100 DOLLARS ($19,751,000.00), calculated on
a rolling four-quarter basis.

5.19 FIXED CHARGE COVERAGE RATIO. Borrowers will maintain a minimum
consolidated Fixed Charge Coverage Ratio of 1.35:1.0 calculated on a rolling
four-quarter basis. "Coverage ratio" is defined as the sum of (x) EBITDA for
the four consecutive fiscal quarters ending immediately prior thereto and (y)
with respect to each acquisition, merger or other business combination made
by a Borrower during the four consecutive fiscal quarters of such Borrower
immediately prior thereto, the aggregate amount of earnings before interest,
taxes, depreciation and amortization of the assets, capital stock, division
or business group acquired in such acquisition, merger or other business
combination (as reasonably allocable thereto) for the period beginning four
fiscal quarters before the fiscal quarter end for which the ratio is then
being calculated and ending on the date such acquisition, merger or other
business combination was made, less tax distributions, less dividends,
DIVIDED by amounts to be required to be repaid pursuant to scheduled facility

<PAGE>

reductions hereunder (if any) from and after the date of such dividend
declaration, plus cash interest expense, plus principal and interest expenses
on Other Permitted Indebtedness; provided, however, that the following shall
be excluded from net earnings (a) any gain or loss arising from the sale of
capital assets (real estate sales are not excluded), (b) any gain arising
from any write-up of assets, (c) earnings of any other Person, substantially
all of the assets of which have been acquired by Borrowers in any manner, to
the extent that such earnings were realized by such other Person prior to the
date of such acquisition, (d) net earnings of any Person in which Borrowers
has an ownership interest, unless such earnings have actually been received
by Borrowers in the form of cash distributions, (e) the earnings of any
Person to which assets of Borrowers shall have been sold, transferred, or
disposed of, or into which Borrowers shall have merged, to the extent that
such earnings arise prior to the date of such transaction, and (f) any gain
arising from the acquisition of any securities of Borrowers. "Fixed Charges"
for any period shall include capitalized lease and other fixed noncontingent
financial obligations and required payments of principal and interest on
Indebtedness for such period.

5.20 LIMITATION ON INDEBTEDNESS. Borrowers shall not, without prior written
approval of Bank, incur, create, contract, assume, have outstanding,
guarantee or otherwise be or become, directly or indirectly, liable in
respect of any Indebtedness in excess of an aggregate of FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($500,000.00) at any time except (a) Indebtedness
arising out of this Agreement, (b) current liabilities for taxes and
assessments incurred in the ordinary course of business, (c) Indebtedness in
respect of current accounts payable or accrued or (d) borrowed funds or
purchase money obligations incurred in the ordinary course of business,
provided that all such liabilities, accounts, and claims shall be promptly
paid and discharged when due or in conformity with customary trade terms.

5.21 SUBORDINATED DEBT. Debt owing to Parent subsequent to the Closing Date,
if any, will be subordinated to Bank, whether incurred prior or subsequent
thereto, excluding allocation or payment incurred in the ordinary course of
business, including payroll expenses, workers' compensation expenses,
insurance expenses and tax payments, pursuant to that Subordination Agreement
signed by Parent of even date herewith.

5.22 NEGATIVE PLEDGE. Borrowers shall not create, incur, permit or suffer to
exist any Lien upon any of its or their property or assets, real or personal,
tangible or intangible, now owned or hereafter acquired, except for Permitted
Liens. "Permitted Liens" shall mean: (a) Liens (if any) granted to Bank to
secure the Loan, (b) pledges or deposits made to secure payments of workers'
compensation insurance (or to participate in any fund in connection with
workers' compensation insurance), (c) Liens imposed by mandatory provisions
of law such as for materialmen, mechanics, warehousemen and other like Liens
arising in the ordinary course of business, securing Indebtedness whose
payment is not yet due, (d) Liens for taxes assessments and governmental
charges or reviews imposed upon Borrowers or upon Borrowers' income or
profits or property, if the same are not yet due and payable or if the same
are being contested in good faith and as to

<PAGE>

which adequate cash reserves have been provided, (e) Liens arising from good
faith deposits in connection with tenders, leases, real estate bids, or
contracts (other than contracts involving the borrowing of money), pledges,
or deposits to secure public or statutory obligations and deposits to secure
(or in lieu of) surety, stay, appeal or customs bonds and deposits to secure
the payment of taxes, assessments, customs duties or other similar charges,
(f) encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, provided that such restrictions do
not impair the use of such property for the purposes intended, and none of
which is violated by existing or proposed structures or land use, or (g)
Liens against the Collateral in an aggregate amount which may at no time
exceed TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00). "Lien" shall
mean any lien, mortgage, security interest, tax lien, pledge, encumbrance,
conditional sale or title retention arrangement, or any other interest in
property designed to secure the repayment of Indebtedness, whether arising by
agreement or under any statute or law or otherwise.

5.23 ERISA COMPLIANCE. Borrowers and each of their respective Subsidiaries
shall, and to the extent such obligations are performed and/or administered
by Parent, Borrowers shall cause Parent to: (a) at all times, make prompt
payment of all contributions required under all Plans and required to meet
the minimum funding standard set forth in ERISA with respect to its Plans;
(b) upon Banks' request, furnish to Bank each annual report/return (Form 5500
Series), as well as all schedules and attachments required to be filed with
the Department of Labor and/or the Internal Revenue Service pursuant to
ERISA, and the regulations promulgated thereunder, in connection with each of
its Plans for each Plan year; (c) notify Bank immediately of any fact,
including but not limited to, any Reportable Event arising in connection with
any of its Plans, which might constitute grounds for termination thereof by
the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer such
Plan, together with a statement, if requested by Bank, as to the reason
therefor and the action, if any, proposed to be taken with respect thereto;
and (d) furnish to Bank, upon its request, such additional information
concerning any of its Plans as may be reasonably requested. "ERISA" shall
mean the Employee Retirement Income Security Act of 1974, as amended,
together with all regulations issued pursuant thereto; "Plan" shall mean an
employee benefit plan or other plan maintained by either the Borrowers for
employees of either of Borrowers and covered by Title IV or ERISA, or subject
to the minimum funding standards under Section 412 of the Internal Revenue
Code of 1954, as amended; and "Reportable Event" shall have the meaning
assigned to such term in Title IV of ERISA.

5.24 COMPLIANCE CERTIFICATE. Within thirty (30) days after the end of each
quarter, each Borrower shall furnish to Bank a certificate in the form of
Exhibits "L-1" and "L-2" attached hereto executed by the chief financial
officer or chief executive officer of each Borrower, stating that a review of
the activities of such Borrower during such fiscal quarter has been made
under his or her supervision, and that such Borrower has observed, performed,
and fulfilled each and every obligation and covenant contained herein and is
not in default under any of the same or, if any such default shall have
occurred, specifying the nature

<PAGE>

and status thereof, and setting forth a computation in reasonable detail as
of the end of the period covered by such statements, of compliance with the
covenants, terms and conditions hereof. With respect to any and all
computations under this Article V, Bank may make and shall advise Borrowers
of the results of its own determinations and computations and such
determinations and computations of Bank shall for all purposes of this
Article V be conclusive and controlling.

5.25 NOTICE TO BANK. Each of Borrowers shall provide within five (5)
Business Banking Days, notice in writing to Bank of (a) the occurrence of any
Events of Default as defined in this Agreement or any of the other Loan
Documents; (b) any change in name, identity or legal structure of either of
Borrowers; (c) any uninsured or partially uninsured loss through fire, theft,
liability or property damage in excess of an aggregate of ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,000.00); or (d) any possibility of judgment
or liability not fully covered by insurance, and which may result in any
material adverse change in the business(es) or in the condition, financial or
otherwise of either of Borrowers.

5.26 RESTRICTIONS ON REAL ESTATE DEVELOPMENT EXPENDITURES. Borrowers will
not, without prior written Bank approval, expend more than THREE MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($3,500,000.00) in any one fiscal year
for residential or lodging properties. Residential or lodging properties
shall be defined as real estate development that is not essential to normal
operations of Borrowers' resorts, and will include the development of lots,
homes, condominiums or interval planned unit developments.

ARTICLE VI
DEFAULT

6.1 EVENTS OF DEFAULT. Any of the following may, at Bank's option,
constitute an "Event of Default:" (a) Borrowers fail to make any payment due
on account of the Loan within ten (10) days following the date such payment
is due, (b) either of Borrowers fail to observe or perform any term,
condition, promise or covenant contained in this Agreement, any other Loan
Document, or any material terms, conditions and covenants of any other
agreement hereinafter entered into between either of Borrowers and Bank and
such failure continues for a period of more than twenty (20) days after
notice by Bank of such failure, (c) any warranty, representation or other
statement by or on behalf of either of Borrowers contained in this Agreement
or in any instrument furnished in compliance with or in reference to this
Agreement or in the making of any advance hereunder is false or misleading in
any material respect when made, (d) either of Borrowers or Parent commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of either of Borrowers or Parent or any substantial part of any of
their property, or shall consent to any such relief or to the appointment or
taking possession by any such official in any involuntary case or other

<PAGE>

proceeding commenced against any of them, (e) an involuntary case or
proceeding is commenced against either of the Borrowers or Parent seeking
liquidation, reorganization or other relief with respect to any of them or
their debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of either of the Borrowers or
Parent or any substantial part of any of their property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days, (f) either of Borrowers or Parent makes an assignment for
the benefit of their creditors, or admits in writing their inability to pay
their debts generally as they become due, (g) either of the Borrowers fail to
pay when due in accordance with its terms and provisions any other
Indebtedness which failure materially impairs the security interests of Bank,
(h) the financial condition of either of the Borrowers or the security for
the Loan is substantially affected in any material adverse manner in the
reasonable opinion of Bank, (i) a material change in the status of the
asbestos litigation of Parent which may result in material deterioration of
Parent's financial condition, (j) any material change in ownership of either
of the Borrowers, (k) any "Reportable Event" (as defined under ERISA) occurs
which Bank determines in good faith constitutes proper grounds for the
termination of any employee pension benefit plan or pension plan of either of
Borrowers covered by ERISA by the Pension Benefit Guaranty Corporation or for
the appointment by an appropriate United States District Court of a trustee
to administer any such plan, and such event continues for thirty (30) days
after written notice of such determination shall have been given to either of
the Borrowers, or (l) any Event of Default occurs under any other agreement
or instrument between Bank and either of the Borrowers.

6.2 DEFAULT REMEDIES. Upon the occurrence and continuance of an Event of
Default as hereinabove described, Bank may, at its option, to the extent
allowed by law, declare the unpaid balance of the Note, together with the
interest thereon, to be fully due and payable without presentation, demand,
protest, or notice of any kind, and may, at its option, exercise any or all
of the following remedies: (a) Bank may cease any advances upon the Loan, (b)
Bank may enter upon the Real Property and take possession of the Collateral,
(c) Bank may employ watchmen at Borrowers' expense to protect the Collateral
(including any building materials stored on the Real Property) from
depreciation or injury, (d) Bank may declare an Event of Default to exist in
any other agreement or instrument of either or both of Borrowers with or in
favor of Bank (it being understood that such an Event of Default hereunder
shall be deemed to be caused by cross-default and Event of Default under such
other agreements and instruments), and (e) Bank may exercise any other
remedies available to Bank at law or in equity, including requesting the
appointment of a receiver, on an EX PARTE basis, to perform any acts required
of either of the Borrowers under this Agreement, and Borrowers hereby
specifically consent to any such request by Bank. The rights and remedies of
Bank hereunder and in the other Loan Documents are cumulative and not
exclusive, and may be enforced concurrently. Bank shall not be required to
pursue or exhaust any Collateral or remedy before pursuing any other
Collateral or remedy. For the purposes of carrying out any rights, powers or
privileges under this Paragraph or otherwise under the Loan Agreements or any
of the other Loan Documents, and exercising such rights, powers or
privileges, Borrowers

<PAGE>

hereby irrevocably constitute and appoint Bank as each of their respective
true and lawful attorneys-in-fact to execute, acknowledge and deliver any
instruments and to do and perform any acts in the name and on behalf of
Borrowers.

In the event that any Event of Default that is a payment default with regard
to any letter of credit shall occur, and said default is not cured according
to the terms of the Letter of Credit Agreement, the total unpaid balance of
principal of the letter of credit and accrued and unpaid interest thereon
(past due interest being compounded) shall then begin accruing interest at
the Bank's Prime Interest Rate, plus two and one-half percent (2.5%) per
annum (the "Default Rate"), to the fullest extent permitted by law, until
such time as all past due payments and accrued interest are paid and all
defaults are cured. At that time, the interest rate will revert to that rate
provided in the letter of credit. Borrowers acknowledge that the effect of
this Default Rate could operate to compound some of the interest obligations
due, and the Borrowers hereby expressly assent to such compounding should it
occur.

6.3 WAIVER OF DEFAULT. Any waiver, permit, consent or approval of any kind
by Bank, or any holder of the Note, of any breach or default hereunder, must
be in writing and shall be effective only to the extent set forth in such
writing. No waiver by Bank of the performance of any covenant or agreement
contained herein or in the Loan Documents or of any breach of this Agreement
or the Loan Documents shall thereafter affect in any manner the right of Bank
to require and force performance of any such covenant or agreement, nor shall
waiver be deemed to constitute or constitute a waiver of any subsequent
breach or breaches of the same or any prior or subsequent breach of any other
term or condition on the part of Borrowers or any other party to be kept or
performed. The receipt by Bank of any payment on any obligation hereby
secured, with knowledge of any breach of covenant contained herein to be
performed by either of Borrowers, shall not be deemed to be a waiver as to
any breach of any covenant of agreement or condition to be performed by
Borrowers and contained herein, or in any other Loan Documents. No delay or
omission by Bank in the exercise of any right or remedy occurring upon a
default or in the doing of any of the matters and things by it permitted to
be done under the terms and provisions of this Agreement or any of the other
Loan Documents shall impair any such right or remedy, not be construed to be
a waiver of any such default or acquiescence therein, nor shall it affect any
subsequent default of the same or a different manner, and every right or
remedy may be exercised from time to time and as often as it is deemed
expedient by Bank.

ARTICLE VII
MISCELLANEOUS

7.1 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Borrowers and Bank and their respective successors and assigns.

7.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and no
modifications of this

<PAGE>

Agreement shall be deemed effective unless executed in writing by Bank and
Borrowers subsequent to the date hereof.

7.3 ARBITRATION.

(a) Binding Arbitration. Upon the demand of Borrowers or Bank
(collectively the "parties"), whether made before the institution of any
judicial proceeding or not more than sixty (60) days after service of a
complaint, third party complaint, cross-claim or counterclaim or any answer
thereto or any amendment to any of the above, any Dispute (as defined below)
shall be resolved by binding arbitration in San Francisco, California, in
accordance with the terms of this arbitration clause. A "Dispute" shall
include any action, dispute, claim, or controversy of any kind, whether
founded in contract, tort, statutory or common law, equity, or otherwise, now
existing or hereafter occurring between the parties arising out of,
pertaining to or in connection with this Agreement or any related agreements,
documents, or instruments (the "Documents"). The parties understand that by
this Agreement they have decided that the Disputes may be submitted to
arbitration rather than being decided through litigation in court and that
once decided by an arbitrator the claims involved cannot be brought, filed or
pursued in court.

(b) Governing Rules. Arbitration conducted pursuant to this Agreement,
including selection of arbitrators, shall be administered by the American
Arbitration Association ("Administrator") pursuant to the Commercial
Arbitration rules of the Administrator. Arbitration conducted pursuant to
the terms hereof shall be governed by the provisions of the Federal
Arbitration Act (Title 9 of the United States Code), and to the extent the
foregoing are inapplicable, unenforceable or invalid, the laws of the State
of California. Judgment upon any award rendered hereunder may be entered in
any court having jurisdiction; provided, however, that nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. Section 91 or similar governing
state law. Any party who fails to submit to binding arbitration following a
lawful demand by the opposing party shall bear all costs and expenses,
including reasonable attorney's fees, incurred by the opposing party in
compelling arbitration of any Dispute.

(c) No Waiver, Preservation of Remedies, Multiple Parties. No provision
of, nor the exercise of any rights under, this arbitration clause shall limit
the right of any party to: (1) foreclose against any real or personal
property collateral or other security; (2) exercise self-help remedies
(including repossession and setoff rights); or (3) obtain provisional or
ancillary remedies such as injunctive relief, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the extent
such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action as described above
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the Dispute to arbitration, nor render inapplicable the
compulsory arbitration provisions hereof. Any claim or Dispute related to
exercise of any self-help, auxiliary or other exercise of rights under this
Paragraph (c) shall be a Dispute hereunder.

<PAGE>

(d) Arbitrator Powers and Qualifications; Awards. Arbitrators shall
resolve all Disputes in accordance with the applicable substantive law as set
forth in paragraph 7.11 hereof. Arbitrators may make an award of attorneys'
fees and expenses if permitted by law or the agreement of the parties. All
statutes of limitation applicable to any Dispute shall apply to any
proceeding in accordance with this arbitration clause. Any arbitrator
selected to act as the only arbitrator in a Dispute shall be required to be a
practicing attorney with not less than ten (10) years practice in commercial
law in the State of California. With respect to a Dispute in which the
claims or amounts in controversy do not exceed FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($500,000.00), a single arbitrator shall be chosen and shall
resolve the Dispute. In such case, the arbitrator shall have authority to
render an award up to but not to exceed FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000.00) including all damages of any kind whatsoever, costs,
fees and expenses. Submission to a single arbitrator shall be a waiver of
all parties' claims to recover more than FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($500,000.00). A Dispute involving claims or amounts in controversy
exceeding FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) shall be
decided by a majority vote of a panel of three (3) arbitrators ("Arbitration
Panel"). An Arbitration Panel shall be composed of one arbitrator who would
be qualified to sit as a single arbitrator in a Dispute decided by one (1)
arbitrator, one who has at least ten (10) years experience in commercial
lending and one who has at least ten (10) years experience in the Borrowers'
industry. Arbitrator(s) may, in the exercise of their discretion, at the
written request of a party in any Dispute: (1) consolidate in a single
proceeding any multiple party claims that are substantially identical and all
claims arising out of a single loan or series of loans including claims by or
against Borrowers, Guarantors, sureties and or owners of collateral if
different from the Borrowers; and (2) administer multiple arbitration claims
as class actions in accordance with Rule 23 of the Federal Rules of Civil
Procedure. If the Arbitration is conducted pursuant to the terms of an
agreement between the Bank and the Borrowers related to the indebtedness
guaranteed, then the Arbitration Panel shall be the one selected by the
Borrowers and Bank pursuant to their agreement to decide the Dispute between
them. The arbitrator(s) shall be empowered to resolve any dispute regarding
the terms of this Agreement or the arbitrability of any Dispute or any claim
that all or any part (including this provision) is void or voidable but shall
have no power to change or alter the terms of this Agreement. The award of
the arbitrator(s) shall be in writing and shall specify the factual and legal
basis for the award. Single Arbitrators and Arbitration Panels shall be
required to make specific, written findings of fact and conclusions of law.

(e) Miscellaneous. To the maximum extent practicable, the
Administrator, the arbitrator(s) and the parties shall take any action
necessary to require that an arbitration proceeding hereunder be concluded
within 180 days of the filing of the Dispute with the Administrator. The
arbitrator(s) shall be empowered to impose sanctions for any party's failure
to proceed within the times established herein. Arbitration proceedings
hereunder shall be conducted in Nevada at a location determined by the
Administrator. In any such proceeding a party shall state as a counterclaim
any claim which arises out of the

<PAGE>

transaction or occurrence or is in any way related to the Documents which
does not require the presence of a third party which could not be joined as a
party in the proceeding. The provisions of this arbitration clause shall
survive any termination, amendment, or expiration of the Documents and
repayment in full of sums owed to Bank by Borrowers unless the parties
otherwise expressly agree in writing. Each party agrees to keep all Disputes
and arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the parties or as
required by applicable law or regulation.

7.4 CAPTIONS. The captions to the articles and paragraphs of this Agreement
are for the convenience of the parties only, and not a part of this
Agreement.

7.5 TIME OF THE ESSENCE. Time is of the essence under the Agreement and of
all the other Loan Documents.

7.6 MATERIALITY. All covenants, agreements, representations and warranties
made herein, and in all the other documents to be delivered in support of the
Loan, shall be deemed to have been material and relied upon by Bank.

7.7 CONFLICT. If there is any conflict between the terms hereof and of the
other Loan Documents executed in connection herewith, such conflict shall be
resolved by conferring upon the Bank the greatest right and/or the most
beneficial terms provided hereunder or under any of such other Loan
Documents; if such conflict is not susceptible to resolution in the foregoing
manner, the provisions of this Agreement shall control.

<PAGE>

7.8 NOTICES. All notices, request and communications shall be in writing,
by fax or by telex (or by telephone promptly confirmed in writing, by fax or
by telex), and shall be addressed as follows:

A. If to Borrowers:

SIERRA-AT-TAHOE, INC.
c/o Northstar-At-Tahoe
P. O. Box 129
Truckee, California 96160
Attn: Ms. Nanci N. Northway
Facsimile Number: 916-659-7749

TRIMONT LAND COMPANY
c/o Northstar-At-Tahoe
P. O. Box 129
Truckee, California 96160
Attn: Ms. Nanci N. Northway
Facsimile Number: 916-659-7749

In each case with copies to:

FIBREBOARD CORPORATION
2121 North California Boulevard, Suite 560
Walnut Creek, California 94596
Attn: Garold E. Swan
Facsimile Number: 510-274-0714

B. If to Bank:

FIRST INTERSTATE BANK OF NEVADA, N.A.
Corporate Banking Division, #727R
One East First Street
Reno, Nevada 89501
Facsimile Number: 702-334-5697

With copies to:

Bradley B Anderson
Attorney at Law
One East First Street
Suite 1108
Reno, Nevada 89501-1609
Facsimile Number: 702-786-1750

<PAGE>

Notices may be sent by hand delivery, or by mail (by registered or certified
mail, return receipt requested) or by facsimile, telex or by telephone
(promptly confirmed in writing, by facsimile or by telex). Either party may,
by proper written notice, change the address to which notices shall be
effective when received. Notices will be deemed received three (3) days
after deposit in the mail, or upon delivery, whichever occurs first.

7.9 INSPECTIONS. Upon reasonable notice from Bank, each of Borrowers agree
to make the Collateral available to Bank or its agents for purposes of
inspection, inventory and appraisal. Such inspection, inventory and
appraisal shall be performed at a time reasonably determined by Bank.
Further, Bank shall at all times have access at reasonable business hours to
inspect, audit and make extracts from all or both of Borrowers' records,
files and books of account, all at Bank's expense.

7.10 SUCCESSORS AND ASSIGNS. The Agreement is made for the sole protection
of Borrowers and Bank, and their respective successors and assigns, and no
other person or persons shall have any right of action hereof.

7.11 GOVERNING LAW. This Agreement and the other Loan Documents are, in all
respects, to be governed by the laws of the State of California and if any
action is taken to enforce the terms of the Loan Documents such action shall
be commenced and maintained within the State of California.

7.12 ATTORNEY FEES. Borrowers will reimburse Bank for all costs, expenses
and reasonable actual attorney fees expended or incurred by Bank in enforcing
this Agreement and each of the other Loan Documents, in actions for
declaratory relief in any way related to this Agreement or any other Loan
Document, or in collecting any sum which becomes due Bank on the Note or any
other Loan Documents.

7.13 OTHER DOCUMENTS. The parties will execute any and all documents,
instruments, and papers necessary to effectuate the intent of this Agreement,
including each of the other Loan Documents, and to effectuate the intent of
each of such other Loan Documents.

7.14 GENDER AND NUMBER. As used herein the neuter shall include the
masculine and feminine and the singular shall include the plural, as the
context requires.

7.15 POWER OF ATTORNEY. Borrowers do each hereby irrevocably appoint,
designate, empower and authorize Bank, as agent, to file for record any
documents, matters or information that Bank deems necessary to file for its
protection under this Agreement or the other Loan Documents. The appointment
of Bank as agent is hereby expressly declared to be that of an agency coupled
with an interest, and as such is to be irrevocable but is not to be construed
as an assumption or obligation of Bank so to act.

7.16 RIGHT TO ACT. Bank shall have the right to commence, to appear in, or
to defend any action of proceeding purporting to affect the rights or duties
of the parties hereunder

<PAGE>

or the security interest of Bank. In connection therewith, Bank shall have
the right to pay in advance all necessary costs and expenses including
reasonable attorney fees, all of which Borrowers agree to repay to Bank upon
demand. All advances and expenses incurred or paid by Bank and all other
amounts paid by Bank under this Paragraph 7.16 shall be added to the balance
of the Note as Bank may determine.

7.17 "TOMBSTONE" ADVERTISEMENTS; BOUND VOLUMES. Borrowers agree that Bank
shall have the right to prepare and release to the Wall Street Journal, other
newspapers, periodicals or other media of its choice announcements regarding
this financing, including traditional "tombstone" advertisements. In
addition, in the event that Bank consolidates and binds the Loan Documents
into one or more bound volumes, Borrowers shall pay for the costs and
expenses thereof (not to exceed FIVE HUNDRED AND NO/100 DOLLARS ($500.00) in
the aggregate) promptly upon receiving any invoice(s) therefor.

7.18 EFFECT OF THIS AGREEMENT. In connection with the Sierra Loan and the
Trimont Loan, the Borrowers made, executed, delivered, ratified and
reaffirmed (as the case may be ) the terms, conditions and covenants of all
documents associated with each loan, including, but not limited to the
promissory notes, loan agreements, deeds of trust, security agreements,
financing statements, assignments, etc. (the "Prior Loan Documents"). This
Agreement and the other Loan Documents entered into in connection herewith,
amend, restate and supersede the Prior Loan Documents (including, without
limitation, all Indebtedness owing under the Sierra Loan Agreement and the
Trimont Loan Agreement) in their entirety. Borrowers' obligations and all
Bank's rights under this Agreement and the Loan Documents, or any instrument
executed pursuant to or in furtherance of this Agreement, shall continue
until all Borrowers' obligations have been fully satisfied, regardless of
whether Bank agrees to any extensions of time hereunder, under the Note or
otherwise. On and after the Closing Date, all amounts outstanding under the
Sierra Note and the Trimont Notes shall be deemed for all purposes to be
amounts outstanding under this Agreement and shall be governed by and
entitled to the benefits of this Agreement and the other Loan Documents.

7.19 OBLIGATIONS OF BORROWERS JOINT AND SEVERAL. All obligations of
Borrowers hereunder and under each of the other Loan Documents shall be joint
and several upon each of the Borrowers in all respects.

7.20 ASSIGNABILITY OF BANK'S RIGHTS. Bank shall at any time and from time to
time have the right, in its sole and absolute discretion, to assign all or
any portion (e.g., through a "participation agreement") of its rights in, to
and under this Agreement, the Note and/or any of the other Loan Documents,
and/or any promissory note, loan agreement, security

<PAGE>

instrument, and/or other document of any kind or nature pertaining to any
other loan made by Bank to either or both of Borrowers, to any one or more
parties.

7.21 INCORPORATION OF RECITALS. The "Recitals" section of this Agreement is
incorporated herein by this reference.

IN WITNESS WHEREOF, the parties hereto have executed the foregoing instrument
of the day and year first above written.

BORROWERS:

SIERRA-AT-TAHOE, INC., a Delaware TRIMONT LAND COMPANY, a
corporation California corporation, doing business
as Northstar-At-Tahoe

By: /s/ William A. Jensen By: /s/ William A. Jensen
-------------------------- ---------------------------
Its: President Its: President
-------------------------- ---------------------------

BANK:

FIRST INTERSTATE BANK OF NEVADA,
NATIONAL ASSOCIATION

By: /s/ Darby Watson
----------------------------
Its: Vice President
----------------------------

<PAGE>

INDEX OF DEFINITIONS AND TERMS

ACF, 21 Loan, 1
Administrator, 28 Loan Agreements, 1
ALTA Title Insurance Policy, 13 Loan Documents, 4
Assignment of Permits, 12 Material Adverse Effect, 18
Bank, 1 Maturity Date, 11
Borrowers, 1 Maximum Permissible Loan Balance, 11
Borrowers' Funded Debt-to-Cash Flow Note, 4
Ratio, 4 Other Permitted Indebtedness, 22
Business Banking Day, 6 Parent, 13
Closing, 4 Participation Agreement, 33
Closing Certificates, 14 Permitted Liens, 23
Closing Date, 4 Person, 19
Collateral, 12 Personal Property, 12
Coverage ratio, 22 Plan, 24
Debt-to-Cash Flow Ratio. See Borrowers' Pledge Agreement, 12
Funded Debt-to-Cash Flow Ratio Prior Loan Documents, 33
Deed of Trust, 11 Real Property, 11
Dispute, 28 Reference Rate, 5
Dividends, 21 Reportable Event, 24
Documents, 28 Scheduled Closing Date, 4
EBITDA, 4 Security Agreements, 12
Environmental Reports, 17 Security Documents, 4
ERISA, 24 Sierra, 1
Events of Default, 25 Sierra Loan, 1
Fixed Charges, 23 Sierra Loan Agreement, 1
Governmental Authority, 18 Sierra Note, 1
Indebtedness, 18 Ski Permit Agreement, 11
Indemnities, 12 Special Covenants, 11
Interest Period, 5 Stock Certificates, 12
L/C Exposure, 2 Subordination Agreement, 12
Letters of Credit, 2 Subsidiary, 17
LIBOR, 5 Trimont Loan, 1
LIBOR Rate, 5 Trimont Loan Agreement, 1
Lien, 24 Trimont Notes, 1

<PAGE>

LIST OF EXHIBITS

Exhibit A Secured Reducing Revolving Line of Credit Promissory Note
Exhibit B Deed of Trust and Assignment of Rents, Issues and Profits, with
Amendment
Exhibit C Special Covenants and Agreements Regarding Ski Permits, with
Amendment
Exhibit D Agreement Concerning First Interstate Bank of Nevada Loan for
Holder Term Special Use Permit Number 4185
Exhibit E-1 Security Agreement for Trimont, with Amendment
Exhibit E-2 Security Agreement for Sierra, with Amendment
Exhibit F-1 Assignment of Permits, Licenses, Variances, Approvals, Plans and
Specifications for Trimont, with Amendment
Exhibit F-2 Assignment of Permits, Licenses, Variances, Approvals, Plans and
Specifications for Sierra, with Amendment
Exhibit G-1 Environmental Indemnity for Trimont, with Amendment
Exhibit G-2 Environmental Indemnity for Trimont and Sierra, with Amendment
Exhibit H Pledge Agreement, with Amendment
Exhibit I Subordination Agreement
Exhibits J-1
through J-4 Copies of UCC Financing Statements
Exhibit K-1 Closing Certificate - Trimont
Exhibit K-2 Closing Certificate - Sierra
Exhibit K-3 Closing Certificate - Fibreboard
Exhibit L-1 Compliance Certificate - Trimont
Exhibit L-2 Compliance Certificate - Sierra

<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> (1,515)
<SECURITIES> 0
<RECEIVABLES> 3,429
<ALLOWANCES> 2,191
<INVENTORY> 80,610
<CURRENT-ASSETS> 148,881
<PP&E> 196,008
<DEPRECIATION> 81,425
<TOTAL-ASSETS> 1,218,954
<CURRENT-LIABILITIES> 69,190
<BONDS> 99,988
<COMMON> 85
0
0
<OTHER-SE> 155,693
<TOTAL-LIABILITY-AND-EQUITY> 1,218,954
<SALES> 253,190
<TOTAL-REVENUES> 253,190
<CGS> 197,356
<TOTAL-COSTS> 197,356
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 350
<INTEREST-EXPENSE> 3,929
<INCOME-PRETAX> 16,655
<INCOME-TAX> 6,660
<INCOME-CONTINUING> 9,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,995
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11

</TABLE>

<PAGE>
EXHIBIT 99.1

FOR IMMEDIATE RELEASE
---------------------
At the Company: At Financial Relations Board:
Stephen L. DeMaria Hannah Bruce, General Information
(510) 274-0700 Stephanie Mishra, Investor Contact
(415) 986-1591

FIBREBOARD SIGNS LETTER OF INTENT TO SELL
WOOD PRODUCTS GROUP

(WALNUT CREEK, CALIFORNIA, June 20, 1995) -- Fibreboard Corporation
(AMEX:FBD) announced today that it has signed a Letter of Intent to sell to
Sierra Pacific Industries substantially all the assets of its Wood Products
operations, including approximately 76,000 acres of timberland and its
facilities at Standard, Chinese Camp, Red Bluff, and Keystone, all of which are
located in central California. The estimated purchase price after certain
adjustments at closing is between $240 and 250 million. After-tax cash proceeds
to Fibreboard are estimated at $170-180 million with a gain for financial
reporting purposes estimated in the range of $75 to 80 million, approximately,
$8.50 per share.

The transaction, which is subject to execution of a definitive purchase
agreement, approval of the parties' respective Boards of Directors and
government regulatory approval, is expected to take several months to close.

Fibreboard Chairman John D. Roach stated, "We believe that the sale of the
Wood Products Group is in the best long-term interests of our shareholders as it
will allow us to focus our resources on strategic opportunities in other
segments of the building products industry. We were pleased to find strong
interest in our Wood Products operations from a number of strategic and
financial buyers. In addition to representing what we view as a fair price, we
feel the Sierra Pacific bid is in the best interests of our existing Wood
Products employees."

Headquartered in Northern California, Fibreboard Corporation is a leader in
the building products industry, manufacturing wood and vinyl products and
industrial insulation. Registered trade names include Norandex and Pabco. In
addition to owning approximately 80,000 acres of timberland in the Central
Sierra Nevada mountains of California, the company also owns and operates two
California resorts: Northstar-at-Tahoe, an all season ski and golf resort and
conference center, and Sierra-at-Tahoe, a day ski facility.
#####

<PAGE>
EXHIBIT 99.2

TEXAS COURT APPROVES FIBREBOARD'S
ASBESTOS GLOBAL AND INSURANCE SETTLEMENT AGREEMENTS

(WALNUT CREEK, CA, JULY 28, 1995) -- Fireboard Corporation (AMEX:FBD) today
announced that both its asbestos personal injury Global Settlement and Insurance
Settlement have been approved by a federal district trial court in Texas.
Circuit Judge Robert Parker, sitting by designation in the United States
District Court for the Eastern District of Texas, issued the decisions in the
cases of AHEARN V. FIBREBOARD CORPORATION (Global Settlement) and CONTINENTAL
CASUALTY COMPANY V. RUDD (Insurance Settlement). The decision follows a
massive international media and direct mail notice campaign to potential
claimants and extensive hearings during the last year.

On August 27, 1993, Fibreboard entered into an agreement in principle for
the Global and Insurance Settlements with its insurers, Continental Casualty and
Pacific Indemnity and, as to the Global Settlement, court appointed
representatives of asbestos personal injury claimants. Definitive agreements,
which required court approval to become effective, were executed by the parties
in late 1993 and were submitted to the federal trial court for consideration
shortly thereafter.

Under the Global Settlement all asbestos-related personal injury
liabilities of Fibreboard will be resolved through insurance funds and existing
corporate reserves. Upon final approval (if appealed), Fibreboard's insurers
are required to pay off existing settlements and assume full responsibility for
any claims filed before August 27, 1993 (the date the agreement in principle was
reached) but not yet settled. A court-supervised claims processing trust has
been established which will be responsible for administering the $1.535 billion
dedicated to resolving claims filed against Fibreboard since August 27, 1993 and
any future claims that could otherwise be asserted against the Company. A
permanent injunction barring the filing of any further claims against Fibreboard
or its insurers has been entered as part of the trial court approval.
Fibreboard's insurers have already either funded into escrow or reserved more
than $3.0 billion to cover the costs of the Global Settlement. It is likely
that Judge Parker's decision approving the Global

<PAGE>

Settlement will be appealed by parties who have objected to certain provisions
of the settlement. Such an appeal could take a year or more to be resolved.

The Insurance Settlement is intended as an alternative solution in the
event the Global Settlement decision should be appealed and fail to receive
final approval. Under the Insurance Settlement Fibreboard's insurers will
satisfy existing settlements reached as of August 27, 1993, and provide
Fibreboard with up to $2.0 billion (plus accrued interest) in additional funds
as needed to resolve unsettled pending claims as of August 27, 1993 and claims
which have been or may be filed against the Company after that date. Fibreboard
cannot predict whether Judge Parker's decision approving the Insurance
Settlement will be appealed but strongly believes that this decision is in the
best interests of current claimants and those who may have claims in the future.

John D. Roach, Fibreboard's Chairman and Chief Executive Officer, said, "I
am extremely pleased we have accomplished this significant milestone in
obtaining final approval of the Global and Insurance Settlement Agreements. We
are now a major step closer to our ultimate goal of favorably resolving
Fibreboard's liability for its pre-1972 manufacture of asbestos containing
products in a manner fair to claimants, shareholders and employees alike. While
one or both of these settlements may be appealed, I am optimistic that the
extensive testimony and evidence during the lengthy trial court hearing clearly
demonstrate that these settlements are fair and reasonable to all parties
involved."

####