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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FIBREBOARD CORPORATION
(NAME OF SUBJECT COMPANY)
FIBREBOARD CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(INCLUDING THE ASSOCIATED RIGHTS)
(TITLE OF CLASS OF SECURITIES)
315712109
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MICHAEL R. DOUGLAS, ESQ.
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
FIBREBOARD CORPORATION
2200 ROSS AVENUE, SUITE 3600
DALLAS, TEXAS 75201
(214) 954-9500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
ROBERT E. SPATT, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954
(212) 455-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Fibreboard Corporation, a Delaware
corporation (the "Company"), and the address of its principal executive
offices is 2200 Ross Avenue, Suite 3600, Dallas, Texas 75201. The title of the
equity securities to which this Solicitation/Recommendation Statement on
Schedule 14D-9 (this "Statement") relates is the Common Stock, par value $0.01
per share (the "Common Stock"), of the Company, including the associated
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of August 25, 1988 (as amended, the "Rights Agreement"),
between the Company and The First National Bank of Boston, as successor Rights
Agent (collectively, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1 dated May 30, 1997 (the "Schedule
14D-1"), by Sierra Corp., a Delaware corporation (the "Offeror") and a wholly
owned subsidiary of Owens Corning, a Delaware corporation ("Parent"), to
purchase all outstanding shares of Common Stock, including the associated
Rights, at a price of $55.00 per share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated May 30, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which Schedule 14D-1, Offer to Purchase, Letter
of Transmittal and other documents, together with any supplements or
amendments thereto, are referred to herein collectively as the "Offer
Documents").
According to the Schedule 14D-1, the principal executive offices of Parent
and the Offeror are located at One Owens Corning Parkway, Toledo, Ohio 43659.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of May 27, 1997 (the "Merger Agreement"), among Parent, the Offeror and the
Company. A copy of the Merger Agreement is filed as Exhibit 1(a) to this
Statement and is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements,
arrangements or understandings and no actual or potential conflicts of
interest between the Company or its affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) Parent or the Offeror or
their respective executive officers, directors or affiliates.
SEVERANCE AND RELATED MATTERS
Certain contracts, agreements, arrangements or understandings between the
Company and certain of its executive officers, directors and affiliates are
described in Annex B hereto and incorporated herein by reference.
At a meeting of the Board of Directors of the Company (the "Board") held on
May 19, 1997, in order to provide certain executives with certain additional
benefits consistent with the current policy of the Company regarding an
officer's entitlement to benefits upon the termination of his employment, the
Board authorized and approved the adoption of a severance agreement with the
Chief Executive Officer of the Company (the "CEO") and the amendment of its
severance agreements with seven senior executives (the "Senior Executives",
and the severance agreements, as amended, including the CEO's new severance
agreement, except as otherwise noted below, in the same form as that given to
the Senior Executives, the "Amended Severance Agreements"). The Board also
authorized the Company to enter into severance agreements with seventeen
additional executives and managers (such executives and managers, the
"Managers", and the severance agreements, the "Manager Severance Agreements").
In addition, to provide severance protection to the employees of the Company's
Dallas, Texas office (the "Dallas Office") in the event that such employees
are terminated following a Change of Control (as defined below), the Board
authorized and adopted a Dallas severance plan ("Dallas Severance Plan")
covering all the employees at the Dallas office (the "Dallas Employees").
Copies of the forms of the
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Amended Severance Agreements, the Manager Severance Agreement, and the Dallas
Severance Plan (collectively, the "Severance Arrangements") are filed as
Exhibits 2(b), 3 and 4, respectively, hereto, and are incorporated herein by
reference.
The Amended Severance Agreements provide that in the event that the
employment of a Senior Executive or the CEO is terminated by the Company
without Cause (as defined below) or by the Senior Executive or the CEO in a
Constructive Termination (as defined below) within two years following a Change
of Control, the Senior Executive or the CEO shall be entitled to the following:
(i) a lump sum equal to two years for Senior Executives and three years for the
CEO (such two or three year period, as applicable, the "Severance Period") of
base salary and bonus; (ii) the bonus for the year of termination, pro-rated
through his or her date of termination; (iii) full vesting on all stock
options, restricted stock and phantom stock units previously awarded, to the
extent not already vested, to the Senior Executive or the CEO; (iv) for
purposes of the Company's benefit plans, programs and fringe benefits
(including any non-qualified plans), the Senior Executive or the CEO shall be
treated as continuing to participate in such plans or programs (including, but
not limited to, any medical or insurance benefits, non-qualified pension plans,
and retiree welfare plans) for the Severance Period (or for any non-qualified
pension plan, receives a payment in lieu of any further participation); (v) if
the Senior Executive or the CEO relocated from California in the past year, up
to $75,000 to reimburse the Senior Executive's or the CEO's relocation expenses
to return to California; and (vi) a gross-up payment in respect of any excise
and other taxes imposed in connection with any "excess parachute payments"
under the Internal Revenue Code of 1986, as amended (the "Code").
In addition, Senior Executives (other than the CEO) may voluntarily terminate
their employment within 6 months of the Change of Control and receive 75% of
the cash severance payment provided in (i) above and 100% of the pro-rated
bonus as well as all the continued benefits and pension accruals provided above
for 18 months (rather than the Severance Period of 24 months). In the case of
the CEO, he may voluntarily terminate his employment for any reason within two
years following a Change of Control and receive all of the benefits listed in
the paragraph above.
The final form of the CEO's Amended Severance Agreement will provide for the
greater of the benefits provided in his existing employment agreement or the
form of the Amended Severance Agreement. The existing employment agreement is
filed as Exhibit 2(a) hereto and is incorporated herein by reference.
The Manager Severance Agreements provide that upon a termination by the
Company without Cause or by the Manager in a Constructive Termination, the
Manager shall be entitled to receive: (i) one year's base salary; (ii) the
Manager's bonus for the fiscal year of termination; (iii) an amount equal to
the Manager's maximum bonus for the fiscal year of termination, prorated for
the period of the Manager's actual employment during the fiscal year of
termination; and (iv) continuation of insurance benefits and fringe benefits
for 12 months following the termination; provided, however, that for five of
the Managers, in the event they are terminated by the Company without Cause or
by the Manager in a Constructive Termination within 12 months following a
Change of Control, they shall receive the benefits above, but instead of one
year's base salary and bonus, they shall receive 18 months of base salary and
bonus and the insurance and fringe benefit continuation shall be for 18 months,
instead of 12 months.
The Dallas Severance Plan provides that upon a Dallas Employee's termination
of employment by the Company without Cause or by a Dallas Employee in a
Constructive Termination, the Dallas Employee shall be entitled to: (i) the
base salary for the applicable severance period (which shall range from three
to 12 months, depending on the employee), (ii) the bonus for such severance
period, (iii) a bonus pro-rated through the employee's date of termination,
(iv) continuation of insurance benefits for the applicable severance period,
and (v) if the employee had relocated from California to Dallas within the last
year, up to $50,000 to pay for relocation expenses to return to California.
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Under the Severance Arrangements, a "Change of Control" is deemed to have
occurred if: (i) the holders of the voting securities of the Company shall
have approved a merger or consolidation of the Company with any other entity,
unless the proposed merger or consolidation would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; (ii) a plan of
complete liquidation of the Company shall have been adopted or the holders of
voting securities of the Company shall have approved an agreement for the sale
or disposition by the Company (in one transaction or a series of transactions)
of all or substantially all of the Company's assets; (iii) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 ("Exchange Act")) shall become the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of 15% or more of
the combined voting power of the Company's then outstanding shares; (iv)
during any period of two consecutive years, members who at the beginning of
such period constituted the Board shall have ceased for any reason to
constitute a majority thereof, unless the election, or nomination for election
by the Company's stockholders, of each director shall have been approved by
the vote of at least two-thirds of the directors then still in office and who
were directors at the beginning of such period (so long as such director was
not nominated by a person who has expressed an intent to effect a Change of
Control or engage in a proxy or other control context); or (v) the occurrence
of any other change of control of a nature that would be required to be
reported in accordance with Form 8-K pursuant to Sections 13 or 15(d) of the
Exchange Act or in the Company's proxy statement in accordance with Schedule
14A of Regulation 14A promulgated under the Exchange Act, or in any successor
forms or regulations to the same effect. Consummation of the Offer will
constitute a Change of Control under the Severance Arrangements.
Under the Severance Arrangements, "Cause" is defined as (i) a conviction of
any felony, or (ii) a willful failure by the employee to substantially perform
his duties, other than a failure resulting from the employee's complete or
partial incapacity due to physical or mental illness or impairment.
Under the Severance Arrangements, "Constructive Termination" is defined as
any of the following: (i) the employee's base salary is reduced without his
written consent, or (ii) the employee's annual compensation potential
(consisting of base salary plus total annual bonus potential) is reduced
without his written consent, or (iii) the employee is required by the Company
without his written consent to relocate to a new place of business that is
more than fifty miles from the employee's place of employment prior to the
Change of Control (or a substantial increase in the amount of required
business travel), or (iv) there is a material adverse change in the employee's
duties or responsibilities in comparison to the duties or responsibilities
which the executive had prior to the Change of Control.
In addition to amending and authorizing the Severance Arrangements, the
Board: (i) approved the amendment of the 1995 Stock Incentive Plan and the
1988 Stock Option Plan so that all options and stock units issued under the
plan would immediately vest upon a Change of Control; (ii) approved the
amendment of the Long-Term Equity Incentive Plan to provide that units will
not be valued at less than the price provided in the Change of Control; and
(iii) approved the amendment of the Profit Sharing/401(k) retirement plan so
that: (a) employees at the Dallas Office who are terminated within two years
following a Change of Control would be vested in the plan, and (b) all
employees at the Dallas Office would receive a retirement contribution for
1997.
The Company also has indemnification agreements with each member of the
Board and each executive officer. The indemnification agreements supplement
the protections afforded to the Company's directors and executive officers
under the Company's Restated Certificate of Incorporation. In general, the
indemnification agreements provide for the Company to indemnify directors and
executive officers against expenses, judgments, fines, and amounts paid in
settlement arising in connection with actions, suits or proceedings, whether
civil, criminal, administrative or investigative (including actions by or in
the right of the Company) against any director or executive officer relating
to his or her services to the Company unless such director's or executive
officer's conduct has been finally adjudged to have been knowingly fraudulent
or deliberately dishonest or to constitute willful misconduct. The
indemnification agreements are binding upon the Company and any successor to
the Company.
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The foregoing description of the indemnification agreements is qualified in
its entirety by reference to the form of agreement which is filed as Exhibit 5
hereto and is incorporated herein by reference.
MERGER AGREEMENT
The following summary of certain provisions of the Merger Agreement is
qualified in its entirety by reference to the text of the Merger Agreement
which is filed as Exhibit 1(a) hereto and is incorporated herein by reference.
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, each of the Company, Parent and the Offeror have agreed, subject to
certain exceptions, to use its reasonable best efforts to cause the purchase
of Shares pursuant to the Offer and the consummation of the Merger to occur as
soon as reasonably practicable. Without limiting the foregoing, each of the
Company, Parent and the Offeror have agreed to use its reasonable best efforts
to take, or cause to be taken, all actions necessary to comply promptly with
all legal requirements that may be imposed on itself with respect to the Offer
and the Merger and shall promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them
in connection with the Offer and the Merger. In addition, neither Parent nor
any of its subsidiaries is obligated in connection with obtaining any required
HSR Act or other governmental approvals to divest or hold separate or to
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of the
businesses, product lines or assets of Parent or any of its subsidiaries or
that would have a material adverse effect on Parent. Pursuant to the Merger
Agreement, the Offeror expressly reserves the right to modify the terms of the
Offer, except that, without the prior written consent of the Company, the
Offeror shall not (i) reduce the number of Shares to be purchased in the
Offer, (ii) reduce the Offer Price (as defined below), (iii) impose any
conditions to the Offer in addition to the conditions described in Section 15
of the Schedule 14D-1 (the "Offer Conditions") or modify such Offer Conditions
(other than to waive any Offer Condition to the extent permitted by the Merger
Agreement), (iv) except as provided in the next sentence, extend the Offer,
(v) change the form of consideration payable in the Offer or (vi) make any
other change or modification in any of the terms of the Offer in any manner
that is adverse to the holders of Shares. Notwithstanding the foregoing, the
Offeror may, without the consent of the Company, (i) extend the Offer, if at
the scheduled expiration date of the Offer any of the Offer Conditions shall
not be satisfied or waived, until such time as such conditions are satisfied
or waived, (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission or the staff thereof applicable to the Offer and (iii) extend the
Offer for a period of up to five business days if, on any scheduled expiration
date on which the Offer Conditions shall have been satisfied or waived, the
number of Shares that have been validly tendered and not withdrawn represent
more than 70% of the voting power of the Shares (on a fully diluted basis),
but less than 90% of the voting power of the then issued and outstanding
Shares. The Merger Agreement further provides that in the event that the
Offeror would otherwise be entitled to terminate the Offer at any scheduled
expiration date thereof due to the failure of one or more of the Offer
Conditions, unless the Merger Agreement shall have been terminated pursuant to
its terms, the Offeror shall, and Parent shall cause the Offeror to, extend
the Offer until such date as the Offer Conditions have been satisfied or such
later date as required by applicable law but not beyond November 30, 1997.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the DGCL,
the Offeror shall be merged with and into the Company at the effective time of
the Merger (the "Effective Time"). Following the Merger, the separate
corporate existence of the Offeror shall cease and the Company shall continue
as the Surviving Corporation and shall succeed to and assume all the rights
and obligations of the Offeror and the Company in accordance with the DGCL. At
the Effective Time, the Charter, as amended as of the Effective Time, and
Bylaws of the Company shall be the Charter and Bylaws of the Surviving
Corporation. The directors of the Offeror shall become the directors of the
Surviving Corporation and the officers of the Company shall become the
officers of the Surviving Corporation.
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Conversion of Securities. As of the Effective Time, by virtue of the Merger
and without any action on the part of the Offeror, the Company or the holders
of any securities of the Offeror or the Company, each Share (other than Shares
owned by the Company, any subsidiary of the Company, Parent, the Offeror, any
other subsidiary of Parent or by stockholders, if any, who are entitled to and
who properly exercise appraisal rights under the DGCL) shall be converted into
the right to receive from the Surviving Corporation, in cash, without
interest, $55.00 per share (the "Offer Price"). Each share of stock of the
Offeror issued and outstanding immediately prior to the Effective Time shall,
at the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of stock of the Offeror, be converted into
and become one fully paid and nonassessable Share, $.01 par value, of the
Surviving Corporation.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Offeror. The
representations and warranties of the Company relate, among other things, to
its organization and qualification; subsidiaries; capital structure; authority
to enter into the Merger Agreement and to consummate the transactions
contemplated thereby; required consents and approvals; filings made by the
Company with the Commission under the Securities Act or the Exchange Act
(including financial statements included in the documents filed by the Company
under these acts); absence of any material adverse change; compliance with
laws; tax matters; liabilities; benefit plans and employees and employment
practices; litigation; environmental matters; state takeover statutes and the
execution of an amendment to the Rights Agreement; and asbestos related
matters.
The Offeror and Parent have also made customary representations and
warranties to the Company. Representations and warranties of the Offeror and
Parent relate, among other things, to: their organization and authority to
enter into the Merger Agreement and to consummate the transactions
contemplated thereby; required consents and approvals; and financing.
Covenants Relating to the Conduct of Business. During the period from the
date of the Merger Agreement to such time as Parent's designees shall
constitute a majority of the Board of Directors of the Company, the Company
has agreed that it will, and will cause its subsidiaries to, in all material
respects, except as contemplated by the Merger Agreement, carry on its
business in the ordinary course of its business as currently conducted and, to
the extent consistent therewith, use reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers and key employees and preserve its present relationships with
customers, suppliers and others having significant business dealings with it.
The Company has agreed that, except as otherwise expressly contemplated by the
Merger Agreement, during such period, except as contemplated by the Merger
Agreement, the Company will not, and will not permit any of its subsidiaries
to, without the prior written consent of Parent (which consent shall not be
unreasonably withheld or delayed):
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than the payment by a subsidiary of the Company of
a dividend or distribution to the Company or another wholly owned
subsidiary of the Company), (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (z) purchase, redeem or otherwise acquire any shares of its capital
stock or those of any subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(b) except as set forth in the letter from the Company to Parent dated
the date of the Merger Agreement and except as required under existing
employee benefit plans, agreements, policies, awards or arrangements in
effect on the date of the Merger Agreement including, without limitation,
the Company Stock Options (as defined below), issue, deliver, sell, pledge,
dispose of or otherwise encumber any shares of its capital stock, any other
voting securities or equity equivalent or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities, equity equivalent or convertible securities (other than
pursuant to the Rights Agreement and other than issuances to a wholly owned
subsidiary of the Company of its capital stock to the Company);
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(c) amend its Charter or Bylaws or other similar organizational
documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, limited
liability company, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets, other than
transactions that are (i) in the ordinary course of business consistent
with past practice, (ii) which involve assets having a purchase price not
in excess of $1,000,000 individually or $5,000,000 in the aggregate or
(iii) acquisitions or purchases of assets to the extent permitted by
paragraph (n) below;
(e) other than settling disputes with the Company's insurance carriers in
connection with insurance for asbestos-related property damage and other
claims (excluding personal injury asbestos claims), sell, lease, encumber
or otherwise dispose of, or agree to sell, lease, encumber or otherwise
dispose of, any of its assets, other than transactions that are in the
ordinary course of business consistent with past practice or which involve
assets which in the aggregate are not in excess of $2,000,000;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of others, enter into any "keep-well" or
other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, except for borrowings incurred in the ordinary course of
business consistent with past practice not to exceed $2,000,000 in the
aggregate or non-acquisition-related borrowings under existing credit
facilities not to exceed $10,000,000 in the aggregate, or make any loans,
advances or capital contributions to, or other investments in, any other
person, other than to or in the Company or any wholly owned subsidiary of
the Company;
(g) except as set forth in the letter from the Company to Parent dated
the date of the Merger Agreement, alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the corporate
structure or ownership of the Company or any subsidiary of the Company;
(h) except as set forth in the letter from the Company to Parent dated
the date of the Merger Agreement, increase the compensation payable or to
become payable to its directors, officers or employees, except for
increases required under employment agreements existing on the date hereof,
and increases for officers and employees in the ordinary course of business
consistent with past practice, or grant any severance or termination pay
to, or enter into any employment or severance agreement, or establish,
adopt, enter into, or amend or take action to enhance or accelerate any
rights or benefits under, any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, except, in each case, as may be required by
the terms of any such plan, agreement, trust, fund, policy or arrangement
or to comply with applicable law or regulation;
(i) knowingly violate or fail to perform any material obligation or duty
imposed upon it by any applicable material federal, state or local law,
rule, regulation, guideline or ordinance;
(j) except as set forth in paragraphs (q) or (r) below, settle or
compromise any suit, proceeding or claim or threatened suit, proceeding or
claim for an amount that is more than $100,000 in the case of any
individual suit, proceeding or claim or $250,000 for all suits, proceedings
or claims;
(k) except to the extent required by law or agreed to by Parent, (i)
compromise any material tax liability or (ii) prepare or file any material
tax return inconsistent with past practice or, on any such material tax
return or otherwise, take any position, make any material election, or
adopt any material accounting method that is inconsistent with positions
taken, elections made or methods used in preparing or filing similar tax
returns;
(l) redeem the Rights or, other than as contemplated by the Merger
Agreement, amend the Rights Agreement;
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(m) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any material change in its
methods of accounting;
(n) make or agree to make any new capital expenditure or expenditures not
previously finally committed to that, individually, exceeds $2,500,000;
provided, however, that as to any individual capital expenditure in an
amount equal to or greater than $1,000,000 but less than or equal to
$2,500,000, the Company will consult with Parent (it being understood that
no consent is required under the Merger Agreement);
(o) except as permitted by paragraph (j) above or paragraph (q) or (r)
pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge, settlement or satisfaction, (i) in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of the Company
included in the documents filed by the Company pursuant to the Securities
Act or the Exchange Act or incurred since the date of such financial
statements in the ordinary course of business consistent with past practice
or (ii) of liabilities required to be paid, discharged or satisfied
pursuant to the terms of any contract in existence on the date of the
Merger Agreement;
(p) excluding contracts covered by paragraphs (q) or (r) below, enter
into, modify in any material respect, amend in any material respect or
terminate any material contract or agreement to which the Company or any of
its subsidiaries is a party or waive (except to the extent permitted by the
Section entitled "Third Party Standstill Agreements" below), release or
assign any material rights or claims except to the extent permitted by the
Merger Agreement;
(q) except to the extent permitted by the letter from the Company to
Parent dated the date of the Merger Agreement, modify, waive or amend, or
consent to any modification, waiver or amendment of, any provision of the
Asbestos Agreements (as defined in the Merger Agreement);
(r) enter into any agreement, or make any commitment, for the resolution
of any asbestos personal injury lawsuits or for the payment of any
settlement monies, fees, costs or disbursements relating thereto exceeding
$12.5 million in the aggregate per 30 day period after the date of the
Merger Agreement unless (i) any payments in respect of such agreements or
commitments would be made entirely from funds provided by the Company's
insurance carriers and (ii) would not, in the event of Global Court
Disapproval (as defined in the Merger Agreement), result in a reduction or
commitment of the amounts otherwise payable to the Company pursuant to the
Trilateral Settlement Agreement (as defined in the Merger Agreement);
provided, however, that the Company may, without regard to the restriction
set forth in this paragraph (r), pay and discharge, and agree to pay and
discharge, any claims with Outstanding Offers and Interim Claims (as
defined in the Merger Agreement); or
(s) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
No Solicitation. The Merger Agreement provides that the Company shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or
permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its subsidiaries to, directly or indirectly, (1) solicit, initiate
or knowingly encourage (including by way of furnishing information), any
inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any Takeover Proposal or (2) participate in any
discussions or negotiations regarding any Takeover Proposal; provided,
however, that if, at any time prior to the acceptance for payment of Shares
pursuant to the Offer, the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that it would be
consistent with its fiduciary responsibilities to the Company's stockholders
under applicable law, the Company may, in response to a Takeover Proposal
which was not solicited subsequent to the date of the Merger Agreement, and
subject to compliance with the notification provisions discussed below, (i)
furnish information
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with respect to the Company to any person pursuant to a confidentiality
agreement in substantially the same form as the confidentiality agreement
entered into between the Company and Parent (other than for provisions similar
to Section 6 thereof) and (ii) participate in discussions, investigations
and/or negotiations regarding such Takeover Proposal. The Merger Agreement
defines "Takeover Proposal" as any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 20% or more of
the aggregate assets of the Company and its subsidiaries, taken as a whole, or
20% or more of the voting power of the Shares then outstanding or any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of the voting power of the Shares then
outstanding or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company other than the transactions contemplated by the Merger Agreement.
The Merger Agreement provides further that, except as described below,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors
or such committee of the Offer, the Merger or the Merger Agreement; provided
that, the Board of Directors of the Company may, (A) in response to any
Takeover Proposal, suspend such recommendation for a period of up to 24 hours
pending its analysis of such Takeover Proposal or (B) at any time prior to the
consummation of the Offer, modify or withdraw such recommendation if the Board
of Directors of the Company determines in good faith, after consultation with
outside counsel, that it would be consistent with its fiduciary
responsibilities to so modify or withdraw such recommendation (regardless of
the existence of a Superior Proposal (as defined below) at such time);
provided further that, unless the Merger Agreement shall have been terminated,
any such suspension, modification or withdrawal shall not prevent Parent and
the Offeror, in its or their discretion, from consummating the Offer and shall
not affect any of the actions taken by the Company pursuant to the provisions
of the Merger Agreement relating to state takeover statutes and the Rights
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Takeover Proposal or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any Takeover
Proposal. Notwithstanding the foregoing, in the event that prior to the
acceptance for payment of Shares pursuant to the Offer the Board of Directors
of the Company determines in good faith, after consultation with outside
counsel, that it would be consistent with its fiduciary responsibilities to
the Company's stockholders under applicable law, such Board of Directors may
(subject to the other provisions regarding Takeover Proposals described
herein) withdraw or modify its approval or recommendation of the Offer, the
Merger and the Merger Agreement, approve or recommend a Superior Proposal (as
defined below) or terminate the Merger Agreement, but in each case, only at a
time after the second business day following Parent's receipt of written
notice (a "Notice of Superior Proposal") (which obligation may be satisfied by
the delivery of the notice described in the next succeeding paragraph)
advising Parent that the Board of Directors of the Company has received a
Takeover Proposal that may constitute a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. For purposes of the Merger Agreement, a
"Superior Proposal" means any proposal determined by the Board of Directors of
the Company in good faith, after consultation with outside counsel, to be a
bona fide proposal and made by a third party to acquire, directly or
indirectly, for consideration consisting of cash, property and/or securities,
more than 50% of the combined voting power of the Shares then outstanding or
all or substantially all the assets of the Company and otherwise on terms
which the Board of Directors of the Company determines in its good faith
judgment, after consultation with outside counsel and with a financial advisor
of nationally recognized reputation (such as Dillon Read), to be more
favorable to the Company's stockholders than the Offer and the Merger.
In addition to the obligations of the Company described in the preceding two
paragraphs, the Merger Agreement provides that the Company shall promptly
advise Parent orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or
Takeover Proposal and the identity of the person making any such request or
Takeover Proposal. The Company is further required under the terms of the
Merger Agreement to endeavor to keep Parent reasonably informed of the overall
status of any such request or Takeover Proposal.
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The Merger Agreement provides that nothing contained therein shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act or
from making any disclosure to the Company's stockholders if, in the good faith
judgment of the Board of Directors of the Company, after consultation with
outside counsel, such disclosure is necessary in order to comply with its
fiduciary duties to the Company's stockholders under applicable law or
otherwise required under applicable law.
Third Party Standstill Agreements. During the period from the date of the
Merger Agreement through the Effective Time, the Company has agreed not to
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its subsidiaries is a
party (other than any involving Parent) unless the Company's Board of
Directors shall have determined in good faith, after consultation with outside
counsel, that failing to release any third party or to amend, modify or waive
such provisions would not be consistent with the Company's Board of Directors'
fiduciary responsibilities under applicable law.
Options. Pursuant to the Merger Agreement, each stock option, stock
appreciation right and limited stock appreciation right of the Company (a
"Company Stock Option") which is outstanding immediately prior to the
consummation of the Offer (an "Option") pursuant to any stock option plan or
long-term incentive plan of the Company in effect on the date of the Merger
Agreement (collectively, the "Company Stock Plans"), whether or not otherwise
exercisable, shall become fully vested and exercisable. Upon the consummation
of the Offer each Option shall be canceled by the Company in return for the
payment, as hereinafter provided for which the holder thereof shall thereupon
be entitled to receive. Each such holder shall receive promptly (but in no
event later than five days) after the consummation of the Offer, a cash
payment in respect of such cancellation from the Company in an amount (if any)
equal to (i) the product of (x) the number of Shares subject or related to
such Option and (y) the excess, if any, of the Offer Price over the exercise
or purchase price per Share subject or related to such Option, minus (ii) all
applicable federal, state and local taxes required to be withheld by the
Company. The Company shall use its reasonable best efforts to ensure that,
after giving effect to the foregoing, no Option shall be exercisable for
Common Stock of the Company following the consummation of the Offer. Each
restricted stock agreement or stock unit agreement which is outstanding
immediately prior to the consummation of the Offer pursuant to any Company
Stock Plan, whether or not otherwise exercisable, shall become fully vested.
Upon the consummation of the Offer each such agreement shall be canceled by
the Company in return for the payment as hereinafter provided for which the
holder thereof shall thereupon be entitled to receive. Each such holder shall
receive promptly (but in no event later than five days) after the consummation
of the Offer, a cash payment in respect of such cancellation from the Company
in an amount equal to (i) the product of (x) the number of Shares subject or
related to such agreement and (y) the Offer Price, minus (ii) all applicable
federal, state and local taxes required to be withheld by the Company. The
Company shall use its reasonable best efforts to ensure that, after giving
effect to the foregoing, no such agreement shall be outstanding following the
consummation of the Offer.
Indemnification. From and after the Effective Time, Parent has agreed that
it will and will cause the Surviving Corporation to exculpate, indemnify and
hold harmless all past and present officers, directors, employees and agents
of the Company and its subsidiaries to the same extent such persons are
currently exculpated and indemnified by the Company pursuant to the Company's
Charter or Bylaws for acts or omissions, occurring at or prior to the
Effective Time and will cause the Surviving Corporation's Charter and Bylaws
to continue to include provisions to such effect. Parent will cause the
Surviving Corporation to provide, for an aggregate period of not less than six
years from the Effective Time, the Company's directors and officers who are
currently covered by the Company's existing insurance and indemnification
policy an insurance and indemnification policy that provides coverage for
events occurring prior to the Effective Time (the "D&O Insurance"), that is no
less favorable than the Company's existing policy or, if substantially
equivalent insurance coverage is unavailable, the best available coverage.
Notwithstanding the foregoing, the Surviving Corporation shall not be required
to pay an annual premium for the D&O Insurance in excess of 250% of the last
annual premium paid prior to the date of the Merger Agreement (which the
Company has represented and warranted to Parent to be $400,250), but in such
case shall purchase as much coverage as possible for such amount.
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Board Representation. The Merger Agreement provides that promptly after such
time as the Offeror purchases Shares pursuant to the Offer, the Offeror shall
be entitled, to the fullest extent permitted by law, to designate at its
option up to that number of directors, rounded to the nearest whole number, of
the Company's Board of Directors, subject to compliance with Section 14(f) of
the Exchange Act, as will make the percentage of the Company's directors
designated by the Offeror equal to the aggregate voting power of the Shares
held by Parent or any of its subsidiaries. However, in the event that the
Offeror's designees are elected to the Board of Directors of the Company,
until the Effective Time, such Board of Directors shall have at least three
directors who are directors on the date of the Merger Agreement and who are
not officers of the Company (the "Independent Directors"). If the number of
Independent Directors shall be reduced below three for any reason whatsoever,
the remaining Independent Directors shall, to the fullest extent permitted by
law, designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors shall designate three
persons to fill such vacancies who shall not be officers or affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent or any
of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of the Merger Agreement. Following the election or
appointment of the Offeror's designees pursuant to the Merger Agreement and
prior to the Effective Time, any amendment, or waiver of any term or
condition, of the Merger Agreement or the Company's Charter or Bylaws, any
termination of the Merger Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other
acts of the Offeror or waiver or assertion of any of the Company's rights
under the Merger Agreement, and any other consent or action by the Board of
Directors of the Company with respect to the Merger Agreement, will require
the concurrence of a majority of the Independent Directors and no other action
by the Company, including any action by any other director of the Company,
shall be required for purposes of the Merger Agreement. In connection with the
foregoing, the Company will promptly, at the option of Parent, to the fullest
extent permitted by law, either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable the Offeror's designees to be elected or
appointed to the Company's Board of Directors as provided above.
Employee Benefits; Severance and Other Agreements. The Merger Agreement
provides that during the period from the Effective Time until December 31,
1998, Parent shall maintain or cause to be maintained wages, compensation
levels, employee pension and welfare plans for the benefit of employees and
former employees of the Company or its subsidiaries which, in the aggregate,
are not less favorable than those wages, compensation levels and other
benefits under the benefit plans of the Company that are in effect as of date
of the Merger Agreement; provided, however, that Parent shall not have any
obligation to provide benefits based on equity securities or any equivalent
thereof. For all purposes of eligibility to participate in and vesting in
benefits provided under employee benefits plans maintained by Parent and its
subsidiaries (but not for purposes of determining benefits (or accruals
thereof) under such plans) which employees and former employees of the Company
become eligible to participate in after the Effective Time, all persons
previously employed by the Company and its subsidiaries and then employed by
Parent or its subsidiaries shall be credited with their years of service with
the Company and its subsidiaries and years of service with prior employers to
the extent service with prior employers is taken into account under such
benefit plans.
Parent has agreed to maintain or cause the Offeror to maintain certain
specified severance agreements and employment agreements relating to officers,
directors and employees that have previously been disclosed by the Company to
Parent (it being understood that nothing in the Merger Agreement shall be
deemed to mean that the Company shall not be required to honor its obligations
under any severance agreement or employment agreement to which it is a party)
and has agreed, to maintain or cause to be maintained the Company's standard
severance policy for its employees as in effect on the date of the Merger
Agreement for a period of at least 12 months from the Effective Time. In
addition, Parent shall honor or cause to be honored all severance agreements
and employment agreements with the Company's directors, officers and employees
to the extent disclosed in the letter from the Company to Parent dated the
date of the Merger Agreement.
Parent will, or will cause the Surviving Corporation to, maintain the
Company's bonus plans (as in effect on or before March 1, 1997) through the
end of the 1997 fiscal year, with bonuses to be paid to the employees
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participating thereunder at the greater of (i) the target level, if
applicable, (ii) the prior year's bonus, or (iii) such bonus as the employee
would have earned if the transaction contemplated by the Merger Agreement had
not occurred, in all events on a basis consistent with past practice.
Parent will, or will cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the employees
of the Company under any welfare plan that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that
have not been satisfied as of the Effective Time under any welfare plan
maintained for the Company's employees immediately prior to the Effective
Time, and (ii) provide each employee of the Company with credit for any co-
payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans
that such employees are eligible to participate in after the Effective Time.
Parent will, or will cause the Surviving Corporation to, prior to the end of
the third month following the end of the current fiscal year, make retirement
contributions to the Company's 401(k) plan on behalf of each eligible Company
employee who was employed on the last day of the current fiscal year of four
percent of such employee's 1997 base salary and bonus up to $6,400 for each
employee; provided, however, that for any amounts to which an employee would
be entitled in excess of $6,400 for those employees whose base salary and
bonuses are in excess of $160,000, such excess amounts shall be paid to each
such employee on a basis consistent with past practice. Notwithstanding the
foregoing, in the case of a Company employee who is terminated prior to
December 31, 1997, the retirement contribution described in the previous
sentence (including any payment for any contribution in excess of $6,400)
shall be made not later than the date of the employee's termination.
Conditions Precedent. The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions: (a) if required by applicable law, the
stockholders of the Company shall have approved the Merger Agreement (provided
that Parent and the Offeror vote all of their Shares entitled to vote thereon
in favor of the Merger); (b) no statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
governmental entity preventing the consummation of the Merger shall be in
effect (provided that each of the parties shall have used its reasonable best
efforts to prevent the entry of any such temporary restraining order,
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered); (c) the Offeror shall have previously
accepted for payment and paid for Shares pursuant to the Offer; and (d) any
waiting period (and any extension thereof) under the HSR Act applicable to the
Merger shall have expired or been terminated.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time, whether before or after the approval of the
stockholders of the Company of the Merger (if required by applicable law): (a)
by mutual written consent of Parent, the Offeror and the Company; (b) by
either Parent or the Company: (i) if (x) as a result of the failure of any of
the Offer Conditions (other than the Minimum Condition (as defined in the
Offer Conditions)), the Offer shall have terminated or expired in accordance
with its terms without the Offeror having accepted for payment any Shares
pursuant to the Offer consistent with the Offeror's obligations with respect
to extension of the Offer described above, (y) as a result of the failure of
the Minimum Condition, the Offer shall have terminated or expired in
accordance with its terms without the Offeror having accepted for payment any
Shares pursuant to the Offer consistent with the Offeror's obligations with
respect to extension of the Offer described above or (z) the Offeror shall
have, consistent with its obligations under the Merger Agreement, failed to
pay for the Shares prior to November 30, 1997 (provided that the right to
terminate the Merger Agreement pursuant to this clause (b)(i) shall not be
available to any party whose failure to perform any of its obligations under
the Merger Agreement results in the failure of any such condition to the
Offer) or (ii) if any United States or Canadian governmental entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions contemplated
by the Merger Agreement and such order, decree or ruling or other action shall
have become final and nonappealable; provided, however, that the right to
terminate the Merger Agreement shall not be available to
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any party who has not used its reasonable best efforts to cause such order to
be lifted; (c) by Parent or the Offeror prior to the purchase of Shares
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement which (i) would give rise to the failure of condition (d) or (e) of
the Offer Conditions and (ii) in the case of a breach of a covenant, cannot be
or has not been cured within 20 days after the giving of written notice to the
Company, or, in the case of a breach of a representation or warranty, cannot
be or has not been cured within 90 days after the giving of written notice to
the Company; (d) by Parent or the Offeror if either Parent or the Offeror is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (c) of the Offer Conditions; provided that the temporary
suspension of the recommendation of the Company's Board of Directors described
above under "No Solicitation" shall not give rise to a right of termination
pursuant to this clause (d); (e) by the Company as described above under "No
Solicitation"; provided, that it has complied with the notice provisions
therein and it complies with requirements of the Merger Agreement relating to
payment of the Expense Reimbursement and the Termination Fee (each as defined
below under "Fees and Expenses"); (f) by the Company, if (i) any of the
representations or warranties of Parent or the Offeror set forth in the Merger
Agreement that are qualified as to materiality shall not be true and correct
in any respect or any such representations or warranties that are not so
qualified shall not be true and correct in any material respect, or (ii)
Parent or the Offeror shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of Parent or the Offeror to be performed or complied
with by it under the Merger Agreement and, in the case of (i), such untruth or
incorrectness cannot be or has not been cured within 90 days after the giving
of written notice to Parent or the Offeror, and, in the case of (ii), such
failure cannot be or has not been cured within 20 days after the giving of
written notice to Parent or the Offeror; or (g) by the Company, if the Offer
has not been timely commenced. In the event of a termination of the Merger
Agreement by either the Company or Parent, the Merger Agreement shall
forthwith become void (except for certain specified provisions, including
those pertaining to the payment of certain expenses and fees and except for
certain confidentiality obligations of the parties) and there shall be no
liability or obligation on the part of Parent, the Offeror or the Company or
their respective officers or directors, other than for liability for any
breach. If the Merger Agreement is terminated by either Parent or the Offeror
or by the Company, the Offeror shall, and Parent shall cause the Offeror to,
terminate promptly the Offer.
Fees and Expenses. Except as provided in the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred by a party to
the Merger Agreement in connection with the Merger Agreement and the
transactions contemplated thereby, including, without limitation, the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses.
The Merger Agreement provides that the Company will pay, or cause to be
paid, in same day funds to Parent (a) $3,000,000 for reimbursement of Parent's
expenses (the "Expense Reimbursement") and (b) $13,500,000 (the "Termination
Fee") under the circumstances and at the times set forth as follows: (i) if
Parent or the Offeror terminates the Merger Agreement in accordance with the
provisions described in clause (d) under "Termination" above, the Company
shall pay the Expense Reimbursement and the Termination Fee upon demand; (ii)
if the Company terminates the Merger Agreement in accordance with the
provision described in clause (e) under "Termination" above, the Company shall
pay the Expense Reimbursement and the Termination Fee within one business day
of such termination; and (iii) if Parent or the Company terminates the Merger
Agreement in accordance with the provision described in clause (b)(i)(y) under
"Termination" above or Parent terminates the Merger Agreement in accordance
with the provision described in clause (c) under "Termination" above as a
result of a breach of a covenant, and, in each case, prior to such
termination, a Takeover Proposal shall have been made (other than a Takeover
Proposal made prior to the date of the Merger Agreement) and concurrently
therewith or within 12 months thereafter, (A) the Company enters into a merger
agreement, acquisition agreement or similar agreement (including, without
limitation, a letter of intent) with respect to a Takeover Proposal, or a
Takeover Proposal is consummated, involving any party (x) with whom the
Company has had any discussions with respect to a Takeover Proposal, (y) to
whom the Company furnished information with respect to or with a view to a
Takeover Proposal or (z) who had submitted a proposal or expressed any
interest publicly in a Takeover Proposal, in the case of each of clauses (x),
(y) and (z), prior to such termination, or (B) the
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Company enters into a merger agreement, acquisition agreement or similar
agreement (including, without limitation, a letter of intent) with respect to
a Superior Proposal, or a Superior Proposal is consummated, then in the case
of either (A) or (B) above, the Company shall pay the Termination Fee and the
Expense Reimbursement upon the earlier of the execution of such agreement or
upon consummation of such Takeover Proposal or Superior Proposal.
The Company and Parent are also parties to a Confidentiality Letter dated
April 23, 1997 containing customary terms, including a standstill provision.
The Confidentiality Letter is filed as Exhibit 1(b) hereto and is incorporated
herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Company's Board of Directors
The Board of Directors, at a meeting duly called and held on May 27, 1997,
unanimously determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to and in
the best interests of the Company and the holders of Shares and approved the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, in all respects.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE OFFEROR UNDER THE OFFER. See
"Background of the Offer; Reasons for the Recommendation--Reasons for the
Recommendation; Factors Considered by the Board" for a discussion of the
factors considered by the Board in making its recommendation.
A copy of the press release issued by the Company announcing the signing of
the Merger Agreement is filed as Exhibit 6(b) to this Statement and is
incorporated herein by reference.
(b) Background of the Offer; Reasons for the Recommendation
Background of the Offer
On April 17, 1997, management of Parent presented an overview to Parent's
board of directors regarding a possible business combination with the Company.
Thereafter, Glen H. Hiner, Chairman of the Board and Chief Executive Officer
of Parent, contacted John D. Roach, Chairman, President and Chief Executive
Officer of the Company, and inquired whether the Company would be interested
in discussing a possible business combination transaction. On April 24, 1997,
Messrs. Hiner and Roach met in San Antonio, Texas. At such meeting, Mr. Hiner
discussed Parent's preliminary views on possible valuations of the Company and
discussed the desire of Parent to conduct certain due diligence reviews with
respect to the Company. Mr. Hiner indicated that Parent desired to evaluate
further a possible business combination with the Company at a price of $50.00
per Share, subject to satisfactory completion of due diligence, necessary
board approvals and negotiation of acceptable contractual terms. After
discussions regarding the situation between management of the Company and its
Board of Directors at a telephonic meeting on April 28, 1997, the Company
acknowledged that, although Parent's preliminary valuation warranted further
evaluation by the Company and its advisors, the Company would be willing to
provide Parent an opportunity to conduct due diligence with respect to the
Company.
On April 30, 1997, Parent and the Company executed a confidentiality and
standstill agreement relating to the Company. Thereafter, the Company made
certain due diligence materials available to Parent and its advisors.
On May 5, 1997, representatives of Parent attended a presentation by
representatives of the Company with respect to the Company's asbestos-related
litigation. On May 6, 1997, representatives of Parent attended a presentation
made by the Company's management in Dallas regarding the Company's business. A
due diligence meeting with selected members of management of Parent and the
Company was held in Dallas on May 9, 1997. During the weeks of May 12 and May
19, representatives of Parent, including Merrill Lynch & Co., conducted a
further due diligence review of information provided by the Company, including
various information regarding the Company's asbestos-related litigation.
During this period, representatives of Parent also visited certain major
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manufacturing and distribution facilities of the Company. In the course of the
discussions during such period, the Company's advisors communicated to Parent
that a price of $50.00 per Share was not likely to be acceptable to the
Company's Board of Directors in connection with a sale of the Company.
On May 16, 1997, the Board of Directors of Parent reviewed the status of
Parent's evaluation of the Company, and authorized Parent's management to
commence formal negotiations with respect to the possible acquisition by
Parent of all outstanding shares of capital stock of the Company. Later that
day, Mr. Hiner contacted Mr. Roach and proposed such an acquisition at a price
of $52.00 per Share in cash, subject to final board approval and negotiation
of an acceptable merger agreement. In the evening of May 16, Parent's legal
advisors delivered to the Company and its advisors a draft of a proposed
merger agreement. Among other things, the proposed merger agreement
contemplated that the Company grant to Parent a stock option for 19.9% of the
Common Stock in addition to providing for termination fee and expense
reimbursement provisions.
On May 19, 1997, the Board of Directors of the Company held a meeting to
consider Parent's proposal, at which management of the Company discussed the
business and prospects of the Company and alternatives to the proposed
transaction with Parent. At such meeting, Dillon, Read & Co. Inc. ("Dillon
Read") also made an extensive financial presentation, including background
information and various financial analyses. After discussion of such factors,
including the economic and other uncertainties inherent in the Company's
business, the Board rejected the $52.00 per Share proposal, but instructed
management and the Company's financial and legal advisors to pursue
discussions with Parent in order to determine if an acceptable price and
merger agreement could be negotiated.
During the week of May 19, 1997, the respective financial and legal advisors
of Parent and the Company held various discussions regarding the economic and
contractual terms of a possible transaction. These discussions culminated in
the submission by Parent, on May 23, 1997, of a revised proposal to purchase
all of the capital stock of the Company at a cash purchase price of $55.00 per
Share, without the aforementioned stock option, subject to board approval and
the negotiation of a satisfactory merger agreement.
During the period of May 23, 1997 through May 27, 1997, negotiations
continued on the terms of a possible transaction and revised drafts of the
proposed merger agreement were delivered, reviewed and negotiated.
In the afternoon of May 27, 1997, the Board of Directors of Parent held a
meeting during which it reviewed and approved the Offer and the Merger
Agreement. Also in the afternoon of May 27, 1997, the Board of Directors of
the Company met to consider Parent's revised proposal and the terms of the
Merger Agreement. At such meeting, the Board of Directors of the Company
considered reports from the Company's financial advisors, as well as the terms
of the Merger Agreement, including provisions relating to the ability of the
Company to consider unsolicited third party proposals and to terminate the
Merger Agreement, under certain circumstances, consistent with the fiduciary
responsibilities of the Board of Directors. Dillon Read then delivered its
opinion to the Board of Directors of the Company to the effect that, as of the
date of such opinion, the per Share consideration to be offered to the
Company's stockholders in the Offer and the Merger is fair, from a financial
point of view, to such stockholders. After discussion and analysis, the Board
of Directors of the Company unanimously approved the Merger Agreement. After
the respective meetings of the Boards of Directors of Parent and the Company,
Parent, the Offeror and the Company executed and delivered the Merger
Agreement.
Before the opening of trading on the New York Stock Exchange and the
American Stock Exchange on the morning of May 28, 1997, Parent and the Company
issued a joint press release announcing the signing of the definitive Merger
Agreement.
Reasons for the Recommendation; Factors Considered by the Board. In
approving the Offer and the Merger Agreement and recommending that all
stockholders tender their Shares pursuant to the Offer, the Board considered a
number of factors including:
(a) the familiarity of the Board with the financial condition, results of
operations, competitive position, business and prospects of the Company, as
reflected in the Company's historical and projected financial information,
current economic and market conditions and the nature of the industry in
which it operates,
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including the inherent economic and other uncertainties in the Company's
business and such industry, and the possible alternatives for the Company
in light of such factors;
(b) management's recommendation of the Offer and the Merger Agreement;
(c) the presentations by Dillon Read at the May 19, 1997 and May 27, 1997
Board meetings and the opinion of Dillon Read to the effect that, as of the
date of such opinion and based upon certain matters considered relevant by
Dillon Read, the $55.00 per Share to be offered to the holders of Shares in
connection with the Offer and the Merger is fair, from a financial point of
view, to such holders. THE FULL TEXT OF SUCH OPINION, DATED MAY 27, 1997,
WHICH SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS AND QUALIFICATIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN BY DILLON
READ, IS INCLUDED AS ANNEX A HERETO AND SHOULD BE READ IN ITS ENTIRETY;
(d) the financial and other terms and conditions of the Offer and Merger
Agreement, including, without limitation, the fact that the terms of the
Merger Agreement should not unduly discourage other interested third
parties, if any, from making bona fide proposals to acquire the Company
subsequent to the execution of the Merger Agreement and, if any such
proposals were made, the Board, in its exercise of its fiduciary
responsibilities, could determine to provide information to and engage in
negotiations with any such third party and terminate the Merger Agreement,
subject to the terms and conditions of the Merger Agreement;
(e) historical market prices of, and recent trading activity in, the
Shares, particularly the fact that the Offer and the Merger will enable the
stockholders of the Company to realize a premium of approximately 49.7%
over the closing price of the Shares on April 30, 1997, the date that is
four weeks prior to the public announcement of the Merger Agreement; and a
premium of approximately 15.8% over the closing price of the Shares on the
last trading day prior to such public announcement; and
(f) the fact that the obligations of Parent and the Offeror to consummate
the Offer and the Merger pursuant to the terms of the Merger Agreement are
not conditioned upon financing.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety
of factors considered in connection with its evaluation, the Board did not
find it practicable to and did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendation. In addition, individual members of the Board may have given
different weight to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to the terms of a letter agreement dated May 5, 1997 (the
"Engagement Letter"), the Company has retained Dillon Read as its exclusive
financial advisor in connection with any acquisition of the Company. Pursuant
to the terms of the Engagement Letter, the Company has agreed to pay Dillon
Read a fee of approximately $5.15 million, of which $1.75 million was payable
upon entering into the Merger Agreement and the remainder is payable upon
consummation of the Offer. The Company has also agreed to reimburse Dillon
Read for its reasonable expenses, including the reasonable fees and
disbursements of outside counsel, and to indemnify Dillon Read and certain
related persons against certain liabilities in connection with their
engagement, including certain liabilities under the federal securities laws.
Neither the Company nor any person acting on its behalf has or currently
intends to employ, retain or compensate any person to make solicitations or
recommendations to the stockholders of the Company on its behalf with respect
to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(i) No transactions in Shares have been effected during the past 60 days by
the Company, or to the best knowledge of the Company, by any executive
officer, director, affiliate or subsidiary of the Company.
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(ii) To the best knowledge of the Company, except for certain Shares to be
donated in charitable contributions or transferred to descendants for estate
planning purposes, (i) each of its executive officers, directors, affiliates
or subsidiaries presently intends to tender all of their Shares to the Offeror
pursuant to the Offer and (ii) none of its executive officers, directors,
affiliates or subsidiaries presently intends to otherwise sell any Shares
which are owned beneficially or held of record by such persons. The foregoing
does not include any Shares over which, or with respect to which, any such
executive officer, director or affiliate or subsidiary acts in a fiduciary or
representative capacity.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company in response to the Offer which
relates to or would result in (i) an extraordinary transaction such as a
merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by
the Company or any subsidiary of the Company; (iii) a tender offer for or
other acquisition of securities by or of the Company; or (iv) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as set forth in this Statement, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to
in Item 7(a) above. Subject to the terms of the Merger Agreement described
herein, the Company may, directly or indirectly, (i) furnish information in
response to an unsolicited request for such information by any person made
after the date of the Merger Agreement, pursuant to appropriate
confidentiality agreements, and (ii) participate in discussions,
investigations and/or negotiations with such entity or group concerning a
Takeover Proposal.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
RIGHTS AGREEMENT
On August 25, 1988, the Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each share of Common Stock then
outstanding. The dividend was payable on September 9, 1988 (the "Record Date")
to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one two-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of the Company at a price of $53.00 per one two-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in the Rights Agreement.
The following is a general description only and is qualified in its entirety
by the Rights Agreement, as amended, which is filed as Exhibits 7(a), 7(b) and
7(c) hereto and is incorporated herein by reference. All undefined capitalized
terms used in the discussion below are used as defined in the Rights
Agreement.
Until the earlier to occur of (i) the tenth day after the first public
announcement that a person or group of affiliated or associated persons have
become an Acquiring Person (as such term is defined below) or (ii) the tenth
business day (or such later date as may be determined by action of the Board
prior to such time as any Person becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in a person or group
becoming an Acquiring Person (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by the certificates for
shares of Common Stock. The term "Acquiring Person" is defined for purposes of
the Rights Agreement as any person or group of affiliated or associated
persons who beneficially own 15% or more of the shares of Common Stock of the
Company then outstanding, subject to certain exceptions specified in the
Rights Agreement.
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The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the shares of Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of shares of Common Stock, will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock outstanding as of the Record Date will
also constitute the transfer of the Rights associated with the shares of
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the shares of Common
Stock as of the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on February 11, 2004 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by the
Company, in each case as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion
price, less than the then current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one two-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the shares of Common Stock or a
stock dividend on the shares of Common Stock payable in shares of Common Stock
or subdivisions, consolidations or combinations of the shares of Common Stock
occurring, in any such case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of the Preferred Shares will
be entitled to a minimum preferential liquidation payment of $100 per share
but will be entitled to an aggregate payment of 100 times the payment made per
share of Common Stock. Each Preferred Share will have 100 votes, voting
together with the shares of Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each Preferred Share will be entitled to receive 100 times the
amount received per share of Common Stock. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one two-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one share of Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which become void), will
thereafter have the right to receive upon exercise that number of shares of
Common Stock (or, in certain circumstances, cash, other securities or
property) having a market value of two times the Purchase Price of the Right
(such right, a "flip-in" right).
In the event that after the time any person or group of affiliated or
associated persons becomes an Acquiring Person, (i) the Company merges with or
into another person, (ii) any person consolidates or merges with or into the
Company and the shares of Common Stock are changed into or exchanged for
securities of another person (or the Company) or cash or other property, or
(iii) the Company sells or transfers assets or earning power
17
<PAGE>
aggregating 50% or more of the assets or earning power of the Company and its
subsidiaries taken as a whole, then proper provision will be made so that each
holder of a Right, other than Rights that have become void, shall have the
right to receive upon exercise that number of common shares of the Principal
Party (as defined below) to such consolidation, merger, sale or transfer
having a market value equal to two times the Purchase Price (such right, a
"flip-over" right). The "Principal Party" is defined for purposes of the
Rights Agreement as (i) in the case of a merger or consolidation, the person
that is the issuer of the shares into which shares of Common Stock are
converted or, if no shares are so issued, the other party to such transaction
or the survivor of such merger or the person resulting from such
consolidation, and (ii) in the case of a sale of assets or earning power, the
person receiving the greatest portion of such assets; provided, however, that
if more than one person issues such shares, is a survivor in such merger or
receives such assets, the "Principal Party" shall be the issuer, survivor or
recipient of the common shares of which have the greatest aggregate market
value, or in the case of a sale of assets or earning power, the recipient of
the greatest portion of the assets or earning power transferred pursuant to
such transaction, in each case, subject to certain exceptions.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or
group of 50% or more of the outstanding shares of Common Stock, the Board may
exchange the Rights (other than Rights owned by such person or group, which
become void), in whole or in part, at an exchange ratio of one share of Common
Stock, or one two-hundredth of a Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one two-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Preferred Shares on the last trading day prior to the
date of exercise.
At any time prior to the time a person or group of affiliated or associated
persons becomes an Acquiring Person, the Board may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time on such basis and
with such conditions as the Board in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Board without the consent of
the holders of the Rights, except that, from and after such time as any person
or group becomes an Acquiring Person, no such amendment may adversely affect
the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board. The Rights should not interfere with any
merger or other business combination approved by the Board.
Effective May 27, 1997, pursuant to the Merger Agreement, the Rights
Agreement was amended (the "Amendment") to provide that (i) so long as the
Merger Agreement has not been terminated pursuant to its terms, neither Parent
nor any of its affiliates will become an Acquiring Person nor will a
Distribution Date be deemed to occur, in each case, solely as a result of the
execution, delivery and performance of the Merger Agreement or the
announcement, making or consummation of the Offer, the acquisition of the
Shares pursuant to the Offer or the Merger, the consummation of the Merger or
any other transactions contemplated by the Merger Agreement and (ii) the
Rights will expire immediately prior to the Effective Time of the Merger. The
foregoing description of the Amendment to the Rights Agreement is qualified by
reference to the Amendment which is filed as Exhibit 7(c) hereto and
incorporated herein by reference.
18
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
<TABLE>
<C> <S>
Exhibit 1(a) --Agreement and Plan of Merger, dated as of May 27, 1997, among
Parent, the Offeror and the Company (incorporated by reference
to Exhibit 2 to the Company's Current Report on Form
8-K filed with the Commission on May 28, 1997).
Exhibit 1(b) --Confidentiality Letter, dated April 23, 1997, between Parent
and the Company.
Exhibit 2(a) --Amended and Restated Employment Agreement, dated January 1,
1995 between the Company and John D. Roach (incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
Exhibit 2(b) --Form of Amended and Restated Severance Agreement (Form of
Severance Agreement for CEO and Senior Executives).
Exhibit 3 --Form of Severance Agreement for Managers.
Exhibit 4 --Form of Dallas Severance Agreement.
Exhibit 5 --Form of Indemnification Agreement (incorporated by reference to
the Company's Registration Statement on Form 10 dated May 23,
1988, as amended on June 28, 1988).
Exhibit 6(a) --Letter to Stockholders dated May 30, 1997.+
Exhibit 6(b) --Press Release, dated May 28, 1997 (incorporated by reference to
Exhibit 99 to the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 28, 1997).
Exhibit 7(a) --Rights Agreement, dated as of August 25, 1988 between the
Company and The First National Bank of Boston, as successor
Rights Agent (incorporated by reference to the Company's Current
Report on Form 8-K dated August 25, 1988).
Exhibit 7(b) --Amendment No. 1 to the Rights Agreement, dated as of February
11, 1994 (incorporated by reference to the Company's Form 8-A/A
dated February 15, 1994).
Exhibit 7(c) --Amendment No. 2 to Rights Agreement, dated as of May 27, 1997
(incorporated by reference to the Company's Form 8-A/A dated May
29, 1997).
Exhibit 8 --Opinion of Dillon, Read & Co. Inc. dated May 27, 1997.++
</TABLE>
- --------
+ Included in copy mailed to stockholders.
++ Included as Annex A in copy mailed to stockholders.
19
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Fibreboard Corporation
By: /s/ Donald F. McAleenan
----------------------------------
Name: Donald F. McAleenan
Title: Vice President and Deputy
General Counsel
Dated: May 30, 1997
20
<PAGE>
ANNEX A
[LETTERHEAD OF DILLON, READ & CO. INC.]
May 27, 1997
The Board of Directors
Fibreboard Corporation
3600 Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, of the per share consideration to be offered to the holders (the
"Shareholders") of shares of Common Stock, par value $.01 per share (the "Common
Stock"), of Fibreboard Corporation, a Delaware corporation (the "Company"),
including the associated preferred share purchase rights issued pursuant to the
Rights Agreement, dated as of August 25, 1988, as amended, between the Company
and the First National Bank of Boston, as successor rights agent, in
connection with the proposed acquisition (the "Acquisition") of the Company by
Owens Corning, a Delaware corporation ("Acquiror").
We have assumed that the terms of the Acquisition are as set forth in the
Agreement and Plan of Merger dated as of May 27, 1997 among Acquiror, Sierra
Corp. and the Company (the "Agreement"). We understand that the Acquisition is
to be effected in a two-step transaction, the first step of which will be a cash
tender offer (the "Tender Offer") by Sierra Corp. for all, but not less than
such number of shares constituting a majority of the voting power, of the Common
Stock (on a fully diluted basis) at a per share price of $55.00 net to the
seller in cash upon the terms and conditions set forth in the Agreement. We
further understand that each share of Common Stock not acquired in the Tender
Offer (except those owned by Acquiror, any subsidiary of Acquiror, the Company
or any subsidiary of the Company or Dissenting Shares (as defined in the
Agreement)) will be converted in a subsequent merger of Sierra Corp. with and
into the Company into the right to receive $55.00 in cash.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and financial information relating to the
Company; (ii) reviewed the historical price and trading activity for the shares
of Common Stock; (iii) reviewed certain internal financial information and other
data provided to us by the Company relating to the business and prospects of
the Company, including financial projections prepared by the management of the
Company; (iv) conducted discussions with members of the senior management of the
Company; (v) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we considered relevant; (vi) reviewed
publicly
A-1
<PAGE>
-2-
[LETTERHEAD OF DILLON, READ & CO. INC.]
available financial and securities market data pertaining to certain publicly
held companies in lines of business generally comparable to those of the
Company; and (vii) conducted such other financial studies, analyses and
investigations, and considered such other information as we deemed necessary
and appropriate. We were not requested to, and did not, solicit third party
indications of interest in acquiring the Company.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have relied upon it being complete and accurate in all material respects.
We have not been requested to and have not made an independent evaluation or
appraisal of any assets or liabilities (contingent or otherwise) of the Company
or any of its subsidiaries, nor have we been furnished with any such evaluation
or appraisal. Further, we have assumed, with your consent, that all of the
information, including the projections provided to us by the Company's
management, was prepared in good faith and was reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the Company's
management as to the future financial performance of the Company, and was based
upon the historical performance and certain estimates and assumptions which were
reasonable at the time made. In addition we have not been asked to and do not
express any opinion as to the after-tax consequences of the Acquisition to any
Shareholder. In addition, our opinion is based on economic, monetary and market
conditions existing on the date hereof.
We are acting as financial advisor to the Company and its Board of
Directors in connection with the Acquisition and will receive a fee from the
Company for our services. We have performed and continue to perform investment
banking services for the Company and have received customary compensation for
such services. As we have informed you, we also have performed investment
banking services for Acquiror and have received customary compensation for such
services. In the ordinary course of its business, Dillon, Read & Co. Inc.
("Dillon Read") may trade the securities of the Company and Acquiror for its own
account or for the accounts of customers, and it may at any time hold a long or
short position in such securities.
It is understood that our advisory services and the opinion expressed
herein are provided for the information of the Board of Directors in their
evaluation of the Acquisition, and our opinion is not intended to be and does
not constitute a recommendation as to whether or not any Shareholder should
tender shares of Common Stock pursuant to the Tender Offer. Our opinion may
not be published or otherwise used or referred to, nor shall any public
reference to Dillon Read be made, without our prior written consent.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the per share consideration to be offered to the Shareholders
in connection with the Acquisition is fair, from a financial point of view, to
such Shareholders.
Very truly yours,
DILLON, READ & CO. INC.
A-2
<PAGE>
ANNEX B
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about May 30, 1997, as part
of Fibreboard Corporation's (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the tender offer by Sierra Corp.
(the "Offeror") (the "Schedule 14D-9") to the holders of record of the
Company's Common Stock, par value $0.01 per share, including the associated
preferred stock purchase rights (collectively, the "Shares"). Capitalized
terms used and not otherwise defined herein shall have the meaning set forth
in the Schedule 14D-9. You are receiving this Information Statement in
connection with the possible election of persons designated by the Offeror to
a majority of the seats on the Board of Directors of the Company (the
"Board"). The Merger Agreement provides that promptly after such time as the
Offeror purchases Shares pursuant to the Offer, the Offeror shall be entitled,
to the fullest extent permitted by law, to designate at its option up to that
number of directors, rounded to the nearest whole number, of the Company's
Board, subject to compliance with Section 14(f) of the Exchange Act, as will
make the percentage of the Company's directors designated by the Offeror equal
to the aggregate voting power of the Shares held by Parent or any of its
subsidiaries. However, in the event that the Offeror's designees are elected
to the Board, until the Effective Time of the Merger, such Board shall have at
least three directors who are directors on the date of the Merger Agreement
and who are not officers of the Company (the "Independent Directors"). If the
number of Independent Directors shall be reduced below three for any reason
whatsoever, the remaining Independent Directors shall, to the fullest extent
permitted by law, designate a person to fill such vacancy who shall be deemed
to be an Independent Director for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors of the Company shall
designate three persons to fill such vacancies who shall not be officers or
affiliates of the Company or any of its subsidiaries, or officers or
affiliates of Parent or any of its subsidiaries, and such persons shall be
deemed to be Independent Directors for purposes of the Merger Agreement.
Following the election or appointment of the Offeror's designees pursuant to
the Merger Agreement and prior to the Effective Time of the Merger, any
amendment, or waiver of any term or condition, of the Merger Agreement or the
Company's Charter or Bylaws, any termination of the Merger Agreement by the
Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of the Offeror or waiver or assertion of any
of the Company's rights under the Merger Agreement, and any other consent or
action by the Board of Directors of the Company with respect to the Merger
Agreement, will require the concurrence of a majority of the Independent
Directors and no other action by the Company, including any action by any
other director of the Company, shall be required for purposes of the Merger
Agreement. In connection with the foregoing, the Company will promptly, at the
option of Parent, to the fullest extent permitted by law, either increase the
size of the Company's Board and/or obtain the resignation of such number of
its current directors as is necessary to enable the Offeror's designees to be
elected or appointed to the Company's Board as provided above. This
Information Statement is required by Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
The Offer to Purchase is scheduled to expire at 12:00 midnight, New York
City time, on June 26, 1997, at which time, if all conditions to the Offer
have been satisfied or waived, the Offeror has informed the Company that it
intends to purchase all of the Shares validly tendered pursuant to the Offer
and not properly withdrawn, provided, however, that Parent may extend the
Offer for a period of up to five business days if, on any scheduled expiration
date on which the conditions to the Offer shall have been satisfied or waived,
the number of Shares that have been validly tendered and not withdrawn
represent more than 70% of the voting power of the Shares (on a fully diluted
basis), but less than 90% of the voting power of the then issued and
outstanding Shares.
The information contained in this Information Statement concerning the
Offeror and Parent has been furnished to the Company by Parent, and the
Company assumes no responsibility for the accuracy, completeness or fairness
of any such information.
B-1
<PAGE>
At the close of business on May 22, 1997, there were 8,490,020 shares of
Common Stock issued and outstanding, which is the only class of securities
outstanding having the right to vote for the election of directors of the
Company, each of which entitles its record holder to one vote.
OFFEROR DESIGNEES
Set forth below are the name, age, current business address, citizenship,
present principal occupation or employment and employment history (covering a
period of not less than five years) of each director designee (the "Offeror
Designees") of the Offeror for the Company's Board of Directors. Unless
otherwise indicated, each such person's business address is One Owens Corning
Parkway, Toledo, Ohio 43659. All persons listed below are citizens of the
United States of America.
Glen H. Hiner, age 62, Chairman of the Board and Chief Executive Officer of
Parent since January 1992. Director of Parent since 1992. Mr. Hiner is also
director of Dana Corporation and The Prudential Insurance Company of America.
Christian L. Campbell, age 46, Senior Vice President, General Counsel and
Secretary of Parent since January 1995; formerly Vice President, General
Counsel and Secretary at Nalco Chemical (1990).
Charles H. Dana, age 57, Executive Vice President of Parent since January
1994; formerly Senior Vice President and President--Industrial Materials Group
for Parent (1989).
David W. Devonshire, age 51, Senior Vice President and Chief Financial
Officer of Parent since July 1993; formerly Corporate Vice President, Finance
at Honeywell, Inc. (1992).
Efthimios O. Vidalis, age 42, Vice President and President, Insulation for
Parent since July 1996; formerly Vice President and President, Composites for
Parent (1994) and Vice President, Reinforcements Division, Europe for Parent
(1986).
Dennis L. Jarvela, age 53, Vice President--Corporate Law for Parent since
1993; formerly Director-- Corporate Law for Parent (1985).
John W. Christy, age 39, Senior Counsel for Parent since September 1996;
formerly a partner with the law firm of Coffield, Ungaretti & Harris, Chicago,
Illinois (1990); associate attorney with Coffield, Ungaretti & Harris (1983).
Matthew M. Preston, age 33, Senior Counsel for Parent since April 1996;
formerly a partner with the law firm of McDermott, Will & Emery, Chicago,
Illinois (1995); associate attorney with McDermott, Will & Emery (1993); and
associate attorney with Hopkins & Sutter, Chicago, Illinois (1989).
It is expected that the Offeror Designees may assume office at any time
following the purchase by the Offeror of a specified minimum number of Shares
pursuant to the Offer, which purchase cannot be earlier than June 26, 1997,
and that, upon assuming office, the Offeror Designees will thereafter
constitute at least a majority of the Board. This step will be accomplished at
a meeting or by written consent of the Board providing that the size of the
Board will be increased and/or sufficient numbers of current directors will
resign such that, immediately following such action, the number of vacancies
to be filled by the Offeror Designees will constitute at least a majority of
the available positions on the Board. It is currently not known which of the
current directors of the Company will resign. The Offeror has informed the
Company that each of the officers listed above has consented to act as a
director of the Company, if so designated.
None of the executive officers and directors of Parent or the Offeror
currently is a director of, or holds any position with, the Company. The
Company has been advised that, to the best knowledge of Parent and the
Offeror, none of Parent's or the Offeror's directors or executive officers
beneficially owns any equity securities, or rights to acquire any equity
securities, of the Company and none has been involved in any transactions with
the Company or any of its directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission.
B-2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of May 29, 1997, the number of shares of
Common Stock beneficially owned by (i) each person known to the Company to own
beneficially more than 5% of the Company's outstanding Common Stock, (ii) each
director and Named Officer (as defined in the Summary Compensation Table)
(excludes Messrs. Donohue and Johnston who were not Named Officers as of May
29, 1997), and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated below, the persons listed have advised
the Company that they have sole voting and investment power with respect to
the securities shown as owned by them.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (1) CLASS (2)
- ------------------------ ------------ ----------
<S> <C> <C>
The SC Fundamental Value Fund, L.P. and affiliated
entities............................................... 650,200(3) 7.66
Neuberger & Berman, L.P................................ 639,742(4) 7.54
Marvin C. Schwartz..................................... 504,200(5) 5.94
John D. Roach.......................................... 416,045 4.70
Garold E. Swan......................................... 51,624 *
Herbert M. Elliott..................................... 46,480 *
Philip R. Bogue........................................ 49,000 *
Michael R. Douglas..................................... 43,932 *
John W. Koeberer....................................... 44,000 *
George B. James........................................ 40,000 *
G. Robert Evans........................................ 30,000 *
William D. Eberle...................................... 24,000 *
Donald K. Miller....................................... 9,667 *
Bill M. Lindig......................................... 0 *
Ronald W. Mathewson.................................... 0 *
All directors and executive officers as a group (15
persons)............................................... 797,109 8.75
</TABLE>
- --------
(1) Includes shares issuable under the Company's 1988 Option Plan and 1995
Stock Incentive Plan (i) upon the exercise of stock options which are
currently exercisable or exercisable within 60 days or (ii) upon the
vesting of stock units and restricted stock within 60 days in the
following amounts: Mr. Roach, 363,333 shares; Mr. Swan, 32,500 shares; Mr.
Elliott, 35,000 shares; Mr. Bogue, 36,000 shares; Mr. Douglas, 25,000; Mr.
Koeberer, 36,000 shares; Mr. James, 16,000 shares; Mr. Evans, 20,000
shares; Mr. Eberle, 20,000 shares; Mr. Miller, 4,667 shares; and all
directors and executive officers as a group, 618,500 shares. In certain
instances, the number of shares shown as being beneficially owned may not
be deemed to be beneficially owned for other purposes.
(2) *--Less than one (1) percent.
(3) Information was derived from a Schedule 13D received by the Company on
December 28, 1995.
(4) Information was derived from a Schedule 13G received by the Company on
February 20, 1996. Of the 639,742 shares, Neuberger & Berman, L.P. has
sole voting power over 119,000 shares.
(5) Information was derived from a Schedule 13D received by the Company on
February 11, 1995.
B-3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names of the current directors and executive
officers of the Company, their ages as of April 15, 1997 and their principal
occupation during the last five years.
<TABLE>
<S> <C> <C>
Philip R. Bogue......... (72) Mr. Bogue has been a director of the Company since June
1988. Mr. Bogue was interim President of the Portland Art
Museum from January 1993 to May 1994. He was Assistant to
the President of Portland State University in Portland,
Oregon, from 1983 to 1989. He previously served as Managing
Partner of the Portland office of Arthur Andersen LLP, a
major accounting firm. Mr. Bogue is a director of Good
Health Plan of Oregon.
William D. Eberle....... (73) Mr. Eberle has been a director of the Company since December
1991. Mr. Eberle has been Chairman of Manchester Associates,
Ltd., an international consulting firm, for more than five
years. He has also served as President and Chief Executive
Officer of the U.S. Motor Vehicle Manufacturers Association
(1975-1977), as Chairman and Chief Executive Officer of
American Standard Corporation (1966-1971) and as Vice
President of Boise Cascade Corporation (1959-1966). He was
involved in government service as a member of the Idaho
House of Representatives and Speaker of the House (1953-
1961), a United States Trade Representative (1971-1975) and
the Director of Cabinet of the Council for International
Economic Policy (1973-1974). Mr. Eberle is Chairman of
America Service Group, Showscan Entertainment, Inc., and
Barry's Jewelers, Inc. and is Co-Chairman of Mid-States Plc.
He is also a director of Sirrom Capital Corporation,
Mitchell Energy and Development Corporation and Ampco-
Pittsburgh Corporation.
G. Robert Evans......... (65) Mr. Evans has been a director of the Company since December
1991. From February 1991 to January 1, 1997, Mr. Evans was
Chairman and Chief Executive Officer, and effective January
1, 1997, Chairman of Material Sciences Corporation, which
develops and commercializes materials technologies and
produces laminates and multi-layer composite materials. From
1990 to 1991 he was President, Chief Executive Officer and a
director of Corporate Finance Associates Illinois, Inc., a
financial intermediary and consulting firm. From 1987 to
1990 he was President, Chief Executive Officer and a
director of Bemrose Group USA, a British-owned holding
company engaged in value added manufacturing and sale of
advertising specialty products. Prior to 1987, Mr. Evans
served as President and Chief Executive Officer of Allsteel,
Inc. (1984-1987), Southwall Technologies (1983-1984), Arcata
Corporation (1969-1983) and in various executive positions
with U.S. Gypsum Company (1953-1969). He currently serves as
a director of Swift Energy Company and Consolidated
Freightways Corporation.
George B. James......... (59) Mr. James has been a director of the Company since June
1993. Mr. James has been Senior Vice President and Chief
Financial Officer of Levi Strauss & Co. since 1985. From
1982 to 1985 he was Executive Vice President of Crown
Zellerbach Corporation, a paper products manufacturer. Prior
to 1982, Mr. James served as Senior Vice President and Chief
Financial Officer of Arcata Corporation, a wood products
manufacturer. He currently serves as a director of Crown
Vantage, Inc. and Basic Vegetable Products.
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C> <C>
John W. Koeberer........ (53) Mr. Koeberer has been a director of the Company since June
1988. Mr. Koeberer was a founder of Tehama Bank, which is
located in Red Bluff, California, and has been Chairman of
its board of directors since 1984. For the past seventeen
years, Mr. Koeberer has been Chairman, President and Chief
Executive Officer of The California Parks Company, which
provides concession services for national, state, county and
municipal parks. He has also served as Chairman of the
Lassen Volcanic National Park Foundation for the past eleven
years. Since 1992, Mr. Koeberer has been President of the
California Parks Hospitality Association, an organization
representing private enterprise in the California State Park
System. He has served on the California Tourism Commission
since 1993 and was President of the California Ski
Industries Association from 1975 to 1976. He currently
serves as a director of the California State Chamber of
Commerce, the Shasta Cascade Wonderland Association, the San
Francisco Visitor and Convention Bureau and the California
Travel Industries Association.
Bill M. Lindig.......... (60) Mr. Lindig has been a director of the Company since December
1996. Mr. Lindig has served as President and Chief Executive
Officer of SYSCO Corporation since January 1995. SYSCO is
the largest marketer and distributor of foodservice products
in the U.S. Between 1970 and 1980 Mr. Lindig held a variety
of management positions with SYSCO's operating companies. In
1983, Mr. Lindig was elected a director of SYSCO Corporation
and in 1984 he became President of the foodservice division.
In 1985, Mr. Lindig was named Executive Vice President and
Chief Operating Officer of SYSCO Corporation, and was
appointed President and COO later that year. Mr. Lindig
holds board positions at Burlington Northern Santa Fe
Corporation, the Greater Houston Partnership, Memorial
Hospital Systems and Food Distributors International.
Donald K. Miller........ (65) Mr. Miller has been a director of the Company since April
1996. Since January 1987, Mr. Miller has been Chairman of
Greylock Financial Inc., a firm engaged in merchant banking.
From 1987 to 1995 he was Chairman of Christensen Boyles
Corporation, a mining and service concern. He was also
Chairman and CEO of Thompson Advisory Group, L.P., a public
asset management partnership, from November 1990 to April
1993 and Vice Chairman from April 1993 to November 1994. He
currently serves as a director of Huffy Corporation, Layne
Christensen Company, PIMCO Advisors, L.P. and RPM Inc.
John D. Roach........... (53) Mr. Roach was elected Chairman, President and Chief
Executive Officer of the Company in July 1991. Prior to his
appointment, Mr. Roach was Executive Vice President of
Manville Corporation, a manufacturer of building products,
paperboard packaging, fiberglass and industrial minerals,
where he served as President of its Mining and Minerals
Group and President of Celite Corporation, a wholly-owned
Manville subsidiary. In addition, Mr. Roach served as
President of Manville Sales Corporation, now known as
Schuller International, and the Fiberglass and Specialty
Products Groups from 1988 to 1990, and as Chief Financial
Officer of Manville Corporation from 1987 to 1988. Prior to
Manville, Mr. Roach was a strategy consultant and Vice
Chairman of Braxton Associates; Vice President and Managing
Director of the Strategic Management Practice
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C> <C>
for Booz, Allen, Hamilton; and Vice President and Director
of the Boston Consulting Group. Previous experience at
Northrop Corporation included Director of strategic
planning, economic analysis, MIS and co-manager of a venture
capital subsidiary. He currently serves as a director of
Morrison-Knudsen, Thompson PBE, Inc. and PMI Group, Inc.
Ronald W. Mathewson..... (59) Mr. Mathewson was elected Executive Vice President and Chief
Operating Officer of the Company in October 1996. Prior to
joining the Company, Mr. Mathewson served from 1994 to 1995
as Executive Vice President of Magnetek, Inc. and President
of the Lighting Group. From 1988 to 1994, he served at
Manville Corporation (now Schuller International) where he
was corporate Senior Vice President, President of the
Building Products Group and Vice President/General Manager
of the Building Insulation Division. Mr. Mathewson also
spent 27 years with General Electric Company where he served
as General Manager of several business units within the
Lighting Business Group.
Michael R. Douglas...... (43) Mr. Douglas became General Counsel to the Company in
September 1987 and was elected Secretary in November 1990.
He was elected Vice President in August 1991 and Senior Vice
President in October 1993. From March 1986 to September 1987
he was employed by the Asbestos Claims Facility, of which
the Company was a member, as Senior Legal Counsel and then
as Director of Law-West Coast Region. From 1982 to 1986 he
was an attorney in the asbestos litigation group of Jim
Walter Corporation.
Stephen L. DeMaria...... (56) Mr. DeMaria joined the Company in May 1989 as Director-
Corporate Communications and Investor Relations and was
elected Vice President, Corporate Relations in August 1991.
Prior to joining the Company, he was Executive Vice
President of the California Forest Protective Association,
an industry trade association representing the interests of
industrial timberland owners before the California
legislature and regulatory agencies.
Herbert M. Elliott...... (58) Mr. Elliott was appointed General Manager of Pabco in
October 1991 and was elected Vice President of the Company
in February 1992, and President of Stone Products and Pabco
in July 1996. Prior to joining the Company, Mr. Elliott was
a partner in Management Resource Partners, a professional
management firm advising corporations on financial and
operating matters and functioned as CEO, CFO or a director
of several companies. Mr. Elliott has been CFO of
Consolidated Fibers and Itel Corporation, Vice President
Corporate Development of Alexander and Baldwin and a
consultant for A.T. Kearney.
Donald F. McAleenan..... (42) Mr. McAleenan joined the Company as Deputy General Counsel
in February 1992 and was elected Vice President in August
1996. Prior to joining the Company, Mr. McAleenan served
from September 1989 to January 1992 as Assistant General
Counsel at AT&E Corporation, a company engaged in wireless
communications. From 1980 to 1989, he was engaged in private
law practice in New York City.
Garold E. Swan.......... (44) Mr. Swan joined the Company as Controller in September 1988.
He was elected Vice President in October 1991 and Vice
President, Finance in October 1996. He previously was an
Audit and Financial Consulting Manager in the Portland,
Oregon office of Arthur Andersen LLP.
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C> <C>
Kevin P. O'Meara........ (32) Mr. O'Meara joined Fibreboard in May 1997 as Vice President,
Strategic Planning and Business Development. Prior to
joining Fibreboard, from 1996 to 1997 he was a Manager in
the Dallas office of Bain & Co., a Boston-based management
consulting firm. From 1994 to 1996, Mr. O'Meara was a
Consultant with Bain. He was an Associate with Hicks, Muse,
Tate and Furst, a private investment firm, from 1990 to
1994.
</TABLE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a quarterly retainer
of $5,000 and are paid $1,000 for each meeting of the Board of Directors that
they attend. Outside Directors also receive the attendance fee for committee
meetings, other than those committee meetings held on the same day as a
meeting of the Board of Directors, as well as $500 for each meeting held by
telephone conference call. The chairmen of the Compensation and Audit
Committees also receive an additional annual retainer of $5,000. Directors are
reimbursed for their expenses incurred in attending meetings of the Board of
Directors.
Outside Directors also participate in the Company's 1995 Stock Incentive
Plan, which provides for automatic annual grants of options to outside
directors for 4,000 shares of Common Stock at an exercise price equal to 100%
of fair market value on the grant date. Under this plan, new Outside Directors
also receive automatic one-time awards of 2,000 stock units, which vest over a
three-year period or immediately in full upon a change of control.
The Board has implemented a program under the 1995 Stock Incentive Plan
whereby Outside Directors may elect to receive an equivalent number of stock
units in lieu of their annual retainer fees. The number of stock units issued
to a participating director on a quarterly basis is based on the average
closing price of the Common Stock over the preceding quarter.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the year ended December 31, 1996. The Board has three standing committees, an
Audit Committee, a Compensation Committee and a Nominating Committee, each
composed of Messrs. Bogue, Eberle, Evans, James, Koeberer, Miller and Lindig.
The Nominating Committee also includes Mr. Roach. During 1996 the Audit
Committee met twice, the Compensation Committee met four times and the
Nominating Committee met six times. Each director attended all of the meetings
held during 1996 of the Board and the committees on which such director
served, except Mr. James who attended more than 80% of such meetings.
The Audit Committee's responsibilities include selecting the Company's
auditors and reviewing the Company's audit plan, financial statements and
internal accounting and audit procedures. The functions of the Compensation
Committee include establishment of compensation plans for the Company's
executive officers and administration of certain of the Company's employee
benefit and compensation programs. The Nominating Committee's responsibilities
include recommending nominees for election as directors and developing
candidate specifications for membership. The Nominating Committee will
consider recommendations for nominees for directorships submitted by
stockholders. From time to time the Board of Directors may establish other
committees to facilitate its business objectives.
B-7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Set forth below is information concerning the annual and long-term
compensation for services rendered in all capacities to the Company for the
fiscal years ended December 31, 1996, 1995 and 1994, of those persons who were
at December 31, 1996, (i) the Chief Executive Officer of the Company, (ii) the
Chief Operating Officer of the Company, (iii) the other four most highly
compensated executive officers of the Company, and (iv) the Company's former
Senior Vice President and Chief Financial Officer (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------------------- ---------
LONG-TERM ALL
OTHER RESTRICTED SECURITIES INCENTIVE OTHER
ANNUAL STOCK UNDERLYING PLAN ($)
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (1) (#) ($) (2)
------------------ ---- ------- ------- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John D. Roach........... 1996 440,000 564,850 1,031,795(3) 1,312,500 40,000 1,631,166 233,234
Chairman, President & 1995 410,000 526,338 -- -- 40,000 255,600 262,605
CEO 1994 360,000 434,450 -- -- -- 200,000 212,780
Ronald W. Mathewson..... 1996 68,750(4) 50,000 -- 700,000 20,000 -- 25,000
Executive VP & COO 1995 -- -- -- -- -- -- --
1994 -- -- -- -- -- -- --
Michael R. Douglas...... 1996 206,000 152,569 393,181(3) 262,500 15,000 652,466 11,143
Senior VP, General 1995 197,500 142,570 -- -- 15,000 102,240 20,016
Counsel & Secretary 1994 190,000 130,470 -- -- -- 55,000 10,580
Robert W. Johnston...... 1996 206,000(5) 152,569 -- -- -- 811,866 --
Senior VP, Vinyl 1995 190,000 79,340 -- -- 10,000 -- 10,500
Products 1994 63,000 47,500 -- 149,375 -- -- --
Herbert M. Elliott...... 1996 162,000 90,391 -- 262,500 15,000 489,350 61,669
VP, Industrial 1995 155,000 108,895 -- -- 15,000 76,680 63,897
Insulation 1994 150,000 109,690 -- -- -- 70,000 57,380
Garold E. Swan.......... 1996 158,500 75,287 173,683(3) 196,875 9,000 326,234 7,826
VP, Finance 1995 152,000 73,150 -- -- 7,500 51,120 11,190
1994 140,000 64,090 -- -- -- 32,500 9,326
James P. Donohue........ 1996 209,359(6) 126,752 -- -- -- 654,134 --
Former Senior VP & CFO 1995 217,500 161,086 -- -- 15,000 102,240 51,149
1994 210,000 196,175 -- -- -- 65,000 36,780
</TABLE>
- --------
(1) Indicates value of stock units as of the date of grant. As of December 31,
1996, Messrs. Roach, Mathewson, Douglas, Elliott and Swan held 50,000,
20,000, 10,000, 10,000, and 7,500 stock units, respectively, valued at
$1,687,500, $675,000, $337,500, $337,500 and $253,125, respectively. Under
the terms of the stock units, shares of Common Stock are not issued or
delivered to holders until the rights vest. The rights vest five years
from the date of grant. No dividends are paid on stock units.
(2) Includes 401(k) Retirement Plan contributions to the accounts of the Named
Officers. Also includes the contributions allocated to the accounts of
Messrs. Roach, Mathewson and Elliott under the Company's supplemental
retirement plan for executive officers (i) for 1996, in the amounts of
$204,700, $25,000 and $53,030, respectively, and (ii) for 1995, in the
amounts of $214,200, $0 and $47,200, respectively.
(3) Includes (i) the cost to the Company of benefits provided to Messrs.
Roach, Douglas and Swan during 1996 aggregating $595,088, $216,972, and
$110,672, including relocation and moving expenses incurred during the
year in the amounts of $576,471, $209,120 and $103,769, respectively, and
(ii) tax reimbursement payments during 1996 relating to relocation and
moving expenses paid by the Company on behalf of Messrs. Roach, Douglas
and Swan in the amounts of $436,707, $176,209 and $63,001, respectively.
Such expenses were incurred in connection with the relocation of the
Company's corporate offices from Walnut Creek, California to Dallas,
Texas.
(4) Mr. Mathewson was elected Executive Vice President and Chief Operating
Officer of the Company on October 15, 1996.
(5) Mr. Johnston retired as an executive officer from the Company on December
31, 1996.
(6) Mr. Donahue resigned from the Company in November 1996.
B-8
<PAGE>
OPTION AND SAR GRANTS
Set forth below is information relating to grants of stock options to the
Named Officers during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------- ----------------------------
% OF TOTAL
OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) (1) FISCAL YEAR ($/SH) (2) DATE 5% ($) 10% ($)
- ---- ------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John D. Roach........... 40,000 36.36% $32.00 12/09/2001 $353,640 $781,450
Ronald W. Mathewson..... 20,000 18.18% $32.00 12/09/2001 $176,820 $390,725
Michael R. Douglas...... 15,000 13.63% $32.00 12/09/2001 $132,600 $293,045
Herbert M. Elliott...... 15,000 13.63% $32.00 12/09/2001 $132,600 $293,045
Garold E. Swan.......... 9,000 8.18% $32.00 12/09/2001 $ 79,560 $175,825
Robert W. Johnston...... -- -- -- -- -- --
James P. Donohue........ -- -- -- -- -- --
</TABLE>
- --------
(1) These options become exercisable in equal annual installments over a
three-year period. In the event of a change of control, the options listed
above become immediately exercisable.
(2) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Set forth below is information with respect to the exercise of stock options
by the Named Officers during fiscal year 1996 and the number and value of
unexercised options held by the Named Officers at December 31, 1996.
<TABLE>
<CAPTION>
SHARES
ACQUIRED ON VALUED NUMBER OF SECURITIES VALUE OF UNEXERCISED
EXERCISE REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME (#) ($) (1) OPTIONS AT FY-END (#) AT FY-END ($) (2)
- ---- ----------- -------- -------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John D. Roach........... 0 0 363,333 66,667 11,102,429 399,870
Ronald W. Mathewson..... 0 0 0 20,000 0 35,000
Michael R. Douglas...... 20,000 $410,000 25,000 25,000 686,850 149,950
Herbert M. Elliott...... 0 0 35,000 25,000 999,350 149,950
Garold E. Swan.......... 0 0 32,500 14,000 968,425 77,600
Robert W. Johnston...... 0 0 5,000 5,000 61,850 61,850
James P. Donohue........ 0 0 135,000(3) 0 4,266,050 0
</TABLE>
- --------
(1) The value realized on stock option exercises represents the difference
between the grant price of the options exercised and the market price of
the underlying shares of Common Stock as of the date of exercise
multiplied by the number of options exercised.
(2) Based on the closing price of the Company's Common Stock on the American
Stock Exchange at 12/31/96 ($33.75).
(3) Mr. Donohue exercised 130,000 options in January 1997.
EMPLOYMENT, SEVERANCE AND CHANGE-OF-CONTROL ARRANGEMENTS
In July 1991, the Company entered into an Employment Agreement with John D.
Roach to serve as Chairman of the Board, President and Chief Executive Officer
of the Company. Under the Employment Agreement, as amended in January 1995,
Mr. Roach currently receives a minimum annual salary of $465,000,
B-9
<PAGE>
subject to increase as determined by the Board of Directors, plus a bonus of
up to 130% of base salary. The term of the agreement renews automatically each
month for a period of two years, absent notice of termination by either party.
In the event Mr. Roach's employment is terminated by the Company or by Mr.
Roach under certain circumstances, he is entitled to receive (i) one year's
salary and bonus, (ii) an additional pro-rated bonus for the year of
termination, (iii) consulting fees for one year following termination at his
then current compensation, and (iv) immediate vesting of awards under the
Company's stock incentive plans and any non-qualified deferred compensation or
retirement benefits. If Mr. Roach's employment terminates following a change
of control (as defined in the agreement), Mr. Roach is entitled to two years'
compensation, plus the benefits described under (ii) and (iv) above. Pursuant
to the Agreement, the Company established a trust to fund Mr. Roach's
severance benefits. Mr. Roach's employment agreement will be superseded by the
severance agreement described in the attached Schedule 14D-9.
The Company has also entered into severance agreements with its executive
officers as a means of enabling the Company to attract and retain key members
of management. Severance benefits under the agreements include (a) one year's
salary and bonus, (b) an additional pro-rated bonus for the year of
termination, and (c) a one-year continuation of the officer's benefits. If
termination is within one year after a change of control, the officer is
entitled to (i) eighteen (18) months' salary plus one year's bonus, (ii) an
additional pro-rated bonus for the year of termination, and (iii) immediate
vesting of awards under the Company's stock incentive plans and any non-
qualified deferred compensation or retirement benefits. These agreements will
be amended as set forth in the attached Schedule 14D-9.
All outstanding awards under the 1988 Option Plan, the 1995 Stock Incentive
Plan and the Long-Term Equity Incentive Plan become exercisable or fully
vested in the event of a change of control of the Company or other related
event, including (i) a person or entity becomes the beneficial owner of 15%
(25% under the 1988 Option Plan) or more of the voting power of the Company's
shares, or (ii) during any two consecutive years, members of the Board of
Directors at the beginning of such period cease to constitute a majority
thereof, unless the election or nomination of each director is approved by the
vote of at least two-thirds of the directors still in office who were
directors at the beginning of such period, or (iii) the occurrence of any
other change of control reportable under the Exchange Act, or (iv) stockholder
approval of a merger or consolidation of the Company, or (v) the adoption of a
plan of complete liquidation of the Company, or stockholder approval of the
sale by the Company of all or substantially all of its assets. The events
described under subparagraphs (i), (iii) and (iv) above will not be deemed a
change of control if so determined by the Board of Directors. Certain
amendments to these plans are described in the attached Schedule 14D-9.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW OF COMPENSATION POLICY
The primary objective of the Company's management team over the past five
years has been to improve the Company's profitability and increase stockholder
value. During 1992-1996 the Company achieved significant success in this
regard. The operating performance of the Company's businesses improved
substantially and the Company as a whole achieved record operating earnings
each year. In addition, during this period the Company built substantial
corporate value through strategic acquisitions in the building products
industry, as well as through the sale of the Wood Products Group in 1995 and
the Resort Group in 1996.
The Committee believes that the compensation policies and programs which it
has implemented have directly contributed to management's successful track
record and its continuing focus on improving profitability and increasing
stockholder value.
The Committee has developed a compensation policy under which a substantial
portion of the compensation of executive officers is directly linked to the
financial performance of the Company and the enhancement of stockholder value.
To promote this policy, the Committee implemented a compensation program for
1996 that (i) continued the successful annual cash incentive plan first
introduced during 1992, which "pays for performance" and provides bonuses
based on the realization of annual financial goals, and (ii) included the 1995
B-10
<PAGE>
Stock Incentive Plan, which provides for the grant of stock options and other
equity incentive opportunities that directly tie management's interests to
those of stockholders.
The Committee believes that executive compensation should be highly
leveraged toward the incentive-based programs described above. By placing much
of an officer's compensation "at risk" in this manner, the Company's
compensation program focuses management's efforts on improving financial
performance and effectively integrates executive compensation with the
Company's annual and long-term strategic objectives.
1996 EXECUTIVE OFFICER COMPENSATION PROGRAM
The Committee works regularly with a nationally known compensation
consulting firm to assure that the Company's executive compensation program
remains competitive and that it appropriately reflects the Committee's
compensation philosophy.
After a thorough process involving analysis of the outside consultant's
proposals and reports and Committee deliberations, the Committee implemented
the 1996 executive officer compensation program. The components of this
program are described below.
Base Salary. The Committee determines the base salary component of executive
compensation by reviewing executive salary levels at a broad group of
companies with comparable revenues engaged in general industry (the "Survey
Group")/1/, as well as evaluating the specific job functions and past
performance of individual officers. The Committee believes that base salaries
for executive officers in general fall within the median range of executive
salary levels at comparable companies surveyed by the Committee.
Annual Cash Incentive Program. The Annual Cash Incentive Program is a pay-
for-performance plan under which cash bonus awards are paid based upon (i)
achievement of annual earnings targets approved by the Committee and (ii)
evaluation of an officer's personal performance during the year. Performance
criteria under this program consist of: (i) Company and/or business unit
earnings performance, with threshold, target and maximum challenge earnings
objectives established at the beginning of the year to reflect the Company's
goals set forth in its business plan for that year (75% weight), and (ii) the
achievement of individual performance goals, which reflect business objectives
set for each officer for that year (25% weight). Award amounts for each
executive are based upon a percentage of that participant's base salary, with
the percentage varying based on the executive's level of responsibility.
For performance during 1996, the Company's executives earned an average of
96% of the maximum potential cash bonus awards available under the Annual Cash
Incentive Program based upon the achievement of 1996 earnings targets and the
accomplishment of individual business objectives.
Stock Unit and Option Grants. In 1996 the Committee granted an aggregate of
117,500 stock units and 110,000 stock options, respectively, under the 1995
Stock Incentive Plan to the Company's executive officers. The Committee
determined the number of units and options granted to executive officers
primarily by reviewing the levels of executive grants at companies included in
the Survey Group, as well as by evaluating each officer's respective job
responsibilities, past performance and expected future contributions.
The Committee believes that these stock unit and option grants will more
closely align the long-term interests of senior management with those of
stockholders and assist in the retention of key executives.
Long-Term Equity Incentive Plan. This Plan authorizes the grant of phantom
stock units vesting over the term of multi-year performance cycles set by the
Committee. In 1996, the Committee did not grant any phantom
- --------
(1) This group covers a broad range of industries and is not limited to
companies included in the Dow Jones Building Materials Index.
B-11
<PAGE>
stock units to the Company's executive officers under this plan. The Committee
has no present intention of granting additional phantom stock units.
In order to encourage increased equity ownership by the Company's executive
officers, the Committee implemented a program during 1996 whereby officers
could elect to settle their vested phantom stock units in the form of shares
of the Company's common stock and stock units in lieu of cash. The stock units
granted will vest in three years only if the officer continues to hold an
equivalent number of shares of common stock issued in settlement of his
phantom stock units. In connection with this program, the Committee
accelerated the payment date of certain vested phantom stock units held by the
Company's executive officers to January 1997 and settled the after-tax
payments on these units in the form of shares of the Company's common stock
and stock units in lieu of cash.
Compensation of CEO. John D. Roach joined the Company as Chairman, President
and CEO in July 1991. The Company entered into an employment agreement with
Mr. Roach at that time, the terms of which were determined pursuant to arms-
length negotiations. Mr. Roach's employment agreement, as amended in January
1995, is described above, under the Section entitled "Employment, Severance
and Change-of-Control Arrangements."
The Committee believes that Mr. Roach's base salary for 1996 was set at the
median salary level for his position at comparable companies surveyed by the
Committee.
Mr. Roach earned a cash bonus of $564,850 under the Annual Cash Incentive
Program for performance during 1996, representing 98.75% of the maximum
potential bonus Mr. Roach may earn under this program. Mr. Roach's bonus was
based on the Company achieving certain earnings targets determined at the
beginning of the year (75% weight) and the achievement by Mr. Roach of
individual performance goals set by the Committee (25% weight). The maximum
annual bonus that Mr. Roach may earn under this program is an amount equal to
130% of his base salary.
In 1996, the Committee granted an aggregate of 40,000 stock options and
50,000 stock units to Mr. Roach under the 1995 Stock Incentive Plan. The
Committee determined the size of the awards by reviewing the amount of equity-
based compensation granted to CEOs at companies included in the Survey Group,
as well as by evaluating Mr. Roach's job responsibilities, past performance
and expected future contributions.
Policy on Deductibility of Compensation. Section 162(m) of the Internal
Revenue Code provides that a company may not take a tax deduction for that
portion of the annual compensation paid to a named executive officer in excess
of $1 million, unless certain exemption requirements are met. The 1995 Stock
Incentive Plan is designed to meet the exemption requirements of Section
162(m). The Committee has determined at this time not to seek to qualify the
Company's remaining executive officer compensation programs under Section
162(m).
The Company's executive compensation program is subject to change at the
discretion of the Committee. The Committee will monitor the Company's
executive compensation program on an ongoing basis to ensure that it continues
to support a performance-oriented environment and remains properly integrated
with the Company's annual and long-term strategic objectives.
MEMBERS OF COMPENSATION COMMITTEE
<TABLE>
<S> <C>
George B. James, Chairman John W. Koeberer
G. Robert Evans Bill M. Lindig
William D. Eberle Donald K. Miller
Philip R. Bogue
</TABLE>
B-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
-------- ----------- ----
<C> <S> <C>
Exhibit 1(a) --Agreement and Plan of Merger, dated as of May 27, 1997,
among Parent, the Offeror and the Company (incorporated
by reference to Exhibit 2 to the Company's Current Report
on Form 8-K filed with the Commission on May 28, 1997).
Exhibit 1(b) --Confidentiality Letter, dated April 23, 1997, between
Parent and the Company.
Exhibit 2(a) --Amended and Restated Employment Agreement, dated January
1, 1995 between the Company and John D. Roach
(incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
Exhibit 2(b) --Form of Amended and Restated Severance Agreement (Form
of Severance Agreement for CEO and Senior Executives).
Exhibit 3 --Form of Severance Agreement for Managers.
Exhibit 4 --Form of Dallas Severance Agreement.
Exhibit 5 --Form of Indemnification Agreement (incorporated by
reference to the Company's Registration Statement on Form
10 dated May 23, 1988, as amended on June 28, 1988).
Exhibit 6(a) --Letter to Stockholders dated May 30, 1997.+
Exhibit 6(b) --Press Release, dated May 28, 1997 (incorporated by
reference to Exhibit 99 to the Company's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on May 28, 1997).
Exhibit 7(a) --Rights Agreement, dated as of August 25, 1988 between
the Company and The First National Bank of Boston, as
successor Rights Agent (incorporated by reference to the
Company's Current Report on Form 8-K dated August 25,
1988).
Exhibit 7(b) --Amendment No. 1 to the Rights Agreement, dated as of
February 11, 1994 (incorporated by reference to the
Company's Form 8-A/A dated February 15, 1994).
Exhibit 7(c) --Amendment No. 2 to Rights Agreement, dated as of May 27,
1997 (incorporated by reference to the Company's Form 8-
A/A dated May 29, 1997).
Exhibit 8 --Opinion of Dillon, Read & Co. Inc. dated May 27, 1997.++
</TABLE>
- --------
+ Included in copy mailed to stockholders.
++ Included as Annex A in copy mailed to stockholders.
<PAGE>
Exhibit 1(b)
FIBREBOARD CORPORATION
2200 Ross Avenue
Suite 3600
Dallas, Texas 75201
April 23, 1997
Owens Corning
Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Attention: Christian L. Campbell
General Counsel
Ladies and Gentlemen:
You have expressed an interest in a possible negotiated cash transaction
involving Fibreboard Corporation (the "Company"). In connection with your
analysis of a possible negotiated cash transaction with the Company (a
"Transaction"), you have requested certain oral and written information
concerning the Company from directors, officers, employees, representatives
and/or agents of the Company (the "Company's Representatives"). All such
information furnished to you or your Representatives (as defined below) by or on
behalf of the Company on or after the date hereof (irrespective of the form of
communication), and all analyses, compilations, data, studies, notes,
interpretations, memoranda or other documents prepared by you or your
Representatives containing or based in whole or in part on any such furnished
information are collectively referred to herein as the "Information." In
consideration of furnishing you with the Information, the Company requests your
agreement to, and you agree to and will cause your affiliates and any other
person acting on your or their behalf to comply with, as if they were you, all
of the following:
1. The Information will be used solely for the purpose of evaluating a
Transaction and will not be used in any way, directly or indirectly, to compete
with the Company or its subsidiaries or affiliates, and the Information will be
kept strictly confidential and will not be disclosed by you or your
Representatives, except (a) as required in the opinion of your outside counsel
by applicable law, regulation or legal process, and only (i) to the extent you
have not directly caused the legal requirement to disclose to be applicable by
the actions of you or your Representatives, and (ii) after compliance with
Section 3 below, and (b) that you may disclose the Information or portions
thereof to those of your directors, officers and employees and representatives
of your legal, accounting and financial advisors (the persons to whom such
disclosure is permissible being collectively referred to herein as your
"Representatives") who need to know such information for the purpose of
evaluating such Transaction; provided, that your Representatives (i) are
informed of the confidential and proprietary nature of the Information and (ii)
agree to be bound by and perform this agreement. You agree to be responsible
for any breach of this agreement by your Representatives (it being understood
that such responsibility shall be in addition to and not by way of limitation of
any right or remedy the Company may have against such Representatives with
respect to any such breach).
<PAGE>
2
2. Without the prior written consent of the Company, neither you nor your
Representatives will disclose to any person (except to the extent otherwise
required in the opinion of your outside counsel by applicable law, regulation or
legal process, and only (a) to the extent you have not directly caused the legal
requirement to disclose to be applicable by the actions of you or your
Representatives, and (b) after compliance with Section 3 below), either the fact
that any investigations, discussions or negotiations are taking place concerning
a possible Transaction, or that you have received Information from the Company
or Information has been made available by the Company, or any of the terms,
conditions or other facts with respect to any such possible Transaction,
including the status thereof. The term "person" as used in this agreement will
be interpreted broadly to include the media and any corporation, company, group,
partnership or other entity or individual.
3. If you or any of your Representatives become legally compelled
(including by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) to disclose any of the Information or
the information referred to in Section 2 above, you shall provide the Company
with prompt prior written notice of such requirement so that the Company may
seek a protective order or other appropriate remedy. If such protective order
or other remedy is not obtained, you and your Representatives agree to disclose
only that portion of the Information which you are advised by opinion of outside
counsel is legally required to be disclosed and to use your reasonable efforts
to preserve the confidentiality of the Information and the information referred
to in Section 2 above (including by obtaining an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Information and the information referred to in Section 2 above). In addition,
you and your Representatives will not oppose any action (and will, if and to the
extent requested by the Company, cooperate with, assist and join with the
Company, at the Company's expense, in any reasonable action) by the Company to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Information and the information
referred to in Section 2 above.
4. The term "Information" does not include any information which (i) at
the time of disclosure or thereafter is generally available to the public (other
than as a result of a disclosure directly or indirectly by you or your
Representatives), (ii) was available to you on a nonconfidential basis from a
source other than the Company or its advisors, provided that, to your best
knowledge after due inquiry, such source was not prohibited from disclosing such
information to you by a legal, contractual or fiduciary obligation owed to the
Company or (iii) you can establish is already in your possession (other than
information furnished by or on behalf of the Company on or after the date
hereof).
5. If you determine not to pursue a Transaction, you will promptly notify
the Company of your determination. At the time of such notice, or if, at any
earlier time, the Company so directs (whether or not you determine to pursue a
Transaction), you and your Representatives will, at your expense, promptly
return to the Company or, at the Company's sole option, destroy, all Information
and all copies, extracts or other reproductions in whole or in part thereof,
provided, however, that you may choose to destroy all copies of any analyses,
compilations, studies or other documents prepared by you or for your use
containing or reflecting Information. Compliance by you and your
Representatives with any direction of
<PAGE>
3
the Company or election by you to destroy Information pursuant to this Section 5
shall be certified in writing to the Company by your authorized officer
supervising such destruction. Notwithstanding the return or destruction of the
Information, you and your Representatives will continue to be bound by your
confidentiality and other obligations hereunder.
6. You agree that, for a period of two years from April 30, 1997, you will
not, unless invited (on an unsolicited basis) by the Board of Directors of the
Company: (i) acquire, offer or propose to acquire, or agree or seek to acquire,
directly or indirectly, by purchase or otherwise, any securities or direct or
indirect rights or options to acquire any securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the Company,
or any assets of the Company or any subsidiary or division thereof or of any
such successor or controlling person; (ii) enter into or agree, offer, propose
or seek to enter into, or otherwise be involved in or part of, directly or
indirectly, any acquisition transaction or other business combination relating
to all or part of the Company or its subsidiaries or any acquisition transaction
for all or part of the assets of the Company or any subsidiary of the Company or
any of their respective businesses; (iii) make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" (as such terms are used
in the rules of the Securities and Exchange Commission) to vote, or seek to
advise or influence any person or entity with respect to the voting of, any
voting securities of the Company; (iv) form, join or in any way participate in a
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934) with respect to any voting securities of the Company or any of its
subsidiaries; (v) seek or propose, alone or in concert with others, to influence
or control the Company's management or policies; (vi) directly or indirectly
enter into any discussions, negotiations, arrangements or understandings with
any other person with respect to any of the foregoing activities or propose any
of such activities to any other person; (vii) advise, assist, encourage, act as
a financing source for or otherwise invest in any other person in connection any
of the foregoing activities; or (viii) disclose any intention, plan or
arrangement inconsistent with any of the foregoing. You also agree that, during
the two-year period referred to in the preceding sentence, you will not: (i)
request the Company (including its Board of Directors) or its advisors, directly
or indirectly, to (1) amend or waive any provision of this paragraph (including
this sentence) or (2) otherwise consent to, approve or invite any action
referred to in this paragraph (including this sentence); or (ii) take any
initiative with respect to the Company or any of its subsidiaries which could
require the Company to make a public announcement regarding (1) such initiative,
(2) any of the activities referred to in the preceding sentence, (3) the
possibility of a Transaction or any similar transaction or (4) the possibility
of you or any other person acquiring control of the Company, whether by means of
a business combination or otherwise; provided, if on or prior to May 31, 1997
the Company enters into a definitive agreement with an unrelated third party to
acquire all or substantially all of the Company's outstanding stock or assets,
regardless of whether the consideration thereunder is cash, securities or
otherwise (a "Third Party Definitive Agreement"), you will not be bound by the
provisions of this Section 6; provided further, if after May 31, 1997 and during
the two-year period referred to in the preceding sentence, the Company enters
into a Third Party Definitive Agreement, this Section 6 will not prohibit you
from (i) making a good faith, fully-financed proposal to the Company's board of
directors to acquire all of the Company's outstanding stock, so long as your
offered price provides greater value than the announced value of the Third Party
Definitive Agreement and (ii) publicly announcing such
<PAGE>
4
proposal, and if you so determine in connection therewith, commencing an all
cash tender offer at such price for all of the Company's outstanding stock. The
exceptions contained in the preceding sentence in no way limit any other of your
obligations under this Section 6 or otherwise under this agreement.
7. You agree that, for a period of two years from the date of this letter
agreement, without the prior written consent of the Company, you will not,
directly or indirectly, (a) solicit to hire or hire (or cause or seek to cause
to leave the employ of the Company): (i) any executive employed by the Company;
or (ii) any other employee of the Company or any subsidiary of the Company with
whom you have had contact or who (or whose performance) became known to you in
connection with the process contemplated by this agreement; provided, however,
that the foregoing provision will not prevent you from hiring any such person
who contacts you on his or her own initiative without any direct or indirect
solicitation by or encouragement from you.
8. You understand and acknowledge that neither the Company nor any of its
Representatives is making any representation or warranty, express or implied, as
to the accuracy or completeness of the Information, and neither the Company nor
any of its Representatives will have any liability to you or any other person
resulting from your use of the Information. Only those representations or
warranties that are made to you in a definitive agreement regarding a
Transaction (a "Definitive Agreement") when, as, and if it is executed, and
subject to such limitations and restrictions as may be specified in such
Definitive Agreement, will have any legal effect. The term "Definitive
Agreement" does not include an executed letter of intent or any other
preliminary written agreement, nor does it include any written or oral
acceptance of any offer or bid on your part.
9. You understand and agree that no contract or agreement providing for a
Transaction shall be deemed to exist unless and until a Definitive Agreement has
been executed and delivered, and you hereby waive, in advance, any claims
(including breach of contract) in connection with a Transaction unless and until
you shall have entered into a Definitive Agreement. You also agree that unless
and until a Definitive Agreement between the Company and you with respect to a
Transaction has been executed and delivered, neither the Company nor any of its
stockholders, affiliates or Representatives has any legal obligation of any kind
whatsoever with respect to such Transaction by virtue of this agreement or any
other written or oral expression with respect to such Transaction except, in the
case of this agreement, for the matters specifically agreed to herein. You
understand that (i) the Company and its Representatives shall be free to conduct
any process for any Transaction as they in their sole discretion shall determine
(including negotiating with any of the prospective parties to such Transaction
and entering into a Definitive Agreement without prior notice to you or any
other person) and (ii) any procedures relating to such Transaction may be
changed at any time without notice to you or any other person. You hereby
confirm that you are not acting as a broker for or Representative of any person
and are considering the Transaction only for your own account. Neither this
paragraph nor any other provision in this agreement can be waived, amended or
assigned except by written consent of the Company, which consent shall
specifically refer to this paragraph (or such other provision) and explicitly
make such waiver or amendment.
<PAGE>
5
10. You and the Company hereby acknowledge that you and the Company are
aware, and that you will advise your Representatives and the Company will advise
the Company's Representatives, that the United States securities laws prohibit
any person who has material, non-public information concerning the matters which
are the subject of this agreement from purchasing or selling securities of a
company which may be a party to a transaction of the type contemplated by this
agreement or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
11. You agree that money damages would not be a sufficient remedy for any
breach of this agreement by you and that the Company shall be entitled to, and
you shall not oppose the granting of, equitable relief, including injunction and
specific performance, in the event of any such breach, in addition to all other
remedies available to the Company at law or in equity. You further agree to
waive, and to use your best efforts to cause your directors, officers, employees
and agents, or other Representatives, to waive, any requirement for the securing
or posting of any bond in connection with such remedy.
12. The parties hereby irrevocably and unconditionally consent to submit
to the exclusive jurisdiction of the courts of the State of New York and of the
United States of America located in the Southern District of New York for any
actions, suits or proceedings arising out of or relating to this agreement (and
the parties agree not to commence any action, suit or proceeding relating
thereto except in such courts), and further agree that service of any process,
summons, notice or document by U.S. registered mail to the respective addresses
set forth above shall be effective service of process for any action, suit or
proceeding brought against the parties in any such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this agreement, in the courts of
the State of New York or the United States of America located in the Southern
District of New York, and hereby further irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
13. You agree that no failure or delay by the Company in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor will
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
14. If any provision of this agreement is found to violate any statute,
regulation, rule, order or decree of any governmental authority, court, agency
or exchange, such invalidity shall not be deemed to affect any other provision
hereof or the validity of the remainder of this agreement, and such invalid
provision shall be deemed deleted herefrom to the minimum extent necessary to
cure such violation.
15. You agree that all (a) contacts by you or your Representatives with
the Company regarding the Information or the Transaction, (b) requests for
additional Information, (c) requests for facility tours or management meetings
and (d) discussions or questions regarding procedures shall be made through
Michael Douglas, Esq., General Counsel of the Company,
<PAGE>
6
or Barbara Alexander of Dillon, Read & Co. Inc., the Company's financial
advisor, or as such individuals may otherwise direct.
16. This agreement is for the benefit of the Company and its directors,
officers, employees, representatives and agents and their respective successors
and assigns and will be governed by and construed in accordance with the laws of
the State of New York without regard to the conflicts of law principles thereof.
If you agree with the foregoing, please sign and return a copy of this
letter, which will constitute our agreement with respect to the subject matter
of this letter.
Very truly yours,
Fibreboard Corporation
By: /s/ Michael R. Douglas
-----------------------------
Name: Michael R. Douglas
Title: Senior Vice President and
General Counsel
CONFIRMED AND AGREED
as of the date first above written:
Owens Corning
By: /s/ Christian L. Campbell
----------------------------------
Name: Christian L. Campbell
Title: Senior Vice President, General
Counsel and Secretary
<PAGE>
EXHIBIT 2(b)
FORM OF SEVERANCE AGREEMENT FOR GROUP A
AMENDED AND RESTATED SEVERANCE AGREEMENT
----------------------------------------
This Severance Agreement (this "Agreement") is made as of ____________
__, 1997 by and between FIBREBOARD CORPORATION, a Delaware corporation (the
"Company"), and _________________ ("Executive").
RECITALS
--------
[WHEREAS the Company and Executive have previously entered into
Severance Agreements dated as of _________________ and as of _________________
(the "Prior Agreements") providing for certain benefits to be conferred upon
Executive under specified circumstances in the event that (i) Executive's
employment is terminated by the Company or (ii) Executive voluntarily terminates
his employment with the Company, all upon the terms and conditions set forth
therein;]/1/
WHEREAS the Board of Directors of the Company has approved a new
severance agreement to provide Executive with certain additional benefits and to
conform the terms of such agreement to the current policy of the Company
regarding an officer's entitlement to benefits upon the termination of his
employment;
NOW THEREFORE, the parties hereto agree as follows:
1. Termination Absent a Change of Control.
--------------------------------------
(a) If, prior to a Change of Control, (i) the Company terminates
Executive's employment for any reason other than Permanent Total Disability
or Cause, or (ii) Executive voluntarily terminates his employment under
circumstances involving a Constructive Termination, Executive will be
entitled to the following compensation:
(1) One year's Base Salary; and
(2) An amount equal to the Target Level Bonus (as defined in
Paragraph 12(f) below) for the fiscal year of termination; and
(3) An amount equal to the Target Level Bonus for the fiscal
year of termination, prorated for the period of Executive's
actual employment during the fiscal year of termination.
- --------------------------------
/1/ For CEO, WHEREAS clause will refer to CEO's employment agreement.
<PAGE>
2
(b) The compensation payable under subparagraphs 1(a)(1), (2) and (3)
above shall be paid in a single lump sum within thirty (30) days following
the last date of Executive's employment.
2. Termination On or After A Change of Control.
-------------------------------------------
(a) If within a two-year period after a Change of Control (i) the Company
(or any successor) terminates Executive's employment for any reason other
than Permanent Total Disability or Cause or (ii) Executive voluntarily
terminates his employment under circumstances involving a Constructive
Termination, Executive will be entitled to the following compensation:
(1) 24/2/ months' Base Salary; and
(2) An amount equal to two times/3/ the greater of:
(A) The Target Level Bonus for the fiscal year of termination,
or
(B) The product of (i) the average of the proportion the
executive's annual bonus bore to the executive's Base Salary for
the three years fiscal years prior to the date of termination,
multiplied by (ii) the executive's Base Salary [(the greater of
(A) or (B) being the "Bonus")], [or
(C) any bonus provided under an employment agreement between the
Company and the Executive (the greater of (A), (B) or (C) being
the "Bonus")]/4/; and
(3) The Bonus, prorated for the period of Executive's actual
employment during the fiscal year of termination.
[(b) If within a six-month period following a Change of Control, Executive
voluntarily terminates his employment under circumstances not involving a
Constructive Termination, Executive will be entitled to 75% of the sums
provided in paragraphs 2(a)(1) and 2(a)(2) and 100% of the sum provided in
paragraph 2(a)(3)
- ---------------------------
/2/ 36 months for CEO.
/3/ Three times for CEO.
/4/ For CEO only.
<PAGE>
3
(calculated as if his employment was terminated under circumstances
involving a Constructive Termination).]/5/
(c) The compensation payable under paragraphs 2(a) or (b) above will be
paid in a single lump sum within thirty (30) days after the last date of
Executive's employment.
(d) In the event of a termination of Executive's employment under the
circumstances described in this paragraph 2:
(1) All outstanding options, restricted stock rights and phantom
stock units (valued as of the date of termination of Executive's
employment) previously awarded to Executive shall, to the extent not
already vested, immediately vest and the Company shall promptly issue
stock or cash, as the case may be, to Executive as called for by the
terms of such awards; and
(2) All of Executive's non-qualified deferred compensation or
retirement benefits, if any, accrued through the date of termination
under any non-qualified deferred compensation plan or arrangement
shall immediately vest and be payable, to the extent permissible under
the terms of such plan or arrangement.
[(e) Following a Change of Control, upon a termination of employment under
the circumstances described in this paragraph 2, the Company shall continue
to provide the Executive with the use of his office for 90 days following
the termination of his employment.]/6/
3. Bonus Payment for Year Preceding Termination. If Executive's employment is
--------------------------------------------
terminated for any reason other than Cause prior to the date that the Board
of Directors has determined to award bonuses for a prior fiscal year,
Executive shall receive a bonus equal to the bonus he would have received
if his employment had not been terminated.
4. Voluntary Termination. If Executive voluntarily terminates his employment
---------------------
other than as provided in paragraph 1 or 2 above, Executive shall not be
entitled to any benefits under this Agreement; provided, however, that, if
-------- -------
more than two years after a Change of Control, Executive's employment is
terminated under circumstances which would have, absent a Change of
Control, entitled Executive to benefits under paragraph 1, Executive will
be deemed to have terminated his employment under paragraph 1.
- ----------------------------
/5/ For senior executives only (not CEO). CEO has similar right via his
employment agreement.
/6/ For CEO only.
<PAGE>
4
5. Termination due to Death or Disability. If Executive's employment
--------------------------------------
terminates due to death or Permanent Total Disability, Executive shall be
paid an amount equal to the Target Level Bonus for the fiscal year of
termination, prorated for the period of Executive's actual employment
during the fiscal year of termination. Executive shall not be entitled to
any other benefits under this Agreement, but shall be entitled to any other
benefits to which he is otherwise entitled under the terms of any employee
benefit plans of the Company.
6. Continuation of Insurance Benefits. In the event Executive's employment
----------------------------------
terminates under the circumstances described in paragraph 2(a) of this
Agreement, the Company will continue Executive's participation and coverage
for a period of two/7/ years (the "Severance Period") from Executive's last
day of employment with the Company under all the Company's life, medical,
dental plans and other welfare benefit plans (but excluding the Company's
disability plans) ("Insurance Benefits"), and all perquisites and fringe
benefit plans and programs (other than the Company's Profit Sharing/401(K)
Plan) (the perquisites and fringe benefits together being the "Fringe
Benefits") in which Executive is participating immediately prior to such
employment termination, under the same coverages and on the same terms as
in effect immediately prior to termination; provided, however, that if his
-------- -------
continued participation is not possible under the general terms and
provisions of such plans and programs, the Company shall arrange to provide
him with substantially similar benefits; provided, further, that if any
-------- -------
other Company plan, arrangement or agreement provides for continuation of
Insurance Benefits and Fringe Benefits then the Executive shall receive
such coverage under such other plan, arrangement or agreement, and if the
period of such coverage is shorter than the Severance Period, then the
Executive shall receive pursuant to this section, such coverage for the
remainder of the Severance Period. In the event Executive's employment
terminates under the circumstances described in paragraph 2(b) of this
Agreement, the Company shall continue Executive's participation and
coverage in the Insurance Benefits and Fringe Benefits for a period of 18
months (the "Severance Period") from Executive's last day of employment
with the Company subject to the same provisions as provided in the prior
sentence. In the event Executive's employment terminates under the
circumstances described in paragraph 1 of this Agreement, then the Company
shall provide such Insurance Benefits and Fringe Benefits for one year from
Executive's last day of employment with the Company.
7. Additional Benefit Accruals, Pension Contributions and Relocation
-----------------------------------------------------------------
Assistance. In the event Executive's employment is terminated under the
----------
circumstances described in paragraph 2 of this Agreement then: (i) the
Executive shall also receive additional service credit (including, benefit
accrual and vesting credit) for the Severance Period under any Company
pension plan in which Executive participates; provided, however, that in
-------- -------
the case of a qualified pension plan, the Executive shall be paid (within
30 days after his last day of employment) a cash lump equal to the present
value of the additional benefits Executive would have accrued if he had
been credited for all
- ----------------------
/7/ Three years for CEO.
<PAGE>
5
purposes with the additional years of service under such plan; (ii)
Executive shall also be provided with additional age and service credit for
the Severance Period under the Officer Early Retirement Medical Program, or
any successor thereto; (iii) the executive shall receive an additional
payment equal to 4% of 1997 salary and bonus (including the payments
provided in Paragraph 2); (iv) a contribution to the SERP equal to the SERP
contribution that would have been made on behalf of the Executive if his
employment had continued through the Severance Period; and [(v) if
Executive relocates to California, up to $75,000 to reimburse Executive's
actual relocation expenses (i.e., moving vans, loss on the sale of his
residence, lease buyout costs, closing costs, real estate commissions,
etc.); provided, however, that to the extent such relocation expenses are
-------- -------
paid or reimbursed by another party (i.e., a new employer) the Company
shall not reimburse Executive's relocation expenses; provided, further,
-------- -------
that such relocation expenses shall only be reimbursed if the Executive
provided the Company with written notice of his intent to relocate to
California within 12 months of his last date of employment and completed
such relocation within 18 months of such date]/8/. [In addition, if so
requested by the Executive, outplacement services shall be provided by a
professional outplacement provider at a cost to the Company of not more
than 20% of the Executive's Base Salary.]/9/
8. Certain Additional Payments by the Company:
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, if it is
determined (as hereafter provided) that any payment or distribution by the
Company (other than relocation expenses) to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or
the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being "contingent on a change in ownership
or control" of the Company, within the meaning of Section 280G of the Code
(or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such excise tax
(such tax or taxes, together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax"), then the Executive
will be entitled to receive an additional payment or payments (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such
taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(f) hereof, all determinations
required to be made under this Section 8, including whether an Excise Tax
is payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is
- -------------------
/8/ Only for executives who relocated from California and Ron Mathewson (for
relocation back to Colorado).
/9/ Herb Elliot only.
<PAGE>
6
required and the amount of such Gross-Up Payment, will be made by the
nationally recognized firm of certified public accountants (the "Accounting
Firm") used by the Company prior to the Change of Control. The Company
will direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and the Executive within 15
calendar days after the executive's date of termination, if applicable, and
any other such time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is
payable by the Executive, the Company will pay the required Gross-Up
Payment to the Executive within five business days after receipt of such
determination and calculations. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it will, at the same time as it
makes such determination, furnish the Executive with an opinion that he has
substantial authority not to report any Excise Tax on his federal, state,
local income or other tax return. Any determination by the Accounting Firm
as to the amount of the Gross-Up Payment will be binding upon the Company
and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments that will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to Section 8(f) hereof
and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive will direct the Accounting Firm to determine the amount
of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment will be promptly paid by the
Company to, or for the benefit of, the Executive within five business days
after receipt or such determination and calculations.
(c) The Company and the Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested
by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination
contemplated by Section 8(b) hereof.
(d) The federal, state and local income or other tax returns filed by the
Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable
by the Executive. The Executive will make proper payment of the amount of
any Excise Tax, and at the request of the Company, provide to the Company
true and correct copies (with any amendments) of his federal income tax
return as filed with the Internal Revenue Service and corresponding state
and local tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the Company,
evidencing such payment. If prior to the filing of the Executive's federal
income tax return, or corresponding state or local tax return, if relevant,
the Accounting Firm determines
<PAGE>
7
that the amount of the Gross-Up Payment should be reduced, the Executive
will within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Sections 8(b) and (d) hereof will be borne by the Company. If such fees
and expenses are initially advanced by the Executive, the Company will
reimburse the Executive the full amount of such fees and expenses within
five business days after receipt from the Executive of a statement therefor
and reasonable evidence of his payment thereof.
(f) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification will be given as
promptly as practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the Executive will
further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent known
by the Executive). The Executive will not pay such claim prior to the
earlier of (a) the expiration of the 30-calendar-day period following the
date on which he gives such notice to the Company and (b) the date that any
payment of amount with respect to such claim is due. If the Company
notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive will:
(i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim as the
Company will reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company will bear and pay directly all costs
-------- -------
and expenses (including interest and penalties) incurred in connection with
such contest and will indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 8(f), the Company will control all
proceedings taken in connection with the contest of any claim contemplated
by this Section 8(f) and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority
<PAGE>
8
in respect of such claim (provided, however, that the Executive may
-------- -------
participate therein at his own cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company will determine; provided, however, that if the
-------- -------
Company directs the Executive to pay the tax claimed and sue for a refund,
the Company will advance the amount of such payment to the Executive on an
interest-free basis and will indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax, including interest
or penalties with respect thereto, imposed with respect to such advance;
and provided further, however, that any extension of the statute of
-------- ------- -------
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim will be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Executive
will be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(f) hereof, the Executive receives any refund
with respect to such claim, the Executive will (subject to the Company's
complying with the requirements of Section 8(f) hereof) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 8(f) hereof, a determination is made that the Executive will not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial or
refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be required
to be repaid and the amount of such advance will offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid pursuant to
this Section 8.
9. No Other Severance Benefits. Other than any welfare benefits or relocation
---------------------------
benefits provided under any other Company plan, program or arrangement, the
foregoing severance benefits will be in lieu of all severance payments and
benefits to which Executive might otherwise be entitled under the Company's
general severance policy, if any.
10. Term. This Agreement shall be effective from the date hereof until the
----
second anniversary of a Change of Control.
11. Attorneys' Fees. The Company will pay the reasonable attorneys' fees of
---------------
Executive that were incurred by him in enforcing his rights under this
Agreement if Executive subsequently obtains any benefits under this
Agreement, whether by way of settlement or litigation.
<PAGE>
9
12. Certain Defined Terms. As used herein, the following terms shall have the
---------------------
following meanings:
(a) "Base Salary" shall mean the greater of the annual salary paid to
Executive as of the date of termination of his employment or the date of
the Change of Control, as the case may be.
(b) "Cause" shall mean:
(i) conviction of any felony, or
(ii) willful and continued failure to substantially perform his
duties as an Executive of the Company (other than as a result of total
or partial incapacity due to physical or mental illness (habitual
drunkenness or abuse of drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph)) unless within 30 days after written notice has been
provided to the Executive by the Board of Directors, the Executive
cures the conduct which was the basis for such willful and continued
failure.
(c) "Change of Control" shall mean:
(i) the holders of the voting securities of the Company shall have
approved a merger or consolidation of the Company with any other
entity, unless the proposed merger or consolidation would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than 50% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation;
(ii) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall have
approved an agreement for the sale or disposition by the Company (in
one transaction or a series of transactions) of all or substantially
all of the Company's assets; or
(iii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 ("1934 Act")) shall become the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 15% or more of the combined voting power of
the Company's then outstanding shares;
(iv) during any period of two consecutive years, members who at the
beginning of such period constituted the Board of Directors shall have
ceased for any reason to constitute a majority thereof, unless the
election, or nomination for election by the Company's stockholders, of
each director shall have been approved by the vote of at least two-
thirds of the directors then still
<PAGE>
10
in office and who were directors at the beginning of such period (so
long as such director was not nominated by a person who has expressed
an intent to effect a Change of Control or engage in a proxy or other
control context); or
(v) the occurrence of any other change of control of a nature that
would be required to be reported in accordance with Form 8-K pursuant
to Sections 13 or 15(d) of the 1934 Act or in the Company's proxy
statement in accordance with Schedule 14A of Regulation 14A
promulgated under the 1934 Act, or in any successor forms or
regulations to the same effect.
(d) A "Constructive Termination" shall be deemed to have occurred if (i)
Executive's Base Salary is reduced without his written consent, or (ii)
Executive's annual compensation potential (consisting of Base Salary plus
total annual bonus potential) is reduced without his written consent, or
(iii) Executive is required by the Company without his written consent to
relocate to a new place of business that is more than fifty miles from the
Executive's place of business prior to the Change of Control (or a
substantial increase in the amount of required business travel), or (iv)
there is a material adverse change in the Executive's duties or
responsibilities in comparison to the duties or responsibilities which the
Executive had prior to the Change of Control.
(e) "Permanent Total Disability" shall mean: If at the end of any month
Executive then is, and has been, for six (6) consecutive full calendar
months then ending, or eighty (80) or more of the normal working days
during the twelve (12) consecutive full calendar months then ending, unable
to perform his duties in the normal and regular manner due to mental or
physical illness or injury, Executive will be deemed to be in a state of
Permanent Total Disability. Any determination of such inability to perform
shall be made by the Executive's physician in good faith.
(f) "Target Level Bonus" shall mean the bonus that would have been payable
to Executive under the Company's Annual Cash Incentive Program for the
fiscal year of termination assuming that Executive's employment had
continued for the full year and the Company or the applicable business
unit, as the case may be, had achieved the "Target" level of earnings for
the year previously set by the Board of Directors under this Program.
(g) For purposes of subparagraphs 1(a)(3), 2(a)(3) and 5 of this
Agreement, applicable bonus amounts shall be "prorated" for the period of
Executive's actual employment during the fiscal year of termination by
multiplying the applicable bonus amount by a fraction, the numerator of
which shall be the number of days of Executive's employment during such
year and the denominator of which shall be 365.
13. Modification and Waiver of Breach. No waiver or modification of this
---------------------------------
Agreement shall be binding unless it is in writing, signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a
waiver of a further breach, whether of a similar or dissimilar nature.
<PAGE>
11
14. Assignment. This Agreement shall be binding upon and inure to the benefit
----------
of any successors of the Company. As used herein, "successors" shall
include any person, firm, corporation or other business entity which at any
time, whether by merger, purchase or otherwise, acquires substantially all
of the assets or business of the Company.
15. Notice. Any written notice to be given hereunder to Executive may be
------
delivered to him personally or shall be deemed to have been given upon
deposit thereof in the U.S. mail, certified mail, postage prepaid,
addressed to Executive at the address as it shall appear on the records of
the Company.
16. Construction of Agreement. This Agreement is made and entered into in the
-------------------------
State of California and shall be construed under the laws of California.
17. Entire Agreement. [This Agreement supersedes and replaces the Prior
----------------
Agreements in their entirety, and after the execution hereof by Executive
and the Company, the Prior Agreements shall no longer be of any further
force or effect.]/9/ This Agreement constitutes the entire understanding
between the parties with respect to Executive's severance pay in the event
of a termination of Executive's employment with the Company, superseding
all negotiations, prior discussions and preliminary agreements, written or
oral, concerning said severance pay [;provided, however, that upon any
-------- -------
termination of employment the Executive shall receive the greater of (i)
the payments and benefits provided under this Agreement, and (ii) the
payments and benefits provided in the Amended and Restated Employment
Agreement between the Executive and the Company dated as of January 1,
1995]/10/. This Agreement may not be amended except in writing by the
parties hereto.
- -------------------------
/9/ Senior executives other than the CEO.
/10/ CEO only.
<PAGE>
12
18. Counterparts. This Agreement may be executed in counterparts.
------------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FIBREBOARD CORPORATION
By
-----------------------
John D. Roach
Chairman, President and
Chief Executive Officer
-----------------------
Executive
<PAGE>
EXHIBIT 3
FORM OF SEVERANCE AGREEMENT FOR GROUPS B & C
SEVERANCE AGREEMENT
-------------------
This Severance Agreement (this "Agreement") is made as of ____________
__, 1997 by and between FIBREBOARD CORPORATION, a Delaware corporation (the
"Company"), and _________________ ("Executive").
RECITALS
--------
WHEREAS the Board of Directors of the Company has approved a new
severance agreement to provide Executive with certain additional benefits and to
conform the terms of such agreement to the current policy of the Company
regarding an officer's entitlement to benefits upon the termination of his
employment;
NOW THEREFORE, the parties hereto agree as follows:
1. Termination.
-----------
(a) If (i) the Company terminates Executive's employment for any reason
other than Permanent Total Disability or Cause, or (ii) Executive
voluntarily terminates his employment under circumstances involving a
Constructive Termination, Executive will be entitled to the following
compensation:
(1) One year's Base Salary; and
(2) An amount equal to the Target Level Bonus (as defined in
Paragraph 8(g) below) for the fiscal year of termination; and
(3) An amount equal to the Maximum Bonus for the fiscal year of
termination, prorated for the period of Executive's actual
employment during the fiscal year of termination;
[provided, however, that if (i) or (ii) occur within 12 months following a
-------- -------
Change of Control, then both (1) and (2) above (but not (3)) shall be
increased by 50%.]/1/
(b) The compensation payable under subparagraphs 1(a)(1), (2) and (3)
above shall be paid in a single lump sum within thirty (30) days following
the last date of Executive's employment.
2. Bonus Payment for Year Preceding Termination. If Executive's employment is
--------------------------------------------
terminated for any reason other than Cause prior to the date that the Board
of
- --------------------
/1/ Group B only.
<PAGE>
2
Directors has determined to award bonuses for a prior fiscal year,
Executive shall receive a bonus equal to the bonus he would have received
if his employment had not been terminated.
3. Termination due to Death or Disability. If Executive's employment
--------------------------------------
terminates due to death or Permanent Total Disability, Executive shall be
paid an amount equal to the Target Level Bonus for the fiscal year of
termination, prorated for the period of Executive's actual employment
during the fiscal year of termination. Executive shall not be entitled to
any other benefits under this Agreement, but shall be entitled to any other
benefits to which he is otherwise entitled under the terms of any employee
benefit plans of the Company.
4. Continuation of Insurance Benefits. In the event Executive's employment
----------------------------------
terminates under the circumstances described in paragraph 1(a) of this
Agreement, the Company will continue Executive's participation and coverage
for a period of one year [(18 months if the termination occured within 1
year following a Change of Control)]/2/ (the "Severance Period") from
Executive's last day of employment with the Company under all the Company's
life, medical, dental plans and other welfare benefit plans (but excluding
the Company's disability plans) ("Insurance Benefits"), and all perquisites
and fringe benefit plans and programs (other than the Company's Profit
Sharing/401(K) Plan) (the perquisites and fringe benefits together being
the "Fringe Benefits") in which Executive is participating immediately
prior to such employment termination, under the same coverages and on the
same terms as in effect immediately prior to termination; provided,
--------
however, that if his continued participation is not possible under the
-------
general terms and provisions of such plans and programs, the Company shall
arrange to provide him with substantially similar benefits; provided,
--------
further, that if any other Company plan, arrangement or agreement provides
-------
for continuation of Insurance Benefits and Fringe Benefits then the
Executive shall receive such coverage under such other plan, arrangement or
agreement, and if the period of such coverage is shorter than the Severance
Period, then the Executive shall receive pursuant to this section, such
coverage for the remainder of the Severance Period.
5. No Other Severance Benefits. Other than any welfare benefits or relocation
---------------------------
benefits provided under any other Company plan, program or arrangement, the
foregoing severance benefits will be in lieu of all severance payments and
benefits to which Executive might otherwise be entitled under the Company's
general severance policy, if any.
6. Term. This Agreement shall be effective from the date hereof until the
----
second anniversary of a Change of Control.
7. Attorneys' Fees. The Company will pay the reasonable attorneys' fees of
---------------
Executive that were incurred by him in enforcing his rights under this
Agreement if Executive
- --------------------
/2/ Group B only.
<PAGE>
3
subsequently obtains any benefits under this Agreement, whether by way of
settlement or litigation.
8. Certain Defined Terms. As used herein, the following terms shall have the
---------------------
following meanings:
(a) "Base Salary" shall mean the greater of the annual salary paid to
Executive as of the date of termination of his employment or the date of
the Change of Control, as the case may be.
(b) "Cause" shall mean:
(i) conviction of any felony, or
(ii) willful and continued failure to substantially perform his
duties as an Executive of the Company (other than as a result of total
or partial incapacity due to physical or mental illness (habitual
drunkenness or abuse of drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph)) unless within 30 days after written notice has been
provided to the Executive by the Board of Directors, the Executive
cures the conduct which was the basis for such willful and continued
failure.
(c) "Change of Control" shall mean:
(i) the holders of the voting securities of the Company shall have
approved a merger or consolidation of the Company with any other
entity, unless the proposed merger or consolidation would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than 50% of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation;
(ii) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall have
approved an agreement for the sale or disposition by the Company (in
one transaction or a series of transactions) of all or substantially
all of the Company's assets; or
(iii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 ("1934 Act")) shall become the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 15% or more of the combined voting power of
the Company's then outstanding shares;
(iv) during any period of two consecutive years, members who at the
beginning of such period constituted the Board of Directors shall have
ceased
<PAGE>
4
for any reason to constitute a majority thereof, unless the election,
or nomination for election by the Company's stockholders, of each
director shall have been approved by the vote of at least two-thirds
of the directors then still in office and who were directors at the
beginning of such period (so long as such director was not nominated
by a person who has expressed an intent to effect a Change of Control
or engage in a proxy or other control context); or
(v) the occurrence of any other change of control of a nature that
would be required to be reported in accordance with Form 8-K pursuant
to Sections 13 or 15(d) of the 1934 Act or in the Company's proxy
statement in accordance with Schedule 14A of Regulation 14A
promulgated under the 1934 Act, or in any successor forms or
regulations to the same effect.
(d) A "Constructive Termination" shall be deemed to have occurred if (i)
Executive's Base Salary is reduced without his written consent, or (ii)
Executive's annual compensation potential (consisting of Base Salary plus
total annual bonus potential) is reduced without his written consent, or
(iii) Executive is required by the Company without his written consent to
relocate to a new place of business that is more than fifty miles from the
Executive's place of employment prior to the Change of Control (or a
substantial increase in the amount of required business travel), or (iv)
there is a material adverse change in the Executive's duties or
responsibilities in comparison to the duties or responsibilities which the
Executive had prior to the Change of Control.
(e) "Maximum Bonus" shall mean the maximum bonus that would have been
payable to Executive under the Company's bonus plans for the fiscal year of
termination assuming that Executive's employment had continued for the full
year and the Executive, the Company or the applicable business unit, as the
case may be, had satisfied all performance criteria to the greatest extent
possible.
(f) "Permanent Total Disability" shall mean: If at the end of any month
Executive then is, and has been, for six (6) consecutive full calendar
months then ending, or eighty (80) or more of the normal working days
during the twelve (12) consecutive full calendar months then ending, unable
to perform his duties in the normal and regular manner due to mental or
physical illness or injury, Executive will be deemed to be in a state of
Permanent Total Disability. Any determination of such inability to perform
shall be made by the Executive's physician in good faith.
(g) "Target Level Bonus" shall mean the bonus that would have been payable
to Executive under the Company's Annual Cash Incentive Program for the
fiscal year of termination assuming that Executive's employment had
continued for the full year and the Company or the applicable business
unit, as the case may be, had achieved the "Target" level of earnings for
the year previously set by the Board of Directors under this Program.
(h) For purposes of subparagraph 1(a)(3) of this Agreement, applicable
bonus amounts shall be "prorated" for the period of Executive's actual
employment during
<PAGE>
5
the fiscal year of termination by multiplying the applicable bonus amount
by a fraction, the numerator of which shall be the number of days of
Executive's employment during such year and the denominator of which shall
be 365.
9. Modification and Waiver of Breach. No waiver or modification of this
---------------------------------
Agreement shall be binding unless it is in writing, signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a
waiver of a further breach, whether of a similar or dissimilar nature.
10. Assignment. This Agreement shall be binding upon and inure to the benefit
----------
of any successors of the Company. As used herein, "successors" shall
include any person, firm, corporation or other business entity which at any
time, whether by merger, purchase or otherwise, acquires substantially all
of the assets or business of the Company.
11. Notice. Any written notice to be given hereunder to Executive may be
------
delivered to him personally or shall be deemed to have been given upon
deposit thereof in the U.S. mail, certified mail, postage prepaid,
addressed to Executive at the address as it shall appear on the records of
the Company.
12. Construction of Agreement. This Agreement is made and entered into in the
-------------------------
State of Texas and shall be construed under the laws of Texas.
13. Entire Agreement. This Agreement constitutes the entire understanding
----------------
between the parties with respect to Executive's severance pay in the event
of a termination of Executive's employment with the Company, superseding
all negotiations, prior discussions and preliminary agreements, written or
oral, concerning said severance pay. This Agreement may not be amended
except in writing by the parties hereto.
14. Counterparts. This Agreement may be executed in counterparts.
------------
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FIBREBOARD CORPORATION
By
-----------------------
John D. Roach
Chairman, President and
Chief Executive Officer
-----------------------
Executive
<PAGE>
EXHIBIT 4
SEVERANCE PLAN FOR DALLAS EMPLOYEES
WHEREAS the Board of Directors (the "Board") of Fibreboard Corporation
(the "Company") is contemplating entering into an agreement that would resulting
in a Change of Control (as defined below); and
WHEREAS the acquiring entity in such Change of Control has expressed
an intent to close the Company's Dallas, Texas office (the "Office"); and
WHEREAS the Board wishes to provide certain severance benefits to the
employees of the Office (the "Employees") in the event the Employees are
terminated following the Change of Control, the Company desires to establish
this Severance Plan for Dallas (the "Plan").
NOW, THEREFORE, the Company does hereby establish the Plan in
accordance with the following terms:
1. Term of the Plan. This Plan shall become effective on ________
----------------
__, 1997 and remain in effect until the second anniversary of a Change of
Control; provided, however, that the Company shall in all events remain liable
-------- -------
to provide any amounts or benefits to which an Employee became entitled
hereunder prior to such anniversary.
2. Covered Employees. This Plan shall apply to the Employees whose
-----------------
names are set forth on Schedule A hereto and who are employed immediately prior
to a Change of Control. Additional names of Employees can be added to such
Schedule prior to a Change of Control. However, no Employee's name can be
deleted from Schedule A on or after the inception of the Plan who remains
employed with the Company.
3. Definitions. For purposes of this Plan, the following definitions
-----------
shall apply:
"Base Salary" shall mean the Employee's annual base salary on the
Effective Date.
"Bonus" shall mean the bonus that would have been payable to the
Employee under the Company's Annual Cash Incentive Program for the fiscal year
of termination assuming the Employee's employment had continued for the full
year and the Company and the Employee had achieved the "Target" level of
earnings for the year previously set by the Board under the program.
"Cause" shall mean:
(i) conviction of any felony, or
<PAGE>
2
(ii) willful and continued failure to substantially perform his duties
as an Employee of the Company (other than as a result of total or
partial incapacity due to physical or mental illness (habitual
drunkenness or abuse of drugs or controlled substances not being
considered a physical or mental illness for purposes of this
paragraph)) unless within 30 days after written notice has been
provided to the Employee by the Company, the Employee cures the
conduct which was the basis for such willful and continued
failure.
"Change of Control" shall mean:
(i) the holders of the voting securities of the Company shall have
approved a merger or consolidation of the Company with any other
entity, unless the proposed merger or consolidation would result
in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation;
(ii) a plan of complete liquidation of the Company shall have been
adopted or the holders of voting securities of the Company shall
have approved an agreement for the sale or disposition by the
Company (in one transaction or a series of transactions) of all
or substantially all of the Company's assets; or
(iii) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 ("1934 Act")) shall become
the "beneficial owner" (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of 15% or more of the combined
voting power of the Company's then outstanding shares;
(iv) during any period of two consecutive years, members who at the
beginning of such period constituted the Board of Directors shall
have ceased for any reason to constitute a majority thereof,
unless the election, or nomination for election by the Company's
stockholders, of each director shall have been approved by the
vote of at least two-thirds of the directors then still in office
and who were directors at the beginning of such period (so long
as such director was not
<PAGE>
3
nominated by a person who has expressed an intent to effect a
Change of Control or engage in a proxy or other control context);
or
(v) the occurrence of any other change of control of a nature that
would be required to be reported in accordance with Form 8-K
pursuant to Sections 13 or 15(d) of the 1934 Act or in the
Company's proxy statement in accordance with Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or in any
successor forms or regulations to the same effect.
"Constructive Termination" shall be deemed to have occurred if (i)
Employee's Base Salary is reduced without his written consent, or (ii)
Employee's annual compensation potential (consisting of Base Salary plus total
annual bonus potential) is reduced without his written consent, or (iii)
Employee is required by the Company without his written consent to relocate to a
new place of business that is more than fifty miles from the Company's office in
Dallas, Texas (or a substantial increase in the amount of required business
travel), or (iv) there is a material adverse change in the Employee's duties or
responsibilities in comparison to the duties or responsibilities which the
Employee had prior to the Change of Control.
"Effective Date" shall mean the date on which a Change of Control
occurs.
"Maximum Bonus" shall mean the maximum bonus that would have been
payable to the Employee under the Company's bonus plans for the fiscal year of
termination assuming that the Employee's employment had continued for the full
year and the Employee, the Company or the applicable business unit, as the case
may be, had satisfied all performance criteria to the greatest extent possible.
"Permanent Total Disability" shall mean: If at the end of any month
Employee then is, and has been, for six (6) consecutive full calendar months
then ending, or eighty (80) or more of the normal working days during the twelve
(12) consecutive full calendar months then ending, unable to perform his duties
in the normal and regular manner due to mental or physical illness or injury,
Employee will be deemed to be in a state of Permanent Total Disability. Any
determination of such inability to perform shall be made by the Employee's
physician in good faith.
"Relocation Payment" shall mean, for each Employee, the amount
designated as the Relocation Payment on Schedule A hereto with respect to such
Employee.
<PAGE>
4
"Retirement" shall mean a termination of employment by Employee
pursuant to late, normal or early retirement under a pension plan sponsored by
the Company, as defined in such plan.
"Severance Period" shall mean, for each Employee, the period
designated on Schedule A hereto with respect to such Employee.
4. Compensation Upon Termination. The Employee shall be entitled to
-----------------------------
the severance benefits provided in this Section 4 hereof in the event Employee's
employment is terminated within two years following a Change of Control (i) by
the Company without Cause, (ii) by Employee as a result of a Constructive
Termination (either (i) or (ii) causing a "Termination"). Notwithstanding the
foregoing, no Employee shall be entitled to severance benefits in the event of a
termination of employment on account of death, Permanent Total Disability or
Retirement, but excluding any such termination which is coincident with or
subsequent to a termination which would otherwise give rise to severance
benefits. Upon termination of the Employee's employment as provided above, the
Employee shall be entitled to the following benefits:
(a) Severance. As soon as practicable after the Termination, but in
---------
any event no later than 10 business days following such Termination, the Company
shall pay or cause to be paid to the Employee, a lump sum cash amount equal to
the sum of (i) the Base Salary for the Severance Period, and (ii) the Bonus for
the Severance Period (i.e., if the Severance Period were 6 months, then Bonus
for the Severance Bonus would be 1/2 of the Bonus for a year). In addition, at
the time of the above payment, the Employee shall be entitled to an additional
lump sum cash payment equal to the sum of (A) Employee's unpaid annual salary
through the date of termination, (B) a pro rata portion of the Maximum Bonus
(calculated through the date of termination), and (C) any accrued vacation pay,
in each case, in full satisfaction of Employee's rights thereto. The Company
shall also pay the Employee the Relocation Payment provided in Schedule A, if
the Employee provided the Company with written notice of his intent to relocate
to California within 12 months of his last date of employment and completed such
relocation within 18 months of such date.
(b) Additional Benefits. The Employee shall be entitled to continued
-------------------
medical, dental, life insurance and any other welfare benefit plan coverage (but
excluding the Company's disability plans) for the Employee and the Employee's
eligible dependents on the same basis as in effect prior to the Change of
Control or the Employee's Termination of employment, whichever is deemed to
provide for more substantial benefits, until the end of the Severance Period.
(c) Outplacement. If so requested by the Employee, outplacement
------------
services shall be provided by a professional
<PAGE>
5
outplacement provider at a cost to the Company of not more than 20% of the
Employee's Base Salary.
(d) Withholding. Payments and benefits provided pursuant to this
-----------
Section 4 shall be subject to any applicable payroll and other taxes required to
be withheld.
(e) Offset for Other Severance. In the event that Employee is
--------------------------
eligible for severance under any other Company plan or agreement, then any
severance amounts payable pursuant to this Plan shall be reduced by the amount
payable under such other plan or agreement.
5. Fees and Expenses. The Company shall pay all reasonable legal
-----------------
fees and related expenses (including the costs of experts, evidence and counsel)
incurred by the Employee as they become due as a result of the Employee's
seeking to obtain or enforce any right or benefit provided by this Plan or by
any other plan or arrangement maintained by the Company under which the Employee
is or may be entitled to receive benefits; provided, however, that the
-------- -------
circumstances set forth above occurred on or after a Change of Control.
6. Notice. For the purposes of this Plan, notices and all other
------
communications provided for in the Plan shall be in writing and shall be deemed
to have been duly given when personally delivered, delivered by a nationally
recognized overnight delivery service, or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last given by
each party to the other, provided that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received
on the date of delivery thereof or on the third business day after the mailing
thereof, except that notice of change of address shall be effective only upon
receipt.
7. Amendment and Termination. This Plan may not be amended or
-------------------------
terminated during the period commencing on the date of a Change of Control and
ending on the second anniversary of the Change of Control; provided, however,
-------- -------
that no amendment or termination after the inception of this Plan may alter or
curtail the entitlements of an Employee accrued under the terms of this Plan by
virtue of a termination of the Employee's employment prior to such amendment or
termination and the Company shall continue to provide the benefits or payments
to which an Employee had become entitled hereunder prior to the termination or
amendment of this Plan.
8. Non-exclusivity of Rights. Nothing in this Plan shall prevent or
-------------------------
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Employee may qualify, nor shall anything herein
<PAGE>
6
limit or reduce such rights as the Employee may have under any agreements with
the Company or any of its subsidiaries (although any such severance benefits
reduce the severance payable under this Plan). Amounts which are vested
benefits or which the Employee is otherwise entitled to receive under any plan
or program of the Company or any of its subsidiaries shall be payable in
accordance with such plan or program, except as explicitly modified by this
Plan.
9. Third Party Beneficiary. Each Employee covered under this Plan
-----------------------
shall have third party beneficiary rights with respect to the Employee's rights
and entitlements hereunder and may file suit on his or her behalf in a court of
competent jurisdiction to enforce such rights and entitlements.
10. Governing Law. This Plan shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Texas without giving effect
to the conflict of law principles thereof. Any action brought by any party to
this Plan shall be brought and maintained in a court of competent jurisdiction
in the State of Texas.
11. Successors and Assigns. This Plan shall be binding upon and
----------------------
shall inure to the benefit of the Company, its successors and assigns, and the
Company shall require any successor or assign to expressly assume and agree to
maintain this Plan and to perform under this Plan to the same extent that the
Company would be required to perform under the Plan if no such succession or
assignment had taken place. The term "Company" as used herein shall include
such successors and assigns. The terms "successors and assigns" as used herein
shall mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company whether by operation of law or otherwise.
12. Severability. The provisions of this Plan shall be deemed
------------
severable, and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of the other provisions hereof.
<PAGE>
7
SCHEDULE A
----------
Employee Severance Period Relocation Payment
- -------- ---------------- ------------------
<PAGE>
EXHIBIT 6.(A)
FIBREBOARD CORPORATION
[LOGO] 2200 ROSS AVENUE, SUITE 3600
DALLAS, TEXAS 75201
May 30, 1997
Dear Stockholder:
I am pleased to inform you that on May 27, 1997, Fibreboard Corporation (the
"Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Owens Corning, a Delaware corporation ("Owens Corning"), and
Sierra Corp., a Delaware corporation and a wholly owned subsidiary of Owens
Corning (the "Offeror"). Pursuant to the Merger Agreement, the Offeror is
today commencing a tender offer (the "Offer") to purchase all outstanding
shares of Common Stock, par value $.01 per share, of the Company, including
the associated preferred share purchase rights (collectively, the "Shares") at
a price of $55.00 per Share, net to the seller in cash, without interest
thereon. The Merger Agreement provides that each Share not acquired by the
Offeror pursuant to the Offer will be exchanged for the same consideration
payable pursuant to the Offer in cash in connection with the merger (the
"Merger") of the Offeror into the Company, which will occur as soon as
practicable following the consummation of the Offer.
Your Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and determined that the Offer and the
Merger are fair to, and in the best interests of, the stockholders of the
Company. Accordingly, the Board of Directors recommends that stockholders
accept the Offer and tender their Shares to the Offeror pursuant to the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including, among other things, the opinion of Dillon, Read &
Co. Inc. ("Dillon Read"), the Company's financial advisor, that, as of the
date of such opinion, the $55.00 per Share to be offered to the stockholders
of the Company in connection with the Offer and the Merger is fair, from a
financial point of view, to such stockholders. The full text of the written
opinion of Dillon Read, which sets forth the procedures followed, assumptions
and qualifications made, matters considered and limitations of the review
undertaken in connection with such opinion, is attached hereto and
stockholders are urged to read the opinion in its entirety.
Additional information with respect to the transaction is contained in the
enclosed Schedule 14D-9. Also enclosed is the Offeror's Offer to Purchase,
dated May 30, 1997, and related materials, including a Letter of Transmittal
to be used for tendering your Shares. We urge you to read the enclosed
material and consider this information carefully.
Sincerely,
[LOGO OF JOHN D. ROACH]
Chairman, President and
Chief Executive Officer
<PAGE>
EXHIBIT 8
[LETTERHEAD OF DILLON, READ & CO. INC.]
May 27, 1997
The Board of Directors
Fibreboard Corporation
3600 Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, of the per share consideration to be offered to the holders (the
"Shareholders") of shares of Common Stock, par value $.01 per share (the "Common
Stock"), of Fibreboard Corporation, a Delaware corporation (the "Company"),
including the associated preferred share purchase rights issued pursuant to the
Rights Agreement, dated as of August 25, 1988, as amended, between the Company
and the First National Bank of Boston, as successor rights agent, in
connection with the proposed acquisition (the "Acquisition") of the Company by
Owens Corning, a Delaware corporation ("Acquiror").
We have assumed that the terms of the Acquisition are as set forth in the
Agreement and Plan of Merger dated as of May 27, 1997 among Acquiror, Sierra
Corp. and the Company (the "Agreement"). We understand that the Acquisition is
to be effected in a two-step transaction, the first step of which will be a cash
tender offer (the "Tender Offer") by Sierra Corp. for all, but not less than
such number of shares constituting a majority of the voting power, of the Common
Stock (on a fully diluted basis) at a per share price of $55.00 net to the
seller in cash upon the terms and conditions set forth in the Agreement. We
further understand that each share of Common Stock not acquired in the Tender
Offer (except those owned by Acquiror, any subsidiary of Acquiror, the Company
or any subsidiary of the Company or Dissenting Shares (as defined in the
Agreement)) will be converted in a subsequent merger of Sierra Corp. with and
into the Company into the right to receive $55.00 in cash.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and financial information relating to the
Company; (ii) reviewed the historical price and trading activity for the shares
of Common Stock; (iii) reviewed certain internal financial information and other
data provided to us by the Company relating to the business and prospects of
the Company, including financial projections prepared by the management of the
Company; (iv) conducted discussions with members of the senior management of the
Company; (v) reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we considered relevant; (vi) reviewed
publicly
<PAGE>
-2-
[LETTERHEAD OF DILLON, READ & CO. INC.]
available financial and securities market data pertaining to certain publicly
held companies in lines of business generally comparable to those of the
Company; and (vii) conducted such other financial studies, analyses and
investigations, and considered such other information as we deemed necessary
and appropriate. We were not requested to, and did not, solicit third party
indications of interest in acquiring the Company.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have relied upon it being complete and accurate in all material respects.
We have not been requested to and have not made an independent evaluation or
appraisal of any assets or liabilities (contingent or otherwise) of the Company
or any of its subsidiaries, nor have we been furnished with any such evaluation
or appraisal. Further, we have assumed, with your consent, that all of the
information, including the projections provided to us by the Company's
management, was prepared in good faith and was reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the Company's
management as to the future financial performance of the Company, and was based
upon the historical performance and certain estimates and assumptions which were
reasonable at the time made. In addition we have not been asked to and do not
express any opinion as to the after-tax consequences of the Acquisition to any
Shareholder. In addition, our opinion is based on economic, monetary and market
conditions existing on the date hereof.
We are acting as financial advisor to the Company and its Board of
Directors in connection with the Acquisition and will receive a fee from the
Company for our services. We have performed and continue to perform investment
banking services for the Company and have received customary compensation for
such services. As we have informed you, we also have performed investment
banking services for Acquiror and have received customary compensation for such
services. In the ordinary course of its business, Dillon, Read & Co. Inc.
("Dillon Read") may trade the securities of the Company and Acquiror for its own
account or for the accounts of customers, and it may at any time hold a long or
short position in such securities.
It is understood that our advisory services and the opinion expressed
herein are provided for the information of the Board of Directors in their
evaluation of the Acquisition, and our opinion is not intended to be and does
not constitute a recommendation as to whether or not any Shareholder should
tender shares of Common Stock pursuant to the Tender Offer. Our opinion may
not be published or otherwise used or referred to, nor shall any public
reference to Dillon Read be made, without our prior written consent.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the per share consideration to be offered to the Shareholders
in connection with the Acquisition is fair, from a financial point of view, to
such Shareholders.
Very truly yours,
DILLON, READ & CO. INC.
