10-K405 1 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [XX] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] for the fiscal year ended December 31, 1994 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] for the transition period from _________ to ___________ Commission file number 0-016951 -------- FIBREBOARD CORPORATION (exact name of registrant as specified in charter) Delaware 94-0751580 ---------------------------------------------------- (State or other juris- (I.R.S. Employer Iden- diction of incorporation) tification No.) 2121 N. California Blvd., Suite 560, Walnut Creek, CA 94596 ------------------------------------------------------------ (Address of principal executive offices) (510) 274-0700 -------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XXX No --------. --------. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K XXX ---------. The aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 17, 1995 was $129,142,976. As of the close of business on March 17, 1995, the Registrant had outstanding 4,237,787 shares of common stock. Documents Incorporated by Reference Portions of Fibreboard Corporation's Proxy Statement relating to its 1995 Annual Meeting of Stockholders, which will be filed pursuant to Regulation 14A not later than April 30, 1995, are incorporated by reference in Part III. PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES Fibreboard Corporation (Fibreboard) is a Delaware corporation incorporated in 1917. Between June 1978 and June 1988, Fibreboard was a wholly-owned subsidiary of Louisiana-Pacific Corporation (L-P). In June 1988, L-P distributed Fibreboard's common stock to its shareholders, and Fibreboard once again became an independent, publicly held company. Fibreboard operates in two primary industry segments: building products and resort operations. Sales in 1994 for each segment were as follows:
In Millions % ----------- --- Building Products -- Wood Products $180.3 50 Norandex Inc. 85.6 24 Industrial Insulation Products 56.4 15 Resort Operations 41.4 11 ------ $363.7 ------
Building Products consists of the Wood Products Group, Norandex Inc. and the Industrial Insulation Products Group. Wood Products manufactures lumber, hardwood plywood and other value-added wood products and owns approximately 80,000 acres of timberland in northern California. Norandex, acquired August 31, 1994, is a manufacturer of vinyl siding for exterior residential applications, which is distributed, along with a wide variety of other exterior building products, through a company-owned distribution network of 71 branches located primarily in the mid-west, Great Lakes, mid-Atlantic and northeast states. Industrial Insulation Products, sold under the trade name of Pabco, manufactures molded insulation for high temperature and industrial applications, fireproofing board used in commercial construction and metal jacketing. Resort Operations includes Northstar-at-Tahoe, a year-round destination resort including ski and golf facilities, and Sierra-at-Tahoe, a day ski area, both located near Lake Tahoe, California. Fibreboard employs approximately 3,500 people (including approximately 1,100 seasonal employees in Resort Operations), substantially all of whom are non-union. Information concerning the revenues, operating results and identifiable assets of each of Fibreboard's industry segments can be found in Note 12 to Fibreboard's consolidated financial statements, "Industry Segment Information" on page 36. BUILDING PRODUCTS -- WOOD PRODUCTS GROUP PRODUCTS - Softwood lumber, principally pine industrial grade and fir dimension lumber; - Mouldings and millwork used in the construction of windows, doors and furniture parts; - High-grade hardwood plywood panels used primarily in furniture and cabinets, including premium priced thin panels used in the furniture industry; and - Processed bark for decorative landscape applications and soil amendments. More than 35% of Fibreboard's sawmill production is industrial grade lumber which historically has been retained by Fibreboard or sold to others for further processing into moulding, millwork, windows, doors and furniture parts. Fibreboard's management believes that the specialty nature of industrial grade lumber makes it more profitable and somewhat less subject to price fluctuations than other grades. The remaining sawmill output is comprised of common and dimension lumber grades used in lower-end industrial applications and in framing for home construction and remodeling applications. MARKETS Products are marketed directly to factories or remanufacturing operations for further processing, to wholesalers and to other building material distributors located principally in the western United States. Fibreboard's industrial grade lumber market extends to the midwestern states, while its common and dimension lumber market is largely confined to California. MARKET POSITION, COMPETITION AND ENTRY BARRIERS Fibreboard does not account for a significant percentage of the nations's lumber production. The principal means of competition are price, delivery and quality. Fibreboard believes that the location of its sawmills are ideal for the west coast lumber market. Fibreboard believes it is one of the five largest hardwood plywood producers in the United States, with an approximate 10% market share. Fibreboard's market share is limited by its production capacity. The principal means of competition are quality and delivery. Fibreboard believes its California manufacturing location is a competitive advantage in serving the southern California furniture and cabinet industries. Fibreboard does not account for a significant percentage of the nation's moulding and millwork production. Fibreboard's moulding and millwork operations compete with a limited number of large producers and several hundred small operations, and benefit from Fibreboard's integrated lumber supply. There are substantial barriers to entry to Fibreboard's markets including: (a) difficulties in achieving meaningful economies of scale; (b) industry capital requirements; (c) timber supply; and (d) existing and potential environmental regulation and forest land set asides. SUPPLIERS Fibreboard's sawmill and plywood operations historically required approximately 135 million board feet of logs to operate at scheduled capacities. This requirement will be reduced to 125 million board feet in 1995 and 110 million board feet in 1996 through the initiatives discussed below. Fibreboard owns approximately 80,000 acres of timberland in northern California which supply raw materials to its operations. Fibreboard's timberlands are comprised primarily of ponderosa pine and white fir, with smaller amounts of other species. These lands can supply on a sustained yield basis approximately 35% - 40% of the log requirements for Fibreboard's present sawmills and plywood mill operating at scheduled capacities. The balance of Fibreboard's log requirements are supplied by U.S. Forest Service (USFS) timber cutting contracts, cutting contracts with private timberland owners and by open market purchases. Fibreboard's logging operations are conducted by independent contractors. Fibreboard's USFS timber cutting contracts are typically "pay-as-cut" contracts. Contracts are generally awarded in an open, competitive bid process, although some are awarded using sealed bids. Stumpage prices typically are subject to escalation and de-escalation based on movement of published indices for finished products. A significant portion of Fibreboard's log needs have historically come from the Stanislaus National Forest in California. In 1991, the USFS issued its Stanislaus management plan which will govern operation of the forest for the next 10 to 15 years (the Final Plan). The Final Plan projects an annual allowable sale quantity (the ASQ) of 88 million board feet. This ASQ represents a 30% reduction from the average quantity of timber sold each year since 1973. Fibreboard believes this ASQ is unnecessarily low since the annual timber growth on the Stanislaus is estimated to exceed 300 million board feet. Fibreboard has appealed the Final Plan to the USFS Washington, D.C. office, challenging the methodologies used and conclusions reached. The appeal is still pending. If that appeal is not successful, Fibreboard will consider legal action through the court system. In January 1993, the USFS issued interim rules governing the harvest of federal timber in California to protect the habitat of the California spotted owl. While the owl has not been declared "endangered" or "threatened" under the Endangered Species Act, the interim rules impose logging restrictions to allow further study of the owl's status. The interim rules generally prohibit logging trees larger than 30 inches in diameter under any USFS timber contract awarded after March 1, 1993, and impose certain other restrictions. In early 1995, the USFS released a Draft Environmental Impact Statement resulting from its study of the California Spotted Owl in the national forests of the Sierra Nevada mountains of California, including the Stanislaus (the DEIS). The DEIS presents a number of alternative forest management scenarios, and recommends an alternative which will further significantly reduce the ASQ from the levels contemplated in the Final Plan. If approved, implementation of the recommended alternative will produce an ASQ for the Stanislaus of approximately 27 million board feet, of which roughly one-third is presumed devoted to biomass and firewood programs (which yield few, if any, commercial sawlogs) with 19% of the remainder set aside for the small business program. The DEIS is expected to have a similar impact on the ASQ of neighboring national forests. The DEIS is not expected to impact 1995 timber sale activity, although the interim rules in effect serve to reduce the ASQ to a level comparable to that envisioned by the DEIS. The DEIS is subject to public comment through mid-May 1995, with a final record of decision expected from the USFS late in the year. Fibreboard believes the DEIS is seriously flawed. The USFS scientific team concluded the California Spotted Owl population may be greater today than it was 100 years ago, yet the recommended alternative ignores this data. In addition, the recommended alternative does not adequately address the issue of forest health, particularly the prevention of catastrophic forest fires or epidemic insect infestation. Furthermore, the economic analysis of the impact of implementation on communities whose economic viability will be threatened is insufficient and not appropriately considered in reaching the recommended alternative. Fibreboard expects to raise these issues during the public comment period. Fibreboard expects to appeal the DEIS, if finalized, and will consider legal action if the appeal is unsuccessful. Litigation challenging the interim rules is still pending. Fibreboard cannot predict whether there will be any ability to lessen the potential impact on the Stanislaus ASQ of adopting the DEIS recommended timber management alternative. Fibreboard expects that future costs of timber harvested from USFS lands will increase as competition for available timber mounts. Fibreboard believes continued supply constraints will enhance the value of its fee-owned timber, even though production decreases may be necessitated. Fibreboard has undertaken a number of initiatives to respond to these timber supply concerns, including the following: - A $6.7 million capital expenditure program to install additional state of the art optimization equipment in Fibreboard's two sawmills will be completed during 1995. Once completed, the yield and grade of finished products will improve. The increased yield will result in Fibreboard being able to manufacture more and higher value finished products from a lower quantity of raw materials. Once the improvements are completed, Fibreboard anticipates reducing the Chinese Camp sawmill operating schedule to 1 shift. - The quantity of logs required as raw materials for the manufacture of plywood has been reduced roughly 50% by purchasing veneer core material from outside suppliers, rather than manufacturing this material, and increasing the percentage of non-veneer core materials used in manufacturing. The implementation of the above two items is expected to reduce Fibreboard's annual log requirements to 110 million board feet by the end of 1995. - Fibreboard has aggressively pursued alternative sources of timber supply. Examples include using cottonwood logs from the Pacific Northwest in the manufacture of plywood, cutting logs imported from New Zealand and Chile and securing cutting rights to 4,800 acres of privately owned timberland in northern New Mexico. Fibreboard expects to continue seeking alternative sources of timber supply in the future. - Fibreboard has implemented a "Land Owners Assistance Program" under which its forestry staff assists private land owners in the management of timber properties, including preparation of timber management plans. The program results in Fibreboard having access to greater quantities of logs from private lands than might otherwise be the case. While Fibreboard believes it has adequate timber available under contract, from its fee lands or expected through open market log purchases to meet its needs for 1995 and well into 1996, it currently is unable to determine the ultimate outcome of these timber supply issues. In the event there is inadequate timber to support all existing manufacturing operations of Fibreboard and its competitors, some facilities (potentially including Fibreboard operations) may be forced to curtail operations or close. Fibreboard will evaluate the need for such actions based on the quantity and characteristics of available timber and existing market conditions for its products at the time such decisions are required. Fibreboard's remanufacturing operations purchase primarily industrial grade pine lumber for value-added processing. Fibreboard sawmills supply more than 50% of these annual lumber requirements with the remainder purchased on the open market. Fibreboard has not experienced any difficulties in procuring adequate raw materials for these facilities, although a timber supply shortage could result in lower volumes of industrial lumber available and/or higher prices. ENVIRONMENTAL POLICY Fibreboard endeavors to adhere to sound environmental practices in both management of its forest lands and facility operations. Fibreboard believes it has been an industry leader in environmentally sound timber management. Fibreboard timberlands are composed of multiple-aged stands. Fibreboard makes optimal use of all fiber by (a) maximizing productivity by directing logs to the conversion facility that can most efficiently and profitably convert those logs to products and (b) processing waste materials formerly discarded in landfills to lower costs and to generate additional sales. BUYERS Markets for Fibreboard's wood products are price sensitive. However, industry pricing is supported by the general shortage of timber available for harvest in California and the western states. Adverse effects of competing in price sensitive markets are minimized by Fibreboard's integrated operations and proximity to its primary markets. FACILITIES LUMBER Normal Annual Production Capacity Plant Location (thousand board feet) Production Schedule -------------- --------------------- ------------------- Standard, CA 80,000 2 shifts-5 days/week Chinese Camp, CA* 40,000 1 shift-5 days/week ------- TOTAL 120,000 REMANUFACTURING Normal Annual Production Capacity Plant Location (thousand board feet) Production Schedule -------------- --------------------- ------------------- Red Bluff, CA 40,000 2 shifts-5 days/week (millwork) HARDWOOD PLYWOOD Normal Annual Production Capacity Plant Location (thousand board feet) Production Schedule -------------- --------------------- ------------------- Standard, CA 120,000 3 shifts-5 days/week OTHER OPERATIONS Plant Location Key Products -------------- ------------ Keystone, CA Decorative bark * Projected capacity on one shift after installation of optimization equipment. CAPITAL SPENDING In recent years, Fibreboard has maintained a capital spending program at each of its wood products facilities to lower manufacturing costs. Through capital improvements, including significant enhancements to the Chinese Camp, Standard Plywood and Red Bluff facilities, Fibreboard has enhanced the value of its core business. Management anticipates wood products capital expenditures should normally range from $2 to $3 million annually. Fibreboard has committed to a $6.7 million capital expenditure program to install additional state of the art optimization equipment in its two sawmills during 1995. SEASONALITY The wood products business is somewhat seasonal and usually experiences increased levels of demand during the warm weather construction season. In addition, wood products are significantly affected by economic cycles. OPERATING RESULTS - WOOD PRODUCTS GROUP Historical Performance (000's omitted) 1994 1993 1992 ---- ---- ---- Sales $180,309 $190,494 $169,655 Pre-tax operating income 12,670 18,468 17,321 Depreciation, depletion & amortization 4,307 6,340 7,031 Capital expenditures ( 2,426) ( 4,240) ( 2,969) --------- --------- --------- Operating cash flow 14,551 20,568 21,383 NORANDEX INC. PRODUCTS Norandex produces vinyl siding and accessories at its state-of-the-art manufacturing facility in Claremont, NC. More than 90% of manufactured products are sold through a 71 branch company-owned distribution network operating in 23 states. Norandex manufactured vinyl siding and accessories account for approximately 35% of distribution sales. Purchased windows and doors make up an additional 30% of sales. Other resale products include aluminum and steel siding and other primarily exterior building products and installation supplies. Norandex products are used in residential remodeling (60% to 65% of sales) and new construction (35% to 40% of sales). MARKET POSITION, COMPETITION AND ENTRY BARRIERS Norandex is one of the top ten producers of vinyl siding in North America, out of 28 producers which supply an overall vinyl siding market of approximately 28 million squares (a square is material sufficient to cover a 10 foot by 10 foot area). Fibreboard believes Norandex has a 5% to 6% market share in vinyl siding. Fibreboard believes Norandex is among the industry's low cost producers with production yields substantially higher than the industry average. Norandex is one of four vinyl siding producers that has a captive distribution network, and Fibreboard believes the Norandex distribution network to be the most extensive. Norandex distribution competes regionally with many privately-owned distribution companies which offer products manufactured by Norandex's competitors. Barriers to entry in the manufacture of vinyl siding are significant, requiring a substantial investment in manufacturing equipment. By contrast, barriers to entry in the distribution business are modest. The principal means of competition are service and quality. SUPPLIERS The primary raw material used in the manufacture of vinyl siding is polyvinyl chloride (PVC) resin. Norandex has supply agreements at current market prices with two major manufacturers of PVC resin. Norandex has not experienced any difficulty in securing sufficient raw material to meet its manufacturing needs. The price of PVC resin is subject to price swings. Norandex has historically been able to pass the impact of raw material price increases on through increased end product prices. BUYERS Norandex's 71-branch distribution network covers 23 states, concentrated in the mid-west, mid-Atlantic and northeast areas of the country. Buyers are typically residential siding installation and construction and remodeling contractors. Norandex believes its manufacturing flexibility and ability to meet short back order delivery times provide it a competitive advantage. FACILITIES VINYL SIDING Normal Annual Production Capacity Plant Location (squares) Production Schedule -------------- ------------------- ------------------- Claremont, NC 1,650,000 3 shifts-7 days/week BRANCH LOCATIONS Norandex operates a company-owned distribution network of 71 branches located in the following 23 states: Colorado (2), Delaware, Illinois (3), Indiana (5), Iowa (2), Kansas, Kentucky (2), Maryland, Michigan (8), Minnesota (2), Nebraska, New York (5), North Carolina (3), North Dakota, Ohio (8), Pennsylvania (4), South Carolina (2), Tennessee (2), Utah (2), Vermont, Virginia (7), West Virginia (4) and Wisconsin (4). Branches are typically 10,000 to 20,000 square feet in size. CAPITAL SPENDING Norandex historical capital expenditures have averaged $2 to $3 million per year, primarily for maintenance and improvement of manufacturing and branch equipment. Fibreboard has committed $1.2 million to increase the Claremont plant manufacturing capacity by 22%. This project will be completed during the first quarter of 1995. The increase in capacity is reflected above. SEASONALITY Norandex sales activity is tied to construction activity in its market areas. Construction activity is seasonal and dependent on weather patterns. Historically, sales are low in the first quarter of the year, before picking up in the second and third quarters and falling off in the fourth quarter. Manufacturing activity, while somewhat heavier during the high-activity summer months, is more evenly spread throughout the year. OPERATING RESULTS - NORANDEX INC. Historical Performance (000's omitted) 1994* 1993* 1992* ----- ----- ----- Sales $85,607 NA NA Pre-tax operating income 8,096 NA NA Depreciation & amortization 1,815 NA NA Capital expenditures** ( 585) NA NA ------------- Operating cash flow 9,326 NA NA * Operating results are since August 31, 1994, the date Norandex Inc. was acquired. See Note 13 to Fibreboard's Consolidated Financial Statements for further information. ** Capital expenditures do not include assets acquired on August 31, 1994. INDUSTRIAL INSULATION PRODUCTS GROUP (PABCO) PRODUCTS Pabco produces molded industrial insulation, fireproofing board and metal jacketing. Molded industrial insulation (calcium silicate - "CalSil") is produced in a variety of standard sizes and configurations for use in industrial construction and maintenance, primarily for high temperature piping and boiler applications. The panel industrial fireproofing board (Super Firetemp(TM), also a form of calcium silicate insulation) can be used in industrial and commercial applications such as protecting columns, flues, cable trays, tanks, bulkheads, etc. Super Firetemp competes with a number of generic fireproofing products. Super Firetemp retains its shape, size and strength under continuous service at temperatures in excess of 2,000 DEG.F. and may be re-used after exposure to extreme temperatures. Super Firetemp is exceptionally easy to cut and handle, and can be applied directly to the surface it is protecting, unlike competing products which require clearance space. Consequently, Super Firetemp's durability, space efficiency and ease of application may provide greater cost savings to users than competing products. Pabco also manufactures metal jacketing and metal elbows used to cover and protect insulation products after installation. MARKETS Nearly all of Pabco's products are sold into industrial markets, with a small percentage sold into commercial markets. Approximately 90% of sales are domestic, with the remainder primarily to South America and the Middle East. MARKET POSITION, COMPETITION AND ENTRY BARRIERS Fibreboard believes there are four significant producers of calcium silicate industrial insulation used in North America. Pabco is the largest producer of this specialized product category which directly competes with fiberglass, mineral wool, foam glass and ceramic fibers in the industrial insulation market. Pabco's CalSil production facilities are the largest, single product plants in its segment of the domestic industrial insulation industry. Pabco's precision-molded, modular technology allows for more efficient operation at a wider range of volumes than can be achieved by major competitors. Pabco's key insulation and metal plants include operations in the Gulf States region where buyers and sales are currently concentrated. Pabco believes its products are preferred in construction projects where ease of installation is paramount since Pabco's product is more easily field fabricated. Each of Pabco's major competitors operates single- facility, older plants located in the midwest and eastern states. Fibreboard believes these may be higher-cost facilities, in areas of inherent labor cost disadvantages. Barriers to entry in CalSil production are significant due to capital requirements. However, in certain applications, other types of insulation may be substituted. Fibreboard believes that there are only three major domestic producers of metal elbows and jacketing material for insulation protection with each having a roughly equal share of the domestic market. The three producers have substantial excess capacity compared to market demand. Pabco is the only North American producer of calcium silicate-based industrial fireproofing board which it manufactures under an exclusive foreign license. However, competing foreign products have been sold in the United States with some limited success. The principal means of competition are price, quality and service. SUPPLIERS The primary raw materials in calcium silicate insulation are diatomaceous earth and limestone. There are several sources of supply of diatomaceous earth of a quality which Pabco considers acceptable for production of calcium silicate insulation. Pabco has entered into long term material supply contracts on favorable terms. The raw materials for the metal operations are aluminum, stainless steel, vinyl and paper materials. Pabco has not experienced any difficulties in obtaining adequate supplies and does not anticipate any such difficulties, although metal pricing has varied significantly over the last three years. Depending on inventory positions and purchase commitments, metal market price volatility can have a significant impact on operating profits. BUYERS A majority of Pabco's revenues are derived in the maintenance market. Primary customers include insulation contractors and distributors concentrated in the Gulf States region. Products are marketed by Pabco's sales force to insulation distributors and contractors. Although industrial insulation sales are price sensitive, Fibreboard believes Pabco's low-cost facilities, material and energy costs give Pabco a significant cost advantage over competitors. FACILITIES MOLDED INDUSTRIAL INSULATION Normal Annual Production Capacity Plant Location (cubic feet) Production Schedule -------------- ------------------- ------------------- Ruston, LA 2,300,000 3 shifts-7 days/week Grand Junction, CO 2,300,000* 3 shifts-7 days/week --------- TOTAL 4,600,000 * Facility was not operated during 1994 to match production with demand. Facility was reopened in January 1995 and is expected to operate for several months. PANEL INDUSTRIAL FIREPROOFING BOARD Normal Annual Production Capacity Plant Location (pounds) Production Schedule -------------- ------------------- ------------------- Grand Junction, CO 7,500,000 3 shifts-7 days/week METAL JACKETING Plant Location Production Capacity Production Schedule -------------- ------------------- ------------------- Palestine, TX (1) 1 shift-5 days/week Poca, WV (1) 1 shift-5 days/week Huntington Beach, CA (1) 1 shift-5 days/week (1) Capacity cannot be expressed in a standard unit of measure. CAPITAL SPENDING The industrial insulation group requires minimal capital expenditures, primarily for maintenance purposes, averaging less than $500,000 per year. Fibreboard's management does not believe any significant capital expenditures will be required for the foreseeable future. SEASONALITY Industrial insulation products are impacted by petrochemical and general economic cycles affecting industrial capital expenditure programs. In general, sales activity is not significantly impacted by seasonality. OPERATING RESULTS - INDUSTRIAL INSULATION PRODUCTS GROUP
Historical Performance (000's omitted) 1994 1993 1992 ---- ---- ---- Sales $56,376 $49,215 $49,701 Pre-tax operating income 6,452 5,382 6,138 Depreciation & amortization 788 1,041 1,810 Capital expenditures ( 327) ( 324) ( 114) Operating cash flow 6,913 6,099 7,834
RESORT OPERATIONS -- FACILITIES Fibreboard is the owner, developer and operator of a 6,800 acre year-round destination resort near the north shore of Lake Tahoe, California. The resort, Northstar-at-Tahoe (Northstar), features extensive ski facilities located on an 8,600 foot mountain with a vertical ski trail drop of 2,200 feet. Facilities include eight chair lifts and a high-speed gondola plus a day lodge, various restaurants, shops, entertainment and group conference facilities. Summer facilities include riding stables, mountain bike and hiking trails, an 18-hole golf course, tennis courts, a swimming pool and other recreational amenities. Northstar includes 598 building lots and 654 condominium units, all of which have been sold. Participating owners may offer homes or condominiums for rental through Northstar's rental management program. Northstar has significant additional land which is suitable for real estate development. Northstar anticipates developing a new subdivision consisting of 158 single family home sites beginning in 1995. Northstar believes the average sales price of these lots, once developed, will be $125,000 to $160,000 each. Northstar intends to begin offering lots for sale on a phased basis over several years, beginning in 1995. During 1993, Fibreboard purchased the assets of Sierra Ski Ranch, a day ski area located near the south shore of Lake Tahoe in California. The ski area, renamed Sierra-at-Tahoe (Sierra), features 44 ski trails located on an 8,900 foot mountain with a vertical drop of 2,200 feet. Facilities include nine chairlifts, three restaurants and retail and ski rental shops. Sierra is a day use only area, and has no lodging facilities. Lodging is available in South Lake Tahoe, 14 miles away. MARKETS Northstar and Sierra are marketed through a variety of public media, including magazines, newspapers, radio, television and outdoor advertising, as well as through direct convention sales and contacts with business and trade groups. Northstar is located approximately 200 highway miles east of San Francisco and approximately 40 miles west of Reno, Nevada, while Sierra is located approximately 190 highway miles east of San Francisco. The primary market area is the state of California. Fibreboard estimates that approximately 60% of Northstar's skiers are from northern California and 18% from southern California compared to Sierra where an estimated 90% of skiers are from northern California. Fibreboard believes Northstar's location, ease of access, quality of facilities, service, amenities and image appeal directly to the family and high income skier segments of its market while Sierra appeals primarily to the value-conscious day skier. MARKET POSITION AND COMPETITION Northstar is one of the better known year-round destination resorts in the Lake Tahoe vicinity. Northstar competes directly with other ski resorts in the area as well as with major ski and year-round destination resorts throughout the western United States. Sierra's competition is primarily limited to ski areas located in the central Sierra Nevada mountains, although it does attract some destination skiers from the South Lake Tahoe area. CAPITAL SPENDING Over the past several years, Northstar has made substantial capital expenditures to improve efficiency and competitiveness. Major projects included high speed quad chairlifts, additional snow making and a new mountaintop restaurant. Northstar has expanded its snowmaking capability to reduce the effect of weather patterns and add stability to the revenue stream. Snowmaking also improves the attractiveness of the ski mountain to a broader as well as more experienced range of skiers. Fibreboard anticipates that annual resort operations capital expenditures, primarily for annual maintenance and additional resort amenities, will approximate $3 million. Fibreboard expects an additional $3 million will be spent in 1995 for real estate lot development. SEASONALITY Operations are highly seasonal with more than 75% of revenues realized during the ski season from late November through early-April. The length of the ski season and the profitability of operations are significantly affected by weather. Although Northstar has snowmaking capacity to mitigate some of the effects of adverse weather conditions, abnormally warm weather or lack of adequate snowfall can materially reduce revenues. Sierra lacks significant snowmaking capability but generally benefits from higher annual snowfall than Northstar. Depending on the weather and other factors, annual skier visits have varied from 265,000 to 420,000 at Northstar and 200,000 to 330,000 at Sierra over the last decade. OPERATING RESULTS - RESORT OPERATIONS
Historical Performance (000's omitted) 1994 1993 1992 ---- ---- ---- Sales $41,413 $25,501 $20,361 Pre-tax Operating Income* 8,020 2,325 1,648 Depreciation & amortization 3,467 2,514 2,331 Capital expenditures** ( 6,229) ( 4,813) ( 2,966) ------- ------- ------- Operating cash flow 5,258 26 1,013 * Includes negative impact of 1993 mid-year acquisition of Sierra which had anticipated expenses in excess of revenues of approximately $1 million. ** Capital expenditures do not include acquired assets of Sierra-at-Tahoe in 1993.
ENVIRONMENTAL MATTERS -- All of Fibreboard's production facilities are subject to regulation by federal and state environmental agencies. Fibreboard believes its facilities substantially meet applicable environmental requirements in all material respects. Although compliance with environmental requirements is currently not materially burdensome, given the uncertainties associated with environmental matters generally, and with changing laws and regulations in particular, there can be no assurance that continued compliance will not be materially burdensome in the future. Information concerning Fibreboard's involvement in landfill clean-ups is incorporated herein by reference to Note 15 of Fibreboard's consolidated financial statements, "Other Litigation and Contingencies," on page 43. ITEM 3. LEGAL PROCEEDINGS ASBESTOS-RELATED PERSONAL INJURY CLAIMS At December 31, 1994, Fibreboard was a defendant in approximately 41,900 personal injury claims. Approximately 15,600 of these claims were filed on or after August 27, 1993 and will be covered by the Global Settlement discussed below, if approved. Additional claims are anticipated in the future. These claims typically allege injury or death from asbestos exposure. Fibreboard is generally only one of several defendants. These claims seek compensatory, and in many cases, punitive damages in varying amounts depending on injury severity. Claims are pending in federal and state courts throughout the United States. During 1993 Fibreboard reached settlement agreements (the Global Settlement and Insurance Settlement) with its insurers and plaintiff representatives which, if approved by the courts, should resolve Fibreboard's existing and future asbestos-related personal injury liabilities within insurance resources and existing corporate reserves. These settlements require court approval. The Global Settlement action is titled Gerald Ahearn, James Dennis and Charles W. Jeep, on Behalf of Themselves and Others Similarly Situated, Plaintiffs, v. Fibreboard Corporation, Defendant, Continental Casualty Company and Pacific Indemnity Company, Intervenors, Civil Action No. 6:93cv526, U.S. District Court for the Eastern District of Texas, Tyler Division. The Insurance Settlement action is titled Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company, Plaintiffs, v. Daniel Herman Rudd, Jr., Beverly White and John Hansel, on Behalf of Themselves and Others Similarly Situated, and Owens-Illinois, Inc., on Behalf of Itself and Others Similarly Situated, and Penn Mutual Life Insurance Company, Defendants, Civil Action No. 6:94cv458, U.S. District Court for the Eastern District of Texas, Tyler Division. Additional information concerning personal injury claims can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37. ASBESTOS-IN-BUILDINGS CLAIMS At December 31, 1994, Fibreboard was a defendant in 14 asbestos-in- buildings claims pending in federal and state courts throughout the United States. Fibreboard is typically only one of several defendants. These claims involve many thousands of buildings and seek hundreds of millions of dollars in compensatory damages for expenses incurred for locating, testing and monitoring or removing asbestos-containing materials. Some claims also seek punitive damages. Additional information concerning Fibreboard's asbestos-in-buildings claims can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37. INSURANCE COVERAGE FOR PERSONAL INJURY CLAIMS Fibreboard is litigating with two insurers, Continental Casualty Company and Pacific Indemnity Company, to determine the amount of insurance available to Fibreboard under policies issued by these companies (In Re Asbestos Insurance Coverage Cases, Judicial Council Coordination Proceeding No. 107). The litigation has been completed at the trial court level, with judgments favoring Fibreboard on all issues. These judgments were appealed to the California Court of Appeal by the insurers. In November 1993, the Court of Appeal issued its ruling on the trigger and scope of coverage issues which upheld the favorable trial court judgments in these areas, except the court held the period for coverage would begin at the time of exposure to Fibreboard's asbestos products rather than at the time of exposure to any company's asbestos product, with the presumption that those periods are the same. The insurers have filed petitions for review with the California Supreme Court, which has granted review but not yet scheduled any further activity. At the request of Fibreboard, Continental and Pacific Indemnity, the Court of Appeal withheld its ruling on certain issues which were unique between Fibreboard and its insurers while the parties seek approval of the Global and Insurance Settlements. If the Global and/or Insurance Settlements are ultimately approved, Fibreboard and its insurers will seek to dismiss the insurance coverage litigation. Further information concerning this litigation can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37. INSURANCE COVERAGE FOR ASBESTOS-IN-BUILDINGS CLAIMS Fibreboard believes the total limits of insurance policies in effect from 1932 to 1985 which may provide coverage for the asbestos-in-buildings claims aggregated approximately $390 million (approximately $295 million of which has been confirmed through settlements during 1994 and 1993), which is in addition to the personal injury insurance coverage and does not include additional policies which contain no aggregate limit. The remaining insurers dispute coverage. Fibreboard is pursuing an insurance coverage suit (Fibreboard vs. Continental Casualty, et al; Superior Court of the State of California for the City and County of San Francisco). Trial in this action has been continued. During the continuance, Fibreboard and its insurers are attempting to settle their disputes. Additional information concerning this litigation can be found in Note 14 to Fibreboard's consolidated financial statements, "Asbestos-Related Litigation," which begins on page 37. Other Litigation Fibreboard has been named as a potentially responsible party in two California landfill clean ups, the Operating Industries Inc. site in Monterey Park and the GBF landfill in Pittsburg, and has been named as a defendant in a private lawsuit related to the Acme landfill in Martinez, CA. Additional information concerning Fibreboard's involvement can be found in Note 15 to Fibreboard's consolidated financial statements, "Other Litigation and Contingencies," on page 43. In March 1994, two purported class action lawsuits were filed in Delaware Chancery Court naming the Company and its directors as defendants (Sonem Partners LTD., et al. v. Roach, et al., Civil Action No. 13411; Vogel v. Roach, et al., Civil Action No. 13421). Both lawsuits alleged substantially similar causes of actions for breach of fiduciary duty relating to the 1994 amendment of Fibreboard's stockholder rights plan and Fibreboard's rejection of a March 1994 unsolicited proposal of a merger with or an acquisition of Fibreboard. These lawsuits were dismissed without prejudice in February 1995 at no cost to Fibreboard. Fibreboard is involved in a number of additional disputes arising from its operations. Fibreboard believes resolution of these disputes will not have a material adverse impact on its financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to executive officers of Fibreboard follows:
-------------------------------------------------------------------- NAME AGE POSITION -------------------------------------------------------------------- John D. Roach 51 Chairman, President and Chief Executive Officer James P. Donohue 54 Senior Vice President, Finance and Administration and Chief Financial Officer Michael R. Douglas 41 Senior Vice President, General Counsel and Secretary James D. Costello 51 Vice President, Wood Products Operations Stephen L. DeMaria 54 Vice President, Corporate Relations Herbert M. Elliott 56 Vice President, Industrial Insulation Products William A. Jensen 42 Vice President, Resort Operations Robert W. Johnston 58 Vice President, Vinyl Products Garold E. Swan 42 Vice President and Controller
Officers serve at the discretion of the board of directors. Mr. Roach was elected Chairman, President and Chief Executive Officer of Fibreboard on July 2, 1991. Prior to his election, Mr. Roach was Executive Vice President of Manville Corporation, where he served as President of its Mining and Minerals Group and President of Celite Corporation, a wholly-owned Manville subsidiary. In addition, Mr. Roach served as President of Manville Sales Corporation, now known as Schuller International, from 1988 to 1989, and as Chief Financial Officer of Manville Corporation from 1987 to 1988. Prior to Manville, Mr. Roach was a strategy consultant and Vice Chairman of Braxton Associates; Vice President and Managing Director of the Strategic Management Practice for Booz, Allen, Hamilton; and Vice President and Director of The Boston Consulting Group. Previous experience at Northrop Corporation included Director of strategic planning, economic analysis, accounting, management information systems and co-manager of a venture capital subsidiary. Mr. Donohue was elected Senior Vice President, Finance and Administration and Chief Financial Officer in October 1991. Prior to joining Fibreboard, he was an Executive Vice President of Continental Bank in Chicago where he held a wide variety of senior management positions during his 25 years with the bank. Mr. Douglas became General Counsel to Fibreboard in September 1987 and was elected Secretary in November 1990. He was elected Vice President in August 1991 and Senior Vice President in October 1993. From March 1986 to September 1987 he was employed by the Asbestos Claims Facility, of which Fibreboard was a member, as Senior Legal Counsel and then as Director of Law-West Coast Region. From 1982 to 1986 he was an attorney in the asbestos litigation group of Jim Walter Corporation. Mr. Costello has been Vice President, Wood Products Operations since December 1988. He previously was employed by Snider Lumber Products Co., Inc. from December 1983 until December 1988. Prior to December 1983, he was employed by Fibreboard for 14 years. Mr. Costello rejoined Fibreboard with the acquisition of Snider in October 1988, at which time he was president of Snider. Mr. Costello is First Vice Chairman of Western Wood Products Association, an industry group. Mr. DeMaria joined Fibreboard in May 1989 as Director-Corporate Communications and Investor Relations and was elected Vice President, Corporate Relations in August 1991. Prior to joining Fibreboard, he was Executive Vice President of the California Forest Protective Association, an industry trade association representing the interests of industrial timberland owners before the California legislature and regulatory agencies. Mr. Elliott was appointed General Manager of Pabco in October 1991 and was elected Vice President, Industrial Insulation Products in February 1992. Prior to joining Fibreboard, Mr. Elliott was a partner in Management Resource Partners, a professional management firm advising corporations on financial and operating matters and functioned as CEO, CFO or a director of companies with sales from $5-$50 million. Mr. Elliott has been CFO of Consolidated Fibers and Itel Corporation, Vice President Corporate Development of Alexander and Baldwin and a consultant for A.T. Kearney. Mr. Jensen joined Fibreboard in October 1991 as General Manager of Northstar-at-Tahoe and was elected Vice President in June 1993. From 1989 to 1991, Mr. Jensen was Vice President of Marketing and Sales for Sunday River Ski Resort in Bethel, Maine. From 1986 to 1989, Mr. Jensen was Vice President, Tracked Vehicles for Kassbohrer of North America, a manufacturer of ski resort snow grooming vehicles and equipment. Mr. Johnston joined Fibreboard with the acquisition of Norandex Inc. on August 31, 1994 at which time he was elected Vice President. Mr. Johnston has been employed with Norandex Inc. for 19 years and has held the office of President since 1985. He was formerly Vice President of Sales and Branch Operations for Norandex. Mr. Johnston was previously employed by Kaiser Aluminum Corporation and Reynolds Metals Company. Mr. Swan has been Controller of Fibreboard since October 1988, and was elected Vice President in October 1991. He previously was an Audit and Financial Consulting Manager in the Portland, Oregon office of Arthur Andersen LLP. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of March 17, 1994, there were 11,788 holders of record of Fibreboard common stock. Fibreboard's common stock is traded on the American Stock Exchange under the symbol FBD. Information with respect to the quarterly high and low market sales prices for Fibreboard's common stock for 1994 and 1993, based upon sales transactions reported by the American Stock Exchange, is provided below. Market Prices of Fibreboard Common Stock
1994 1993 -------------- ------------ High Low High Low ---- --- ---- --- For the quarters ended ---------------------- March 31 39 3/8 32 3/8 12 6 7/8 June 30 38 7/8 23 3/4 14 1/4 10 September 30 30 3/4 25 1/8 26 7/8 11 1/2 December 31 31 5/8 26 1/8 35 5/8 21 1/8
The closing price of Fibreboard's common stock on March 17, 1995 was $31 1/2. Since its spin-off from Louisiana-Pacific Corporation on June 6, 1988, Fibreboard has not paid cash dividends. Fibreboard's Structured Settlement Program contains restrictions on the amount of dividends or distributions to shareholders. At December 31, 1994, $12.9 million was available for the payment of dividends, share repurchases or other distributions. ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31 --------------------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- (Dollar amounts in thousands except per share) Net sales $363,705 $265,210 $239,717 $234,056 $244,609 Income (loss) from continuing operations (1) 27,035 11,713 9,432 (29,288) 3,269 Income (loss) from continuing operations per share (fully diluted) (1) 6.01 2.62 2.30 (7.33) .84 Operating assets 373,636 261,359 223,590 226,205 281,939 Asbestos-related assets 812,347 969,136 826,582 363,015 67,660 Total assets 1,185,983 1,230,495 1,050,172 589,220 349,599 Long-term debt (2) 101,293 23,539 13,306 17,508 27,914 NOTES: (1) Includes pre-tax $18,858 gain on sale of surplus timberlands in 1994; pre- tax $3,762 gain on surplus real estate sales and reduced depreciation expense of $1,437 reflecting adjustment of asset lives in 1993; pre-tax $2,353 pension gain and $2,998 gain on surplus real estate sales in 1992; cumulative effect of a change in accounting principle of $(1,954), net of tax in 1991; pre-tax unusual items of $(13,912) in 1991 and $9,816 in 1990; and asbestos-related costs of $20,000 in 1991. See notes to financial statements for additional information concerning these items. (2) Does not include amounts for asbestos claims settlements. See Note 14 to the financial statements, "Asbestos-Related Litigation," on Page 37 for additional information. Also does not include asbestos-related long term debt of $22,360 in 1994, $21,361 in 1993, $20,572 in 1992 and $19,726 in 1991. Does include $4,870, $5,905, $6,875, $7,785 and $10,997 of long-term debt for which Fibreboard receives offsetting interest and principal payments from notes receivable -- see Note 5, "Long-Term Debt."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1994 VS. 1993 Net sales increased 37%. Of the increase, $85.6 million, or 87% of the total, was due to the addition of Norandex Inc. on August 31, 1994. The remaining increase resulted from increases in industrial insulation products and resort operations, reduced by a decline in wood product sales. Income from continuing operations was $27.0 million compared to $11.7 million in 1993. The 1994 amount includes a pre-tax gain of $18.9 million ($11.2 million after tax) from the sale of surplus timberlands in the third quarter. Norandex contributed pre-tax operating income of $8.1 million for the last four months of the year. Operating income increased for industrial insulation products and resort operations, while wood products experienced a decline. BUILDING PRODUCTS Wood products sales declined 5%. The majority of the decrease was due to the early 1994 sale of the agricultural container business, which in 1993 generated sales of approximately $9.7 million. For 1994, lumber sales were higher (increased volume reduced by slightly lower average product sales prices) while decreases were experienced in plywood sales (lower shipment volume) and moulding and millwork (lower volume and sales prices). Wood products operating income declined from $18.5 million to $12.7 million driven by higher log costs in 1994 and slightly lower product sales prices compared to 1993. Higher log costs were caused by a 1993 decision to purchase available open market logs, ensuring a raw material supply for 1994. However, the incremental logs were purchased at high prices which drove up average log cost for 1994. As a higher percentage of logs to be consumed in 1995 will come from company owned lands, Fibreboard expects its average log cost in 1995 will be significantly lower than in 1994. Fibreboard believes it has adequate raw material on hand, under contract or expected to become available through open market log purchases to operate its primary converting facilities at scheduled production levels through 1995 and into 1996. However, future timber supply remains a strategic concern. Competition for the reduced timber available from the USFS has resulted in higher prices for those contracts where Fibreboard has been the successful bidder. Interim harvest rules announced in early 1993 for USFS timber in California and the possible implementation of the DEIS recommended forest management alternative could further reduce the quantity of timber available for harvest. Fibreboard has responded to these concerns by pursuing non-traditional sources of raw materials, such as imported logs from New Zealand and Chile and the acquisition of timber cutting rights on 4,800 acres in northern New Mexico. Fibreboard expects to continue pursuing alternative timber sources in the future. In addition, Fibreboard has evaluated various operating configurations available to respond most profitably to raw material constraints, and has committed $6.7 million in 1995 to install additional sawmill optimization technology which is expected to improve manufacturing yield and grade recovery. In the past, timber supply concerns have resulted in increased sales prices for Fibreboard's wood products. While there can be no assurance, Fibreboard believes sales prices for its products may increase should timber supply be further constrained. Continuing supply constraints should also enhance the value of Fibreboard's fee-owned timberlands. From its acquisition on August 31, 1994 through the end of the year, Norandex generated sales of $85.6 million and operating income of $8.1 million. Norandex sales activity is seasonal, and is driven by the weather and construction activity in its primary market areas. Construction activity is typically at a peak in June-October. Mild early winter weather in Norandex's market areas extended the building season into December and increased Norandex generated profits beyond expectations. Due to the seasonality of the business, the results of the last four months of 1994 should not be considered indicative of the results that would be achieved for a full year of Norandex operations. Industrial insulation products sales increased 15% due principally to increased shipments and higher sales prices of metal products with some improvement in molded industrial insulation sales. Operating income increased to $6.5 million from $5.4 million in 1993. Metal products profitability increased as average sales prices increased in advance of corresponding raw material cost increases. However, this improvement was offset somewhat by lower profits from molded insulation due to higher material costs. RESORT OPERATIONS Resort revenues increased from $25.5 million to $41.4 million on a 100% increase in skier visits. The increase in skier visits was a result of the addition of Sierra-at-Tahoe (which operated only 23 days subsequent to its acquisition in 1993), a heavy early season snow fall in the fourth quarter of 1994 and the inclusion of two high-volume Christmas to New Years weeks in 1994, one as the first and one as the last week of the year, versus only one such week in 1993's results. Operating income improved from $2.3 million to $8.0 million driven primarily by the revenue increase as well as aggressive cost controls. Fibreboard believes Northstar's and Sierra's marketing campaigns have increased their market share among Lake Tahoe ski resorts. Northstar anticipates beginning development of a new subdivision of 158 single family home sites which will be offered for sale on a phased basis over several years starting in 1995. Northstar believes this additional real estate activity will add operating profit of $1.5 to $2.0 million per year. GENERAL CORPORATE EXPENSES Unallocated costs declined from $8.3 million to $7.4 million, reflecting the 1994 resolution of a contingent liability related to post-retirement benefits which resulted in a gain of $1.0 million. ASBESTOS-RELATED COSTS The 1994 and 1993 results of operations do not include any asbestos-related costs. During 1994, $2.2 million of unreimbursed costs related to the asbestos litigation were incurred and charged against the reserve established in prior years. As more fully discussed in Note 14 to the consolidated financial statements, at December 31, 1991, Fibreboard estimated its potential liability for asbestos-related personal injury claims to be received through the end of the decade at $1,610 million and that it would ultimately receive insurance proceeds of $1,584 million related to those claims. Although Fibreboard, its insurers and plaintiffs' representatives entered into the Insurance and Global Settlements discussed elsewhere, Fibreboard does not believe these settlements impact its estimate of liability through the end of the decade, and no additional events have transpired which indicate these estimates should be changed. Consequently, no adjustment has been made to the estimated liability for personal injury claims through the end of the decade or anticipated insurance proceeds. Fibreboard will periodically evaluate its estimates and make adjustments as circumstances and future developments dictate. OTHER ITEMS Interest expense increased from $3.6 million to $4.9 million, as Fibreboard had higher average borrowings (due to the Norandex purchase on August 31, 1994) offset by lower rates under its new revolving credit facility. Interest and other income increased to $22.6 million from $5.6 million. Other income included gains from the sales of surplus real estate of $20.5 million in 1994 and $3.8 million in 1993. Interest income increased to $2.1 million from $1.8 million as additional amounts were available for investment than in 1993. Fibreboard's effective tax rate was 41% in 1994 and 1993. LIQUIDITY AND CAPITAL RESOURCES Fibreboard generated cash flows from operations (including gains on the sale of assets) of $70.2 million in 1994, compared to a use of $1.4 million in 1993. The investment in working capital was reduced $31.4 million in 1994, compared to an increased investment of $28.5 million in 1993. Fibreboard had an abnormally high level of log inventories on hand at December 31, 1993, which was reduced to a more normal level at year end 1994. Fibreboard believes it will continue to generate substantial cash flows from operations in the future. Fibreboard has a $175 million revolving credit facility which expires September 30, 1997. At December 31, 1994, borrowings were $86.0 million and $82.9 million remained available. Borrowings may be used for general corporate purposes and acquisitions. Maximum availability decreases to $150 million at September 30, 1995 and to $125 million at September 30, 1996. In addition, Fibreboard's resort operations have two revolving credit facilities, a $5 million operating credit line which expires May 31, 1995 and a $8.1 million reducing revolving line which expires May 31, 1998 and under which maximum availability is reduced by $1.4 million in April of each year. Fibreboard is negotiating with a bank to replace Resort Operations' two revolving credit facilities and a $4.5 million term loan with a new $30 million revolving facility. This new facility is expected to be in place by early in the second quarter of 1995. Fibreboard believes these facilities, combined with cash generated from on-going operations, will be adequate to fund existing operating cash needs and acquisition activities. In addition to working capital needs, Fibreboard anticipates primarily discretionary capital expenditures of approximately $19 million to $20 million during 1995. Major anticipated projects include $6.7 million to install additional optimization equipment in two sawmills, $1.2 million to expand the Norandex vinyl siding manufacturing plant capacity by 22% and infrastructure development costs of approximately $3 million to support the lot sales program at Northstar, as well as replacements and improvements of machinery and equipment and additional ski area amenities. Capital expenditures will be funded from operating cash flow and borrowings under Fibreboard's credit facilities as needed. Fibreboard has scheduled principal reductions of long-term debt due in 1995 of $2.0 million. Of this amount, Fibreboard will receive $1.0 million from notes receivable which have interest and payment terms identical to a like amount of Fibreboard's revenue bonds. In addition to cash needs related to continuing operations, Fibreboard must fund its modest on-going asbestos-related costs. To date, substantially all such costs, other than the cost of litigating insurance coverage issues, have been funded from insurance resources. At December 31, 1994, Fibreboard had $1.9 million in cash on hand restricted for asbestos-related uses. Fibreboard and Continental have entered into an interim agreement under which Continental agreed to make certain funds available for defense and indemnity costs associated with asbestos-related personal injury claims during the period pending final approval of the Global and/or Insurance Settlements discussed below, or if neither are approved, through the final conclusion of the insurance coverage litigation, however long that may take. Fibreboard believes the amounts to be paid by Continental under this interim agreement and amounts available under settlements with asbestos-in-buildings insurers will be adequate to satisfy its asbestos-related cash requirements as they come due. During 1993, Fibreboard and its insurers entered into the Insurance Settlement Agreement, and Fibreboard, its insurers and plaintiffs representatives entered into the Global Settlement Agreement. These agreements are interrelated. Final court approval of these agreements is required. Fibreboard believes trial court approval will occur in the first half of 1995, but if appealed, it may be 1996 or later before final court approval could be obtained. If both the Global and Insurance Settlement Agreements are approved, Fibreboard believes its existing and future personal injury asbestos liabilities will be resolved through insurance resources and existing corporate reserves. If the Insurance Settlement is approved but the Global Settlement is not approved, the insurers will provide Fibreboard with up to $2 billion to resolve claims pending as of August 27, 1993 and all future claims, and will pay claims settled but not yet paid as of August 27, 1993. Fibreboard believes it is probable its insurance coverage for personal injury claims will ultimately be confirmed on appeal or the settlements discussed above will be approved by the court. However, if neither the Global Settlement nor Insurance Settlement is approved and if the trial court decisions in the insurance coverage litigation are subsequently overturned or substantially modified on appeal, Fibreboard would not have adequate resources to fund its asbestos personal injury liabilities. 1993 VS. 1992 Net sales increased 11%, reflecting increased wood products sales and resort operations revenues while sales of industrial insulation products were flat. Income from continuing operations was $11.7 million compared to $9.4 million in 1992. Operating profit increased in wood products and resort operations, but declined slightly in insulation products. BUILDING PRODUCTS Wood products sales increased 12%, due principally to increased selling prices in all three major product lines while shipment volumes declined in lumber and plywood. Mill closures and manufacturing operations consolidations accounted for the majority of the lumber volume decline while softer demand impacted plywood shipments. Selling prices for many products reached record highs during the second quarter, before falling during the third quarter. Wood products operating income increased from $17.3 million to $18.5 million. This improvement was due to price increases and manufacturing improvements offset by increased log costs and volume decreases. Price increases during the year were largely in response to timber and finished product shortage concerns, as timber supply continued to be more restricted and additional industry production capacity reductions were made during the year. Industrial insulation products sales were nearly unchanged between years. A lack of significant construction and maintenance activity in the petrochemical and power generation industries was offset by a modest increase in export sales activity. Industrial insulation products operating income decreased to $5.4 million from $6.1 million in 1992. The decrease was caused by reduced average sales prices for molded insulation products, which were partially offset by continuing manufacturing improvements and tighter margins on sales of metal products. RESORT OPERATIONS Resort revenues increased from $20.4 million to $25.5 million on a 16% increase in skier visits. The increase in skier visits was a result of improved snowfall in the Sierra during the first quarter of 1993 compared to 1992. Northstar set records during 1993 in a number of areas, including skier days, meals served and lodging room nights. Operating income improved from $1.6 million to $2.3 million. This increase understates the significant improvements achieved at Northstar-at-Tahoe during the year, as the business unit operating income includes anticipated start-up and operating expenses at Sierra since its July 1993 acquisition in excess of revenues of approximately $1 million. The Northstar improvement was due to the increase in skier visits, lower snowmaking costs due to increased snowfall, aggressive marketing and cost controls. GENERAL CORPORATE EXPENSES Unallocated costs declined from $11.9 million to $8.3 million, reflecting improvements resulting from the organizational restructuring completed during 1992 and reversal of certain contingency accruals no longer considered necessary, offset by higher incentive compensation tied to stock performance. In addition, 1992 costs include $1.0 million to increase the reserve for future landfill cleanup costs. ASBESTOS-RELATED COSTS The 1993 and 1992 results of operations do not include any asbestos-related costs. During 1993, $1.8 million of unreimbursed costs related to the asbestos litigation were incurred and charged against the reserve established in prior years. OTHER ITEMS Interest expense declined from $4.2 million to $3.6 million, due to lower rates on variable rate debt and lower aggregate borrowings. Interest and other income decreased from $7.7 million to $5.6 million. Other income included $2.4 million in 1992 resulting from the freezing of a defined benefit pension plan and gains from the sales of surplus real estate of $3.0 million in 1992 and $3.8 million in 1993. Interest income declined as lower amounts were available for investment at lower rates than in prior years. On July 1, 1993, Fibreboard adjusted the depreciable lives of its assets to more closely approximate their economic useful lives, resulting in a reduction of depreciation expense of $1.4 million during 1993. This expense reduction is included in the segment results discussed above. Fibreboard's effective tax rate was 41% in 1993 and 44% in 1992. Fibreboard adopted Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES (SFAS 109) on January 1, 1993. SFAS 109 requires an asset and liability approach for financial accounting and reporting for income taxes, and requires the recognition of the tax impact of certain items for which no income tax impact would have been provided in the past. Fibreboard recorded no adjustment of its tax accounts as a result of adopting SFAS 109. IMPACT OF INFLATION Inflation has not had any significant impact on Fibreboard's operations during the three years ended December 31, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements and Supplementary Data PAGE Consolidated Statements of Income for 21 each of the three years in the period ended December 31, 1994 Consolidated Balance Sheets as of December 31, 22 1994 and 1993 Consolidated Statements of Cash Flows for each 24 of the three years in the period ended December 31, 1994 Consolidated Statements of Stockholders' Equity 26 for each of the three years in the period ended December 31, 1994 Notes to Consolidated Financial Statements 27 Report of Independent Public Accountants 44 Report of Management 45 Supplementary Data (unaudited) - Selected Quarterly Financial Data for each of the 46 two years in the period ended December 31, 1994 FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 ------------------------------ 1994 1993 1992 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE) Net sales $363,705 $265,210 $239,717 Cost of sales 295,202 225,214 205,802 -------- -------- -------- Gross margin 68,503 39,996 33,915 Other expenses: Selling and administrative 40,690 22,120 20,703 Asbestos-related costs (Note 14) -- -- -- -------- -------- -------- Income from operations 27,813 17,876 13,212 Interest expense, net of capitalized interest (Note 1) (4,931) (3,575) (4,222) Interest and other income 22,555 5,551 7,707 -------- -------- -------- Income before income taxes 45,437 19,852 16,697 Income taxes (18,402) (8,139) (7,265) -------- -------- -------- Net income $ 27,035 $ 11,713 $ 9,432 -------- -------- -------- -------- -------- -------- Earnings per share: Primary $6.02 $2.66 $2.30 Fully diluted 6.01 2.62 2.30 Weighted average shares outstanding (thousands): Primary 4,493 4,396 4,101 Fully diluted 4,496 4,470 4,101
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ----------------------------- 1994 1993 ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents (Note 1) $ 8,842 $ 5,322 Receivables (Notes 2, 4 and 5) 40,412 16,268 Income tax refund receivable (Note 1) -- 3,500 Current portion of notes receivable (Note 5) 1,317 988 Inventories (Notes 1, 4 and 5) 76,656 80,158 Prepaid expenses 1,836 1,373 Deferred income taxes (Note 1) 9,270 6,898 ---------- ---------- Total current assets 138,333 114,507 Timber and timberlands, net (Notes 5 and 11) 30,305 35,564 Property, plant and equipment, at cost: (Notes 1, 4 and 5) Land and improvements 22,051 21,079 Buildings 37,121 25,569 Machinery and equipment 130,503 110,771 Construction in progress 1,142 1,198 ---------- ---------- 190,817 158,617 Accumulated depreciation (75,850) (69,121) ---------- ---------- Net property, plant and equipment 114,967 89,496 Notes receivable (Note 5) 12,451 11,432 Goodwill (Note 13) 64,623 -- Other assets 12,957 10,360 ---------- ---------- Total operating assets 373,636 261,359 Cash restricted for asbestos costs 1,893 827 Asbestos costs to be reimbursed (Note 14) 810,454 968,309 ---------- ---------- $1,185,983 $1,230,495 ---------- ---------- ---------- ----------
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ----------------------------- 1994 1993 ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks (Note 4) $ -- $ 17,657 Current portion of long-term debt (Note 5) 2,045 4,764 Accounts payable and accrued liabilities 58,698 30,416 (Note 3) Reserve for asbestos-related costs (Note 14) 2,700 2,700 ---------- ---------- Total current liabilities 63,443 55,537 Long-term debt (Note 5) 101,293 23,539 Reserve for asbestos-related costs (Note 14) 14,584 16,795 Other long-term liabilities (Note 7 and 8) 24,109 21,412 Deferred income taxes (Note 1) 19,440 18,755 ---------- ---------- Total operating liabilities 222,869 136,038 Asbestos claims settlements (Note 14) Current 6,878 11,048 Long-term 788,487 941,880 ---------- ---------- Total asbestos claims settlements 795,365 952,928 Long-term debt associated with asbestos 22,360 21,361 ---------- ---------- (Note 5) Total liabilities 1,040,594 1,110,327 Commitments & contingencies (Notes 11, 14 and 15) Stockholders' equity (Notes 7, 9 and 10): Preferred stock, $.01 par value, 3,000,000 shares authorized; none issued -- -- Common stock, $.01 par value, 15,000,000 shares authorized; 4,224,225 and 4,201,420 shares issued 42 42 Additional paid-in capital 76,166 75,836 Retained earnings 73,752 46,717 Minimum pension liability adjustment (Note 7) (4,571) (2,427) ---------- ---------- Total stockholders' equity 145,389 120,168 ---------- ---------- $1,185,983 $1,230,495 ---------- ---------- ---------- ----------
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ------------------------------ 1994 1993 1992 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Cash flows from operating activities: Net income $ 27,035 $ 11,713 $ 9,432 Adjustments to reconcile income to net cash provided (used) by operating activities: Depreciation, amortization and depletion 11,134 10,517 11,998 Deferred income taxes 1,135 2,227 5,563 Deferred long term benefits (671) 1,606 (374) Compensation for stock grants 129 1,039 517 Gain on sale of assets (21,270) (3,762) (2,998) Change in working capital: Receivables 5,522 (867) 3,500 Inventories 30,795 (27,799) (4,858) Prepaid expenses 188 (578) 84 Accounts payable and accrued liabilities (5,075) (1,414) (6,070) Discontinued operations net asset change -- 2,193 139 -------- -------- -------- Net cash provided (used) by operations 48,922 (5,125) 16,933 Cash flows from investing activities: Non-cash net assets of acquired operations (119,894) (13,054) -- Proceeds from asset sales 26,023 5,313 4,066 Property, plant and equipment additions (9,399) (9,815) (5,027) Timber and timberlands changes, net 1,901 (3,270) (344) Reductions of notes receivable 1,611 996 3,862 Decrease (increase) in other assets (1,039) (517) 559 -------- -------- -------- Net cash provided (used) by investing activities (100,797) (20,347) 3,116
(continued) FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
YEAR ENDED DECEMBER 31 ------------------------------ 1994 1993 1992 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Cash flows from financing activities: New borrowings $ 93,000 $ 15,000 $ 7,560 Repayment of debt (35,622) (10,799) (10,403) Employee stock plan transactions 201 534 44 -------- -------- -------- Net cash provided (used) by financing activities 57,579 4,735 (2,799) -------- -------- -------- Net cash provided (used) by business activities 5,704 (20,737) 17,250 Cash flows from asbestos- related activities: Receipts from insurers 7,657 19,848 18,016 Structured settlement program activity 476 (1,638) (10,167) Other asbestos-related cash transactions (9,251) (13,832) (18,865) Change in cash restricted for asbestos costs (1,066) 5,670 5,255 -------- -------- -------- Net cash provided (used) by asbestos-related activities (2,184) 10,048 (5,761) -------- -------- -------- Net increase (decrease) in cash 3,520 (10,689) 11,489 Cash at beginning of year 5,322 16,011 4,522 -------- -------- -------- Cash at end of year $ 8,842 $ 5,322 $ 16,011 -------- -------- -------- -------- -------- -------- Cash paid during the year for: Interest (net of capitalized interest) $ 2,986 $ 3,011 $ 4,112 Income taxes 12,718 5,538 7,138 Non-cash items: Increase (decrease) in accrued asbestos - related legal costs (198) (574) 846 Increase in asbestos claims settlements 151,498 244,072 468,293 Payments made to claimants on Fibreboard's behalf 309,537 88,230 -- Increase in receivables from sale of surplus real estate 2,949 250 250 Acquisition of businesses Fair value of assets acquired 155,440 13,954 -- Cash paid 119,894 13,054 -- -------- -------- -------- Liabilities assumed 35,546 900 --
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31 ------------------------------ 1994 1993 1992 ---- ---- ---- (DOLLAR AMOUNTS IN THOUSANDS) Common stock: Beginning balance, 4,201,420, 4,142,300 and 4,052,213 shares issued $ 42 $ 41 $ 40 Shares issued under employee stock plans, 22,805, 59,120 and 90,087 shares -- 1 1 -------- -------- -------- Ending balance, 4,224,225, 4,201,420 and 4,142,300 shares issued $ 42 $ 42 $ 41 -------- -------- -------- -------- -------- -------- Additional paid-in capital: Beginning balance $ 75,836 $ 74,264 $ 73,246 Fair value in excess of par value for shares issued under employee stock plans 201 533 501 Compensation related to employee stock plans 129 1,039 517 -------- -------- -------- Ending balance $ 76,166 $ 75,836 $ 74,264 -------- -------- -------- -------- -------- -------- Retained earnings: Beginning balance $ 46,717 $ 35,004 $ 25,572 Net income 27,035 11,713 9,432 -------- -------- -------- Ending balance $ 73,752 $ 46,717 $ 35,004 -------- -------- -------- -------- -------- -------- Minimum pension liability: Beginning balance $ (2,427) $ (1,439) $ -- Changes during the year (2,144) (988) (1,439) -------- -------- -------- Ending balance $ (4,571) $ (2,427) $ (1,439) -------- -------- -------- -------- -------- --------
See attached notes to financial statements FIBREBOARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF PRESENTATION The consolidated financial statements include the accounts of Fibreboard Corporation, a Delaware Corporation, and all its wholly-owned subsidiaries (collectively Fibreboard) after elimination of intercompany balances and transactions. Certain reclassifications of prior year amounts have been made to conform with the current presentation. EARNINGS PER SHARE Earnings per common and common equivalent share are calculated using the weighted average number of common shares outstanding during the year plus the net additional number of shares which would be issuable upon the exercise of stock options, assuming Fibreboard used the proceeds received to purchase additional shares at market value. The effect of common stock equivalents was not material in 1992. CASH AND CASH EQUIVALENTS Fibreboard utilizes a centralized cash management system to minimize the amount of cash on deposit with banks and maximize interest income from amounts not required for immediate disbursement. Cash includes cash on hand or in banks available for immediate disbursal. Cash equivalents are short-term investments that have an original maturity date of less than 90 days. INVENTORY VALUATION Inventories are valued at the lower of cost (first-in, first-out) or market. Inventory costs include material, labor and operating overhead. Operating supplies are priced at average cost. Inventories are valued as follows:
DECEMBER 31 --------------------- 1994 1993 ---- ---- Finished goods $45,622 $21,833 Raw materials 29,182 56,649 Supplies 1,852 1,676 ------- ------- Total inventories $76,656 $80,158 ------- ------- ------- -------
TIMBER Fibreboard follows an overall policy on fee timber that amortizes timber costs over the total fiber available during the estimated growth cycle. Timber carrying costs are expensed as incurred. PROPERTY, PLANT AND EQUIPMENT Fibreboard uses the units of production method of depreciation for some of its machinery and equipment which depreciates cost over the estimated number of units that the equipment will be able to produce during its useful life. Provisions for depreciation of buildings and the remaining machinery and equipment have been computed using straight-line rates based upon the estimated service lives (4-30 years). Fibreboard capitalizes interest on borrowed funds incurred during construction periods. Capitalized interest is amortized over the lives of the related assets. Interest capitalized in 1994, 1993 and 1992 was $0, $183 and $142. Fibreboard capitalizes logging road construction costs as part of "Land and Improvements." These costs are amortized as the timber volume adjacent to the road system is harvested. On July 1, 1993, Fibreboard adjusted the depreciable lives of its assets to more closely approximate their useful lives, resulting in a reduction of depreciation expense of $1,437 in 1993. INCOME TAX POLICIES The income tax provision includes the following:
YEAR ENDED DECEMBER 31 ------------------------------- 1994 1993 1992 ---- ---- ---- Current income taxes $ 17,534 $ 8,579 $ 2,661 Benefit of operating loss carry forward -- (729) -- Deferred income taxes 868 289 4,604 -------- ------- ------- $ 18,402 $ 8,139 $ 7,265 -------- ------- ------- -------- ------- -------
The following table summarizes the differences between the statutory federal and effective tax rate:
YEAR ENDED DECEMBER 31 --------------------------- 1994 1993 1992 ---- ---- ---- Federal tax rate 35% 35% 34% State income taxes 6 6 7 Book/tax basis differences -- -- 2 Other -- -- 1 --- --- --- 41% 41% 44% --- --- --- --- --- ---
In 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law increasing the federal tax rate from 34% to 35%. Effective January 1, 1993, the Company implemented the provisions of Statement of Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 utilizes the liability method and deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. The adoption of SFAS 109 had no effect on reported net income. The tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:
YEAR ENDED DECEMBER 31 ---------------------- 1994 1993 ---- ---- Deferred tax assets: Accrued liabilities $ 5,344 $ 5,294 Current portion asbestos reserve 1,134 1,163 Alternative minimum tax credit carryover 1,258 -- Other 1,534 441 ------- ------- Total deferred tax assets $ 9,270 $ 6,898 ------- ------- ------- ------- Deferred tax liabilities: Property, plant and equipment 15,751 $12,088 Timber 8,230 9,740 Post retirement benefits (7,187) (7,124) Long-term asbestos (144) (1,046) State taxes (1,142) (476) Other 3,932 5,573 ------- ------- Total deferred tax liabilities $19,440 $18,755 ------- ------- ------- -------
Prior to the implementation of SFAS 109, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11, Accounting for Income Taxes (APB 11). The following table summarizes the major components of the provision for deferred taxes under APB 11 which resulted from timing differences in the recognition of income and expense for financial reporting and tax purposes:
YEAR ENDED DECEMBER 31 1992 ---- Asbestos related costs $5,245 Depreciation (1,325) Tax basis of inventories (139) Income and expense affecting future years 516 Involuntary conversions (7) Plant shut down costs 474 Post retirement benefits (160) ------ $4,604 ------ ------
2. RECEIVABLES
DECEMBER 31 ------------------------ 1994 1993 ---- ---- Trade receivables $40,924 $16,166 Less reserves for bad debts (2,352) (702) Other receivables 1,840 804 ------- ------- $40,412 $16,268 ------- ------- ------- -------
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
DECEMBER 31 ------------------------ 1994 1993 ---- ---- Accounts payable $23,009 $ 9,077 Accrued pension costs 4,518 1,058 Asbestos-related legal costs 233 430 Salaries and wages payable 9,108 5,532 Taxes other than income taxes 3,175 1,978 Workers' compensation 6,330 4,339 Other 12,325 8,002 ------- ------- $58,698 $30,416 ------- ------- ------- -------
Fibreboard is self-insured for the majority of its workers compensation benefits. Workers compensation expense was $2,356, $1,074 and $1,836 in 1994, 1993 and 1992 based on actual and estimated claims incurred. 4. NOTES PAYABLE At December 31, 1993, Fibreboard had a $40,000 operating line of credit facility, secured by a substantial majority of Fibreboard's receivables, inventories and machinery and equipment. This facility was replaced during 1994 with the revolving credit facility described in Note 5. Fibreboard has a $5,000 operating line of credit dedicated for the seasonal cash needs of its resort operations. Borrowings under the facility carry interest at the prime rate plus 1/4% (8-3/4% at December 31, 1994). The facility expires May 31, 1995. At December 31, 1994, no amounts were outstanding; however, $1,428 of availability under the facility was utilized to secure standby letters of credit. 5. LONG-TERM DEBT Fibreboard's long-term debt not associated with asbestos consists of the following:
DECEMBER 31 --------------------- 1994 1993 ---- ---- Revolving credit facility,interest at LIBOR plus 0.75% to 1.0%(6.36% at December 31, 1994), secured by the timberlands, machinery and equipment, receivables and inventories of Fibreboard and its subsidiaries other than the resort subsidiaries $ 86,000 $ -- Term loans, interest at 11.8% -- 6,164 Reducing revolving credit facility, interest at prime plus 1/2% (9.0% at December 31, 1994), maximum amount available reduces by $1,429 each April with the balance due May 31, 1998 (maximum amount available at December 31, 1994 was $8,069), secured by the assets of a resort subsidiary 6,700 10,000 Term loan, interest at prime plus 1/2% (9.0% at December 31, 1994), payable in varying annual installments through 1998, secured by the assets of a resort subsidiary 4,500 5,000 Pollution control project revenue bonds, 6.6%, payable annually through 1999, unsecured 5,905 6,875 Other debt--6.8% to 11.5% payable in varying amounts 233 264 -------- -------- 103,338 28,303 Less: Current portion (2,045) (4,764) -------- -------- $101,293 $ 23,539 -------- -------- -------- --------
Required repayment of long-term debt is as follows:
YEAR ENDING DECEMBER 31 ----------- 1995 $ 2,045 1996 3,759 1997 89,770 1998 6,429 1999 1,335 -------- $103,338 -------- --------
Fibreboard has notes receivable with terms and payment dates which are substantially identical to $5,905 of revenue bonds included in the above table. Payments under these notes are as follows:
YEAR ENDING DECEMBER 31 ----------- 1995 $ 1,035 1996 1,105 1997 1,175 1998 1,255 1999 1,335 -------- $ 5,905 -------- --------
Fibreboard obtained a $175,000 revolving credit facility during 1994. Initial borrowings were used to replace the credit facility described in Note 4, repay the 11.8% term loans and fund a portion of the purchase of Norandex Inc. (see Note 13). The maximum amount available reduces to $150,000 on September 30, 1995 and to $125,000 on September 30, 1996 with the balance due September 30, 1997, unless the maturity date is extended by Fibreboard and its lenders. Proceeds of borrowings may be used for general corporate purposes and acquisitions. Additional amounts available aggregated $82,904 at December 31, 1994. Fibreboard's loan agreements contain various financial covenants, the most restrictive of which impose limitations on dividends and other distributions to stockholders, require the maintenance of minimum levels of net worth, limit the ratio of consolidated funded debt to net worth and require maintenance of certain coverage ratios. At December 31, 1994, these covenants were met. Fibreboard has entered into an interest rate swap to fix the interest rate on $50,000 of borrowings under the revolving credit facility. Through October 1995, Fibreboard will pay the intermediary interest at 6.41% and will receive interest at LIBOR. In addition, Fibreboard has entered into an agreement under which it will receive an interest payment on $50,000 to the extent LIBOR exceeds 7.5% for the period November 1995 through October 1996. The cost of this transaction will be recognized during 1996. Fibreboard's asbestos related long-term debt consists of the following and is due upon conclusion of the asbestos personal injury insurance coverage litigation. In the event Fibreboard prevails in the insurance coverage litigation, the amounts will be repaid from insurance proceeds.
DECEMBER 31 -------------------- 1994 1993 ---- ---- Amounts advanced under reimbursement agreement, interest at prime minus 2% (6.5% at December 31, 1994) $22,360 $21,361
6. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH AND SHORT-TERM INVESTMENTS Carrying amount approximates fair value because of the short maturity of these investments. NOTES RECEIVABLE Fair value of notes receivable is estimated by discounting future cash flows using current rates at which similar loans would be made. NOTES PAYABLE TO BANKS Carrying amount approximates fair value based on current rates offered to the corporation for similar debt. LONG-TERM DEBT Fair market value is estimated by discounting the future cash flows using the current rates at which similar debt could be placed. INTEREST RATE INSTRUMENTS Fair market value is based on market rates at the end of the period for similar instruments. The estimated fair values of financial instruments are as follows:
1994 1993 ------------------- ------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------ ----- ------ ----- Financial assets: Cash and short-term investments $ 10,735 $ 10,735 $ 6,149 $ 6,149 Notes receivable 13,768 14,087 12,420 12,721 Interest rate instruments 350 841 -- -- Financial liabilities: Notes payable to banks -- -- 17,657 17,657 Long-term debt 103,338 101,907 28,303 28,818
Fibreboard's consolidated balance sheets include financial instruments resulting from the asbestos-related litigation, asbestos costs to be reimbursed, asbestos claims settlement obligations and asbestos-related long-term debt. These are unique financial instruments. Consequently, these instruments are not traded nor is it likely a willing buyer could be found. Therefore, it is not practicable to estimate a market value. The balance sheets as of December 31, 1994 and 1993 reflects asbestos costs to be reimbursed of $810,454 and $968,309, asbestos claims settlements of $795,365 and $952,928 and asbestos-related long- term debt of $22,360 and $21,361. 7. PENSION PLANS Fibreboard has pension plans covering substantially all employees. Contributions to defined benefit plans are based on actuarial calculations of amounts necessary to cover current cost and amortization of prior service costs. Benefits for employees of the acquired Norandex operation continue to vest while all other plan participants' benefits have vested and been frozen. Contributions to defined contribution plans are nondiscretionary and based on varying percentages of eligible compensation for the year. The status of Fibreboard's defined benefit pension plan at December 31, 1994 and 1993 is as follows:
DECEMBER 31 --------------------- 1994 1993 ---- ---- Vested benefit obligation $ 73,674 $ 71,109 -------- -------- -------- -------- Accumulated benefit obligation $ 76,503 $ 73,612 -------- -------- -------- -------- Projected benefit obligations $ 80,977 $ 73,612 Plan assets 55,336 55,218 -------- -------- Projected benefit obligations in excess of plan assets (25,641) (18,394) Unrecognized obligation at transition 1,206 1,326 Unrecognized net loss in past service 7,318 4,113 Adjustment required to recognize minimum liability (8,889) (5,439) -------- -------- Net accrued pension expense $(26,006) $(18,394) -------- -------- -------- --------
Of the accrued expense, $4,518 and $1,058 is included in accounts payable and accrued liabilities (Note 3). The actuarial assumptions used to determine accrued pension expense and the funded status of the plans for 1994 were: 7.5% discount rate (net pension expense), 8.25% discount rate (funded status), 8% expected long-term rate of return on plan assets and a 5% salary increase for active participants. The assets of the plan at December 31, 1994 and 1993 consist of bonds, both corporate and government, stocks, cash and cash equivalents. As required by Statement of Accounting Standards No. 87, Employers' Accounting for Pensions, Fibreboard has recognized a minimum pension liability associated with its frozen defined benefit plan. As a result, Fibreboard recorded an after tax reduction in equity of $4,571 at December 31, 1994 and $2,427 at December 31, 1993. Pension expense included the following components:
YEAR ENDED DECEMBER 31 ---------------------- 1994 1993 1992 ---- ---- ---- Benefits earned by employees $ 296 $ -- $ 878 Interest cost on projected benefit obligation 5,774 5,489 5,739 Return on plan assets 433 (5,832) (3,655) Net amortization and deferral (4,659) 1,729 (750) Curtailment gain -- -- (2,353) ------- ------- ------ Net pension cost (income) of defined benefit plans 1,844 1,386 (141) Contributions to defined contribution pension plans 2,262 2,033 730 ------- ------- ------ Net pension expense $4,106 $3,419 $ 589 ------- ------- ------ ------- ------- ------
On December 31, 1992, a defined benefit pension plan with assets in excess of obligations was frozen, resulting in a curtailment gain of $2,353. The assets of the plan were merged with Fibreboard's other defined benefit pension plan. The curtailment gain is reflected as a component of interest and other income in the Consolidated Statements of Income. 8. NON-PENSION POST-RETIREMENT BENEFITS Through 1992, Fibreboard provided post-retirement benefits to employees who met certain requirements until they reached age 65. The benefits provided were mainly health care and dental. This benefit was discontinued for employees who retired after December 31, 1992. However, post-retirement benefits are available to certain collective bargaining units of facilities which have been sold. The status of Fibreboard's non-pension post retirement benefits at December 31, 1994 and 1993 are as follows:
YEAR ENDED DECEMBER ------------------- NET PERIODIC POST RETIREMENT BENEFIT COST 1994 1993 ---- ---- Interest cost $ 176 $ 674 Net other (1,456) -- ------ ------ Total $(1,280) $ 674 ------ ------ ------ ------ ACCRUED BENEFIT COST Accumulated post retirement benefit obligation Retirees $1,331 $3,647 Eligible actives 267 -- Other active plan participants 163 -- ------ ------ 1,761 3,647 Unrecognized net (gain) loss (360) 98 ------ ------ Total $2,121 $3,549 ------ ------ ------ ------
Amounts recorded as net other includes a gain of $1,164 from the resolution of a post-retirement benefit obligation of facilities sold in 1988. A 16% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1994. The cost trend rate was assumed to decrease to 9% in 1995 and slightly thereafter until 2001 at which time the rate was assumed to stabilize at 6%. Increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated post retirement benefit obligation as of December 31, 1994 by $45 and the aggregate of the service and interest cost components of net periodic post retirement cost for the year then ended by $4. The weighted average discount rate used in determining the accumulated post retirement benefits was 8.25% while 7.5% was used to determine the 1994 post-retirement benefit cost. 9. STOCK OPTION AND STOCK PURCHASE PLANS Fibreboard has a stock option and rights plan for certain officers, directors and key employees. The plan provides for granting stock options, stock appreciation rights, limited stock appreciation rights and restricted stock awards. Awards under the plan are determined by the compensation committee of the Board of Directors. The maximum number of shares available for award under the plan is 800,000. Option prices are set by the committee. Option prices for grants must be at least 85% of the fair market value on the date of grant. The time limit within which options may be exercised and other exercise terms are fixed by the committee. When stock options are exercised, the proceeds (including any tax benefits to Fibreboard resulting from the exercise) are credited to the appropriate common stock and additional paid-in capital accounts. Compensation related to restricted stock awards and certain option grants (measured at the grant date) is recognized as expense over the term of the related award. At December 31, 1994, options to purchase 503,650 shares at prices from $2.83 to $25.38 were outstanding. Options exercised in 1994 were 4,750. At December 31, 1994, options to purchase 491,650 shares were immediately exercisable. Options becoming exercisable in 1995 are 12,000. Option awards for 54,000 shares include limited stock appreciation rights for a like number of shares. Each limited stock appreciation right entitles the holder, in certain limited circumstances, to surrender the underlying option in exchange for cash equal to the difference between fair market value at the date of surrender and the option price for such shares. At December 31, 1994, restricted stock awards of 35,000 shares were outstanding. The shares awarded will be issued, 7,000 shares in 1995, 15,000 in 1996 and 13,000 in 1997 provided the grantee is employed continuously through the issue date. In addition, Fibreboard had an employee stock purchase plan which was suspended in 1992. The plan allowed employees to purchase Fibreboard stock with an aggregate purchase price of up to 15% of the employee's base salary at the beginning of each purchase period. The purchase price was the lesser of 85% of fair market value at the beginning of each purchase period or 85% of fair market value at the actual purchase date. The maximum number of shares issuable under the plan was 250,000. During 1994, 1993 and 1992, 0, 0 and 17,360 shares of Fibreboard stock were sold to employees under this plan. Fibreboard has a long-term equity incentive plan, which provides for awards of phantom stock units. Each phantom stock unit entitles the grantee to a cash payment equal to the fair market value of one share of Fibreboard common stock at the maturity date less the fair market value on the grant date. At December 31, 1994, 235,400 phantom stock units had been awarded at fair market value on the grant date from $27.50 to $30.00. These phantom stock units mature 47,400 units in 1995, 79,000 units in 1996, and 109,000 units in 1997. Compensation expense recognized for these plans was $129, $1,039 and $517 in 1994, 1993 and 1992. 10. PREFERRED STOCK PURCHASE RIGHTS In 1988, Fibreboard implemented a stockholder rights plan and distributed to stockholders one preferred share purchase right for each share of Fibreboard common stock then outstanding. Under the rights plan, as amended in 1994, each right entitles the registered holder to purchase from Fibreboard 1/100th of a share of Series A Junior Participating Preferred Stock at an exercise price of $106 per 1/100th share, subject to adjustment. The rights will not be exercisable until a party acquires beneficial ownership of 15% or more of Fibreboard's then outstanding common shares. The rights, which do not have voting rights, expire in February 2004 and may be redeemed in whole by Fibreboard, at its option, at a price of $.01 per right prior to the expiration or exercise of the rights. In the event Fibreboard is acquired in an unsolicited merger or other business combination transaction, each right will entitle the holder to receive, upon exercise of the right, common stock of the acquiring company having a market value of two times the then current exercise price of the right. In the event a party acquires 15% or more of Fibreboard's outstanding common shares, each right will entitle the holder to receive upon exercise Fibreboard common shares having a market value of two times the exercise price of the right. 11. COMMITMENTS Fibreboard is obligated to purchase timber under cutting contracts with the U.S. Forest Service, which extend to 1996. The table below presents Fibreboard's best estimate of its commitment under timber cutting contracts by year of contract expiration:
YEAR ENDING DECEMBER 31 ----------- 1995 $ 7,427 1996 2,015 ------- $ 9,442 ------- -------
Fibreboard leases certain office and warehouse space and machinery and equipment under operating leases which expire within six years. Minimum lease payments and subleases for the next five years are as follows:
YEAR ENDING DECEMBER 31 ----------------------- PAYMENTS SUBLEASES -------- --------- 1995 $ 6,669 $443 1996 6,141 225 1997 4,796 -- 1998 3,889 -- 1999 2,906 -- ------- ---- $24,401 $668 ------- ---- ------- ----
In addition, the Company leases property from the U.S. Forest Service for one of its resort operations. Lease payment terms are based on a percentage of revenues. Total rent expense for all operating leases amounted to $4,979, $2,194 and $1,753 in 1994, 1993 and 1992. 12. INDUSTRY SEGMENT INFORMATION Information about Fibreboard's industry segments is set forth below.
YEAR ENDED DECEMBER 31 ---------------------------------------- 1994 1993 1992 ---- ---- ---- Outside sales: Building products Wood Products $ 180,309 $ 190,494 $ 169,655 Norandex 85,607 -- -- Industrial Insulation Products 56,376 49,215 49,701 Resort operations 41,413 25,501 20,361 ---------- ---------- ---------- Consolidated $ 363,705 $ 265,210 $ 239,717 ---------- ---------- ---------- ---------- ---------- ---------- Operating profit: Building products Wood Products $ 12,670 18,468 17,321 Norandex 8,096 -- -- Industrial Insulation Products 6,452 5,382 6,138 Resort operations 8,020 2,325 1,648 ---------- ---------- ---------- Total Operations 35,238 26,175 25,107 Unallocated expense, net (7,425) (8,299) (11,895) Interest expense (4,931) (3,575) (4,222) Interest and other income 22,555 5,551 7,707 ---------- ---------- ---------- Income before taxes $ 45,437 $ 19,852 $ 16,697 ---------- ---------- ---------- ---------- ---------- ---------- Identifiable assets: Building products Wood Products $ 121,223 $ 165,023 $ 138,731 Norandex 147,066 -- -- Industrial Insulation Products 27,268 25,831 27,480 Resort operations 39,536 36,100 24,331 Discontinued operations -- -- 2,193 Unallocated assets 38,543 34,405 30,855 Asbestos-related assets 812,347 969,136 826,582 ---------- ---------- ---------- Total assets $1,185,983 $1,230,495 $1,050,172 ---------- ---------- ---------- ---------- ---------- ---------- Depreciation, depletion and amortization: Building products Wood Products $ 4,307 $ 6,340 $ 7,031 Norandex 1,815 -- -- Industrial Insulation Products 788 1,041 1,810 Resort operations 3,467 2,514 2,331 Capital expenditures: Building products Wood Products 2,426 4,240 2,969 Norandex (1) 28,628 -- -- Industrial Insulation Products 327 324 114 Resort operations(2) 6,229 17,794 2,966 (1) Includes acquired assets of $28,043 in 1994. (2) Includes acquired assets of $12,981 in 1993.
13. ACQUISITIONS AND DISPOSITIONS In July 1993, Fibreboard acquired the net assets of Sierra Ski Ranch, a ski facility located in California, for $13,054. The acquisition was accounted for as a purchase of assets. The ski area was subsequently renamed Sierra-at-Tahoe. On August 31, 1994, Fibreboard acquired the stock of Norandex Inc., a manufacturer and distributor of residential exterior building products, for $119,894 in cash including acquisition costs. The acquisition, which was accounted for as a purchase, resulted in $65,332 of goodwill which will be amortized over 30 years. Norandex operating earnings have been included in Fibreboard's consolidated statement of income since the date of acquisition. The following unaudited table presents the pro forma combined results of Fibreboard and Norandex assuming the transaction took place at January 1, 1994 or 1993.
YEAR ENDED DECEMBER 31 -------------------------- (unaudited) 1994 1993 ---- ---- Net Sales $507,695 $457,841 Net Income 30,267 18,483 Earnings per share: Primary 6.74 4.20 Fully diluted 6.73 4.13
The pro forma results include only adjustments necessary to 1) reflect the allocation of the purchase price resulting in changes in depreciation and amortization; 2) recognize the interest cost associated with the purchase; and 3) recognize the income tax effects of these adjustments. Because the pro forma results include only the adjustments indicated above, they should not be considered indicative of the results that would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. No attempt has been made to quantify in the pro forma results additional costs which may be incurred as a result of the combination, even though certain costs are expected to increase. Furthermore, the pro forma results include the effects of gains on asset sales and restructuring costs which occurred during the periods and which may not reoccur. In February 1994, Fibreboard sold its agricultural container manufacturing facilities located in Fresno, CA in order to concentrate its resources on the primary wood products and remanufacturing businesses. In July 1994, 8,900 acres of non-essential timberlands were sold for $21,500 and an $18,858 pre-tax gain was recognized in interest and other income. 14. ASBESTOS-RELATED LITIGATION CONTINGENT LIABILITY FOR ASBESTOS-RELATED CLAIMS Overview: Fibreboard's ability to continue to operate in the normal course of business is dependent upon its ongoing capability to fund asbestos-related defense and indemnity costs. Prior to 1972, Fibreboard manufactured insulation products containing asbestos. Fibreboard has since been named as a defendant in many thousands of personal injury claims for injuries allegedly caused by asbestos exposure and in asbestos-in-buildings actions involving many thousands of buildings. Fibreboard believes it has unique insurance coverage for personal injury claims, as the trial court has held (with the issue on appeal) that claims with initial exposure to asbestos prior to 1959 are covered by two no-aggregate-limit policies. During 1993, Fibreboard and its insurers entered into the Insurance Settlement Agreement, and Fibreboard, its insurers and plaintiffs representatives entered into the Global Settlement Agreement. These agreements are interrelated. Final court approval of these agreements is required. Fibreboard believes trial court approval could occur during the first half of 1995, but if appealed, it may be 1996 or later before final court approval could be obtained. If both the Global and Insurance Settlement Agreements are approved, Fibreboard believes its existing and future personal injury asbestos liabilities will be resolved through insurance resources and existing corporate reserves. If the Insurance Settlement is approved but the Global Settlement is not approved, the insurers will provide Fibreboard with up to $2,000,000 to resolve claims pending as of August 27, 1993 and all future claims, and will pay claims settled but not yet paid as of August 27, 1993. Claims Activity: Fibreboard has already resolved 147,400 personal injury claims for approximately $1,654,400, not including legal defense costs. Substantially all of the settlements have been achieved through 1) payments by Fibreboard's insurers; 2) assignments of Fibreboard's rights to insurance payments, most of which have been converted to three-party agreements among Fibreboard, its insurer and plaintiffs; or 3) deferring payments pending resolution of the personal injury insurance coverage litigation discussed below. An additional 26,800 claims have been disposed of at no cost to Fibreboard other than legal defense costs. At December 31, 1994, Fibreboard estimates that approximately 41,900 claims have been filed against it which remain unresolved. Approximately 15,600 of these claims were initially filed against Fibreboard on or after August 27, 1993 and will be covered by the Global Settlement, if approved. Fibreboard is unable to determine the exact number of claims that may be filed in the future, although the number is expected to be substantial. Fibreboard has achieved excellent results in resolving asbestos-in- buildings actions. At December 31, 1994, of the 152 actions served against it, Fibreboard has been dismissed from 134 (31 of which joined the National Schools class action), settled or agreed to settle five for $2,020, tried one to a defense verdict and remains a defendant in 14 actions. In one of the remaining actions, Fibreboard won a defense verdict on product identification and cost of abatement issues, although further proceedings are scheduled. The following tables illustrate asbestos-related claims activity for the last three years:
YEAR ENDED DECEMBER 31 ---------------------------- 1994 1993 1992 ---- ---- ---- Personal Injury Claims ---------------------- New claims received(1) 3,500 35,100 37,000 Claims disposed Settled 15,185 27,907 54,137 Dismissed 2,685 2,716 1,898 "Green Card" settlements(2) 189 429 862 Judgments(3) 1 48 18 Adjustments(4) 1,366 2,300 1,900 Average settlement amount per claim settled(5)-- pre-1959 claims $ 8 $ 12 $ 14 post-1959 claims $ 7 $ 4 $ 3 Claims pending at year end(6) 41,900 57,800 56,200 Asbestos-in-Buildings Claims ---------------------------- New actions received 1 -- 1 Actions disposed Dismissed 8 7 12 Settled -- 1 -- Actions pending at year end 14 21 29 1. Fibreboard believes new claims received increased during 1993 and 1992 in anticipation of the Global and Insurance Settlements in 1993 and due to significant year end settlements of outstanding claims in 1992 that included a significant number of unfiled claims incorporated into large group settlements. Of the claims received in 1994 and 1993, 2,900 and 14,600 claims were filed on or after August 27, 1993, and will be covered by the Global Settlement, if approved. 2. Under Green Card Settlements, there is no determination of liability by Fibreboard to a claimant. Instead, Fibreboard waives the statute of limitations should a claimant develop an asbestos-related impairment in the future. 3. Judgments represent defense verdicts in favor of Fibreboard, or plaintiff verdicts where the net amount payable by Fibreboard is zero after applying prior settlement amounts or plaintiff verdicts where the judgment has been paid. Since 1992, only 24 judgments have resulted in monetary payments, aggregating $5,385. Additional judgments favoring plaintiffs have been entered. Fibreboard is appealing these judgments. The amount of such judgments is included in Fibreboard's overall liability estimate discussed below. 4. Often, multiple claims are filed for the same injury. In addition, Fibreboard's claims database was constructed by merging several third- party databases in 1988. During 1992 and 1993, Fibreboard attempted to identify duplicate claims and remove them from the database. It is often not possible to fully identify duplicate claims until the claims are prepared for trial. Fibreboard anticipates additional future adjustments. 5. These averages are for claims where the initial year of exposure is known. 6. Of the claims pending at December 31, 1994, 15,600 were filed on or after August 27, 1993, and will be covered by the Global Settlement, if approved.
-------------------------------------------------------------------------------- Insurance Coverage for Personal Injury Claims: During 1993, Fibreboard entered into a settlement agreement with Continental Casualty Company (Continental) and Pacific Indemnity Company (Pacific) (the Insurance Settlement). In addition, Fibreboard, Continental, Pacific and plaintiffs' representatives entered into a settlement agreement (the Global Settlement). These agreements are interrelated. Final court approval of the agreements is required. Fibreboard believes trial court approval could occur during the first half of 1995, but if appealed, it may be 1996 or later before final court approval could be obtained. If both the Global Settlement and Insurance Settlement are approved, Fibreboard believes its existing and future personal injury asbestos liabilities will be resolved through insurance resources and existing corporate reserves. Fibreboard will contribute $10,000 toward a $1,535,000 settlement trust, which it will obtain from other remaining insurance sources and existing reserves. The Home Insurance company paid $9,892 into the escrow account after December 31, 1994 on behalf of Fibreboard, in satisfaction of an earlier settlement agreement. Fibreboard is obligated to pay $245, which includes interest from the settlement date to December 31, 1994, into the escrow account if the Global Settlement is approved. The remainder of the trust will be funded by Continental and Pacific. The insurers have placed $1,525,000 in an escrow account pending court approval of the settlements. The balance of the escrow account was $1,560,633 at December 31, 1994 after payment of interim expenses associated with the Global Settlement. The trust will be used to compensate "future" plaintiffs, defined as those plaintiffs who had not filed a claim against Fibreboard before August 27, 1993. Such future plaintiffs only source of compensation will be the trust, as an injunction will be entered prohibiting future claims against Fibreboard or the insurers. If the Global Settlement is not approved, but the Insurance Settlement is approved, the insurers will instead provide Fibreboard with up to $2,000,000 to resolve pending and future claims and will pay the deferred payment portion of existing settled claims. While Fibreboard is optimistic, there is no assurance final court approval of either the Global Settlement or the Insurance Settlement can be obtained. If neither the Global Settlement nor the Insurance Settlement is approved, the parties will be bound by the outcome of the insurance coverage litigation and prior settlements with Continental and Pacific, unless other settlements are reached. All insurance proceeds due from other insurers under previous settlements have been received. In the event the settlements discussed above are not approved, Fibreboard believes it has substantial insurance coverage for asbestos-related defense and indemnity costs. Fibreboard's disputes with Continental and Pacific have been the subject of litigation which began in 1979. Trial court judgments rendered in 1990 give Fibreboard virtually unlimited insurance coverage for asbestos- related personal injury claims where the initial exposure to asbestos occurred prior to March 1959. Under the judgments, these insurers can be required to pay up to $500 for each occurrence (defined as each individual claim) with no limitation on the aggregate number of occurrences. The insurers appealed to the California Court of Appeal. Among other issues, Continental disputed the definition of an occurrence under its policy as well as the trigger and scope of coverage as determined by the trial court, while Pacific argued that its policy contained an aggregate limit as well as disputing the trigger and scope of coverage issues. In November 1993, the Court of Appeal issued its ruling on the trigger and scope of coverage issues, confirming the favorable trial court judgments, except the court held the period for coverage would begin at the time of exposure to Fibreboard's asbestos products rather than at the time of exposure to any company's asbestos product, with the presumption that these periods are the same. The insurers have filed petitions for review with the California Supreme Court, which has granted review but not yet scheduled any further activity. At the request of Fibreboard, Continental and Pacific, the Court of Appeal withheld its ruling on the remaining issues while the parties seek approval of the Global and Insurance Settlements. If the Global and/or Insurance Settlements are ultimately approved, Fibreboard and its insurers will seek to dismiss the insurance coverage litigation. Fibreboard has entered into an interim agreement with Continental under which Continental agreed to provide a full defense to Fibreboard on pre-1959 claims and make certain funds available as needed to pay currently due Structured Settlement Obligations and other personal injury defense costs for which Fibreboard does not otherwise have insurance available during the period pending final approval of the Global and/or Insurance Settlement, or if neither is approved, through the ultimate conclusion of the insurance coverage appeal, however long that may take. In exchange for the benefits provided under this agreement, Fibreboard agreed not to settle additional pre-1959 personal injury claims without Continental's consent. If neither the Global Settlement nor the Insurance Settlement are approved and Fibreboard prevails in the appeal of the insurance coverage litigation, Continental has agreed to provide Fibreboard with $315,000 to $425,000 to resolve personal injury claims alleging first exposure to asbestos after March 1959, less any amounts Fibreboard recovers from the Pacific settlement described below. Continental would also continue to have responsibility for all pre-1959 personal injury claims against Fibreboard up to $500 per claim. In March 1992, Fibreboard and Pacific entered into a settlement agreement (the Pacific Agreement). If the Global Settlement or Insurance Settlement is approved, the Pacific Agreement will be of no effect. If neither of the settlements is approved, the Pacific Agreement establishes amounts payable to Fibreboard if the trial court judgments are upheld. Fibreboard received $10,000 upon signing the agreement and received an additional $10,000 during 1993. In addition, if the judgments are affirmed on appeal, Fibreboard will receive from $80,000 to $105,000 to be used for claims costs for which it does not otherwise have insurance. In the event the trigger and scope of coverage judgments are reversed on appeal, Pacific will owe Fibreboard nothing and will have a right to repayment of interim funds previously advanced. Fibreboard believes amounts available under the settlements discussed above will be adequate to fund defense and indemnity costs until the insurance coverage appeal is concluded, whether as a result of the final approval of the Global and/or Insurance Settlements or the final resolution of the insurance coverage litigation. Liability Quantification: At the end of 1991, Fibreboard attempted to quantify its liability for asbestos-related personal injury claims then pending as well as anticipated to be received through the end of the decade. There are many opportunities for error in such an exercise. Assumptions concerning the number of claims to be received, the disease mix of pending and future claims and projections of defense and indemnity costs may or may not prove correct. Fibreboard's assumptions are based on its historical experience, modified as appropriate for anticipated demographic changes or changes in the litigation environment. Notwithstanding the inherent risk of significant error in such a calculation, Fibreboard estimated that the amount necessary to defend and dispose of asbestos-related personal injury claims pending at December 31, 1991 and anticipated through the end of the decade plus the costs of prosecuting its insurance coverage litigation would aggregate $1,610,000. Because of the dynamic nature of this litigation, it is more difficult to estimate how many personal injury claims will be received after 1999 as well as the costs of defending and disposing of those future claims. Consequently, Fibreboard's estimated liability contains no amounts for personal injury claims received after the end of the decade, although it is likely additional claims will be received thereafter. Fibreboard determined it was probable that it would ultimately receive insurance proceeds of $1,584,000 for the defense and disposition of the claims quantified above. Fibreboard's opinion was based on its understanding of the disputed issues, the financial strength of the insurers and the opinion of outside legal counsel regarding the outcome of the insurance coverage litigation. As a result, Fibreboard recorded a liability, net of anticipated insurance proceeds, of $26,000 at December 31, 1991, representing its best estimate of the unreimbursed cost of resolving personal injury claims then pending and anticipated through the remainder of the decade as well as the costs of prosecuting the insurance coverage litigation. Although there likely will be claims filed beyond the end of the decade, these have not been estimated. During 1994, 1993 and 1992, unreimbursed costs of $2,211, $1,802 and $4,729 were charged against this reserve. Fibreboard continues to believe it is probable that it will ultimately receive insurance proceeds of $1,584,000 for the defense and disposition of the asbestos-related personal injury claims quantified above. Although Fibreboard, its insurers and plaintiffs' representatives entered into the Insurance and Global Settlements discussed above, Fibreboard does not believe these settlements impact its estimate of liability through the end of the decade, and no additional events have transpired during 1994 which indicate the potential liability and insurance proceeds estimates should be changed. Consequently, no adjustment has been made to the estimated liability for personal injury claims through the end of the decade or anticipated insurance proceeds. Fibreboard will continue to reevaluate its estimates and will make adjustments to the effect dictated by changes in the personal injury litigation. Asbestos-in-Buildings Liabilities: Fibreboard does not believe it is presently possible to reasonably estimate potential liabilities for asbestos-in-buildings claims, if any. Fibreboard believes that its asbestos-containing products, properly used, cause no damage to buildings. Further, Fibreboard can frequently identify its asbestos- containing products and aggressively pursues dismissals of claims where its products are not identified. To date, Fibreboard has been very successful in obtaining dismissals, and has won the only trial which went to verdict and won a defense verdict on product identification and cost of abatement issues in another trial in which further proceedings are scheduled. Fibreboard has settled five asbestos-in-buildings claims, including settlement agreements in the National Schools class action and another class action, for $2,020. The class action settlements are subject to court approval. Further, although personal injury claims have similar characteristics, the same cannot be said for asbestos-in-buildings claims. Each claim can involve from one to several thousand buildings, each of which may vary as to age, ability to identify various producers products contained in the building as well as the extent of a producer's product present, building use, difficulty of abatement (if required) and so on. Thus, while extrapolation of personal injury claims disposition experience may provide useful information for estimating future personal injury liability, such an analysis cannot be applied to asbestos-in- buildings claims. Trials in some of the pending asbestos-in-buildings claims are likely to occur over the next few years. To date Fibreboard has successfully defended these claims, or settled the claims for nominal amounts compared to the damages sought. Based on its experience to date, Fibreboard believes the ultimate resolution of asbestos-in-buildings claims will not have a material adverse effect on its financial condition. Insurance for Asbestos-in-Buildings Claims: Fibreboard has reached final settlements with four of its primary insurers and several of its excess level insurers. The settlements confirm more than $295,000 of insurance as needed to defend and dispose of asbestos-in-buildings claims, of which $6,400 has been used through December 31, 1994. Fibreboard is also litigating with its remaining insurance carriers and believes the total limits of insurance policies in effect from 1932 to 1985 which may provide coverage for asbestos-in-buildings claims, aggregate approximately $390,000 (including the $295,000 referred to in the prior paragraph), which is in addition to the personal injury insurance coverage and does not include additional policies which contain no aggregate limit. The remaining insurers dispute coverage. To date substantially all of Fibreboard's costs of defending asbestos-in-buildings claims have been paid by insurance. Fibreboard is seeking a declaration that the underlying asbestos-in- building claims are covered under various insurance policies. Barring settlement, final resolution of the insurance available for asbestos- in-buildings claims may not be known for some time as an appeal of the trial court decision is likely. The trial has been continued. No date has been set for the trial to recommence. Fibreboard is continuing settlement discussions with the remaining insurers. EVENTS IMPACTING ASBESTOS-RELATED LIABILITIES A number of events could impact Fibreboard's ability to continue to manage its asbestos-related liabilities within available resources. The potential impact of the personal injury issues which follow are largely dependent on whether the Global and/or Insurance Settlements are approved. Insurance Assignment Program: During 1991, Fibreboard introduced its Insurance Assignment Program as a settlement vehicle for large groups of claims. Under this program, the plaintiffs accept an assignment of Fibreboard's right to insurance monies from Continental as complete settlement of their claims against Fibreboard. Consequently, these settlements involve no cash payments by Fibreboard. This contrasts with settlements under Fibreboard's Structured Settlement Program, in existence since 1988, wherein partial payments are made by Fibreboard using insurance funds with the remainder of the settlement deferred pending resolution of insurance coverage. The settlement agreements entered into to date under the Insurance Assignment Program do not require Fibreboard to pay cash unless insurance proceeds are ultimately not available. Additional provisions of certain settlement agreements provide that Fibreboard and the plaintiffs return to the "status quo" existing prior to settlement if certain specified court actions are not obtained. The plaintiffs have a right to return to the status quo should Continental declare bankruptcy prior to the final resolution of the personal injury insurance coverage litigation. During 1992, Fibreboard obtained widespread acceptance of this program to resolve large numbers of pending and not yet filed claims. Most of the assignment agreements have subsequently been converted to three-party agreements among Fibreboard, Continental and the plaintiffs. A 1992 judicial determination in California state court supporting the right of Fibreboard to settle claims via the Insurance Assignment Program was reversed by the appellate court in 1994. Fibreboard does not believe this reversal will have an adverse impact on the resolution of its asbestos-related personal injury liabilities. Insurance Assignment Program and three-party settlements are recorded as a liability when the settlement is executed. A corresponding asset for anticipated insurance proceeds is also recorded. This accounting treatment differs from the handling of unresolved claims, where no gross liability is recorded until such time as the claim is settled. Structured Settlement Program: Beginning in 1988, Fibreboard has used its Structured Settlement Program (SSP) to settle personal injury claims. Under the SSP, Fibreboard and the plaintiff agree to a settlement amount. Fibreboard agrees to pay 40% of the settlement amount of pre-1959 claims in cash, and the remainder is deferred until September 1, 1996 or upon approval of the Global and/or Insurance Settlements. Settlements of post-1959 claims result in deferring 100% of the settlement amount. As a consequence of the insurance settlements with Continental and Pacific in 1993, the SSP now has been superseded by three-party agreements among Continental, Fibreboard and the plaintiffs, whereby Continental or Fibreboard agrees to pay certain amounts depending upon the resolution of the insurance coverage case or the final approval or disapproval of the Global and Insurance Settlements. These three-party agreements typically provide a partial cash payment from Continental on pre-1959 claims. Oher Issues (Asbestos-in-Buildings Claims): Many asbestos-in-buildings claims allege a conspiracy and/or concert of action theory which assert, among other things, that the asbestos producers withheld information regarding the potential danger of asbestos. If this theory prevails at trial, it could eliminate the requirement that the plaintiff positively identify Fibreboard's products as present in buildings in trials where the conspiracy theory is alleged. The conspiracy theory has not yet been tested in trial against Fibreboard, although Fibreboard believes it has meritorious defenses. Other Issues (Punitive Damage Claims): Most of the personal injury claims and many of the asbestos-in-buildings actions also seek punitive damages. Fibreboard has not paid any punitive damages judgments except when funded by insurance. It is uncertain whether punitive damages would be covered by insurance as the law in this area varies from state to state. During 1991, Fibreboard received a ruling by the 9th Circuit Court of Appeal that punitive damages awarded by the Cimino jury in Texas and by a West Virginia jury in a consolidated trial similar to Cimino were covered by insurance. However, this ruling may have limited applicability in view of the varying state rules regarding punitive damage awards. RESOURCES AVAILABLE FOR ASBESTOS-RELATED COSTS Under the terms of the interim agreement, Continental will provide a full defense to Fibreboard on pre-1959 claims and make certain funds available as needed to pay currently due Structured Settlement obligations and other personal injury defense costs for which Fibreboard does not have insurance available during the period pending final approval of the Global and/or Insurance Settlement, or if neither is approved, through the ultimate conclusion of the insurance coverage appeal, however long that may take. At December 31, 1994, Fibreboard had $1,062 in cash on hand restricted for asbestos-in-buildings- related expenditures. At December 31, 1994, $6,878 was due in 1995 to asbestos claimants who had accepted Structured Settlement Program obligations and will be paid by Continental under the interim agreement. Fibreboard believes restricted cash on hand, amounts available under the interim agreement with Continental and amounts available under settlement agreements with Fibreboard's asbestos-in- buildings insurers will be adequate to fund defense and indemnity costs of personal injury and asbestos-in-buildings claims plus any amounts due under current and future Structured Settlement Program settlements. 15. OTHER LITIGATION AND CONTINGENCIES Fibreboard has been named as a potentially responsible party in two separate landfill clean-ups in the state of California, the Operating Industries, Inc. landfill in Monterey Park and the GBF landfill in Pittsburg. In addition, Fibreboard has been named as a defendant in a private party lawsuit seeking to recover costs of clean-up and remediation of the Acme landfill in Martinez, California. In all cases, Fibreboard's former container products division was responsible for materials deposited at the landfills. Fibreboard is working with the steering committees of each site to determine Fibreboard's allocable share of investigation and remediation costs. Fibreboard has established a reserve against which the costs of study and cleanup, as well as ongoing legal and steering committee administrative costs, will be charged. The amount of the reserve was increased by $986 in 1992 to account for the addition of the Acme landfill contingency and to reflect more current remediation cost estimates for the GBF landfill. As of December 31, 1994, the reserve had a remaining balance of $1,627. Fibreboard believes its litigation reserves will be adequate to cover its remaining costs associated with these landfill sites. Fibreboard is involved in a number of additional disputes arising from its operations. Fibreboard believes resolution of these disputes will not have a material adverse impact on its financial condition or results of operations. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Fibreboard Corporation: We have audited the accompanying consolidated balance sheets of Fibreboard Corporation (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fibreboard Corporation and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in more detail in Note 14 to the accompanying financial statements, Fibreboard has been subject to significant asbestos-related litigation and claims allegedly caused by products that the Company manufactured prior to 1972. The amounts involved are substantial. During 1993, Fibreboard, its insurance carriers, and counsel for personal injury claimants entered into agreements which, if finally approved by the court, would resolve the Company's asbestos-related personal injury liabilities within available insurance and existing reserves. However, if these agreements are not approved by the court, the ultimate resolution of these claims and litigation could be materially adverse to Fibreboard causing a substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that Fibreboard will continue as a going concern and do not include any adjustments that might result from the final resolution of these asbestos-related uncertainties. Arthur Andersen LLP San Francisco, California, February 1, 1995. REPORT OF MANAGEMENT The objectivity and integrity of the consolidated financial statements are the responsibility of Fibreboard Corporation management. To discharge this responsibility, management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded and that accounting records are reliable. Management supports an internal audit program to provide assurance that the system of internal controls is operating effectively. The consolidated financial statements and notes thereto and other financial information included in this annual financial report have been prepared by management in accordance with generally accepted accounting principles, and by necessity include some items determined using management's best judgment, tempered by materiality. The Board of Directors discharges its responsibility for reported financial information through its Audit Committee. This Committee, composed of all outside directors, meets periodically with management, the internal audit department and Arthur Andersen LLP to review the activities of each. John D. Roach James P. Donohue Chairman, President and Senior Vice President, Chief Executive Officer Finance and Administration Garold E. Swan Vice President and Controller FIBREBOARD CORPORATION AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA (DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE) (UNAUDITED)
Gross Net Earnings Per Share Quarter Net Sales Margin Income (Fully Diluted) ------- --------- ------ ------ ------------------ 1994 ---- 1st $ 86,300 $19,526 $ 7,458 $1.66 2nd 59,608 6,935 2,105 .47 3rd 80,393 11,655 13,015(1,2) 2.90 4th 137,404 30,387 4,457(2) .99 -------- ------- ------- TOTAL $363,705 $68,503 $27,035 6.01 -------- ------- ------- -------- ------- ------- 1993 ---- 1st $ 74,894 $16,741 $ 6,420 $1.47 2nd 65,021 10,617 3,370 .77 3rd 59,136 6,393 1,188 .26 4th 66,159 6,245 735 .16 -------- ------- ------- TOTAL $265,210 $39,996 $11,713 $2.62 -------- ------- ------- -------- ------- ------- (1) Includes a pre-tax gain of $18,858 on the sale of non-essential timberlands. (2) Includes the results of operations of Norandex Inc. acquired on August 31, 1994.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to the Directors of Fibreboard is incorporated herein by reference from "Election of Directors" and "Directors Not Standing for Election" of Fibreboard Corporation's Proxy Statement to be filed pursuant to Regulation 14A not later than April 30, 1995. See also "Executive Officers of the Registrant" in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information with respect to Executive Compensation is incorporated herein by reference from "Compensation of Directors" and "Executive Compensation" of Fibreboard's Proxy Statement to be filed pursuant to Regulation 14A not later than April 30, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to Security Ownership of Certain Beneficial Owners and Management is incorporated herein by reference from "Security Ownership of Management and Principal Stockholders" of Fibreboard's Proxy Statement to be filed pursuant to Regulation 14A not later than April 30, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS FILED IN THIS REPORT. 1. Index to Financial Statements and Supplementary Data. See page 20. 2. Index to Financial Statement Schedules. See page 51. 3. The following exhibits are filed as part of this Form 10-K: EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- --------------------------------------------- 3.1 Fibreboard's Restated Certificate of Incorporation (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 3.2 Fibreboard's Restated Bylaws as amended June 8, 1993 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993). 4.1 Specimen Common Stock Certificate, $.01 par value (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 4.2 Rights Agreement dated as of August 25, 1988 between Fibreboard Corporation and Bank of America, N.T.&S.A. as Rights Agent (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated August 25, 1988). 4.2.1 Amendment No. 1 to Rights Agreement, dated as of February 11, 1994, between Fibreboard Corporation and The First National Bank of Boston (incorporated herein by reference from Fibreboard Corporation's Form 8-A/A dated February 15, 1994). 10.1* Form of Indemnification Agreement between Fibreboard Corporation and each director and officer of Fibreboard Corporation (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 10.2 Asset Purchase Agreement dated February 22, 1988, between Fibreboard Corporation and Gaylord Container Corporation (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 10.3 Fibreboard Corporation Restated 1988 Employee Stock Option and Rights Plan (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992). 10.3.1 Amendment No. 1 to Fibreboard Corporation Restated 1988 Employee Stock Option and Rights Plan (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994). 10.4 Form of Fibreboard Corporation Profit Sharing 401(k) Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 47 10.5 Fibreboard Corporation 1988 Employee Stock Purchase Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1988). 10.5.1 Prospectus Supplement (Appendix) to Registration Statement on Form S-8 No. 33-26449 for Shares issuable under the Fibreboard Corporation 1988 Employee Stock Purchase Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1989). 10.6 Agreement of Compromise, Settlement and Release dated May 27, 1987, between Fibreboard Corporation and The Home Insurance Company (incorporated herein by reference from Fibreboard Corporation's Registration Statement on Form 10 dated May 23, 1988, as amended on June 28, 1988). 10.6.1 Agreement dated February 6, 1995 between Fibreboard Corporation and The Home Insurance Company. 10.7 Fibreboard Corporation Structured Settlement Program Description dated November 8, 1988 (incorporated herein by reference from Fibreboard's Current Report on Form 8-K dated November 8, 1988). 10.8 Form of Structured Settlement Agreement (incorporated herein by reference from Fibreboard's Current Report on Form 8-K dated November 8, 1988). 10.9 Form of Stipulation Regarding Settlement Negotiations and Right to Alternative Dispute Resolution (incorporated herein by reference from Fibreboard's Current Report on Form 8-K dated November 8, 1988). 10.10 Amended and Restated Trust Agreement dated September 29, 1989 by and among Fibreboard Corporation, the Trustees and the Directors and Officers of Fibreboard (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1989). 10.11 Consulting/Sales Representation Agreement dated February 20, 1989 between Distribution International and Pabco Metals Corporation, a wholly-owned subsidiary of Fibreboard Corporation (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated February 20, 1989). 10.12* Summary description of Fibreboard Corporation incentive compensation arrangements (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1993). 10.13* Amended and Restated Employment Agreement dated January 1, 1995 between Fibreboard Corporation and John D. Roach. 10.14 Amended and Restated Credit Agreement dated September 29, 1994 among Fibreboard Corporation, as Borrower, Certain Commercial Lending Institutions and Bank of America National Trust and Savings Association, as Administrative Co-Agent and Collateral Co-Agent (incorporated herein by 48 reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994). 10.14.1 First Amendment to Amended and Restated Credit Agreement, dated as of March 10, 1995, among Fibreboard Corporation, Bank of America National Trust and Savings Association, as administrative co-agent for the Lenders and as collateral co-agent for the Lenders, and the several financial institutions party to the Credit Agreement. 10.15 Stock Purchase Agreement among Noranda Aluminum, Inc., Norandex Inc. and Fibreboard Corporation dated as of August 31, 1994 (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated August 31, 1994). 10.16* Form of Severance Agreement dated January 1, 1992 between Fibreboard Corporation and Messrs. Donohue, Costello, Douglas, DeMaria, Elliott and Swan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1991). 10.17 Agreement and related documents dated March 27, 1992 between Fibreboard Corporation and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1991). 10.18 Rescission of Insurance Policies dated March 27, 1992 between Fibreboard Corporation and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1991). 10.19* Amended and Restated Fibreboard Corporation Supplemental Retirement Plan. 10.20 Settlement Agreement dated January 1, 1993 between Fibreboard Corporation and Continental Casualty Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.21 Settlement Agreement dated January 1, 1993 between Fibreboard Corporation and Fireman's Fund Insurance Company, Insurance Company of North America and Royal Insurance Company (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.22 Settlement Agreement between Fibreboard Corporation and American Home Assurance Company, et al (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1992). 10.23 Agreement of Purchase and Sale between Fibreboard Corporation and Sierra Ski Ranch, Inc. dated as of June 11, 1993 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1993). 49 10.24 Settlement Agreement among Fibreboard Corporation, Continental Casualty Company and Ness, Motley, Loadholt, Richardson & Poole and certain affiliated law firms dated as of August 5, 1993 (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 1993). 10.25 Agreement between Fibreboard Corporation and Continental Casualty Company dated April 9, 1993 (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated April 9, 1993). 10.26 Loan Agreement dated May 3, 1993 between First Interstate Bank of Nevada, N.A. and Trimont Land Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1993). 10.27 Loan Agreement dated September 17, 1993 between First Interstate Bank of Nevada, N.A. and Sierra-at-Tahoe and Trimont Land Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1993). 10.28 Settlement Agreement dated October 12, 1993 among Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended September 30, 1993). 10.29 Supplemental Agreement dated October 12, 1993 between Fibreboard Corporation and Continental Casualty Company (pursuant to Rule 24b- 2 promulgated under the Securities Exchange Act of 1934, as amended, confidential treatment has been requested for this exhibit. This agreement has been placed under court seal.) 10.30 Global Settlement Agreement among Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company, Pacific Indemnity Company and The Settlement Class, together with Exhibits A-E (incorporated herein by reference from Fibreboard Corporation's Current Report on Form 8-K dated December 23, 1993). 10.30.1 Amendment No. 1 to the Global Settlement Agreement, dated December 15, 1994, by and among The Settlement Class, Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company, Pacific Indemnity Company and the Trustees of the Fibreboard Asbestos Compensation Trust. 10.30.2 Amendment No. 2 to the Global Settlement Agreement, dated February 6, 1995, by and among the Settlement Class, Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company. 50 10.30.3 Amendment No. 1 to the Escrow Agreement, dated February 6, 1995, by and among Continental Casualty Company, Pacific Indemnity Company, Fibreboard Corporation and The First National Bank of Chicago. 10.31 Agreement dated March 1994 among Representative Plaintiffs, Fibreboard Corporation, Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company and Pacific Indemnity Company (incorporated herein by reference from Fibreboard Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 19943). 10.32 Settlement Agreement dated October 28, 1994 between Fibreboard Corporation, CIGNA Specialty Insurance Company, Central National Insurance Company of Omaha, Century Indemnity Company, CIGNA Property and Casualty Insurance Company and Insurance Company of North America (pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended, confidential treatment has been requested for this exhibit). 10.33* Fibreboard Corporation Long-Term Equity Incentive Plan (incorporated herein by reference from Fibreboard Corporation's Annual Report on Form 10-K for the year ended December 31, 1993). 21. Fibreboard Corporation Subsidiaries. 23. Consent of Arthur Andersen LLP * Denotes management contract or compensation plan identified pursuant to Item 14(a)(3) of Form 10-K. (b) REPORTS ON FORM 8-K No Current Reports on Form 8-K were filed during the period October 1, 1994 to December 31, 1994. INDEX TO FINANCIAL STATEMENT SCHEDULES TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 Schedule Page -------- ---- III Valuation and qualifying accounts for each 52 of the three years in the period ended December 31, 1993 Report of independent public accountants on 53 financial statement schedules. 51 FIBREBOARD CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31 (000'S Omitted)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- -------- -------- -------- -------- ADDITIONS BALANCE AT CHARGED TO UNCOLLECTIBLE BALANCE BEGINNING COSTS AND ACCOUNTS AT END DESCRIPTION OF PERIOD EXPENSES WRITTEN OFF OTHER(A) OF PERIOD ----------- --------- -------- ----------- -------- --------- 1992 ---- Reserve for: Doubtful accounts 687 225 (287) -- 625 Asbestos-related costs 26,026 -- -- (4,729) 21,297 1993 ---- Reserve for: Doubtful accounts 625 615 (538) -- 702 Asbestos-related costs 21,297 -- -- (1,802) 19,495 1994 ---- Reserve for: Doubtful accounts 702 569 (310) 1,391 2,352 Asbestos-related costs 19,495 -- -- (2,211) 17,284 (a) Consists of reserve for doubtful accounts of acquired company and asbestos- related payments.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Stockholders of Fibreboard Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Fibreboard Corporation included in this Form 10-K, and have issued our report thereon dated February 1, 1995. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the significant uncertainty surrounding the asbestos claims that have been filed against the Company as discussed in Note 14 to the financial statements. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedule II, Valuation and Qualifying Accounts, is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP San Francisco, California February 1, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIBREBOARD CORPORATION ---------------------- (Registrant) Dated: March 24, 1995 By: /s/ John D. Roach -------------------- John D. Roach Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated: Name Title Date ------------------------- ----------------- ----------- /s/ John D. Roach Chairman, President, March 24, 1995 ------------------------- Chief Executive Officer John D. Roach and Director (Principal Executive Officer) /s/ James P. Donohue Senior Vice President, March 24, 1995 ------------------------- Finance and Adminis- James P. Donohue tration and Chief Financial Officer (Principal Financial Officer) /s/ Garold E. Swan Vice President and March 24, 1995 ------------------------- Controller (Principal Garold E. Swan Accounting Officer) /s/ Philip R. Bogue Director March 24, 1995 ------------------------- Philip R. Bogue Name Title Date ------------------------- ----------------- ----------- /s/ William D. Eberle Director March 24, 1995 ------------------------- William D. Eberle /s/ G. Robert Evans Director March 24, 1995 ------------------------- G. Robert Evans /s/ George B. James Director March 24, 1995 ------------------------- George B. James /s/ John W. Koeberer Director March 24, 1995 ------------------------- John W. Koeberer /s/ James F. Miller Director March 24, 1995 ------------------------- James F. Miller EX-10.6-1 2 EXHIBIT 10.6.1 EXHIBIT 10.6.1 AGREEMENT This Agreement is entered into as of February 6, 1995 between Fibreboard Corporation ("Fibreboard") and The Home Insurance Company ("Home") (collectively the "Parties"). WHEREAS, under date of May 27, 1987, the Parties entered into an "Agreement of Compromise, Settlement and Release" relating to asbestos personal injury claims; and WHEREAS, under date of December 23, 1993, Fibreboard entered into a "Global Settlement Agreement" with Continental Casualty Company, CNA Casualty Company of California, Columbia Casualty Company, Pacific Indemnity Company and a Settlement Class relating to asbestos personal injury claims; and WHEREAS, in connection with the Global Settlement Agreement the settling parties established an escrow pursuant to an "Escrow Agreement"; and WHEREAS, the Global Settlement Agreement and Escrow Agreement have been recently amended in the form attached hereto as Exhibit 1: NOW THEREFORE, the Parties agree as follows: 1. On or before February 10, 1995, Home will pay into the Escrow Account the amount of $9,892,223 (the "Principal Amount") together with simple interest on said amount at the rate of 3.085% from and after January 1, 1994 until the date of payment as a separate escrow fund ("New Escrow Fund"). 1. 2. In accordance with the Escrow Agreement, as amended, the amounts paid by Home into the New Escrow Fund will be held as a separate fund in the Escrow Account and will earn interest in accordance with the terms of the Escrow Agreement. Neither the amounts paid into the New Escrow Fund nor any interest earned thereon shall be used to make any of the distributions permitted under Section 5(b) of the Escrow Agreement. 3. At such time as the Escrow Account terminates, the amounts held in the New Escrow Fund by Home and interest thereon will be paid as follows: a. In the event of a Global Approval Judgment as defined in the Global Settlement Agreement, the amounts in the New Escrow Fund will be paid to the Trust established under Article 5 of the Global Settlement Agreement. b. In the event of Global Court Disapproval as defined in the Global Settlement Agreement, the amount in the New Escrow Fund will be paid to Home. 4. The payments by Home pursuant to this Agreement shall be deemed to be payments under the Parties' May 27, 1987 agreement. In the event of Global Approval Judgment, Home's obligations under the May 27, 1987 agreement shall be deemed satisfied. In the event amounts are paid back to Home under paragraph 3.b above, any portion of the Principal Amount repaid to Home will be made available to Fibreboard under and in accordance with the terms of the May 27, 1987 agreement. 2. 5. Fibreboard will cause to be entered a dismissal without prejudice as against The Home Insurance Company in FIBREBOARD V. CONTINENTAL CASUALTY COMPANY, No. 844903, pending in the Superior Court of the State of California, County of San Francisco. FIBREBOARD CORPORATION Dated: 2/6 , 1995 By /s/ Michael R. Douglas ----------- --------------------------- Michael R. Douglas Senior Vice President and General Counsel THE HOME INSURANCE COMPANY Dated: 3/1 , 1995 By /s/ James F. Duhig ----------- --------------------------- James F. Duhig Assist. Vice President 3. EX-10.13 3 EXHIBIT 10.13 EXHIBIT 10.13 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made effective as of January 1, 1995 by and between FIBREBOARD CORPORATION, a Delaware corporation (the "Company"), and John D. Roach ("Executive"). WHEREAS, the parties hereto have entered into an Employment Agreement dated July 2, 1991; and WHEREAS, the parties hereto desire to amend and restate the Employment Agreement on the terms set forth herein. IN CONSIDERATION of the terms and mutual covenants contained herein, the parties hereto agree as follows: 1. CONTINUING EMPLOYMENT. The Company agrees to employ Executive, and Executive agrees to continue in the employ of the Company on the terms and conditions hereinafter set forth. 2. TERM. A. This Agreement, as amended and restated, shall take effect as of January 1, 1995 (the "Effective Date") and shall continue until December 31, 1996, unless extended under the provisions of Subsection 2(B). B. This Agreement shall automatically be renewed for a two-year term at the expiration of each calendar month after the Effective Date, unless the Board of Directors of the Company or Executive provides notice to the other party at least sixty (60) days prior to the end of any month that the Agreement will not be renewed. If such notice is given, the term of employment under this Agreement shall end two (2) years following the expiration of the first calendar month that ends at least sixty (60) days following the date of such notice. In such event, Executive's reasonable efforts during the remaining term of this Agreement to obtain other employment effective upon the end of the term of this Agreement shall not be deemed to violate the requirements of Section 4 hereof. The terms and conditions of Executive's employment during such extended term shall remain as set forth herein. 3. POSITION. Executive shall hold the positions of Chairman of the Board, President and Chief Executive Officer of the Company, and shall have the powers and responsibilities consistent with such positions. Executive will have general charge of the day-to-day management and operations of the Company. Executive shall also perform all duties which from time to time are assigned to him by the Company's Board of Directors, and shall provide the Board with periodic reports upon request. Executive's services shall be performed at the location of the Company's corporate headquarters immediately preceding the Effective Date ("current location") or at a location within a fifty (50) mile radius of the current location, unless otherwise mutually agreed upon by the parties. At the pleasure of the Company's shareholders, Executive agrees to serve as a Director on the Company's Board of Directors at no additional compensation. 4. DUTIES. During the period of employment with the Company, Executive shall faithfully perform the duties of his position and devote full time, attention, skill and best efforts to such duties. Such duties are to be conducted in accordance with generally accepted prudent business practices and in compliance with the business policies of the Company. Executive shall not engage in any other employment (including consulting services) during the term of this Agreement, without the specific written consent of the Company. Notwithstanding the foregoing, Executive may serve as a non-employee director of other public or private companies or other entities provided that such service does not violate the requirements of Section 8 of this Agreement. 5. COMPENSATION. For all services rendered by Executive under this Agreement, the Company shall compensate Executive as described below: A. BASE SALARY. Executive's current Base Salary is $410,000 per annum. Executive's Base Salary may increase from time to time as determined by the Company's Board of Directors. Any such increase in Executive's Base Salary shall be reflected in an appendix to this Agreement signed by Executive and the Chairman of the Company's Compensation Committee. Executive shall receive his Base Salary in equal installments in accordance with the Company's current payroll practices. B. BONUS AND INCENTIVE PROGRAMS. Executive shall participate in (i) the Company's Annual Cash Incentive Program, or other bonus program which shall offer Executive the opportunity to earn an annual bonus of up to 130% of his Base Salary, based on performance criteria mutually set by Executive and the Board of Directors of the Company, and (ii) any other bonus or incentive programs or arrangements provided by the Company from time to time to senior executive officers, on such terms as may be determined by the Board of Directors of the Company. C. EMPLOYEE BENEFITS AND PERQUISITES. Executive shall be entitled to and shall receive all other benefits and conditions of employment, including health, life and 2 disability insurance, generally available to the senior officers of the Company, provided that Executive's entitlement to severance and other benefits in the event of the termination of his employment shall be governed by Section 6 of this Agreement. Executive shall also be entitled to such perquisites (other than those the subject of which is expressly addressed herein) as are provided to the other senior officers of the Company and/or are provided to chief executive officers of comparable companies. D. VACATION. Executive shall be entitled to paid vacation during the term of this Agreement in accordance with the Company's vacation policy for senior executives, subject to a minimum of four (4) weeks paid vacation per year. 6. CONSEQUENCES OF TERMINATION OF EMPLOYMENT BEFORE END OF TERM. A. DEATH OR DISABILITY. If Executive's employment is terminated by reason of death or Permanent Total Disability (as defined below), Executive, or Executive's estate, as the case may be, shall be entitled to (i) the full compensation which Executive would have received hereunder up to the date of such termination by reason of death or Permanent Total Disability, including the bonus payments provided for under Subsection 6C(4) below, and (ii) such benefits as are determined in accordance with the Company's employee benefit plans. As used herein, "Permanent Total Disability" is defined as follows: If at the end of any month Executive then is, and has been for six (6) consecutive full calendar months then ending, or eighty (80) or more of the normal working days during the twelve (12) consecutive full calendar months then ending, unable to perform his duties under this Agreement in the normal and regular manner due to mental or physical illness or injury, Executive will be deemed to be in a state of Permanent Total Disability. Any determination of such inability to perform shall be made only by the Board of Directors of the Company with such professional advice as they deem appropriate. Such determinations shall be final and conclusive. B. TERMINATION BY THE COMPANY FOR CAUSE. Nothing herein shall prevent the Company from terminating Executive's employment for Cause. In such event, Executive shall be 3 entitled to no further compensation hereunder and shall be entitled only to such benefits as are determined in accordance with the Company's employee benefit plans. As used herein, "Cause" shall mean (i) any act of fraud in the performance of Executive's duties hereunder, (ii) conviction of any felony, (iii) engaging in any action with the intention of causing serious detriment to any of the operations of the Company or to any of its subsidiaries, or (iv) willful and continued failure of Executive to substantially perform his duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness (habitual drunkenness or abuse of drugs or controlled substances not being considered a physical or mental illness for purposes of this paragraph)). C. TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE; CHANGE OF CONTROL. (1) TERMINATION OTHER THAN FOR CAUSE. The Company may terminate Executive's employment prior to the end of the term of this Agreement for any reason. If before the end of the term of this Agreement, either (i) Executive's employment is terminated by the Company for reasons other than Permanent Total Disability (as defined in Subsection 6 A) or Cause (as defined in Subsection 6 B), or (ii) Executive voluntarily terminates his employment for Good Reason (as defined in Subsection 6 C (6) below), the Company agrees (a) to pay Executive a severance payment equal to (i) One Year's Compensation, as defined below and (ii) the bonus payments provided for under Subsection 6 C(4) below. Payment will be made in a single lump sum within thirty (30) days following the date of termination of employment; (b) to retain Executive to provide, and Executive agrees to provide, services as a consultant to the Company during the twelve month period following the date of termination of employment ("Consulting Period"), in consideration for which services Executive shall be entitled to receive One Year's Compensation, payable in monthly installments; (c) to continue Executive's participation and coverage for a period of two years from the date of termination under all of the Company's life, medical, dental, and disability plans, and all fringe benefit plans and programs in 4 which Executive is participating immediately prior to such date of termination ("Insurance Benefits"), under the same coverages and on the same terms as in effect immediately prior to the date of termination, provided that if his continued participation is not possible under the general terms and provisions of such plans and programs, the Company shall arrange to provide him with substantially similar benefits; and (d) that (i) any outstanding options to purchase shares of Company stock, related stock appreciation rights and phantom stock units will vest immediately and become immediately exercisable, and the Company shall issue stock to Executive pursuant to any previously awarded restricted share rights, and (ii) all of Executive's non-qualified deferred compensation or retirement benefits, including benefits accrued under the Company's Supplemental Retirement Plan, if any, will vest and be paid out immediately to the extent permitted by the relevant plan documents and related award documents with respect thereto. During the Consulting Period, Executive shall be reasonably available to the executive officers of the Company for consultation on any and all policy or technical questions within his knowledge and experience. It is understood that Executive shall be obligated to devote to such consultation only a portion of his time, which shall not be so great as to preclude him from engaging in other business activities or employment. Notwithstanding Section 4 hereof, Executive is specifically permitted to engage in other employment, subject, however, to Section 8 of this Agreement, which shall remain in force during the period in which Executive is available as a consultant pursuant to this subsection. The Board of Directors in its discretion may at any time accelerate the monthly payments for consulting services, in which case Executive's obligation to provide consulting services shall cease. Executive and Company agree that Executive's services as a consultant are, by reason of his extensive technical and managerial skill and experience with the Company's business and in the field in which the Company operates, of a special, unique, extraordinary and intellectual character, the loss of which by the Company would not be capable of adequate compensation in damages. The severance benefits and consulting compensation payable hereunder will be in lieu of all other severance payments and other benefits to which Executive might otherwise be entitled from the Company. 5 (2) TERMINATION AFTER CHANGE OF CONTROL. If either (i) Executive's employment is terminated by the Company for any reason, other than Permanent Total Disability or Cause, within two (2) years following a Change of Control, or (ii) Executive voluntarily terminates his employment for any reason within two (2) years following a Change of Control: (a) The Company will pay Executive a severance payment, in lieu of the severance payment and consulting arrangement described in Section 6 C (1), equal to (i) two times One Year's Compensation and (ii) the bonus payments provided for under Subsection 6 C(4) below. Payment will be made in a single lump sum within thirty (30) days following the date of termination; (b) The Company will provide to Executive the benefits set forth in Sections 6 C (1) (c) and (d) above; and (c) The foregoing severance benefits will be in lieu of all other severance payments and other benefits to which Executive might otherwise be entitled from the Company. (3) ONE YEAR'S COMPENSATION. For purposes of this Agreement, "One Year's Compensation" shall mean the sum of (i) Executive's current annual Base Salary immediately before such termination (or, in the case of a termination by Executive for Good Reason, his Annual Base Salary in effect immediately before the event constituting Good Reason) and (ii) an amount equal to the product of such Base Salary multiplied by the Average Yearly Bonus Ratio. The "Average Yearly Bonus Ratio" shall be a percentage equal to the average percentage that Executive's bonus for each full calendar year of employment with the Company (commencing January 1, 1992) represents of his annual Base Salary for that year. The Average Yearly Bonus Ratio calculation, as in effect from time to time, shall be set forth in Appendix A. (4) BONUS PAYMENTS FOR YEAR OF TERMINATION AND YEAR PRECEDING TERMINATION. In the event that Executive's employment is terminated by the Company for any reason other than for Cause, or if Executive voluntarily terminates his employment for any reason, the Company shall make the following payments to Executive in addition to any applicable severance benefits provided for hereunder: 6 (a) The Company shall pay Executive a bonus payment equal to the amount determined by multiplying (i) Executive's then current Base Salary, prorated for the number of months during the calendar year of termination actually employed, by (ii) the Average Yearly Bonus Ratio. See Appendix A. (b) If Executive's employment is terminated subsequent to the end of a calendar year but prior to the date that the Board of Directors has determined to award bonuses for such calendar year, the Company shall pay Executive a bonus payment for services provided during such prior calendar year in an amount determined by multiplying Executive's Base Salary for such prior calendar year by the Average Yearly Bonus Ratio. See Appendix A. (5) CHANGE OF CONTROL. For purposes of this Agreement, "Change of Control" shall have the following meaning: (a) The holders of the voting securities of the Company approve a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (b) A plan of complete liquidation of the Company is adopted or the holders of voting securities of the Company approve an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets; or (c) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 ("1934 Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 15% or more of the combined voting power of the Company's then outstanding shares, unless, 7 within 30 business days after notice to the Company of such event, the Board of Directors (as constituted immediately prior to such event) adopts a resolution that for purposes of this Agreement no Change in Control shall have occurred (which resolution may be revoked by the Board of Directors at any time, in which case a Change in Control will be deemed to have occurred as of the date such revocation becomes effective); or (d) During any period of two consecutive years beginning after the date of execution of this Agreement, members who at the beginning of such period constitute the Board of Directors cease for any reason to constitute a majority thereof, unless the election, or nomination for election by the Company's stockholders, of each director is approved by the vote of at least two-thirds of the directors then still in office and who were directors at the beginning of such period; or (e) The occurrence of any other change of control of a nature that would be required to be reported in accordance with Item 1(a) of Form 8-K pursuant to Sections 13 or 15(d) of the 1934 Act or in the Company's proxy statement in accordance with Item 6(e) of Schedule 14A of Regulation 14A promulgated under the 1934 Act, or in any successor forms or regulations to the same effect; unless, within 30 business days after notice to the Company of such events, the Board of Directors (as constituted immediately prior to such event) adopts a resolution that for purposes of this Agreement no Change in Control has occurred (which resolution may be revoked at any time, in which case a Change in Control will be deemed to have occurred on the date such revocation becomes effective.) (6) GOOD REASON. For purposes of this Agreement, "Good Reason" shall include any of the following changes which are effected without Executive's written consent: (i) a material change in Executive's titles, responsibilities, authority, duties, status or reporting level, (ii) a reduction in Executive's salary or bonus opportunity, or (iii) a change in Executive's place of employment which is more than 50 miles from Executive's place of employment prior to the change. 8 D. VOLUNTARY TERMINATION BY EXECUTIVE. If Executive terminates his employment of his own volition (whether by retirement or otherwise) other than for Good Reason or as described in Section 6 C above, Executive shall not be entitled to any severance or further compensation hereunder, except that Executive shall receive the compensation provided for under this Agreement through the date of termination, including the bonus payments provided for under Section 6C(4), together with such benefits as are determined in accordance with the Company's employee benefit plans. E. PROFIT SHARING PLAN FORFEITURES. In the event that Executive terminates employment before he is fully vested in his accounts under the Company's qualified profit sharing plan or successor plan, he shall be entitled to a payment equal to the amount of his accounts that he forfeits under such plan by reason of such termination, payable within thirty (30) days of such termination. F. EXCESS PARACHUTE PAYMENTS. If the Internal Revenue Service asserts or proposes to assert that any compensation payable hereunder, alone or when aggregated with other compensation payable to Executive, would constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and/or would subject Executive to a tax under Section 4999 of the Code (or successor or similar provisions), Executive shall have the right to contest, at the Company's expense and using counsel acceptable to Executive and the Company, the assertion of such an excise tax. If as a result of such contest, or if it is determined by counsel acceptable to Executive and the Company that, an excise tax shall be imposed on Executive under Section 4999 of the Code (or successor or similar provision) the Company shall promptly pay Executive such additional amount or amounts as shall be necessary to reimburse Executive for (i) such excise tax and (ii) any income, employment and excise taxes incurred by Executive which are attributable to the reimbursement of such excise tax payment(s). 7. IRREVOCABLE TRUST. The Company has previously established an irrevocable trust for purposes of funding the benefits payable to Executive pursuant to subsections 6 C and 6 E of this agreement. The Company shall make cash contributions to such trust at such time or times as shall be necessary to maintain a balance in such trust at least equal to the amount that would be payable under subsections 6 C and 6 E, were Executive to be qualified for such payments. Payments for which Executive becomes qualified under this Agreement shall be made directly from the trust. The trust will guarantee the 9 payments provided for herein, and will be primarily liable for such payments. Such trusts shall be maintained until Executive has terminated employment and no further amounts are owed to Executive pursuant to subsection 6 C or 6 E. The trustee of said trust shall be acceptable to, but independent of, the Company and Executive and shall be empowered to pay the amount to which Executive becomes entitled according to the terms of subsection 6 C or 6 E. Any earnings on the principal held in such trust shall be paid annually to the Company to the extent not necessary to maintain the trust balance at the level required above. Payments made to Executive from such trust shall, to the extent of such payments, satisfy the Company's obligations under subsection 6 C and 6 E. 8. NONCOMPETITION AGREEMENT. Executive agrees that during the term of this Agreement and during the Consulting Period, he will not engage, directly or indirectly (including, by way of example only, as a director, principal, partner, venturer, employee or agent), nor have any direct or indirect interest, in any business similar to or competitive to the business then being carried on by the Company or its parent or any of its divisions or subsidiaries ("Fibreboard companies"), in any area of the world where any of the Fibreboard companies is or has been selling its products or otherwise carrying on its business or selling activities. Included within the meaning of an indirect interest for purposes of this Section 8 would be, by way of example only, an interest in a trust, corporation, venture or partnership, which, in turn, owns an interest in any such business, or an interest in any such business through a nominee, agent, option or other device. It is agreed that the foregoing provisions do not apply to an investment by Executive in stock (provided the ownership interest of said investment at any time or when bought does not exceed five percent (5%) of the outstanding shares of any enterprise whose business is similar to or competitive to the business then being carried on by the Fibreboard companies) or an investment by Executive in a mutual fund. If any of the provisions of this Section 8 shall contravene or be invalid under the laws of the State of California, such contravention or invalidity shall not invalidate all of the provisions of this Section 8, but rather this Section 8 shall be construed insofar as the laws of the State of California are concerned as not containing the particular provision or provisions held to be invalid in said state and the rights and obligations shall be construed and enforced accordingly. Nothing in this Agreement shall prohibit Executive from serving, with the consent of the Board of Directors of the Company, as a nonemployee director of a public company that is not a competitor of the Company. 10 9. DISCLOSURE OF INFORMATION. Executive shall not, during the term of this Agreement, or at any time thereafter, divulge, furnish or make accessible to anyone, except in the performance of the duties of the office or in the regular course of business of the Company, any knowledge or information with respect to any confidential or secret aspect of the business of the Company, including any confidential or secret information relating to the customers or suppliers of the Company. 10. MODIFICATION AND WAIVER OF BREACH. No waiver or modification of this Agreement shall be binding unless it is in writing and signed by the parties hereto. No waiver of a breach hereof shall be deemed to constitute a waiver of a further breach, whether of a similar or dissimilar nature. 11. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of any successors of the Company. As used herein, "successors" shall include any person, firm, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires substantially all of the assets or business of the Company. 12. NOTICE. Any written notice to be given hereunder to Executive may be delivered to him personally or shall be deemed to have been given upon deposit thereof in the U.S. mail, certified mail, postage prepaid, addressed to Executive at the address as it shall appear on the records of the Company. 13. CONSTRUCTION OF AGREEMENT. This Agreement is made and entered into in the State of California and shall be construed under the laws of the State of California. 14. ATTORNEYS' FEES. The Company will pay the attorneys' fees of Executive that were incurred by him in enforcing his rights under this Agreement if Executive subsequently obtains any benefits under this Agreement, whether by way of settlement or litigation. 15. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between the parties with respect to Executive's employment with the Company during the term set forth in Section 2 above, superseding all negotiations, prior discussions and preliminary agreements, written or oral, concerning said employment. This Agreement may not be amended except in writing by the parties hereto. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. This Agreement may be executed in counterparts. /s/ John D. Roach -------------------------------- John D. Roach FIBREBOARD CORPORATION By: /s/ G. Robert Evans ------------------------------ G. Robert Evans Chairman - Fibreboard Compensation Committee 12 APPENDIX A SECTION 6C(3) AVERAGE YEARLY BONUS RATIO 1992 148.13% 1993 148.13% 1994 130.00% (estimated) Average Yearly Bonus Ratio 142.09% (estimated) SECTION 6 C(3) AND (4) - EXAMPLES 1. EXAMPLE 1 - If Executive's employment is terminated by the Company on November 30, 1995 for any reason other than Permanent Total Disability, Cause or Change of Control, Executive shall be entitled to receive the following compensation: (a) One Year's Compensation. (b) One Year's Consulting Services. (c) A bonus payment equal to the product obtained by multiplying (i) an amount equal to 11 months of Executive's 1995 base salary by (ii) the average yearly bonus percentage that Executive earned over the 1992/1994 period. (d) For purposes of calculating "One Year's Compensation" in this example (which includes a full one-year bonus payment), the Average Yearly Bonus Ratio calculation would cover the 1992/1994 period. 2. EXAMPLE 2 - If Executive's employment is terminated by the Company on January 31, 1996 for any reason other than Permanent Total Disability, Cause or Change of Control, Executive shall receive the following compensation: (a) One Year's Compensation. 13 (b) One Year's Consulting Services. (c) In the event that the Board of Directors has not yet determined bonuses for 1995, a bonus for the 1995 calendar year, in an amount determined by multiplying Executive's 1995 base salary by the average yearly bonus percentage that Executive earned over the 1992/1994 period. (d) An additional bonus payment for the 1996 stub period equal to the product determined by multiplying (i) an amount equal to one month of Executive's 1996 base salary by (ii) the 1992/1995 average yearly bonus ratio. (e) For purposes of calculating "One Year's Compensation" in this example (which includes a full one-year bonus payment), the Average Yearly Bonus Ratio calculation would cover the 1992/1995 period. 3. EXAMPLE 3 - If Executive's employment terminates as a result of a Change of Control, Executive receives two times One Year's Compensation in lieu of the One Year's Compensation and One Year's Consulting Services provided for above. Executive would also receive the bonus payments described in Examples 1 and 2 above, as applicable. 14 EX-10.14-1 4 EXHIBIT 10.14.1 EXHIBIT 10.14.1 FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "AMENDMENT"), dated as of March 10, 1995, is entered into by and among FIBREBOARD CORPORATION (the "BORROWER"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative co-agent for the Lenders (the "ADMINISTRATIVE AGENT") and as collateral co-agent for the Lenders (the "COLLATERAL AGENT") (in such capacities, the "AGENT"), and the several financial institutions party to the Credit Agreement (collectively, the "LENDERS"). RECITALS A. The Borrower, Lenders, and Agent are parties to an Amended and Restated Credit Agreement dated as of September 29, 1994 (the "CREDIT AGREEMENT") pursuant to which the Agent and the Lenders have extended certain credit facilities to the Borrower. B. The Borrower has requested that the Lenders agree to certain amendments of the Credit Agreement. C. The Lenders are willing to amend the Credit Agreement, subject to the terms and conditions of this Amendment. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms used herein shall have the meanings, if any, assigned to them in the Credit Agreement. 2. AMENDMENTS TO CREDIT AGREEMENT. (a) The following additional definitions shall be inserted in Section 1.1(a) of the Credit Agreement in appropriate alphabetical order: "'EXCHANGED TIMBERLAND' is defined in CLAUSE (e) of SECTION 8.2.8." "'MAJOR EXCHANGE' is defined in CLAUSE (e) of SECTION 8.2.8." (b) Clause (e) of Section 8.2.8 of the Credit Agreement shall be amended and restated in its entirety to read as follows: 1 "(e) exchanges of Timberlands for other timberlands to become subject to the Lien of the Deeds of Trust hereunder pursuant to CLAUSE (d) of SECTION 10.10 (the "EXCHANGED TIMBERLAND"), and exchanges of timberland not constituting Collateral hereunder for other timberland, in each case in the ordinary course of business, with Persons who are not Affiliates of the Borrower, if: (i) the aggregate fair market value of all Timberland so exchanged by the Borrower and its Subsidiaries does not exceed on a cumulative basis $100,000,000 during the term of this Agreement; (ii) the Exchanged Timberland or other timberland to be received in exchange is of at least an equivalent fair market value to the Timberland or other timberland to be exchanged or, if such Exchanged Timberland or other timberland is not of at least an equivalent fair market value, the amount of any shortfall otherwise constitutes a permitted disposition under this SECTION 8.2.8; (iii) at the time of such exchange, no Default exists or shall result from such exchange; (iv) in the case of Timberland, the Collateral Agent has received copies of appraisals or valuations for the Timberlands to be exchanged and for the Exchanged Timberland to be received in the exchange, which appraisals or valuations shall, (x) in the case of any exchange where the Borrower is transferring properties (in one or a series of related transactions) having a fair market value in excess of $10,000,000 (a "MAJOR EXCHANGE"), be in form and substance satisfactory to the Collateral Agent and the Required Lenders, and be prepared by Mason, Bruce & Girard or other timber appraisers of recognized standing satisfactory to the Collateral Agent and the Required Lenders, and (y) in all other cases, shall be in form and substance satisfactory to the Collateral Agent and may be prepared by the Borrower or any of its Subsidiaries in such form and content as is usual and customary in accordance with past practices of the Borrower and its Subsidiaries; and (v) in the case of Timberland, the requirements of CLAUSE (d) of SECTION 10.10 shall have been complied with; and" (c) Subclause (iii) of clause (f) of Section 8.2.8 of the Credit Agreement shall be amended by deleting the words "and the Required Lenders" in the third line of such subclause. 2 (d) Clause (d) of Section 10.10 shall be amended and restated in its entirety as follows: "(d) In connection with a proposed release of Collateral under CLAUSES (e) or (f) of SECTION 8.2.8, the requirements set forth below shall apply in respect of such contemplated release: (i) The Borrower shall deliver the following items to the Collateral Agent, in form and substance satisfactory to the Collateral Agent, and, in the case of a Major Exchange, the Required Lenders: (A) a Collateral release notice or request, as applicable, including (1) a brief narrative description of the transaction, and (2) as applicable, for the specific transaction and on a cumulative basis since the Original Effective Date, the values of all Collateral released and summary of the terms thereof; (B) in respect of releases under CLAUSE (e) of SECTION 8.2.8, (1) evidence of recordation (or recordation instructions) of Deeds of Trust (or amendments to any existing Deeds of Trust, as applicable) with respect to the Exchanged Timberland being received in exchange for the Timberland being released, such Deeds of Trust or amendments to be recorded substantially concurrently with any full or partial reconveyances of the Timberland being released, together with ALTA policies of title insurance, and including such endorsements and reinsurance as may be required by the Collateral Agent and, in the case of a Major Exchange, the Required Lenders, insuring the Liens created by such Deeds of Trust or amendments as being a perfected Lien against the Collateral described therein and subject only to such exceptions as are acceptable to the Collateral Agent and, in the case of a Major Exchange, the Required Lenders, and other Liens permitted by SECTION 8.2.3; (2) such consents, estoppels, tenant subordination agreements and other documents and instruments in connection with such Deeds of Trust or amendments as shall reasonably be deemed necessary by the Collateral Agent and, in the case of a Major Exchange, the Required Lenders; and (3) evidence that all other actions reasonably necessary or, in the opinion of the Collateral Agent and, in the case of a Major Exchange, the Required Lenders, desirable to perfect and protect the priority of the Lien created by such Deeds of Trust or amendments, and to enhance the Collateral Agent's ability to preserve and protect its interests in and access to such Exchanged Timberland, have been taken; 3 (C) any title insurance endorsements that the Collateral Agent and, in the case of a Major Exchange, the Required Lenders, may reasonably require, in respect of each release of Collateral; and (D) such other items as the Collateral Agent and, in the case of a Major Exchange, the Required Lenders, may reasonably determine to be necessary, including certificates or other evidence of compliance with the provisions of this Agreement." 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants to the Agent and the Lenders as follows: (a) No Default or Event of Default has occurred and is continuing as of the date hereof. (b) The execution, delivery and performance by the Borrower of this Amendment have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. The Credit Agreement as amended by this Amendment constitutes the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with its respective terms, except as such enforceability thereof may be limited by (i) bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The representations and warranties set forth in Article VII (excluding, however, those contained in Section 7.7) of the Credit Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations and warranties are true and correct as of such earlier date); PROVIDED that Section 7.5 of the Credit Agreement shall be deemed to refer to the most recent date of the delivery of the financial statements referred to therein. Except as disclosed by the Borrower to the Administrative Agent and the Lenders pursuant to Section 7.7 of the Credit Agreement, the statements set forth in Section 6.2.1(b) of the Credit Agreement are true and correct as of the date hereof. (d) The Borrower is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Agent and the Lenders or any other Person. 4 4. EFFECTIVE DATE. This Amendment will become effective as of March 10, 1995 (the "EFFECTIVE DATE"), PROVIDED that the Agent has received from the Borrower and the Required Lenders a duly executed counterpart of this Amendment, together with a duly executed Guarantor Acknowledgment and Consent in the form attached hereto (the "CONSENT"). 5. RESERVATION OF RIGHTS. The Borrower acknowledges and agrees that the execution and delivery by the Agent and the Lenders of this Amendment shall not be deemed to create a course of dealing or otherwise obligate the Agent or the Lenders to forbear or execute similar amendments under the same or similar circumstances in the future. 6. MISCELLANEOUS. (a) Except as herein expressly amended, all terms, covenants and provisions of the Credit Agreement are and shall remain in full force and effect and all references therein to such Credit Agreement shall henceforth refer to the Credit Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Credit Agreement. (b) This Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment. (c) This Amendment shall be governed by and construed in accordance with the law of the State of California. (d) This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Agent of a facsimile transmitted document purportedly bearing the signature of a Lender or the Borrower shall bind such Lender or the Borrower, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Agent. (e) This Amendment, together with the Credit Agreement, contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein and 5 therein. This Amendment supersedes all prior drafts and communications with respect thereto. This Amendment may not be amended except in accordance with the provisions of Section 11.1 of the Credit Agreement. (f) If any term or provision of this Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Amendment or the Credit Agreement, respectively. (g) The Borrower covenants to pay to or reimburse the Agent, upon demand, for all costs and expenses (including allocated costs of in-house counsel) incurred in connection with the development, preparation, negotiation, execution and delivery of this Amendment. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written. FIBREBOARD CORPORATION By: /s/ Garold E. Swan --------------------------- Title: Vice President & Controller BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent and as Collateral Agent By: /s/ Ivo Bakovic --------------------------- Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender By: /s/ Michael J. Dasher ---------------------------- Title: Vice President 6 ABN AMRO BANK N.V. By: /s/ W. J. Millen -------------------------- Title: Vice President, GVP By: /s/ Larry Osborne -------------------------- Title: Group Vice President NATIONSBANK OF NORTH CAROLINA, N.A. By: /s/ Michael Tousignant --------------------------- Title: Assistant Vice President CORESTATES BANK N.A. By: /s/ Robert Krant ------------------------- Title: Vice President FIRST INTERSTATE BANK OF CALIFORNIA By: /s/ Joellen Ademski -------------------------- Title: Vice President WELLS FARGO BANK, N.A. By: /s/ Joe Alexis -------------------------- Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ Maarten Van Otterloo --------------------------- Title: Senior Relationship Manager SANWA BANK CALIFORNIA By: /s/ Dan Stevens --------------------------- Title: Vice President 7 GUARANTOR ACKNOWLEDGMENT AND CONSENT The undersigned, each a guarantor or third party pledgor with respect to the Borrower's obligations to the Agent and the Lenders under the Credit Agreement, each hereby (i) acknowledges and consents to the execution, delivery and performance by Borrower of the foregoing First Amendment to Credit Agreement (the "AMENDMENT"), and (ii) reaffirms and agrees that the respective guaranty, third party pledge or security agreement to which the undersigned is party and all other documents and agreements executed and delivered by the undersigned to the Agent and the Lenders in connection with the Credit Agreement are in full force and effect, without defense, offset or counterclaim. Each of the undersigned hereby represents to the Agent and the Lenders that the execution, delivery and performance by such Person of this Consent have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. (Capitalized terms used herein have the meanings specified in the Amendment.) FIBREBOARD BOX & MILLWORK CORPORATION Dated: March 10, 1995 By: /s/ Garold E. Swan ---------------------------------- Title: Controller/Treasurer PABCO METALS CORPORATION Dated: March 10, 1995 By: /s/ Garold E. Swan --------------------------------- Title: Controller/Treasurer 8 SNIDER LUMBER PRODUCTS CO. INC. Dated: March 10, 1995 By: /s/ Garold E. Swan -------------------------------- Title: Controller/Treasurer NORANDEX INC. Dated: March 10, 1995 By: /s/ Garold E. Swan -------------------------------- Title: Vice President & Treasurer 9 EX-10.19 5 EXHIBIT 10.19 EXHIBIT 10.19 FIBREBOARD CORPORATION SUPPLEMENTAL RETIREMENT PLAN (AS RESTATED JANUARY 1, 1994) PREAMBLE Effective December 14, 1992, Fibreboard Corporation established the Fibreboard Corporation Supplemental Retirement Plan to provide a supplemental non-qualified benefit to certain of the Company's key employees whose ability to accrue benefits under the Company's qualified retirement plans is constrained due to age and statutory limitations. Effective January 1, 1994, this document constitutes a complete amendment and restatement of the Plan as approved by the Board of Directors of Fibreboard Corporation on November 29, 1994. SECTION I DEFINITIONS AND CONSTRUCTION 1.1 "ACCOUNT" shall mean an account maintained for each Participant to which all Contribution Credits and Earnings Credits shall be allocated in accordance with Section III. 1.2 "BOARD OF DIRECTORS" shall mean the Board of Directors of Fibreboard Corporation. 1.3 "COMPANY" shall mean Fibreboard Corporation, a Delaware corporation. 1.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended. 1.5 "COMMITTEE" shall mean as defined in Section 6.1. 1.6 "COMPENSATION" shall mean a Participant's base salary and incentive bonus. 1.7 "CONTRIBUTION CREDITS" shall mean as defined in Section 3.2. 1.8 "EARNINGS CREDITS" shall mean as defined in Section 3.3. 1.9 "FINAL AVERAGE COMPENSATION" shall mean the average of the Participant's Compensation for the Participant's final three years of employment with the Company assuming retirement at age 65. 1.10 "PARTICIPANT" shall mean an individual designated by the Board of Directors to participate in the Plan. 1.11 "PLAN" shall mean the Fibreboard Corporation Supplemental Retirement Plan as set forth herein and as may be amended from time to time. 1.12 "RETIREMENT BENEFIT" shall mean the total benefits that a Participant (i) has received or is entitled to receive from all qualified plans, whether maintained by the Company or sourced from another employer, (ii) is entitled to receive under any insurance annuity contracts purchased by the Company for the benefit of the Participant under the terms of this Plan and (ii) is entitled to receive pursuant to the federal Social Security Act. For the purposes of determining the amount of a Participant's Retirement Benefit for purposes of this Plan, any lump-sum distribution under a qualified plan shall be deemed to be distributed to a Participant in equal annual installments over a 14 year period commencing at age 65. The Committee may make such other assumptions or adjustments as it deems appropriate as to the form and commencement date of benefits under any of the programs described in (i), (ii) or (iii). 1.13 "SPECIFIED EARNINGS RATE" shall mean as defined in Section 3.3. 1.14 "TARGET BENEFIT" shall mean, with respect to each participant, an annual benefit payable for 14 years beginning on the date the Participant attains age 65 equal to 60% of the Participant's Final Average Compensation less the Participant's Retirement Benefit; provided, however, that if a Participant would complete less than 15 years of employment with the Company at age 65, the Participant's Target Benefit shall be reduced by 4% for each such year of employment under 15 years. For purposes of determining a Participant's Target Benefit as of the end of any year, Final Average Compensation and Retirement Benefits shall be estimated based on assumptions determined by the Committee from time to time. SECTION II PARTICIPATION The persons entitled to participate in this Plan shall be selected by the Board of Directors. The initial Participants are John D. Roach, James P. Donohue, Herbert M. Elliott, Stephen L. DeMaria and James D. Costello. The Board of Directors may select additional Participants who are key employees of the Company or one of its subsidiaries or affiliates with significant responsibility for the growth and long-term profitability of the Company or such subsidiary or affiliate and who shall attain at least age 50 in the calendar year in which Contribution Credits are credited to such key employee under this Plan. 2 SECTION III ACCOUNTS 3.1 ACCOUNTS. There shall be established on behalf of each Participant an Account which shall be credited with Contribution Credits and Earning Credits as set forth below. Accounts shall be established for the sole purpose of computing the amount of benefits payable to such Participant under the Plan for services rendered after December 31, 1993. The balance of an Account as of any date shall be the value of such account as of the end of the calendar quarter coincident with or immediately preceding such date. 3.2 CONTRIBUTION CREDITS. As of the end of each calendar year ending after December 31, 1993, the Account of each Participant for such year shall, unless the Committee determines otherwise, be credited with a Contribution Credit ("Contribution Credit") calculated based on assumptions determined by the Committee from time to time. The annual Contribution Credit shall be an amount equal to the level annual deposit required each year until attainment of age 65 that would, when combined with assumed earnings thereon, provide a lump sum at age 65 equal to the net present value on that date of the Target Benefit less the projected future value at age 65 of the previous years' Contribution Credits. The Committee shall determine, in its sole discretion, whether or not to make a Contribution Credit with respect to a Participant for any year. If a Contribution Credit is not made for any year, the Committee may, in its sole discretion, determine future Contribution Credits as if such earlier Contribution Credit had been made. 3.3 EARNINGS CREDITS. The Account of each Participant shall be credited with earnings ("Earnings Credits"), at periodic intervals determined by the Committee, at a rate (the "Specified Earnings Rate") equal to the actual rate of return for such period of an investment vehicle selected by that Participant from a range of investment vehicles authorized by the Committee. The rate of return on investment vehicles shall be tracked solely for the purpose of computing the amount of benefits payable to Participants under the Plan. The Company shall not be obligated to make any actual investment. SECTION IV PAYMENT OF BENEFITS 4.1 NORMAL PAYMENT METHOD. Within thirty (30) days following the earlier of the date a Participant attains age sixty-five (65) or termination of employment with the Company, its subsidiaries and affiliates, for any reason other than death, the Company shall pay the balance of the Participant's Account to the Participant in a single lump sum payment, which shall be in full satisfaction of his or her rights under the Plan. 4.2 DEATH. In the event of a Participant's death prior to distribution of his or her Account under this Plan, the Company shall pay the balance of the Participant's Account to the beneficiary designated by the Participant in accordance with procedures established by the Committee. If a Participant does not designate a beneficiary or the designated beneficiary dies prior to distribution of the portion of a Participant's Account to 3 which the beneficiary was entitled, the balance of the Participant's Accounts will be paid to the Participant's estate in the form of a single lump sum payment. SECTION V AMENDMENT AND TERMINATION This Plan may be amended or terminated at any time by action of the Board of Directors at its sole discretion without prior notice to any person. Members of the Board who are Participants are precluded from voting on any action to terminate this Plan. No amendment shall operate to reduce Participants' benefits accrued to the date of such amendment. Upon termination of this Plan, the rights of all affected Participants in benefits credited to their Accounts shall be nonforfeitable; provided that upon such termination, the Company may elect to pay each Participant the then balance of his or her Account in a single sum payment in full satisfaction of his or her rights under the Plan. SECTION VI MISCELLANEOUS PROVISIONS 6.1 ADMINISTRATION. The general administration of this Plan shall be the responsibility of the Compensation Committee of the Board of Directors (the "Committee"). The day-to-day implementation of the Plan shall be the responsibility of the Company's Chief Executive Officer. 6.2 NATURE OF OBLIGATION. No amount payable to or in respect of any Participant under this Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the participant or the participant's beneficiary, and any attempt to do so will be void. A Participant's or beneficiary's rights to receive payments under this Plan are merely those of an unsecured general creditor of the Company. Such rights constitute a mere promise by the Company to make payments to Participants and their beneficiaries in the future. Any trust created by the Company and any assets held by such trust to assist it in meeting its obligations under the Plan will conform to the terms of the model trust described in Revenue Procedure 92-64 and any payment made from such a trust to a Participant or beneficiary shall, to the extent thereof, be in satisfaction of such person's right to payment under the Plan. It is the intention of all of the parties to this agreement that the Plan be unfunded for federal tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. 6.3 NO EMPLOYMENT RIGHTS. Nothing contained herein shall confer on any Participant the right to be retained in the service of the Company, nor shall it interfere with the right of the Company to discharge or otherwise deal with Participants without regard to the existence of this Plan. 4 EX-10.30-1 6 EXHIBIT 10.30.1 EXHIBIT 10.30.1 AMENDMENT TO GLOBAL SETTLEMENT AGREEMENTS This Amendment to Global Settlement Agreements is made and entered into as of December__, 1994, by and among the Representative Plaintiffs as representatives of the Settlement Class, acting by and through Class Counsel; Fibreboard Corporation, a Delaware corporation; Continental Casualty Company, an Illinois corporation; CNA Casualty Company of California, a California corporation; Columbia Casualty Company, an Illinois corporation; Pacific Indemnity Company, a California corporation, and Henry Ramsey, Charles Renfrew, and Francis E. McGovern as Trustees of the Fibreboard Asbestos Compensation Trust, together the "Parties." RECITALS Whereas, certain of the Parties have entered into a Global Settlement Agreement dated as of August 27, 1993 ("Global Settlement Agreement") which contains as Exhibit A a Glossary of Terms ("Glossary of Terms"). Pursuant to the Global Settlement Agreement the Parties entered into the Fibreboard Asbestos Compensation Trust Agreement ("Trust Agreement") which contains as Annex A the Trust Distribution Process ("Trust Distribution Process" and together with the Global Settlement Agreement, Glossary of Terms, Trust Agreement and Trust Distribution Process, the "Global Settlement Agreements"); and Whereas, the Parties desire to amend several of the Global Settlement Agreements to, among other things, increase the membership of the Select Counsel for the Beneficiaries from five to seven members, offer an expedited payment option to the Trustees along with the already existing expedited review option and create additional flexibility in the spendthrift provisions of the Trust Distribution Process; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the Parties hereby agree as follows: SECTION I AMENDMENTS TO THE GLOSSARY OF TERMS 1.1 The definition of "Earnings Amount" shall be amended to read in full as follows: 30. "EARNINGS AMOUNT" means, with respect to Fund I, Fund II or Fund III, as the case may be, all elements of current periodic income from such Fund (other than any such income on the amounts in the Reserve Account), including interest, periodic dividends (but not special, liquidating or wasting dividends), rent, royalty and other similar payments which represent earnings or profit on an asset, and do not 1. represent elements of appreciation or gain or depreciation or loss (whether realized or unrealized) on an asset, all determined on an accrual basis, in accordance with generally accepted accounting principles; provided however the term "Earnings Amount" for Fund I beginning the fifth Fiscal Year after Global Approval Judgment shall mean Earnings Amount for such year with respect to Fund I determined as provided above plus 80% of Earnings Amount for such year with respect to Fund II determined as provided above if the conditions set forth in Appendix 1 Section 3 to the Trust Distribution Process are met. 1.2 The definition of "Increased Principal Amount" shall be amended to read in full as follows: 52. "INCREASED PRINCIPAL AMOUNT," (i) for any of the third through the twelfth Fiscal Years after Global Approval Judgment, means 125% of the Principal Amount for such Fiscal Year and (ii) for any of Fiscal Years 2009 through 2013, means 112.5% of the Principal Amount for such Fiscal year. In the event both clause (i) and (ii) apply to an individual year Increased Principal Amount means clause (i). 1.3 The definition of "Principal Amount" shall be amended to read in full as follows: 76. "PRINCIPAL AMOUNT" means, for any Fiscal Year after Global Approval Judgment: (i) (a) (X) the aggregate fair market value of all of the investment assets contained in the Fund for which the Distributable Amount is being determined (excluding the then outstanding balance of the Reserve Account) at the close of business on the last business day of the Fiscal Year for which the calculation is made, MINUS (Y) the Earnings Amount for such Fiscal Year, PLUS (Z) all amounts, if any, paid during such Fiscal Year for Trust Expenses, Class Member Claims, Third Party Claims and payments made pursuant to Section 7.16 of the Trust Agreement, in each case for such Fiscal Year (other than any such payments made out of the Reserve Account), MINUS (b) for any Fiscal Year prior to Fiscal Year 2014, the greater of (i) Zero and (ii) the lesser of (Y) the aggregate Surplus for all prior Fiscal Years and (Z) Zero minus Unreimbursed Borrowings; MULTIPLIED BY (ii) a fraction, the numerator of which is one and the denominator of which is the number of Fiscal Years that will occur from the beginning of the Fiscal Year for which the calculation is made through and including the end of Fiscal Year 2018 in the case of Fund I, the 20th Fiscal Year after the end 2. of Fund I (or, if the Trustees have determined to delay the transfer of the remaining balance in Fund II beyond the twentieth Fiscal Year after the end of Fund I pursuant to Section E.2.c(ii) of the Trust Distribution Process, the end of Fund II so determined by the Trustees) in the case of Fund II and the 15th Fiscal Year after the end of Fund II in the case of Fund III (so that, for example, for the Principal Amount applicable to Fiscal Year 2003, the fifteenth year before the last year of Fund I, such denominator would be 15); provided, however, that (1) for the first Fiscal Year after Global Approval Judgment (a) the numerator in the fraction stated in clause (ii) above shall be the number of full calendar years completed after December 31, 1993 through the end of the Fiscal Year in which Global Approval Judgment occurs and (b) the denominator in the fraction stated in clause (ii) above shall be 25; and (2) for each of Fiscal Years 2014 through 2018, the Distributable Amount may be increased by the Trustees up to an amount not in excess of the Principal Amount and the Earnings Amount that was in effect for Fiscal Year 2013. 1.4 The definition of "Select Counsel for the Beneficiaries" or "SCB" shall be amended to read in full as follows: 85. "SELECT COUNSEL FOR THE BENEFICIARIES" or "SCB" means seven lawyers, initially: Joseph B. Cox, Jr., Steven Kazan, Joseph F. Rice, Harry F. Wartnick, Gary Galiher, Wayne Hogan and Robert J. Connerton (the designee of the AFL-CIO) and their successors to be selected as provided in Section 6.3 of the Trust Agreement. 3. SECTION II AMENDMENTS TO TRUST AGREEMENT 2.1 Section 2.4 of the Trust Agreement shall be amended to read in full as full follows: 2.4 ACCEPTANCE OF ASSETS AND ASSUMPTION OF LIABILITIES. In connection with and in furtherance of its purposes, and subject to Section 5.4, the Trustees hereby agree to accept on behalf of the Trust the transfer of the assets described in Section 2.3 above and hereby further expressly agree on behalf of the Trust to assume liability or undertake responsibility for all Class Member Claims and those Third Party Claims for which the Trust is responsible under the Global Settlement Agreement and Trust Distribution Process. Except as otherwise provided in the Trust Distribution Process and in the following sentence, the Trust shall have all defenses, cross claims, and rights to liens, offsets and recoupment that Fibreboard or any other Trustor would have had under applicable law with respect to the Class Member Claims and Third Party Claims to be assumed by the Trust. The Trust shall not assert as a defense to any claim against the Trust any statute of limitations or repose which had not expired as of August 27, 1993 with respect to Fibreboard. 2.2 Section 3.1(a)(1) of the Trust Agreement shall be amended by adding the following subsection (xiv) to the end thereof: (xiv) Approval of an Expedited Payment Option pursuant to Section B.2.b. of the Trust Distribution Process, or the making of the determinations set forth in Section 3(ii) of Appendix 1 to the Trust Distribution Process. 4. 2.3 Section 6.1 of the Trust Agreement shall be amended to read in full as follows: 6.1 FORMATION; DUTIES. The SCB shall consist of seven lawyers chosen to represent the interests of the Beneficiaries. The initial seven SCB lawyers shall be Joseph B. Cox, Jr.; Steven Kazan; Joseph F. Rice; Harry F. Wartnick; Gary Galiher; Wayne Hogan; and Robert J. Connerton (the designee of the AFL-CIO). In giving their approval or in acting pursuant to this Agreement the members of the SCB shall act in the best interest of the Beneficiaries and consistent with the purposes of the Trust. The SCB shall hold an annual meeting to which all lawyers who have submitted a Class Member Claim to the Trust during the past five years shall be invited and be entitled to be present. The SCB shall give a report to the annual meeting describing the activities of the Trust for the prior year, including any approvals given by the SCB pursuant to this Agreement and/or the Trust Distribution Process and all matters on which the Trustees have indicated that they intend to seek the approval of the SCB during the following year. In giving approval to the Trustees, the SCB shall consider in good faith all recommendations made at such annual meeting. The Trustees shall consult with the SCB on the implementation and administration of the Trust Distribution Process. The Trustees may consult with the SCB on any matter affecting the Trust, and, as provided in Section 3.1(a), certain actions by the Trustees shall require the prior approval of the SCB. All approvals of the SCB shall be by majority vote. 2.4 Section 6.3(b) of the Trust Agreement shall be amended to read in full as follows: 5. (b) In the event of a vacancy in the membership of the SCB other than one caused by resignation as aforesaid, the vacancy shall be filled by the unanimous vote of the remaining member(s) of the SCB. If the vacancy is in the position originally held by Robert J. Connerton, the vacancy shall be filled by a person nominated by the AFL-CIO. SECTION III AMENDMENTS TO THE TRUST DISTRIBUTION PROCESS 3.1 Section A of the Trust Distribution Process shall be amended by adding the following sentence to the end thereof: The Trust may elect to offer an Expedited Review Claims option and Expedited Payment Option which would allow a Class Member Claim or Third Party Claim to be paid at an earlier date for a lesser amount than would result from waiting for payment in the order set forth above. 3.2 Section B.2 of the Trust Distribution Process shall be amended to read in full as follows: 2. EXPEDITED REVIEW OPTION AND EXPEDITED PAYMENT OPTION. A. EXPEDITED REVIEW OPTION. The Trust may establish a process for expedited review of ALD-2 claims by persons desiring an accelerated settlement of their claim at a fixed amount ("Expedited Review Claims"). A Beneficiary seeking such expedited review shall submit an abbreviated proof of claim for expedited review by the Trust. The abbreviated proof of claim shall provide the following 6. information concerning the Exposed Person: name, address, social security number, date of birth, date of death (if applicable), marital status, spouse's name and social security number, occupation, the Scheduled Disease for which the Beneficiary believes the claim qualifies, the work sites where the Exposed Person was exposed to asbestos or to Fibreboard asbestos and such information requested by the Trust that adequately demonstrates exposure to asbestos or asbestos-containing products and to Fibreboard asbestos or asbestos-containing products. In addition, the Beneficiary shall supply the Trust with a Medical Report. The Trust will expeditiously review the abbreviated proof of claim and may, but is not required to, offer to settle such Expedited Review Claims for a single fixed cash payment of an amount and on a time schedule established from time to time by the Trust. If the Trust determines not to offer to settle an Expedited Review Claim, the Beneficiary may submit a proof of claim as set forth in Section B.1. The Trust may establish additional categories of Expedited Review Claims with differing fixed cash payments and differing information requirements. In addition, the Trust may eliminate or suspend the Expedited Review Claim option for one or more categories of Class Member Claims if it determines that such option is encouraging the filing of claims that would not otherwise be eligible for payment under these procedures or is using a disproportionate share of the Trust's assets. b. EXPEDITED PAYMENT OPTION. If on any Distribution Date any single payment with respect to Liquidated Class Member Claims or Liquidated Third Party Claims in the first two Schedule Categories or the first payment on 7. Liquidated Class Member Claims or Liquidated Third Party Claims in the third Schedule Category, in either case, were due and unpaid on four or more consecutive Distribution Dates, the Trust may offer an expedited payment option ("Expedited Payment Option") to Claimants in one or more categories of Liquidated Class Member Claims or Liquidated Third Party Claims. The Expedited Payment Option shall consist of a payment in cash in an amount determined by the Trust, but no more than 50% of the unpaid Liquidated amount of the Claim. c. EFFECT OF PAYMENTS. Amounts paid in respect of the Expedited Review Claims or the Expedited Payment Option shall not be subject to the payment order rules set forth in Section F.2 of this Trust Distribution Process but shall be limited to the Distributable Amount for the Fiscal Year in which the Expedited Review Claims or the Expedited Payment Option are paid, along with payments for Trust Expenses, other Class Member Claims and Third Party Claims, whether paid during such Fiscal Year or on the Distribution Date immediately following such Fiscal Year. 3.3 Section B.3. of the Trust Distribution Process shall be amended to read in full as follows: 3. ORDERING OF CLAIMS FOR PROCESSING. Claims shall be ordered for processing by the Trust in the manner described in this Section. As a general practice, the Trust shall review its claims files on a regular basis and notify all Beneficiaries whose claims are likely to be processed in the near future. A Beneficiary's position in the FIFO queue for processing will be determined by the date of receipt by 8. the Trust of a properly completed proof of claim form, and among claims received the same day, by the date of diagnosis of the disease on which the claim is based. All claims filed on or before Global Approval Judgment shall be deemed filed on the date of Global Approval Judgment. Where the Beneficiary has filed an incomplete proof of claim, the Trust shall notify the Beneficiary of the need for additional information and shall not process the claim until the file is complete. A Beneficiary shall not receive a position in the FIFO processing queue until his or her proof of claim is properly completed. 3.4 Section D.2.c. of the Trust Distribution Process shall be amended to read in full as follows: c. The Trust may assert any and all defenses available to it or which would have been available to any Trustor against which the claim could have been asserted absent Global Approval Judgment with respect to Beneficiaries who elect to resolve their claims through the tort system, except that the Trust shall not assert as a defense to any claim against the Trust any statute of limitations or repose which had not expired as of August 27, 1993 with respect to Fibreboard. 3.5 Section E. of the Trust Distribution Process shall be amended to read in full as follows: E. FUNDS FOR PAYMENT OF CLAIMS. As set forth in the Trust Agreement, the Trust shall administer three funds, for payment of Trust Expenses, Class Member Claims and Third Party Claims, to be known as "Fund I," "Fund II," and "Fund III." Fund I is primarily intended to pay 9. expenses of, and claims against, the Trust prior to Fiscal Year 2019. Fund II is primarily intended to pay expenses of, and claims against, the Trust commencing Fiscal Year 2019, although 80% of the annual Earnings Amount on Fund II is available to pay claims commencing in the fifth Fiscal Year after Global Approval Judgment and the principal of Fund II is available to pay expenses and claims commencing Fiscal Year 2014, if Fund I is insufficient for that purpose. Fund III is primarily intended to pay any expenses and claims not paid from Fund I or Fund II, commencing Fiscal Year 2039, although it is available to pay expenses and claims commencing Fiscal Year 2034 if Fund II is exhausted prior to Fiscal Year 2039. In order to assure that, to the maximum extent feasible, Trust resources are preserved and fairly allocated among all Beneficiaries (i.e., those who will have claims in the future as well as those who have claims now) Appendix 1 describes in detail how Trust surpluses realized in any Fiscal Year are to be preserved and limits amounts that can be spent in any Fiscal Year to pay claims from Funds I, II or III. In general, Appendix 1 specifies that payments for Trust Expenses, Class Member Claims and Third Party Claims may not exceed annual earnings on the assets within the relevant Fund plus a portion of the remaining principal (calculated by allocating remaining Fund principal equally over the years remaining in the Fund then in use). If any Surplus remains after payment of all Trust Expenses, Class Member Claims and Third Party Claims and certain indemnity expenses for a Fiscal Year (and after restoration of any increases in Principal Amount used in prior years as described below), such Surplus will either increase the Reserve Account or build Trust principal. This Reserve Account will 10. be used to pay expenses or claims for any later year before Trustees may access any Increased Principal Amount to be used in that year. If, however, in any of the Fiscal Years 3 through 12 after Global Approval Judgment or Fiscal Years 2009 through 2013, the Earnings Amount and Principal Amount together with the funds contained in the Reserve Account in excess of $10,000,000 are not sufficient to pay Trust Expenses and to make all payments with respect to Class Member Claims or Third Party Claims for the first two Schedule Categories that are due or all payments with respect to Class Member Claims or Third Party Claims for the third Schedule Category that were due and unpaid on four consecutive prior Distribution Dates, the Trust may increase the usable portion of the Fund principal by up to 25% for any of Fiscal Years 3 through 12 after Global Approval Judgment or 12.5% for any of Fiscal Years 2009 through 2013. In addition, if any Class Member Claims or Third Party Claims are unpaid in any Fiscal Year beginning with the fifth Fiscal Year after Global Approval Judgment, the Trust may also use 80% of that year's Earnings Amount from Fund II. 1. FUND I. a. COMMENCEMENT OF PAYMENTS. The Trust shall not pay any Class Member Claim or Third Party Claim (other than Extreme Hardship Claims and Expedited Review Claims) from Fund I until the Distribution Date first occurring after the end of the first Fiscal Year after Global Approval Judgment. b. DISTRIBUTABLE AMOUNT. Total cash payments for Trust Expenses, Class Member Claims and Third Party Claims made from Fund I for any Fiscal Year (i.e., payments for Trust Expenses, Extreme Hardship Claims and Expedited Review 11. Claims, and pursuant to an Expedited Payment Option made during that Fiscal Year, together with payments for Class Member Claims and Third Party Claims for that Fiscal Year made on the Distribution Date immediately following that Fiscal Year) (other than any payments made from the Reserve Account) shall not exceed the Distributable Amount for that Fiscal Year. For the first Fiscal Year after Global Approval Judgment the Earnings Amount for Fund I shall be calculated from the date of Global Approval Judgment. c. DISTRIBUTION OF REMAINING BALANCE. The transfer from Fund I to Fund II of any remaining balance in Fund I shall occur on the earlier of (i) the day after the Distribution Date for Fiscal Year 2018, or (ii) the day before the Distribution Date for the first Fiscal Year occurring after Fiscal Year 2013 in which the maximum possible Distributable Amount is less than the Earnings Amount and the Principal Amount that were in effect for Fund I for Fiscal Year 2013, the Trust shall transfer such remaining balance and the remaining balance of the Reserve Account to Fund II, at which time payments out of Fund II shall commence as provided in Section E.2. 2. FUND II. a. COMMENCEMENT OF PAYMENTS. No payments shall be made from Fund II until the Distribution Date for Fiscal Year 2014, except as permitted by Appendix 1. If at that time Fund I still has money left to pay Trust Expenses, Class Member Claims or Third Party Claims, no payments shall be made from Fund II until the earlier of: (1) the day after the Distribution Date for Fiscal Year 2018; or (2) the Fiscal Year in which the Distribution Date referred to in Section E.1.c. (ii) occurs. 12. b. DISTRIBUTABLE AMOUNT. The total amount of payments for Trust Expenses, Class Member Claims and Third Party Claims made from Fund II for any Fiscal Year is limited to the Distributable Amount for that Fiscal Year. c. DISTRIBUTION OF REMAINING BALANCE. The transfer from Fund II to Fund III of any remaining balance in Fund II shall occur on (i) the day after the Distribution Date for the twentieth Fiscal Year after the transfer of the balance in Fund I to Fund II pursuant to Section E.1.c, or (ii) such later date as the Trustees determine would be in the best interests of all Beneficiaries, both present and future (but in no event later than the day after the Distribution Date for Fiscal Year 2038); at which time payments out of Fund III shall commence as provided in Section E.3. 3. FUND III. a. COMMENCEMENT OF PAYMENTS. No payments shall be made from Fund III until the Distribution Date for Fiscal Year 2034. If at that time Fund II still has money left to pay Trust Expenses, Class Member Claims or Third Party Claims, no payments shall be made from Fund III until the date Fund II is exhausted or the balance of Fund II has been transferred into Fund III pursuant to Section E.2.c. b. DISTRIBUTABLE AMOUNT. The total amount of payments for Trust Expenses, Class Member Claims and Third Party Claims made from Fund III for any Fiscal Year is limited to the Distributable Amount for that Fiscal Year. c. DISTRIBUTION OF REMAINING BALANCE. If there is a remaining balance in Fund III on the day after the Distribution Date for Fiscal Year 2054, and there are then, or are anticipated by the Trustees to be in the future, any Trust Expenses, Class 13. Member Claims, Third Party Claims and other obligations of the Trust which have not yet been liquidated and/or fully paid, the Trust shall use the remaining balance of Fund III to pay such Trust Expenses, Class Member Claims, Third Party Claims and other obligations of the Trust. Upon the occurrence of the Termination Date, the Trust shall apply any remaining balance of Fund III to such charitable purposes as the Trustees in their reasonable discretion, after consultation with the SCB, shall determine, which charitable purposes, if practicable, shall be related to occupational health. 4. DETERMINATION OF DISTRIBUTABLE AMOUNT FOR EACH FUND. Within 90 days following the end of each Fiscal Year after Global Approval Judgment, the Trust shall determine the Distributable Amount for such Fiscal Year, which Distributable Amount (after payment of Trust Expenses, Extreme Hardship Claims and Expedited Review Claims, and pursuant to an Expedited Payment Option for such Fiscal Year) shall be distributed to pay Class Member Claims and Third Party Claims, in the order set forth in Section F.2, on a date, no later than 120 days following the end of each such Fiscal Year, chosen by the Trust (the "Distribution Date"). SECTION IV TRUST DISTRIBUTION PROCESS 4.1 Appendix 1 to the Trust Distribution Process shall be amended to read in full as follows: 1. INCREASED PRINCIPAL AMOUNT. The Trustees may increase the Principal Amount for any of the third Fiscal Year through the twelfth Fiscal Year after Global 14. Approval Judgment or Fiscal Years 2009 through 2013 up to the Increased Principal Amount for that year, if (i) the Distributable Amount (if not increased as provided in this sentence) for that Fiscal Year, plus the amount, if any, by which the balance (on the last business day of that Fiscal Year) of the Reserve Account exceeds $10 million, is insufficient to pay all Trust Expenses for such Fiscal Year plus all Class Member Claims and Third Party Claims included in any of the first two Schedule Categories due and payable on the Distribution Date immediately following that Fiscal Year, or any payments with respect to Class Member Claims or Third Party Claims included in the third Schedule Category that were due and unpaid on four or more consecutive Distribution Dates prior to the Distribution Date immediately following that Fiscal Year, and (ii) the Trustees conclude that under the circumstances, and after examination and in light of other options available under the Trust Distribution Process, increasing the Principal Amount would be in the best interests of all Beneficiaries, both present and future, and that the sum of the Earnings Amount for Fund I, such amount in the Reserve Account in excess of $10 million and the amount of the Increased Principal Amount does not exceed the amount required to pay all such Trust Expenses and Class Member Claims and Third Party Claims included in the first two Schedule Categories and any payments with respect to Class Member Claims or Third Party Claims included in the third Schedule Category that were due and unpaid on four or more consecutive Distribution Dates prior to such Distribution Date. 15. 2. RESERVE ACCOUNT. The Reserve Account shall initially be credited with the full amount transferred to the Trust pursuant to Section 2.3(B) of the Global Settlement Agreement, minus the sum of (a) $1.340 billion of the starting balance of Fund I, (b) $200 million, the starting balance of Fund II, and (c) $10 million, the starting balance of Fund III. The Reserve Account is part of Fund I. The Reserve Account shall be increased on each Distribution Date by (x) 100%, until the balance of the Reserve Account equals $25 million, (y) 50%, after the balance of the Reserve Account equals $25 million and until the balance of the Reserve Account equals the sum of the Principal Amount and Earnings Amount for the prior Fiscal Year, and (z) 0%, after the balance of the Reserve Account equals the sum of the Principal Amount and Earnings Amount for the prior Fiscal Year, of either (i) if the Unreimbursed Borrowings as of such date is zero or a positive number, then the Surplus as of such date, or (ii) if the Unreimbursed Borrowings as of such date is a negative number, but such Unreimbursed Borrowings plus the Surplus as of such date is a positive number, then such positive number, or 16. (iii)if Unreimbursed Borrowings as of such date plus the Surplus as of such date is zero or a negative number, then zero (so that this calculation shall not result in a decrease in the Reserve Account). The Reserve Account shall be used to pay all Trust Expenses, Class Member Claims, Third Party Claims and payments made pursuant to Section 7.16 of the Trust Agreement (it being understood that such payments pursuant to Section 7.16 shall not be limited by the amounts in the Reserve Account) for any Fiscal Year in which the Principal Amount and the Earnings Amount is insufficient for such purpose; provided, that the provisions of this sentence shall not be applied to require the reduction of the balance of the Reserve Account below $10 million. Notwithstanding the foregoing, during the first Fiscal Year after Global Approval Judgment, the Trustees shall create and thereafter maintain an appropriate reserve (to be taken out of the amounts otherwise included in the Reserve Account) for required payments in later Fiscal Years for Class Member Claims and Third Party Claims presented in such first Fiscal Year or before, which reserve shall not be otherwise available for the purposes of the immediately preceding sentence. The Trustees shall have the discretion to utilize any and all amounts in the Reserve Account to pay Trust Expenses, Class Member Claims, Third Party Claims and payments pursuant to Section 7.16 of the Trust Agreement. 3. FUND II EARNINGS AMOUNT. The Trustees may use up to 80% of the Earnings Amount on Fund II as part of the Earnings Amount in any Fiscal Year beginning with the fifth Fiscal Year after Global Approval Judgment, if 17. (i) the Distributable Amount (if not increased as provided in this sentence) for that Fiscal Year, plus the amount, if any, by which the balance (on the last business day of that Fiscal Year) of the Reserve Account exceeds $10 million, is insufficient to pay all Trust Expenses for such Fiscal Year plus all Class Member Claims and Third Party Claims that would be due and unpaid on the Distribution Date immediately following that Fiscal Year, and (ii) the Trustees conclude that, under the circumstances and after examination and in light of other options available under the Trust Distribution Process, using Fund II Earnings Amount during Fund I would be in the best interests of all Beneficiaries, both present and future, and that the sum of the Earnings Amount for Fund I, the portion of the Earnings Amount for Fund II proposed to be so used, such amount in the Reserve Account in excess of $10 million and the amount of the Principal Amount or the Increased Principal Amount, as the case may be, does not exceed the amount required to pay all such Trust Expenses and Class Member Claims and Third Party Claims that would otherwise be due and unpaid on such Distribution Date. SECTION V MISCELLANEOUS 5.1 EFFECTIVENESS. This Amendment shall be effective upon: (i) Approval of the Court; and (ii) Receipt by Fibreboard and the Insurers of a supplemental ruling from the Internal Revenue Service ("IRS") to the effect that the amendments do 18. not alter the IRS's conclusions stated in its ruling dated November 21, 1994 unless waived in writing by each of Fibreboard and the Insurers. 5.2 MISCELLANEOUS. This Amendment shall be construed in accordance with and governed by the provisions of each Agreement it amends. 19. IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written by the undersigned, thereunto duly authorized. On behalf of the Representative Plaintiffs and as the Select Counsel for the Beneficiaries By: /s/ Joseph Rice ------------------------------------ Joseph Rice, Esq. By: /s/ Joseph B. Cox ------------------------------------ Joseph B. Cox, Jr., Esq. By: /s/ Harry Wartnick ------------------------------------ Harry Wartnick, Esq. By: /s/ Steven Kazan ------------------------------------ Steven Kazan, Esq. FIBREBOARD CORPORATION By: /s/ Michael R. Douglas ------------------------------------ Title: Sr. V.P. and General Counsel --------------------------------- CONTINENTAL CASUALTY COMPANY By: /s/ Laurens F. Terry ------------------------------------ Title: Vice President --------------------------------- CNA CASUALTY COMPANY OF CALIFORNIA By: /s/ Laurens F. Terry ------------------------------------ Title: Vice President --------------------------------- COLUMBIA CASUALTY COMPANY By: /s/ Laurens F. Terry ------------------------------------ Title: Vice President --------------------------------- PACIFIC INDEMNITY COMPANY By: /s/ Malcolm B. Burton ------------------------------------ Title: Vice President --------------------------------- Trustees of the Fibreboard Asbestos Compensation Trust By: /s/ Henry Ramsey ------------------------------------ Henry Ramsey By: /s/ Charles Renfrew ------------------------------------ Charles Renfrew By: /s/ Francis E. McGovern ------------------------------------ Francis E. McGovern EX-10.30-2 7 EXHIBIT 10.30.2 EXHIBIT 10.32 SETTLEMENT AGREEMENT 1. PARTIES 1.1. This Settlement Agreement ("Agreement") is entered by and between Fibreboard Corporation ("Fibreboard," defined below); and CIGNA Specialty Insurance Company (formerly known as California Union Insurance Company) ("Cal Union" or "CIGNA Specialty"), Central National Insurance Company of Omaha ("Central National"), Century Indemnity Company ("Century"), CIGNA Property and Casualty Insurance Company ("CIGNA P&C") and Insurance Company of North America ("INA")(collectively "Settling Insurers"). 2. DEFINITIONS 2.1. "Allocated Expense" means all reasonable fees, expenses and other costs, including bonding costs pending appeal, reasonably incurred by or on behalf of Fibreboard in connection with the defense and disposition of Asbestos-Related Building Claims for Fibreboard, but does not include any expenses of Fibreboard or compensation for time or fees for Fibreboard personnel, except for reasonable travel costs incurred directly for Fibreboard's defense of the Asbestos-Related Building Claims, does not include fees or expenses at rates above those normally charged under similar circumstances to clients or customers of the firms or vendors employed, or any fees, expenses and other costs incurred by Fibreboard in connection with its efforts to obtain or enforce settlements or judgments determining the obligations of Fibreboard's insurers with respect to the Asbestos-Related Building Claims. 2.2. "Asbestos-Related Building Claim" or "Claim" means claims or suits brought against Fibreboard alleging injury or damage to buildings and property caused by asbestos-containing products or materials ("Asbestos-Related Building Claims"). For purposes of this Agreement, all Asbestos-Related Building Claims brought by one building owner within one state or all Claims brought by or on behalf of the government of the United States or one of its agencies anywhere shall be treated as a single Claim. 2.3. "Fibreboard" means Fibreboard Corporation and includes without limitation any agents, employees, officers, assigns, subsidiaries, successors- or predecessors-in-interest, and, to the extent that Fibreboard Corporation exercises or has exercised or may exercise control or authority over them, means the following: corporations or unincorporated business entities affiliated with Fibreboard Corporation, including without limitation any employee, officer or agent of such affiliated entity, and all persons acting by, through, under or in concert with Fibreboard Corporation, and each of them, and specifically including without limitation any person or entity purporting to be an insured under one or more of the Policies. 2.4. "Indemnity" means any sums paid as damages or otherwise in settlement or satisfaction of judgment of Asbestos-Related Building Claims. 2.5. "Party" means Fibreboard or any Settling Insurer (collectively, the "Parties"). 2.6. "Policy" or "Policies" means liability insurance policies or certificates issued by one of the Settling Insurers which insures Fibreboard, including without limitation the following policies identified in the Coverage Action: SETTLING INSURER POLICY NO. PERIOD --------------------------------------------------------- Central National CNU 126573 7/1/77-6/1/78 Cal Union ZCX 004028 4/1/80-4/1/81 Cal Union ZCX 004437 4/1/81-4/1/82 Cal Union ZCX 006186 4/1/82-4/1/83 Cal Union ZCX 006526 4/1/83-4/1/84 Century CIZ 425553 4/1/82-4/1/84 Central National CNZ 006802 4/1/82-4/1/84 Central National CNZ 006802 4/1/84-4/1/85 CIGNA P&C EX 09-1011 4/1/84-4/1/85 INA XCP 144849 4/1/84-85 3. RECITALS 3.1. Fibreboard has been, is, and expects to be in the future named in multiple Asbestos-Related Building Claims. 3.2. Disputes have arisen between Fibreboard and the Settling Insurers as to their respective rights and obligations relating to the Asbestos-Related Building Claims. 3.3. Fibreboard and the Settling Insurers are parties to the action entitled FIBREBOARD CORPORATION V. CONTINENTAL CAS. CO., ET AL., No. 844903, In the Superior Court of the State of California for the City and County of San Francisco (the "Coverage Action"), which concerns, INTER ALIA, the nature and extent of coverage available, if any, under the policies for matters raised in, arising out of or relating to the Asbestos-Related Building Claims. 3.4. Without waiver of their respective positions in relation thereto, the Parties desire to settle any and all past, present and potential future disputes between them regarding the nature and extent of coverage available, if any, under the Policies for any and all matters raised in, arising out of or relating to the Asbestos-Related Building Claims and the Coverage Action in accordance with the terms of this Agreement. 4. PAYMENT OF ASBESTOS-RELATED BUILDING CLAIMS 4.1. Fibreboard may from time to time request, and Settling Insurers shall in response to such request timely make, in the sequence set forth in paragraph 4.2, payments of Allocated Expense or Indemnity under the Policies for any Asbestos-Related Building Claim in which it is reasonably determined from available information that a Policy was in effect for any of the period of time between the date, with respect to each Claim, of [ * ] of [ * ] or [ * ] at [ *] ] the [ * ] Fibreboard [ * ] the [ * ] the [ * ] of [ * ] or [] * ] or [] * ] at [ * ]. If insufficient information is available to determine the date of first installation, this date will be presumed to [ * ] until information as to another date is developed. 4.2. Payments of Allocated Expense or Indemnity may be requested by Fibreboard and shall be made by Settling Insurers in the following sequence (and not concurrently): 4.2.1. Payment of $[ *] ] Dollars) under policies in effect [ * ] by [] * ] (or, if [ *] ] of [ * ] the [ * ] of [ * ] under those policies to [ *] * ] of [ * ] amount); 4.2.2. Payment of $[ * ] Dollars) under [ * ] (for the [ * ]; 4.2.3. Payment of $[ * ] Dollars) under policies in effect [ * ] by [] * ] (or, if [ *] ] of [ * ] the [ * ] of [] * ] under those policies to [ *] ] of [ * ] amount); 4.2.4. Payment of $[ * ] Dollars) under [ * ] policy [ * ] (or, if [] * ] of [ * ] the [ *] 3 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION ] of [ * ] under those policies to [ *] ] of [ * ] amount); 4.2.5. Payment of $[ * ] Dollars) under policies in effect [ * ] by [] * ] (or, if [ * ] of [ *] ] under those policies to [] * ] of [ * ] amount); 4.2.6. Payment of $[ * ] Dollars) under [ * ] policy [] * ] (or, if [ * ] of [] * ] the [ * ] of [] * ] under those policies to [ *] ] of [ * ] amount); 4.2.7. Payment of $[ *] ] Dollars) under policies in effect [ * ] by [ * ] (or, if [] * ] of [ * ] the [ *] ] of [ * ] under those policies to [] * ] of [ * ] amount); 4.2.8. Payment of $[ * ] Dollars) [ * ] under [ *] ] and [] * ] all [ *] ] from [ * ] from [ *] ] or [ * ] (under policies in which the [ *] ] to [ * ] a [ * ] in [ * ]), subject to the following conditions: 4.2.8.1. Fibreboard [ * ] with the [ *] ] the following [ * ] of [ * ] or [ * ] to [ * ] of [ * ]: 4.2.8.1.1. [ * ] is [] * ] among [ * ] participants in [ * ] ; 4.2.8.1.2. [ *] ] are [ *] ] among [ * ] participants in [ * ]; 4 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION 4.2.8.1.3. [ *] ] are [] * ] among [ * ] participants [ * ]; 4.2.8.1.4. [ *] ] and [] * ] are [] * ]; 4.2.8.1.5. Provided that the [ *] ] to [ * ] Fibreboard in [ * ] the [] * ] Dollars); and 4.2.8.1.6. Provided further that [ * ] Fibreboard shall not [ *] ] the Settling Insurers under paragraph 4.2.8. 4.2.8.2. If [ *] ] begin [ *] ] after [ *] ] until [ * ] by [] * ] or [ * ] or [ * ] an [ * ] the [ *] ] the [ * ] as the [] * ] by each in the [] * ]; 4.2.8.3. Settling Insurers shall at their option [] * ] in [ * ] the [ * ] or [ * ] are [] * ] the Settling Insurers [ *] ] which shall be amended in accordance therewith; provided that [ *] ] Fibreboard reasonably [ *] ]; 4.2.9. Payment of $[ * ] Dollars) each, for a [ *] ] under [ * ] (for the [ *] ] (for the [ *] ] (for the [] * ] (for the [] * ] subject to the following condition: 4.2.9.1. Fibreboard shall contemporaneously [] * ] of [ *] ] allocated to the [ * ] policies; 5 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION 4.2.10. Payment of $[ *] ] Dollars) under [ *] ] (for the [ * ], subject to the following condition: 4.2.10.1. Fibreboard shall contemporaneously [] * ] of [ *] ] allocated to this [ *] ]; 4.2.11. Payment of [ * ] to Fibreboard; 4.2.12. Payment of $[ * ] Dollars) under [ *] ], subject to the following condition: 4.2.12.1. Fibreboard shall contemporaneously [] * ] of [ * ] allocated to this [ * ]. 4.2.13. [ * ] pursuant to paragraphs 4.2.9.1, 4.2.10.1 or 4.2.12.1 [ *] ] the Settling Insurers under paragraphs 4.2.9, 4.2.10 and 4.2.12. 4.3. Payment [] * ] (the [ * ] consistent with the Settlement Agreement, dated January 1993 between Fibreboard and the AIG companies, except that [ *] ] under the policies [ * ] in accordance with section 4 of this Agreement. 4.4. If payment for an Asbestos-Related Building Claim is made simultaneously under more than one Policy, payment shall be made equally under each such Policy to the extent that limits of liability remain unconsumed thereunder in accordance with this Agreement. 4.5. The Settling Insurers will not be charged with punitive or exemplary damages or conspiracy or concert of action judgments, where the substantive law of the jurisdiction under whose law the judgment arises holds that such awards are not covered by insurance because of public policy or contract interpretation. The Settling Insurers will not be charged with fines or penalties, or the multiple portion of damages which are doubled or trebled under any deceptive trade practices act or consumer protection statute, where the substantive law of the jurisdiction under whose law the judgment arises holds that such awards are not covered by insurance because of public policy or contract interpretation; if such law holds that such an award is covered, Settling Insurers shall pay it; and if such law is unsettled, Fibreboard shall have the 6 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION right to seek to require payment of such award either, at the option of Settling Insurers, by submitting the issue for resolution under section 13 or by bringing legal action in a court of law, but Settling Insurers shall not be required to pay such award pending such resolution or action, subject to the right of Fibreboard to an expedited determination under section 13, not to be resorted to routinely, that the probability of success on the merits and/or the threat of substantially harmful consequences to Fibreboard justify requiring the Settling Insurers to advance as much as 50% of the payment of such award, subject to reimbursement upon the conclusion of such resolution or action. 4.6. Payments for Indemnity for Asbestos-Related Building Claims shall be paid by Settling Insurers, at Fibreboard's request, directly to the person asserting a Claim. Payments by the Settling Insurers for Allocated Expenses shall be made, at Fibreboard's request, directly to counsel or other persons responsible for providing Allocated Expenses. Such payments will be timely made by Settling Insurers, and all reasonable efforts will be made to accomplish payment within thirty (30) days of receipt of billings therefor by Settling Insurers. 4.7. If a Settling Insurer disputes its obligation with respect to a payment for Indemnity or Allocated Expenses, the Insurer will nevertheless make the payment and submit the issue for resolution under section 13. Payments which are disputed by Settling Insurers shall be promptly reimbursed by Fibreboard to Settling Insurers in the event of a determination pursuant to the dispute resolution procedures that such payments, or portions thereof, were not required to be made in accordance with this Agreement. If such reimbursement is not made, the amount thereof may be offset against any Indemnity or Allocated Expense payments thereafter required of any of the Settling Insurers. 4.8. As a means of minimizing, reducing or delaying the overall payment of Asbestos-Related Building Claims by Settling Insurers under the Policies, Settling Insurers may at their option make payments for the purpose of gaining access to policies issued by other insurers, whether or not in the sequence set forth in this section, so long as this does not result in prejudice to Fibreboard or Settling Insurers. 4.9. The Settling Insurers shall have no obligation of any kind under the Policies with respect to any and all matters raised in, arising out of or relating to the Asbestos-Related Building Claims or any products claims except as provided in this Agreement; provided, that this Agreement does not modify any obligation of INA under the January 1, 1993 Settlement Agreement between INA and Fibreboard. 5. CLAIM HANDLING 5.1. The Settling Insurers shall have no obligation to assume charge of the defense or handling of Asbestos-Related Building Claims. 7 5.2. Fibreboard shall keep the Settling Insurers (through the person or persons designated as recipients of notice under this Agreement) reasonably informed, as far in advance as feasible, of significant developments in the Asbestos-Related Building Claims, including but not limited to upcoming or ongoing trials, class certification proceedings, serious settlement discussions and evaluations of general strategies or policies of Fibreboard in relation to Asbestos-Related Building Claims. 5.2.1. Fibreboard shall provide periodic reports containing a summary of the current status of each Asbestos-Related Building Claim and shall report AD HOC on the disposition of pending claims and the filing of new Claims, receipt of which by the Settling Insurers shall be satisfactory acknowledgement thereof and reservation of all rights and fulfillment of all duties other than those created by this Agreement with respect thereto. 5.2.2. Before such time as Settling Insurers are called upon to make payments hereunder, the provisions of this paragraph 5.2 shall not require Fibreboard to provide information in a manner different from, or more burdensome than, Fibreboard's obligations under other settlements relating to the Asbestos- Related Building Claims. 5.3. At such time as Settling Insurers are called upon to make payments hereunder, the Settling Insurers shall have the reasonable right to participate in decisions with respect to the defense, handling or settling of Asbestos-Related Building Claims, subject to the ultimate reasonable control of Fibreboard. Fibreboard shall exercise its reasonable best judgment in defending, handling and settling Asbestos-Related Building Claims and shall do so acting in good faith and engaging in fair dealing insofar as the interests of either Settling Insurers or Fibreboard may be implicated. 5.3.1. With respect to any Asbestos-Related Building Claim as to which Fibreboard reasonably expects it may request payment of Indemnity under this Agreement by a Settling Insurer, Fibreboard shall keep the Settling Insurers (through the person or persons designated as recipients of notice under this Agreement) reasonably informed, in advance where feasible, of settlement negotiations in the Asbestos-Related Building Claim in question, and shall give notice thereto of its intent to settle such Claim, unless the amount of such settlement is smaller than $[ * ] for a Claim or $[ * ] for a group of Claims in which the average of each Claim settled is not more than $[ * ]. Such information and notice shall be reasonably sufficient to enable the Settling Insurer in question to review and make timely objection with respect to Fibreboard's intent to settle. 5.3.2. At such time as Settling Insurers are called upon to make payments hereunder, Fibreboard shall provide quarterly reports providing a detailed identification of payments made by it of Allocated Expense and Indemnity in connection with the Asbestos-Related Building Claims. Such reports shall identify each Policy 8 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION under which such payment is made and the amount of coverage or limits of liability that remain unconsumed thereunder. 5.3.3. At such time as Settling Insurers are called upon to pay Allocated Expenses hereunder, the Settling Insurers shall have the reasonable right to consult with counsel for Fibreboard concerning the handling of Asbestos-Related Building Claims at any time for informational purposes and Fibreboard shall instruct its counsel to cooperate fully with Settling Insurers for this purpose and, at the reasonable request of Settling Insurers, provide reports as to the current status of Asbestos-Related Building Claims being handled by such counsel. Neither Fibreboard nor its counsel shall assert the attorney-client privilege or the work product rule or similar rules or privileges as a basis for withholding information relating to the defense of the Asbestos-Related Building Claims which is in the possession or control of counsel handling Asbestos-Related Building Claims on behalf of Fibreboard. 5.4. The Settling Insurers shall have the right reasonably to inspect and, at their expense, copy any documentation relating to billings or payments for Allocated Expense and Indemnity under this Agreement and Fibreboard shall provide all reasonable assistance in providing access thereto. 5.5. At such time as the Settling Insurers begin making payment pursuant to paragraph 4.2.9., after written notice has been given to Fibreboard of the intent to do so, the Settling Insurers shall, at their option, have the right to assume charge of the defense or handling of Asbestos-Related Building Claims while making payments under this Agreement. [ *] ], Fibreboard [ * ] of the [] * ] of payments [] * ] allocated to [ *] ] of the Settling Insurers pursuant to paragraphs 4.2.9.1., 4.2.10.1. or 4.2.12.1; Fibreboard shall have reasonable rights of consultation and information and the defense shall be conducted consistent with Fibreboard's reasonable interests. 6. LIMITS OF LIABILITY AND INDEMNIFICATION 6.1. Payment under this Agreement of Allocated Expenses or Indemnity under any Policy and/or payment, even though not under this Agreement, of claims other than Asbestos-Related Building Claims to which aggregate limits are applicable under any Policy shall be deemed to erode the aggregate limits of such Policy. 6.2. Payment under this Agreement of Allocated Expenses or Indemnity under any Policy and/or payment, even though not under this Agreement, of Fibreboard claims other than Asbestos-Related Building Claims to which aggregate limits are applicable under any Policy of an amount equal to the total amount required by section 4 of this Agreement to be paid under such Policy shall be deemed complete and final exhaustion of the aggregate limits of such Policy and the Settling Insurers shall have 9 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION no obligation to anyone in a greater amount for any Fibreboard claims as to which aggregate limits are applicable. 6.2.1. The payment of the aggregate limit of a Policy as provided by this paragraph 6.2 shall constitute exhaustion of the aggregate limit of that Policy for purposes of calculating the attachment of a policy that is excess to said Policy. 6.3. The amount required by this Agreement to be paid under any Policy shall be deemed the per occurrence limit of liability of such Policy with respect to payment under this Agreement of Allocated Expenses or Indemnity under any Policy and/or payment, even though not under this Agreement, of Fibreboard claims other than Asbestos-Related Building Claims, [] * ] of liability of [] * ]. 6.3.1. The payment of such per occurrence limit as provided by this paragraph 6.3. shall constitute exhaustion of the per occurrence limit of liability of that Policy for purposes of calculating the attachment of a policy that is excess to said Policy. 6.4. Fibreboard and the Settling Insurers agree that the aggregate limits stated in the Policies described in this Agreement apply only once with respect to claims which impact those limits, and that the Settling Insurers shall not be obligated to make payments in regard to any such claims in excess of the aggregate limits described in said Policies. Fibreboard agrees that it shall defend, indemnity and hold harmless the Settling Insurers for any amounts the Settling Insurers may have to pay by reason of any claims relating to whether the Policies' limits are depleted by payments under the provisions of this Agreement. 6.4.1. Any such litigation brought against the Settling Insurers shall be conducted in the mutual interest of Fibreboard and the Settling Insurers. 6.4.1.1. In connection with such litigation, Fibreboard shall not, without the prior written consent of the Settling Insurers, retain as counsel any firm engaged in coverage litigation with one of the Settling Insurers. 6.4.1.2. In such litigation, at Settling Insurers' reasonable request, Fibreboard shall make reasonably clear and conspicuous that Fibreboard is the real party in interest for purposes of coverage positions being taken therein nominally in behalf of the Settling Insurer in question. 6.4.1.3. The Settling Insurers may, at their option and expense, engage counsel to appear on their behalf in such litigation, provided that the conduct of such litigation shall be subject to the ultimate reasonable control of Fibreboard. 10 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION 6.4.2. If Fibreboard fails to defend or indemnify Settling Insurers under paragraph 6.4., and Fibreboard is unable to provide reasonable and adequate assurance to the Settling Insurers of prompt future performance, any further performance by the Settling Insurers under this Agreement shall thereafter be permanently excused and payments theretofore made to Fibreboard under this Agreement under any Policies shall be deemed to have been made in consideration of a full and complete release of all obligations of the Settling Insurers with respect to Fibreboard under said Policies, such that the Settling Insurers shall have no further obligation with respect to any claims by or against Fibreboard thereunder. 7. MUTUAL RELEASE REGARDING ASBESTOS-RELATED BUILDING CLAIMS 7.1. In consideration for the execution of this Agreement, the Parties release and forever discharge each other, together with their respective attorneys, agents, employees, officers, directors, shareholders, assigns, successors- or predecessors-in-interest, subsidiaries, parents or other affiliates, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, debts, expenses, attorneys' fees, damages, judgments, orders and liabilities of whatever kind or nature in contract, tort, law, equity or otherwise, whether arising in common law or statute, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, past, existing, potential, or future, by each other (including without limitation any claim or obligation, actual or potential, with respect to the indemnification and/or defense of under any policy of insurance issued by a Settling Insurer and any and all claims for unfair or deceptive trade or insurance practices, violation of section 790.03 of the Insurance Code of the State of California or any similar or related statute or regulation, violation of section 17200 ET SEQ. of the Business and Professions Code of the State of California or any similar or related statute or regulation, bad faith, punitive damages, breach of contract, breach of the implied covenant of good faith and fair dealing or extra-contractual damages or remedies of any type) for or arising from or related in any way to the Asbestos-Related Building Claims, including without limitation those alleged or set forth, or which could have been alleged or set forth, in the pleadings or other documents filed or served in the Coverage Action, arising out of, related directly or indirectly to or connected with acts, omissions, transactions, occurrences or events which form the basis of the Coverage Action; arising directly or indirectly from acts, omissions, transactions, occurrences or events relating in any way to the Coverage Action; or arising directly or indirectly from the negotiation, terms or implementation of this Agreement (the "Released Claims"). 7.2. It is the intention of the Parties that the foregoing release shall be effective as a bar to all Released Claims. In furtherance, and not in limitation, of such intention, the releases described herein shall be, and shall remain in effect as, full and complete releases of the Released Claims, notwithstanding the discovery or existence of any additional or different facts or claims. It is expressly understood and agreed that this 11 Agreement is intended to cover and does cover not only all known facts and/or claims, but also any further facts and/or claims within the scope of the Released Claims, not now known or anticipated, but which may later develop or be discovered, including all the effects and consequences thereof. 7.2.1. The Parties hereby acknowledge that they are familiar with California Civil Code section 1542, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Each Party hereby waives and relinquishes all rights and benefits which it has or may have under California Civil Code section 1542 and any statute, rule and legal doctrine in this or any other jurisdiction to the same or similar effect as section 1542 to the full extent that it may lawfully waive such rights and benefits. In making this waiver, each Party acknowledges that it may hereafter discover facts in addition to or different from those which it now believes to be true with respect to the subject matter of the disputes and other matters released herein, but agrees that it has taken that possibility into account in reaching this Agreement and that the releases given herein shall be and remain in effect as full and complete releases notwithstanding the discovery or existence of any such additional or different facts, as to which each Party expressly assumes the risk. 7.3. Each Party hereto acknowledges and represents that it (a) has fully and carefully read this Agreement prior to execution; (b) has been fully apprised by its attorneys of the legal effect and meaning of this document and all terms and conditions hereof; (c) has had the opportunity to make whatever investigation or inquiry it deemed necessary or appropriate in connection with the subject matter of this Agreement; (d) has been afforded the opportunity to negotiate as to any and all terms hereof; and (e) is executing this Agreement voluntarily, free from any undue influence, coercion, duress or menace of any kind. 7.4. Each Party agrees to bear its own costs and attorneys' fees with respect to the Coverage Action, the negotiation and drafting of this Agreement and the settlement which led to it. 7.5. Settling Insurers hereby release and waive any and all past, present and future claims, whether for subrogation, contribution, indemnity or other legal or equitable relief, against American Home Assurance Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, Lexington Insurance Company and New Hampshire Insurance Company arising out of or relating to Asbestos-Related Building Claims. 12 8. DISMISSAL 8.1. Within five (5) days of the effective date of this Agreement , Fibreboard shall deliver to counsel for the Settling Insurers an executed request for dismissal from the Coverage Action of each Settling Insurer with prejudice, each Party to bear its own attorney fees and costs. 9. SEPARATE CLAIMS OF INA 9.1. Whereas Fibreboard has agreed to make payment to INA and other insurers in resolution of certain claims against Fibreboard arising from payments made on behalf of Fibreboard under the separate Agreement Concerning Asbestos-Related Claims, commonly known as the "Wellington Agreement," for asbestos-related bodily injury claims; in consideration for the execution of this Agreement, Fibreboard shall accelerate all such future payments due INA and such other insurers, paying them in full within 30 days of the effective date of this Agreement. 9.2. Whereas INA, Fidelity & Casualty Company of New York ("F&C") and Royal Insurance Company ("Royal") have asserted certain claims against Pacific Indemnity Company ("Pacific") and Continental Casualty Company ("Continental") arising from payments made on behalf of Fibreboard under the Wellington Agreement for asbestos-related bodily injury claims (the "Wellington IDP claims") and have asserted the Wellington IDP claims in an action entitled ROYAL INDEMNITY CO., ET AL. V. CONTINENTAL CASUALTY CO., ET AL., No. 926327, in the Superior Court of the State of California for the City and County of San Francisco (the "Royal Action"); and whereas Fibreboard has entered into settlements relating to asbestos-related bodily injury claims with (1) Pacific, Continental and a purported class of asbestos-related bodily injury claimants, court approval for which is being sought in the class action entitled AHEARN, ET AL. V. FIBREBOARD CORPORATION, No. 6:93cv526, in the United States District Court for the Eastern District of Texas, Tyler Division ("the Global Settlement Agreement") and (2) Pacific and Continental, court approval for which is being sought in the class action entitled CONTINENTAL CASUALTY CO., ET AL. V. RUDD, ET AL., No. 6:94cv458, in the United States District Court for the Eastern District of Texas, Tyler Division ("the Trilateral Settlement Agreement"); in consideration for the execution of this Agreement, the Parties agree as follows: 9.2.1. Settling Insurers agree and shall secure the agreement of INA, F&C and Royal not to oppose court approval of the Global Settlement Agreement or the Trilateral Settlement Agreement or challenge any judgment approving either agreement; 13 9.2.2. In the event, and within 30 days, of final court approval of the Global Settlement Agreement, Fibreboard shall pay to INA the sum of $1,100,000.00 (One Million One Hundred Thousand Dollars); 9.2.3. In the event Fibreboard receives or becomes entitled to receive any funds under the Trilateral Settlement Agreement, or any modification thereof, pursuant to final court approval of that agreement, within 30 days thereafter Fibreboard shall pay to INA the sum of $3,000,000.00 (Three Million Dollars); 9.2.4. Settling Insurers shall secure the agreement of INA, F&C and Royal to dismiss the Royal Action, including all appellate proceedings therein, with prejudice, and to release all claims against Pacific and Continental that would otherwise be extinguished or diminished by court approval of the Global Settlement Agreement or the Trilateral Settlement Agreement, including without limitation the IDP Wellington claims, such dismissals and releases conditioned, and to take effect only, upon the receipt by INA of either the payment required by paragraph 9.2.2. or the payment required by paragraph 9.2.3. herein; 9.2.5. Fibreboard shall endeavor reasonably and in good faith to obtain the agreement of Continental and Pacific to a stay of the appeal of the Royal Action pending final court approval or disapproval of the Global Settlement Agreement and Trilateral Settlement Agreement. 9.2.6. In the event that neither the Global Settlement Agreement nor the Trilateral Settlement Agreement receives final court approval and INA does not receive either of the payments under paragraphs 9.2.2 or 9.2.3., INA, F&C and Royal reserve the right to proceed with their Wellington IDP claims, including the appeal in the Royal Action and, to the extent consistent with its contractual or other legal obligations and without prejudice to Fibreboard, Fibreboard shall not oppose the prosecution of these claims. 9.3. It is a condition to the effectiveness of this Agreement that Settling Insurers secure the written agreement of INA, F&C and Royal to the provisions of this section 9. 10. OTHER INSURANCE 10.1. Fibreboard shall endeavor in good faith to secure the execution by American Home Assurance Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, Lexington Insurance Company and New Hampshire Insurance Company of a release and waiver of any and all claims, whether 14 for subrogation, contribution, indemnity or other legal or equitable relief against Settling Insurers arising out of payment of Asbestos-Related Building Claims to or on behalf of Fibreboard. Fibreboard agrees that it shall defend, indemnify and hold harmless the Settling Insurers for any amounts the Settling Insurers are required to pay with respect to a Fibreboard claim, directly or indirectly, in a sequence different from that provided for in Section 4 of this Agreement by reason of a claim made by one of the aforesaid insurers; provided, however, that the reimbursement of any such payment to Settling Insurers shall not relieve Settling Insurers of any obligation to make payments in accordance with Section 4 of this Agreement at a later time. 10.1.1. Fibreboard represents that it is not presently aware of any potential claims, other than Asbestos-Related Building Claims, that are reasonably likely to lead to the exhaustion of aggregate limits of liability of the policies of aforesaid insurers. 10.2. Fibreboard shall endeavor in good faith to obtain, as part of any settlement agreement it enters with any of its other insurers after the date of this Agreement, a release and waiver of claims such other insurers may have or assert against Settling Insurers in connection with the Policies as regards Asbestos-Related Building Claims. 10.3. Fibreboard will use its reasonable best efforts, including the pursuit of litigation, to obtain and enforce settlements or judgments determining the obligations of Fibreboard's other insurers with respect to the Asbestos-Related Building Claims. Fibreboard will retain the right to determine the terms on which it will settle with other insurers; provided, however, that Fibreboard shall not enter into any future settlement determining the obligations of Fibreboard's other insurers with respect to the Asbestos-Related Building Claims without the express written approval, not unreasonably to be withheld, of the Settling Insurers. 10.3.1. Fibreboard shall give the Settling Insurers reasonable advance notice of its participation in negotiations relating to such settlement with Fibreboard's other insurers and inform Settling Insurers of the settlement terms under consideration in such negotiations and shall provide copies or, if not available, the material terms of any such settlement negotiated; 10.3.2. Settling Insurers' [ *] ] any [ * ] Fibreboard [] * ] of payments of [ * ] to particular [] * ] the Settling Insurers pursuant to paragraphs 4.2.8.1., 4.2.9.1., 4.2.10.1. or 4.2.12.1. 10.4. To the extent that Fibreboard obtains a judgment that Employers Reinsurance, ESLIC or Lloyd's of London is obligated to make payments of Allocated Expense or Indemnity under policies in effect in 1956-62, Fibreboard shall, at Settling 15 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION Insurers' request and if otherwise necessary, make payments, not more than $50,000 per Claim, for the purpose of gaining access to such policies, thereby requiring them to pay in such manner as shall defer payments to be made by the Settling Insurers pursuant to section 4 herein, and it is the intent of this Agreement that the aforenamed insurers shall have no right of reimbursement, set-off, contribution, indemnity, subrogation or otherwise against the Settling Insurers arising from payments made by them and Fibreboard shall cooperate reasonably with the Settling Insurers in seeking to enforce such intent. 11. CONFIDENTIALITY AND NONWAIVER 11.1. In consideration of the mutual promises set forth in this Agreement, the Parties have agreed to settle such claims as are enumerated herein strictly as a business accommodation unrelated to the merits of the respective claims of the Parties and without prejudice to their respective positions. Nothing herein shall be construed as a waiver, estoppel or invalidation of any position the Parties may take in the future with respect to any claims or defenses other than the Released Claims. Neither execution nor performance under this Agreement is intended as, nor shall it be construed or referred to in any way as, an admission of the truth of the claims or contentions of any other Party or the existence of any liability or responsibility at any time or for any purpose, or of the violation of federal, state or local law, ordinance or regulation or of any liability or wrongdoing. 11.2. The terms and conditions of this Agreement shall remain confidential and shall not hereafter be disclosed to any person or entity not a Party to the Agreement. Notwithstanding the provisions of this paragraph, this Agreement may be disclosed to attorneys, partners, assignees, reinsurers and their retrocessionaires or to financial auditors and accountants of any Party, and as required by law in public filings or otherwise, and to the extent reasonably necessary for legitimate business purposes; for purposes of obtaining settlements determining the obligations of other insurers of Fibreboard, to such other insurers (on a confidential basis only); or otherwise as compelled against a Party by legal process over the diligent objection and opposition of such Party after reasonable notice to the other Parties. 11.3. This Agreement, and the acts, errors and omissions of the Parties leading up to and including its negotiation and execution constitute the compromise of disputed claims, are subject to the protection afforded by sections 1152 and 1152.5 of the California Evidence Code and Rule 408 of the Federal Rules of Evidence and similar statutes and rules, are without prejudice or value as precedent and shall not be used or referred to or cited in any way in any communication, proceeding or hearing for the purpose of creating, proving, modifying or interpreting obligations of any of the Parties under, or terms and conditions of, any other agreement or any policy. 16 12. INTERPRETATION 12.1. It is acknowledged that each Party, with the assistance of competent counsel, has participated in the negotiation and drafting of this Agreement and that any ambiguity should not be construed for or against any Party on account of such drafting. This Agreement is not an insurance contract and shall not be construed in favor of any Party by virtue of that Party's status as the drafter of language herein. The Parties agree that this Agreement has been negotiated at arm's length by parties of equal bargaining power, each of which was represented by competent counsel of its own choosing. The Parties further acknowledge that the obligations and releases herein described are in good faith and are reasonable in the context of the matters released. 12.2. This Agreement has been negotiated and entered into in the State of California and shall in all respects be governed, enforced and construed in accordance with the laws of the State of California. 13. DISPUTE RESOLUTION 13.1. In event of any disputes arising under this Agreement (including without limitation its interpretation, application or implementation) which the Parties cannot resolve by negotiations, the Parties will submit the dispute to a mediator mutually agreed on by the Parties and paid equally by each side. If the dispute is not resolved by mediation, it shall be submitted to binding and final arbitration, without right of appeal, or to another form of binding alternative dispute resolution ("ADR") of the interested Parties' choosing. In the event the Parties cannot agree on arbitration or another form of ADR, the dispute will be submitted for binding arbitration by the American Arbitration Association pursuant to its rules. 13.1.1. In the event that a Party has demonstrated a pattern of noncompliance with the terms or intendment of this Agreement and that it is reasonably likely to continue to do so, the Party aggrieved thereby shall have the right to the appointment, pursuant to the preceding section, of a single arbitrator or mediator or panel of arbitrators or mediators to sit from time to time in supervision of the future performance of this Agreement by the noncomplying Party until such pattern is reasonably determined to have ended. 14. NOTICE 14.1. All notices, bills, demands, payments, accounting or other communications which any Party desires or is required to give, shall be given in writing and shall be deemed to have been given if hand delivered, sent by facsimile or by United States Mail, to the Party or Parties at the address noticed below or such other address as a Party may designate in writing from time to time: 17 Fibreboard Corporation Mr. Irwin A. Bobrin Attention: Michael R. Douglas, Esq. Account Specialist California Plaza Building CIGNA Companies 2121 N. California Blvd., Suite 560 Asbestos Claims Management Walnut Creek, California 94596 1601 Chestnut Street - TLP 15 Facsimile No. (510) 274-0714 Philadelphia, Pennsylvania 19192-2151 Facsimile No. (215) 761-5475 15. OTHER TERMS AND CONDITIONS 15.1. This Agreement is not intended to confer rights or benefits on any person or entity other than a Party. 15.2. Neither this Agreement nor any of the rights, benefits or obligations arising under this Agreement may be assigned by any Party without the prior written consent of the other Parties, which consent shall not be unreasonably withheld. 15.3. Each Party represents, warrants and agrees that it has not assigned or transferred or purported to or attempted to assign or transfer to any person or entity any right, claim or matter released herein. Each Party shall defend, indemnify and hold the other Parties harmless from any and all claims arising out of or relating to any assignment or transfer and any purported or attempted assignment or transfer contrary to the terms of this paragraph. 15.4. Each Party represents, warrants and agrees that (a) no promises or agreements not expressed herein have been made to it; (b) this Agreement contains the entire agreement between the Parties, that it supersedes any and all prior agreements or understandings between the Parties and that its terms are contractual and not a mere recital; (c) in executing this Agreement, neither Party has relied on any statements or representations made by the other Party or the other Party's agents, servants or attorneys concerning the subject matter, basis or effect of this Agreement other than as set forth herein; and (d) each Party is relying solely on its own judgment and knowledge and the advice of its counsel. 15.5. Any party adjudicated to be in breach of the terms of this Agreement pursuant to an arbitration or other form of ADR proceeding under paragraph 13.1 shall, subject to the reasonable discretion of the arbitrator or adjudicator, be required to pay to the non-breaching party costs and expenses, including reasonable attorneys' fees, incurred by such non-breaching party in connection with the enforcement of this Agreement. 15.6. In the event of the bankruptcy or insolvency or similar proceeding of Fibreboard or an entity including Fibreboard, Fibreboard shall notify the Bankruptcy Court and the Trustee in Bankruptcy or similar officer of the Court of the existence of 18 this Agreement and the Settling Insurers shall thereafter respond to any billings in the manner ordered by the Trustee in Bankruptcy or similar officer of the Court. 15.7. The Parties agree to do all things reasonable to implement this Agreement. The Parties will reasonably assist and cooperate, each with the other, to effectuate the purposes of this Agreement, protect and defend its integrity (including testifying as to its provisions, operations and bona fides) and to do what may be necessary to verify its existence and operation in such matters as may be relevant. To the extent reasonable and practical, each Party shall cooperate and assist the other by providing any information and witnesses reasonably necessary to secure recoveries from other Fibreboard insurers for Asbestos-Related Building Claims. 15.8. The Parties agree that, except as otherwise set forth herein, they have not and will not commence, maintain, initiate or prosecute, or cause, encourage, assist, advise or cooperate with any other person or entity to commence, maintain, initiate or prosecute, any action, suit, proceeding or claim before any court or administrative agency (whether state, federal or otherwise) against any other Party arising from, concerned with, or otherwise related to, in whole or in part, any of the Released Claims. 15.9. The representations, warranties, agreements, and promises made by each Party to this Agreement and contained herein shall survive the execution of this Agreement. 15.10. No amendment, modification, addendum or revision of this Agreement shall be valid unless it is in writing and signed by the Party or Parties to be bound, in which event there need be no separate consideration therefor. 15.11. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed one and the same instrument. This Agreement is not and shall not be effective, however, unless and until each Party executes the original or a counterpart. 15.12. This Agreement shall become effective (the "Effective Date") as to each Party from and after the later of the date the last Party shall have executed this Agreement or the date the conditions of section 9 are satisfied. WHEREFORE, the Parties execute this Agreement as follows: [Signature pages follow] 19 Dated: October 28 1994 FIBREBOARD CORPORATION By /s/ Michael R. Douglas ------------------------- Dated: October 28, 1994 CALIFORNIA UNION INSURANCE COMPANY By /s/ Irwin A. Bobrin ------------------------- Dated: October 28, 1994 CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA By /s/ Irwin A. Bobrin ------------------------- Dated: October 28, 1994 CENTURY INDEMNITY COMPANY By /s/ Irwin A. Bobrin ------------------------- Dated: October 28, 1994 CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY By /s/ Irwin A. Bobrin ------------------------- 20 Dated: October 28, 1994 INSURANCE COMPANY OF NORTH AMERICA By /s/ Irwin A. Bobrin -------------------------- APPROVED AS TO FORM: Dated: October 28, 1994 BROBECK, PHLEGER & HARRISON By /s/ William R. Irwin -------------------------- William R. Irwin Attorneys for Fibreboard Corporation Dated: October 31, 1994 O'MELVENY & MYERS By /s/ Martin S. Checov -------------------------- Martin S. Checov Attorneys for California Union Insurance Company, Central National Insurance Company of Omaha, Century Indemnity Company, CIGNA Property and Casualty Insurance Company and Insurance Company of North America 21 EX-10.30-3 8 EXHIBIT 10.30.3 EXHIBIT 10.30.3 Amendment to Escrow Agreement This Amendment to Escrow Agreement is made this 6 day of February 1995, by and among Continental Casualty Company, an Illinois corporation ("Continental"), Pacific Indemnity Corporation, a California corporation ("Pacific"), Fibreboard Corporation, a Delaware corporation ("Fibreboard"), and The First National Bank of Chicago ("Escrow Agent"). WHEREAS, Continental, Pacific and the Escrow Agent previously entered into the Escrow Agreement dated as of December 23, 1993; and WHEREAS, the parties wish to provide for the deposit of funds provided on behalf of Fibreboard by The Home Insurance Company ("Home") into the Escrow Account created thereunder and make arrangements relating thereto; NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. CREATION OF NEW ESCROW FUND. A separate escrow under the Escrow Agreement called the "New Escrow Fund" shall be created as follows: a. On or before February 10, 1995, Home, on behalf of Fibreboard shall pay into the Escrow Account the New Escrow Fund which shall consist of the amount of $9,892,223 together with simple interest on said amount at the rate of 3.085% from and after January 1, 1994 until the date of payment. b. The New Escrow Fund shall be maintained as a separate fund as part of the Escrow Account by the Escrow Agent subject to the terms and conditions of the Escrow Agreement, provided however that the limitations on investment of the Escrow Assets set forth in Section 3(c) shall apply separately to the Escrow Fund and the New Escrow Fund and the New Escrow Fund may not be used for payments pursuant to Section 5(b). 2. AMENDMENT OF SECTION 5(c). Section 5(c) of the Escrow Agreement shall be amended to read in full as follows: (c) Notwithstanding any contrary provision of this Escrow Agreement, within the 30-day period following the end of each calendar quarter, Escrow Agent shall pay to Continental 64.71% and to Pacific 35.29% of 5% of the income earned by the Escrow Fund and to Home 5% of the income earned by the New Escrow Fund during such calendar quarter. 1. 3. AMENDMENT OF SECTION 12. Section 12 of the Escrow Agreement shall be amended to read in full as follows: 12. IRS FILINGS AND EXAMINATIONS: (a) For federal income tax purposes, the parties expect that Continental will be allocated 64.71% and Pacific will be allocated 35.29% of the income, gains and deductions with respect to the amount of the Escrow Fund and that Continental and Pacific will each be required to include those items of taxable income, gains and deductions of the Escrow Fund which are attributable to them in computing their separate taxable income. The parties further expect that Home will be allocated all the income, gains and deductions with respect to the New Escrow Fund. This Escrow Agreement shall be construed accordingly. Notwithstanding the foregoing, Escrow Agent shall timely file such tax and other returns and statements for the Escrow Account (collectively "Returns"), and shall provide for and pay such taxes, as are required to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, and of any state or local law and the regulations promulgated thereunder. The Escrow Agent shall provide all completed Returns to Continental, Pacific and Home at least ten days in advance of the due date for such Returns and shall obtain the consent of Continental, Pacific and Home to all Returns before they are filed. The Escrow Agent is authorized to employ such agents and independent contractors as it deems necessary in its best judgement in order to perform the federal and state tax reporting required by this paragraph. Continental, Pacific and Home will advise the Escrow Agent of the party who will sign the required federal and state tax returns on behalf of the Escrow Account. (b) The Escrow Agent agrees that Continental, Pacific and Home shall have the sole and exclusive responsibility for handling any income tax examinations relating to the Escrow Fund and the New Escrow Fund. All costs and expenses of any income tax examination relating to potential tax liability of the Escrow Fund or the New Escrow Fund, including the expense of defending any adjustments or proposed adjustments shall be charged to the Escrow Fund, the New Escrow Fund or both as the case may be. (c) The Escrow Agent agrees that it will inform Continental, Pacific and Home promptly of all questions raised by agents conducting an income tax examination of the Escrow Account and shall cooperate with accountants, tax advisors and counsel retained by Continental, Pacific and Home in working with the income tax agents and in responding to any questions and proposed tax adjustments. 2. 4. Any notice or other communication under the Escrow Agreement to Home must be given in writing and either (a) delivered in person, (b) transmitted by telex, telefax or other telecopy mechanism, provided that notice so given is also mailed as provided in clause (c), or (c) mailed, postage prepaid, receipt requested, as follows: Addressed to: James F. Duhig Assistant Vice President The Home Insurance Company 59 Maiden Lane, 22nd Floor New York, NY 10038 or to such other address or to such other person as Home shall have last designated by notice to the other parties. Each such notice or communication shall be effective (i) if given by telecommunication, when transmitted to the appropriate number so specified in (or pursuant to) this Section and an appropriate answer back is received, (ii) if given by mail, three business days after such communication is deposited in the mail with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when actually delivered to such address. All other terms of the Escrow Agreement shall remain in full force and effect. //// //// //// //// //// //// //// //// //// //// 3. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Escrow Agreement to be executed on the day and year first above written. CONTINENTAL CASUALTY COMPANY By /s/ Laurens F. Terry ------------------------------------ Title Vice President --------------------------------- PACIFIC INDEMNITY CORPORATION By /s/ Malcolm B. Burton ------------------------------------ Title Vice President --------------------------------- FIBREBOARD CORPORATION By /s/ Michael R. Douglas ------------------------------------ Title Sr. V.P. & General Counsel --------------------------------- THE FIRST NATIONAL BANK OF CHICAGO By /s/ J. Cahill ------------------------------------ Title Trust Officer --------------------------------- AGREED TO: CLASS COUNSEL By /s/ Joseph Rice ----------------------------------- Joseph Rice, Esq. By /s/ Joseph Cox ----------------------------------- Joseph Cox, Esq. By /s/ Harry Wartnick ----------------------------------- Harry Wartnick, Esq. By /s/ Steven Kazan ----------------------------------- Steven Kazan, Esq. 4. EX-10.32 9 EXHIBIT 10.32 EXHIBIT 10.32 SETTLEMENT AGREEMENT 1. PARTIES 1.1. This Settlement Agreement ("Agreement") is entered by and between Fibreboard Corporation ("Fibreboard," defined below); and CIGNA Specialty Insurance Company (formerly known as California Union Insurance Company) ("Cal Union" or "CIGNA Specialty"), Central National Insurance Company of Omaha ("Central National"), Century Indemnity Company ("Century"), CIGNA Property and Casualty Insurance Company ("CIGNA P&C") and Insurance Company of North America ("INA")(collectively "Settling Insurers"). 2. DEFINITIONS 2.1. "Allocated Expense" means all reasonable fees, expenses and other costs, including bonding costs pending appeal, reasonably incurred by or on behalf of Fibreboard in connection with the defense and disposition of Asbestos-Related Building Claims for Fibreboard, but does not include any expenses of Fibreboard or compensation for time or fees for Fibreboard personnel, except for reasonable travel costs incurred directly for Fibreboard's defense of the Asbestos-Related Building Claims, does not include fees or expenses at rates above those normally charged under similar circumstances to clients or customers of the firms or vendors employed, or any fees, expenses and other costs incurred by Fibreboard in connection with its efforts to obtain or enforce settlements or judgments determining the obligations of Fibreboard's insurers with respect to the Asbestos-Related Building Claims. 2.2. "Asbestos-Related Building Claim" or "Claim" means claims or suits brought against Fibreboard alleging injury or damage to buildings and property caused by asbestos-containing products or materials ("Asbestos-Related Building Claims"). For purposes of this Agreement, all Asbestos-Related Building Claims brought by one building owner within one state or all Claims brought by or on behalf of the government of the United States or one of its agencies anywhere shall be treated as a single Claim. 2.3. "Fibreboard" means Fibreboard Corporation and includes without limitation any agents, employees, officers, assigns, subsidiaries, successors- or predecessors-in-interest, and, to the extent that Fibreboard Corporation exercises or has exercised or may exercise control or authority over them, means the following: corporations or unincorporated business entities affiliated with Fibreboard Corporation, including without limitation any employee, officer or agent of such affiliated entity, and all persons acting by, through, under or in concert with Fibreboard Corporation, and each of them, and specifically including without limitation any person or entity purporting to be an insured under one or more of the Policies. 2.4. "Indemnity" means any sums paid as damages or otherwise in settlement or satisfaction of judgment of Asbestos-Related Building Claims. 2.5. "Party" means Fibreboard or any Settling Insurer (collectively, the "Parties"). 2.6. "Policy" or "Policies" means liability insurance policies or certificates issued by one of the Settling Insurers which insures Fibreboard, including without limitation the following policies identified in the Coverage Action: SETTLING INSURER POLICY NO. PERIOD --------------------------------------------------------- Central National CNU 126573 7/1/77-6/1/78 Cal Union ZCX 004028 4/1/80-4/1/81 Cal Union ZCX 004437 4/1/81-4/1/82 Cal Union ZCX 006186 4/1/82-4/1/83 Cal Union ZCX 006526 4/1/83-4/1/84 Century CIZ 425553 4/1/82-4/1/84 Central National CNZ 006802 4/1/82-4/1/84 Central National CNZ 006802 4/1/84-4/1/85 CIGNA P&C EX 09-1011 4/1/84-4/1/85 INA XCP 144849 4/1/84-85 3. RECITALS 3.1. Fibreboard has been, is, and expects to be in the future named in multiple Asbestos-Related Building Claims. 3.2. Disputes have arisen between Fibreboard and the Settling Insurers as to their respective rights and obligations relating to the Asbestos-Related Building Claims. 3.3. Fibreboard and the Settling Insurers are parties to the action entitled FIBREBOARD CORPORATION V. CONTINENTAL CAS. CO., ET AL., No. 844903, In the Superior Court of the State of California for the City and County of San Francisco (the "Coverage Action"), which concerns, INTER ALIA, the nature and extent of coverage available, if any, under the policies for matters raised in, arising out of or relating to the Asbestos-Related Building Claims. 3.4. Without waiver of their respective positions in relation thereto, the Parties desire to settle any and all past, present and potential future disputes between them regarding the nature and extent of coverage available, if any, under the Policies for any and all matters raised in, arising out of or relating to the Asbestos-Related Building Claims and the Coverage Action in accordance with the terms of this Agreement. 4. PAYMENT OF ASBESTOS-RELATED BUILDING CLAIMS 4.1. Fibreboard may from time to time request, and Settling Insurers shall in response to such request timely make, in the sequence set forth in paragraph 4.2, payments of Allocated Expense or Indemnity under the Policies for any Asbestos-Related Building Claim in which it is reasonably determined from available information that a Policy was in effect for any of the period of time between the date, with respect to each Claim, of [ * ] of [ * ] or [ * ] at [ *] ] the [ * ] Fibreboard [ * ] the [ * ] the [ * ] of [ * ] or [] * ] or [] * ] at [ * ]. If insufficient information is available to determine the date of first installation, this date will be presumed to [ * ] until information as to another date is developed. 4.2. Payments of Allocated Expense or Indemnity may be requested by Fibreboard and shall be made by Settling Insurers in the following sequence (and not concurrently): 4.2.1. Payment of $[ *] ] Dollars) under policies in effect [ * ] by [] * ] (or, if [ *] ] of [ * ] the [ * ] of [ * ] under those policies to [ *] * ] of [ * ] amount); 4.2.2. Payment of $[ * ] Dollars) under [ * ] (for the [ * ]; 4.2.3. Payment of $[ * ] Dollars) under policies in effect [ * ] by [] * ] (or, if [ *] ] of [ * ] the [ * ] of [] * ] under those policies to [ *] ] of [ * ] amount); 4.2.4. Payment of $[ * ] Dollars) under [ * ] policy [ * ] (or, if [] * ] of [ * ] the [ *] 3 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION ] of [ * ] under those policies to [ *] ] of [ * ] amount); 4.2.5. Payment of $[ * ] Dollars) under policies in effect [ * ] by [] * ] (or, if [ * ] of [ *] ] under those policies to [] * ] of [ * ] amount); 4.2.6. Payment of $[ * ] Dollars) under [ * ] policy [] * ] (or, if [ * ] of [] * ] the [ * ] of [] * ] under those policies to [ *] ] of [ * ] amount); 4.2.7. Payment of $[ *] ] Dollars) under policies in effect [ * ] by [ * ] (or, if [] * ] of [ * ] the [ *] ] of [ * ] under those policies to [] * ] of [ * ] amount); 4.2.8. Payment of $[ * ] Dollars) [ * ] under [ *] ] and [] * ] all [ *] ] from [ * ] from [ *] ] or [ * ] (under policies in which the [ *] ] to [ * ] a [ * ] in [ * ]), subject to the following conditions: 4.2.8.1. Fibreboard [ * ] with the [ *] ] the following [ * ] of [ * ] or [ * ] to [ * ] of [ * ]: 4.2.8.1.1. [ * ] is [] * ] among [ * ] participants in [ * ] ; 4.2.8.1.2. [ *] ] are [ *] ] among [ * ] participants in [ * ]; 4 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION 4.2.8.1.3. [ *] ] are [] * ] among [ * ] participants [ * ]; 4.2.8.1.4. [ *] ] and [] * ] are [] * ]; 4.2.8.1.5. Provided that the [ *] ] to [ * ] Fibreboard in [ * ] the [] * ] Dollars); and 4.2.8.1.6. Provided further that [ * ] Fibreboard shall not [ *] ] the Settling Insurers under paragraph 4.2.8. 4.2.8.2. If [ *] ] begin [ *] ] after [ *] ] until [ * ] by [] * ] or [ * ] or [ * ] an [ * ] the [ *] ] the [ * ] as the [] * ] by each in the [] * ]; 4.2.8.3. Settling Insurers shall at their option [] * ] in [ * ] the [ * ] or [ * ] are [] * ] the Settling Insurers [ *] ] which shall be amended in accordance therewith; provided that [ *] ] Fibreboard reasonably [ *] ]; 4.2.9. Payment of $[ * ] Dollars) each, for a [ *] ] under [ * ] (for the [ *] ] (for the [ *] ] (for the [] * ] (for the [] * ] subject to the following condition: 4.2.9.1. Fibreboard shall contemporaneously [] * ] of [ *] ] allocated to the [ * ] policies; 5 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION 4.2.10. Payment of $[ *] ] Dollars) under [ *] ] (for the [ * ], subject to the following condition: 4.2.10.1. Fibreboard shall contemporaneously [] * ] of [ *] ] allocated to this [ *] ]; 4.2.11. Payment of [ * ] to Fibreboard; 4.2.12. Payment of $[ * ] Dollars) under [ *] ], subject to the following condition: 4.2.12.1. Fibreboard shall contemporaneously [] * ] of [ * ] allocated to this [ * ]. 4.2.13. [ * ] pursuant to paragraphs 4.2.9.1, 4.2.10.1 or 4.2.12.1 [ *] ] the Settling Insurers under paragraphs 4.2.9, 4.2.10 and 4.2.12. 4.3. Payment [] * ] (the [ * ] consistent with the Settlement Agreement, dated January 1993 between Fibreboard and the AIG companies, except that [ *] ] under the policies [ * ] in accordance with section 4 of this Agreement. 4.4. If payment for an Asbestos-Related Building Claim is made simultaneously under more than one Policy, payment shall be made equally under each such Policy to the extent that limits of liability remain unconsumed thereunder in accordance with this Agreement. 4.5. The Settling Insurers will not be charged with punitive or exemplary damages or conspiracy or concert of action judgments, where the substantive law of the jurisdiction under whose law the judgment arises holds that such awards are not covered by insurance because of public policy or contract interpretation. The Settling Insurers will not be charged with fines or penalties, or the multiple portion of damages which are doubled or trebled under any deceptive trade practices act or consumer protection statute, where the substantive law of the jurisdiction under whose law the judgment arises holds that such awards are not covered by insurance because of public policy or contract interpretation; if such law holds that such an award is covered, Settling Insurers shall pay it; and if such law is unsettled, Fibreboard shall have the 6 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION right to seek to require payment of such award either, at the option of Settling Insurers, by submitting the issue for resolution under section 13 or by bringing legal action in a court of law, but Settling Insurers shall not be required to pay such award pending such resolution or action, subject to the right of Fibreboard to an expedited determination under section 13, not to be resorted to routinely, that the probability of success on the merits and/or the threat of substantially harmful consequences to Fibreboard justify requiring the Settling Insurers to advance as much as 50% of the payment of such award, subject to reimbursement upon the conclusion of such resolution or action. 4.6. Payments for Indemnity for Asbestos-Related Building Claims shall be paid by Settling Insurers, at Fibreboard's request, directly to the person asserting a Claim. Payments by the Settling Insurers for Allocated Expenses shall be made, at Fibreboard's request, directly to counsel or other persons responsible for providing Allocated Expenses. Such payments will be timely made by Settling Insurers, and all reasonable efforts will be made to accomplish payment within thirty (30) days of receipt of billings therefor by Settling Insurers. 4.7. If a Settling Insurer disputes its obligation with respect to a payment for Indemnity or Allocated Expenses, the Insurer will nevertheless make the payment and submit the issue for resolution under section 13. Payments which are disputed by Settling Insurers shall be promptly reimbursed by Fibreboard to Settling Insurers in the event of a determination pursuant to the dispute resolution procedures that such payments, or portions thereof, were not required to be made in accordance with this Agreement. If such reimbursement is not made, the amount thereof may be offset against any Indemnity or Allocated Expense payments thereafter required of any of the Settling Insurers. 4.8. As a means of minimizing, reducing or delaying the overall payment of Asbestos-Related Building Claims by Settling Insurers under the Policies, Settling Insurers may at their option make payments for the purpose of gaining access to policies issued by other insurers, whether or not in the sequence set forth in this section, so long as this does not result in prejudice to Fibreboard or Settling Insurers. 4.9. The Settling Insurers shall have no obligation of any kind under the Policies with respect to any and all matters raised in, arising out of or relating to the Asbestos-Related Building Claims or any products claims except as provided in this Agreement; provided, that this Agreement does not modify any obligation of INA under the January 1, 1993 Settlement Agreement between INA and Fibreboard. 5. CLAIM HANDLING 5.1. The Settling Insurers shall have no obligation to assume charge of the defense or handling of Asbestos-Related Building Claims. 7 5.2. Fibreboard shall keep the Settling Insurers (through the person or persons designated as recipients of notice under this Agreement) reasonably informed, as far in advance as feasible, of significant developments in the Asbestos-Related Building Claims, including but not limited to upcoming or ongoing trials, class certification proceedings, serious settlement discussions and evaluations of general strategies or policies of Fibreboard in relation to Asbestos-Related Building Claims. 5.2.1. Fibreboard shall provide periodic reports containing a summary of the current status of each Asbestos-Related Building Claim and shall report AD HOC on the disposition of pending claims and the filing of new Claims, receipt of which by the Settling Insurers shall be satisfactory acknowledgement thereof and reservation of all rights and fulfillment of all duties other than those created by this Agreement with respect thereto. 5.2.2. Before such time as Settling Insurers are called upon to make payments hereunder, the provisions of this paragraph 5.2 shall not require Fibreboard to provide information in a manner different from, or more burdensome than, Fibreboard's obligations under other settlements relating to the Asbestos- Related Building Claims. 5.3. At such time as Settling Insurers are called upon to make payments hereunder, the Settling Insurers shall have the reasonable right to participate in decisions with respect to the defense, handling or settling of Asbestos-Related Building Claims, subject to the ultimate reasonable control of Fibreboard. Fibreboard shall exercise its reasonable best judgment in defending, handling and settling Asbestos-Related Building Claims and shall do so acting in good faith and engaging in fair dealing insofar as the interests of either Settling Insurers or Fibreboard may be implicated. 5.3.1. With respect to any Asbestos-Related Building Claim as to which Fibreboard reasonably expects it may request payment of Indemnity under this Agreement by a Settling Insurer, Fibreboard shall keep the Settling Insurers (through the person or persons designated as recipients of notice under this Agreement) reasonably informed, in advance where feasible, of settlement negotiations in the Asbestos-Related Building Claim in question, and shall give notice thereto of its intent to settle such Claim, unless the amount of such settlement is smaller than $[ * ] for a Claim or $[ * ] for a group of Claims in which the average of each Claim settled is not more than $[ * ]. Such information and notice shall be reasonably sufficient to enable the Settling Insurer in question to review and make timely objection with respect to Fibreboard's intent to settle. 5.3.2. At such time as Settling Insurers are called upon to make payments hereunder, Fibreboard shall provide quarterly reports providing a detailed identification of payments made by it of Allocated Expense and Indemnity in connection with the Asbestos-Related Building Claims. Such reports shall identify each Policy 8 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION under which such payment is made and the amount of coverage or limits of liability that remain unconsumed thereunder. 5.3.3. At such time as Settling Insurers are called upon to pay Allocated Expenses hereunder, the Settling Insurers shall have the reasonable right to consult with counsel for Fibreboard concerning the handling of Asbestos-Related Building Claims at any time for informational purposes and Fibreboard shall instruct its counsel to cooperate fully with Settling Insurers for this purpose and, at the reasonable request of Settling Insurers, provide reports as to the current status of Asbestos-Related Building Claims being handled by such counsel. Neither Fibreboard nor its counsel shall assert the attorney-client privilege or the work product rule or similar rules or privileges as a basis for withholding information relating to the defense of the Asbestos-Related Building Claims which is in the possession or control of counsel handling Asbestos-Related Building Claims on behalf of Fibreboard. 5.4. The Settling Insurers shall have the right reasonably to inspect and, at their expense, copy any documentation relating to billings or payments for Allocated Expense and Indemnity under this Agreement and Fibreboard shall provide all reasonable assistance in providing access thereto. 5.5. At such time as the Settling Insurers begin making payment pursuant to paragraph 4.2.9., after written notice has been given to Fibreboard of the intent to do so, the Settling Insurers shall, at their option, have the right to assume charge of the defense or handling of Asbestos-Related Building Claims while making payments under this Agreement. [ *] ], Fibreboard [ * ] of the [] * ] of payments [] * ] allocated to [ *] ] of the Settling Insurers pursuant to paragraphs 4.2.9.1., 4.2.10.1. or 4.2.12.1; Fibreboard shall have reasonable rights of consultation and information and the defense shall be conducted consistent with Fibreboard's reasonable interests. 6. LIMITS OF LIABILITY AND INDEMNIFICATION 6.1. Payment under this Agreement of Allocated Expenses or Indemnity under any Policy and/or payment, even though not under this Agreement, of claims other than Asbestos-Related Building Claims to which aggregate limits are applicable under any Policy shall be deemed to erode the aggregate limits of such Policy. 6.2. Payment under this Agreement of Allocated Expenses or Indemnity under any Policy and/or payment, even though not under this Agreement, of Fibreboard claims other than Asbestos-Related Building Claims to which aggregate limits are applicable under any Policy of an amount equal to the total amount required by section 4 of this Agreement to be paid under such Policy shall be deemed complete and final exhaustion of the aggregate limits of such Policy and the Settling Insurers shall have 9 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION no obligation to anyone in a greater amount for any Fibreboard claims as to which aggregate limits are applicable. 6.2.1. The payment of the aggregate limit of a Policy as provided by this paragraph 6.2 shall constitute exhaustion of the aggregate limit of that Policy for purposes of calculating the attachment of a policy that is excess to said Policy. 6.3. The amount required by this Agreement to be paid under any Policy shall be deemed the per occurrence limit of liability of such Policy with respect to payment under this Agreement of Allocated Expenses or Indemnity under any Policy and/or payment, even though not under this Agreement, of Fibreboard claims other than Asbestos-Related Building Claims, [] * ] of liability of [] * ]. 6.3.1. The payment of such per occurrence limit as provided by this paragraph 6.3. shall constitute exhaustion of the per occurrence limit of liability of that Policy for purposes of calculating the attachment of a policy that is excess to said Policy. 6.4. Fibreboard and the Settling Insurers agree that the aggregate limits stated in the Policies described in this Agreement apply only once with respect to claims which impact those limits, and that the Settling Insurers shall not be obligated to make payments in regard to any such claims in excess of the aggregate limits described in said Policies. Fibreboard agrees that it shall defend, indemnity and hold harmless the Settling Insurers for any amounts the Settling Insurers may have to pay by reason of any claims relating to whether the Policies' limits are depleted by payments under the provisions of this Agreement. 6.4.1. Any such litigation brought against the Settling Insurers shall be conducted in the mutual interest of Fibreboard and the Settling Insurers. 6.4.1.1. In connection with such litigation, Fibreboard shall not, without the prior written consent of the Settling Insurers, retain as counsel any firm engaged in coverage litigation with one of the Settling Insurers. 6.4.1.2. In such litigation, at Settling Insurers' reasonable request, Fibreboard shall make reasonably clear and conspicuous that Fibreboard is the real party in interest for purposes of coverage positions being taken therein nominally in behalf of the Settling Insurer in question. 6.4.1.3. The Settling Insurers may, at their option and expense, engage counsel to appear on their behalf in such litigation, provided that the conduct of such litigation shall be subject to the ultimate reasonable control of Fibreboard. 10 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION 6.4.2. If Fibreboard fails to defend or indemnify Settling Insurers under paragraph 6.4., and Fibreboard is unable to provide reasonable and adequate assurance to the Settling Insurers of prompt future performance, any further performance by the Settling Insurers under this Agreement shall thereafter be permanently excused and payments theretofore made to Fibreboard under this Agreement under any Policies shall be deemed to have been made in consideration of a full and complete release of all obligations of the Settling Insurers with respect to Fibreboard under said Policies, such that the Settling Insurers shall have no further obligation with respect to any claims by or against Fibreboard thereunder. 7. MUTUAL RELEASE REGARDING ASBESTOS-RELATED BUILDING CLAIMS 7.1. In consideration for the execution of this Agreement, the Parties release and forever discharge each other, together with their respective attorneys, agents, employees, officers, directors, shareholders, assigns, successors- or predecessors-in-interest, subsidiaries, parents or other affiliates, from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, debts, expenses, attorneys' fees, damages, judgments, orders and liabilities of whatever kind or nature in contract, tort, law, equity or otherwise, whether arising in common law or statute, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, past, existing, potential, or future, by each other (including without limitation any claim or obligation, actual or potential, with respect to the indemnification and/or defense of under any policy of insurance issued by a Settling Insurer and any and all claims for unfair or deceptive trade or insurance practices, violation of section 790.03 of the Insurance Code of the State of California or any similar or related statute or regulation, violation of section 17200 ET SEQ. of the Business and Professions Code of the State of California or any similar or related statute or regulation, bad faith, punitive damages, breach of contract, breach of the implied covenant of good faith and fair dealing or extra-contractual damages or remedies of any type) for or arising from or related in any way to the Asbestos-Related Building Claims, including without limitation those alleged or set forth, or which could have been alleged or set forth, in the pleadings or other documents filed or served in the Coverage Action, arising out of, related directly or indirectly to or connected with acts, omissions, transactions, occurrences or events which form the basis of the Coverage Action; arising directly or indirectly from acts, omissions, transactions, occurrences or events relating in any way to the Coverage Action; or arising directly or indirectly from the negotiation, terms or implementation of this Agreement (the "Released Claims"). 7.2. It is the intention of the Parties that the foregoing release shall be effective as a bar to all Released Claims. In furtherance, and not in limitation, of such intention, the releases described herein shall be, and shall remain in effect as, full and complete releases of the Released Claims, notwithstanding the discovery or existence of any additional or different facts or claims. It is expressly understood and agreed that this 11 Agreement is intended to cover and does cover not only all known facts and/or claims, but also any further facts and/or claims within the scope of the Released Claims, not now known or anticipated, but which may later develop or be discovered, including all the effects and consequences thereof. 7.2.1. The Parties hereby acknowledge that they are familiar with California Civil Code section 1542, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Each Party hereby waives and relinquishes all rights and benefits which it has or may have under California Civil Code section 1542 and any statute, rule and legal doctrine in this or any other jurisdiction to the same or similar effect as section 1542 to the full extent that it may lawfully waive such rights and benefits. In making this waiver, each Party acknowledges that it may hereafter discover facts in addition to or different from those which it now believes to be true with respect to the subject matter of the disputes and other matters released herein, but agrees that it has taken that possibility into account in reaching this Agreement and that the releases given herein shall be and remain in effect as full and complete releases notwithstanding the discovery or existence of any such additional or different facts, as to which each Party expressly assumes the risk. 7.3. Each Party hereto acknowledges and represents that it (a) has fully and carefully read this Agreement prior to execution; (b) has been fully apprised by its attorneys of the legal effect and meaning of this document and all terms and conditions hereof; (c) has had the opportunity to make whatever investigation or inquiry it deemed necessary or appropriate in connection with the subject matter of this Agreement; (d) has been afforded the opportunity to negotiate as to any and all terms hereof; and (e) is executing this Agreement voluntarily, free from any undue influence, coercion, duress or menace of any kind. 7.4. Each Party agrees to bear its own costs and attorneys' fees with respect to the Coverage Action, the negotiation and drafting of this Agreement and the settlement which led to it. 7.5. Settling Insurers hereby release and waive any and all past, present and future claims, whether for subrogation, contribution, indemnity or other legal or equitable relief, against American Home Assurance Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, Lexington Insurance Company and New Hampshire Insurance Company arising out of or relating to Asbestos-Related Building Claims. 12 8. DISMISSAL 8.1. Within five (5) days of the effective date of this Agreement , Fibreboard shall deliver to counsel for the Settling Insurers an executed request for dismissal from the Coverage Action of each Settling Insurer with prejudice, each Party to bear its own attorney fees and costs. 9. SEPARATE CLAIMS OF INA 9.1. Whereas Fibreboard has agreed to make payment to INA and other insurers in resolution of certain claims against Fibreboard arising from payments made on behalf of Fibreboard under the separate Agreement Concerning Asbestos-Related Claims, commonly known as the "Wellington Agreement," for asbestos-related bodily injury claims; in consideration for the execution of this Agreement, Fibreboard shall accelerate all such future payments due INA and such other insurers, paying them in full within 30 days of the effective date of this Agreement. 9.2. Whereas INA, Fidelity & Casualty Company of New York ("F&C") and Royal Insurance Company ("Royal") have asserted certain claims against Pacific Indemnity Company ("Pacific") and Continental Casualty Company ("Continental") arising from payments made on behalf of Fibreboard under the Wellington Agreement for asbestos-related bodily injury claims (the "Wellington IDP claims") and have asserted the Wellington IDP claims in an action entitled ROYAL INDEMNITY CO., ET AL. V. CONTINENTAL CASUALTY CO., ET AL., No. 926327, in the Superior Court of the State of California for the City and County of San Francisco (the "Royal Action"); and whereas Fibreboard has entered into settlements relating to asbestos-related bodily injury claims with (1) Pacific, Continental and a purported class of asbestos-related bodily injury claimants, court approval for which is being sought in the class action entitled AHEARN, ET AL. V. FIBREBOARD CORPORATION, No. 6:93cv526, in the United States District Court for the Eastern District of Texas, Tyler Division ("the Global Settlement Agreement") and (2) Pacific and Continental, court approval for which is being sought in the class action entitled CONTINENTAL CASUALTY CO., ET AL. V. RUDD, ET AL., No. 6:94cv458, in the United States District Court for the Eastern District of Texas, Tyler Division ("the Trilateral Settlement Agreement"); in consideration for the execution of this Agreement, the Parties agree as follows: 9.2.1. Settling Insurers agree and shall secure the agreement of INA, F&C and Royal not to oppose court approval of the Global Settlement Agreement or the Trilateral Settlement Agreement or challenge any judgment approving either agreement; 13 9.2.2. In the event, and within 30 days, of final court approval of the Global Settlement Agreement, Fibreboard shall pay to INA the sum of $1,100,000.00 (One Million One Hundred Thousand Dollars); 9.2.3. In the event Fibreboard receives or becomes entitled to receive any funds under the Trilateral Settlement Agreement, or any modification thereof, pursuant to final court approval of that agreement, within 30 days thereafter Fibreboard shall pay to INA the sum of $3,000,000.00 (Three Million Dollars); 9.2.4. Settling Insurers shall secure the agreement of INA, F&C and Royal to dismiss the Royal Action, including all appellate proceedings therein, with prejudice, and to release all claims against Pacific and Continental that would otherwise be extinguished or diminished by court approval of the Global Settlement Agreement or the Trilateral Settlement Agreement, including without limitation the IDP Wellington claims, such dismissals and releases conditioned, and to take effect only, upon the receipt by INA of either the payment required by paragraph 9.2.2. or the payment required by paragraph 9.2.3. herein; 9.2.5. Fibreboard shall endeavor reasonably and in good faith to obtain the agreement of Continental and Pacific to a stay of the appeal of the Royal Action pending final court approval or disapproval of the Global Settlement Agreement and Trilateral Settlement Agreement. 9.2.6. In the event that neither the Global Settlement Agreement nor the Trilateral Settlement Agreement receives final court approval and INA does not receive either of the payments under paragraphs 9.2.2 or 9.2.3., INA, F&C and Royal reserve the right to proceed with their Wellington IDP claims, including the appeal in the Royal Action and, to the extent consistent with its contractual or other legal obligations and without prejudice to Fibreboard, Fibreboard shall not oppose the prosecution of these claims. 9.3. It is a condition to the effectiveness of this Agreement that Settling Insurers secure the written agreement of INA, F&C and Royal to the provisions of this section 9. 10. OTHER INSURANCE 10.1. Fibreboard shall endeavor in good faith to secure the execution by American Home Assurance Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, Lexington Insurance Company and New Hampshire Insurance Company of a release and waiver of any and all claims, whether 14 for subrogation, contribution, indemnity or other legal or equitable relief against Settling Insurers arising out of payment of Asbestos-Related Building Claims to or on behalf of Fibreboard. Fibreboard agrees that it shall defend, indemnify and hold harmless the Settling Insurers for any amounts the Settling Insurers are required to pay with respect to a Fibreboard claim, directly or indirectly, in a sequence different from that provided for in Section 4 of this Agreement by reason of a claim made by one of the aforesaid insurers; provided, however, that the reimbursement of any such payment to Settling Insurers shall not relieve Settling Insurers of any obligation to make payments in accordance with Section 4 of this Agreement at a later time. 10.1.1. Fibreboard represents that it is not presently aware of any potential claims, other than Asbestos-Related Building Claims, that are reasonably likely to lead to the exhaustion of aggregate limits of liability of the policies of aforesaid insurers. 10.2. Fibreboard shall endeavor in good faith to obtain, as part of any settlement agreement it enters with any of its other insurers after the date of this Agreement, a release and waiver of claims such other insurers may have or assert against Settling Insurers in connection with the Policies as regards Asbestos-Related Building Claims. 10.3. Fibreboard will use its reasonable best efforts, including the pursuit of litigation, to obtain and enforce settlements or judgments determining the obligations of Fibreboard's other insurers with respect to the Asbestos-Related Building Claims. Fibreboard will retain the right to determine the terms on which it will settle with other insurers; provided, however, that Fibreboard shall not enter into any future settlement determining the obligations of Fibreboard's other insurers with respect to the Asbestos-Related Building Claims without the express written approval, not unreasonably to be withheld, of the Settling Insurers. 10.3.1. Fibreboard shall give the Settling Insurers reasonable advance notice of its participation in negotiations relating to such settlement with Fibreboard's other insurers and inform Settling Insurers of the settlement terms under consideration in such negotiations and shall provide copies or, if not available, the material terms of any such settlement negotiated; 10.3.2. Settling Insurers' [ *] ] any [ * ] Fibreboard [] * ] of payments of [ * ] to particular [] * ] the Settling Insurers pursuant to paragraphs 4.2.8.1., 4.2.9.1., 4.2.10.1. or 4.2.12.1. 10.4. To the extent that Fibreboard obtains a judgment that Employers Reinsurance, ESLIC or Lloyd's of London is obligated to make payments of Allocated Expense or Indemnity under policies in effect in 1956-62, Fibreboard shall, at Settling 15 * CONFIDENTIAL TREATMENT REQUESTED BY FIBREBOARD CORPORATION THIS PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION Insurers' request and if otherwise necessary, make payments, not more than $50,000 per Claim, for the purpose of gaining access to such policies, thereby requiring them to pay in such manner as shall defer payments to be made by the Settling Insurers pursuant to section 4 herein, and it is the intent of this Agreement that the aforenamed insurers shall have no right of reimbursement, set-off, contribution, indemnity, subrogation or otherwise against the Settling Insurers arising from payments made by them and Fibreboard shall cooperate reasonably with the Settling Insurers in seeking to enforce such intent. 11. CONFIDENTIALITY AND NONWAIVER 11.1. In consideration of the mutual promises set forth in this Agreement, the Parties have agreed to settle such claims as are enumerated herein strictly as a business accommodation unrelated to the merits of the respective claims of the Parties and without prejudice to their respective positions. Nothing herein shall be construed as a waiver, estoppel or invalidation of any position the Parties may take in the future with respect to any claims or defenses other than the Released Claims. Neither execution nor performance under this Agreement is intended as, nor shall it be construed or referred to in any way as, an admission of the truth of the claims or contentions of any other Party or the existence of any liability or responsibility at any time or for any purpose, or of the violation of federal, state or local law, ordinance or regulation or of any liability or wrongdoing. 11.2. The terms and conditions of this Agreement shall remain confidential and shall not hereafter be disclosed to any person or entity not a Party to the Agreement. Notwithstanding the provisions of this paragraph, this Agreement may be disclosed to attorneys, partners, assignees, reinsurers and their retrocessionaires or to financial auditors and accountants of any Party, and as required by law in public filings or otherwise, and to the extent reasonably necessary for legitimate business purposes; for purposes of obtaining settlements determining the obligations of other insurers of Fibreboard, to such other insurers (on a confidential basis only); or otherwise as compelled against a Party by legal process over the diligent objection and opposition of such Party after reasonable notice to the other Parties. 11.3. This Agreement, and the acts, errors and omissions of the Parties leading up to and including its negotiation and execution constitute the compromise of disputed claims, are subject to the protection afforded by sections 1152 and 1152.5 of the California Evidence Code and Rule 408 of the Federal Rules of Evidence and similar statutes and rules, are without prejudice or value as precedent and shall not be used or referred to or cited in any way in any communication, proceeding or hearing for the purpose of creating, proving, modifying or interpreting obligations of any of the Parties under, or terms and conditions of, any other agreement or any policy. 16 12. INTERPRETATION 12.1. It is acknowledged that each Party, with the assistance of competent counsel, has participated in the negotiation and drafting of this Agreement and that any ambiguity should not be construed for or against any Party on account of such drafting. This Agreement is not an insurance contract and shall not be construed in favor of any Party by virtue of that Party's status as the drafter of language herein. The Parties agree that this Agreement has been negotiated at arm's length by parties of equal bargaining power, each of which was represented by competent counsel of its own choosing. The Parties further acknowledge that the obligations and releases herein described are in good faith and are reasonable in the context of the matters released. 12.2. This Agreement has been negotiated and entered into in the State of California and shall in all respects be governed, enforced and construed in accordance with the laws of the State of California. 13. DISPUTE RESOLUTION 13.1. In event of any disputes arising under this Agreement (including without limitation its interpretation, application or implementation) which the Parties cannot resolve by negotiations, the Parties will submit the dispute to a mediator mutually agreed on by the Parties and paid equally by each side. If the dispute is not resolved by mediation, it shall be submitted to binding and final arbitration, without right of appeal, or to another form of binding alternative dispute resolution ("ADR") of the interested Parties' choosing. In the event the Parties cannot agree on arbitration or another form of ADR, the dispute will be submitted for binding arbitration by the American Arbitration Association pursuant to its rules. 13.1.1. In the event that a Party has demonstrated a pattern of noncompliance with the terms or intendment of this Agreement and that it is reasonably likely to continue to do so, the Party aggrieved thereby shall have the right to the appointment, pursuant to the preceding section, of a single arbitrator or mediator or panel of arbitrators or mediators to sit from time to time in supervision of the future performance of this Agreement by the noncomplying Party until such pattern is reasonably determined to have ended. 14. NOTICE 14.1. All notices, bills, demands, payments, accounting or other communications which any Party desires or is required to give, shall be given in writing and shall be deemed to have been given if hand delivered, sent by facsimile or by United States Mail, to the Party or Parties at the address noticed below or such other address as a Party may designate in writing from time to time: 17 Fibreboard Corporation Mr. Irwin A. Bobrin Attention: Michael R. Douglas, Esq. Account Specialist California Plaza Building CIGNA Companies 2121 N. California Blvd., Suite 560 Asbestos Claims Management Walnut Creek, California 94596 1601 Chestnut Street - TLP 15 Facsimile No. (510) 274-0714 Philadelphia, Pennsylvania 19192-2151 Facsimile No. (215) 761-5475 15. OTHER TERMS AND CONDITIONS 15.1. This Agreement is not intended to confer rights or benefits on any person or entity other than a Party. 15.2. Neither this Agreement nor any of the rights, benefits or obligations arising under this Agreement may be assigned by any Party without the prior written consent of the other Parties, which consent shall not be unreasonably withheld. 15.3. Each Party represents, warrants and agrees that it has not assigned or transferred or purported to or attempted to assign or transfer to any person or entity any right, claim or matter released herein. Each Party shall defend, indemnify and hold the other Parties harmless from any and all claims arising out of or relating to any assignment or transfer and any purported or attempted assignment or transfer contrary to the terms of this paragraph. 15.4. Each Party represents, warrants and agrees that (a) no promises or agreements not expressed herein have been made to it; (b) this Agreement contains the entire agreement between the Parties, that it supersedes any and all prior agreements or understandings between the Parties and that its terms are contractual and not a mere recital; (c) in executing this Agreement, neither Party has relied on any statements or representations made by the other Party or the other Party's agents, servants or attorneys concerning the subject matter, basis or effect of this Agreement other than as set forth herein; and (d) each Party is relying solely on its own judgment and knowledge and the advice of its counsel. 15.5. Any party adjudicated to be in breach of the terms of this Agreement pursuant to an arbitration or other form of ADR proceeding under paragraph 13.1 shall, subject to the reasonable discretion of the arbitrator or adjudicator, be required to pay to the non-breaching party costs and expenses, including reasonable attorneys' fees, incurred by such non-breaching party in connection with the enforcement of this Agreement. 15.6. In the event of the bankruptcy or insolvency or similar proceeding of Fibreboard or an entity including Fibreboard, Fibreboard shall notify the Bankruptcy Court and the Trustee in Bankruptcy or similar officer of the Court of the existence of 18 this Agreement and the Settling Insurers shall thereafter respond to any billings in the manner ordered by the Trustee in Bankruptcy or similar officer of the Court. 15.7. The Parties agree to do all things reasonable to implement this Agreement. The Parties will reasonably assist and cooperate, each with the other, to effectuate the purposes of this Agreement, protect and defend its integrity (including testifying as to its provisions, operations and bona fides) and to do what may be necessary to verify its existence and operation in such matters as may be relevant. To the extent reasonable and practical, each Party shall cooperate and assist the other by providing any information and witnesses reasonably necessary to secure recoveries from other Fibreboard insurers for Asbestos-Related Building Claims. 15.8. The Parties agree that, except as otherwise set forth herein, they have not and will not commence, maintain, initiate or prosecute, or cause, encourage, assist, advise or cooperate with any other person or entity to commence, maintain, initiate or prosecute, any action, suit, proceeding or claim before any court or administrative agency (whether state, federal or otherwise) against any other Party arising from, concerned with, or otherwise related to, in whole or in part, any of the Released Claims. 15.9. The representations, warranties, agreements, and promises made by each Party to this Agreement and contained herein shall survive the execution of this Agreement. 15.10. No amendment, modification, addendum or revision of this Agreement shall be valid unless it is in writing and signed by the Party or Parties to be bound, in which event there need be no separate consideration therefor. 15.11. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed one and the same instrument. This Agreement is not and shall not be effective, however, unless and until each Party executes the original or a counterpart. 15.12. This Agreement shall become effective (the "Effective Date") as to each Party from and after the later of the date the last Party shall have executed this Agreement or the date the conditions of section 9 are satisfied. WHEREFORE, the Parties execute this Agreement as follows: [Signature pages follow] 19 Dated: October 28 1994 FIBREBOARD CORPORATION By /s/ Michael R. Douglas ------------------------- Dated: October 28, 1994 CALIFORNIA UNION INSURANCE COMPANY By /s/ Irwin A. Bobrin ------------------------- Dated: October 28, 1994 CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA By /s/ Irwin A. Bobrin ------------------------- Dated: October 28, 1994 CENTURY INDEMNITY COMPANY By /s/ Irwin A. Bobrin ------------------------- Dated: October 28, 1994 CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY By /s/ Irwin A. Bobrin ------------------------- 20 Dated: October 28, 1994 INSURANCE COMPANY OF NORTH AMERICA By /s/ Irwin A. Bobrin -------------------------- APPROVED AS TO FORM: Dated: October 28, 1994 BROBECK, PHLEGER & HARRISON By /s/ William R. Irwin -------------------------- William R. Irwin Attorneys for Fibreboard Corporation Dated: October 31, 1994 O'MELVENY & MYERS By /s/ Martin S. Checov -------------------------- Martin S. Checov Attorneys for California Union Insurance Company, Central National Insurance Company of Omaha, Century Indemnity Company, CIGNA Property and Casualty Insurance Company and Insurance Company of North America 21 EX-21 10 EXHIBIT 21 Exhibit 21 FIBREBOARD CORPORATION SUBSIDIARIES As of December 31, 1994 Subsidiary State of Incorporation --------------------- ---------------------- Trimont Land Company, doing business as Northstar-at- Tahoe California Snider Lumber Products Co., Inc. Delaware Pabco Metals Corporation Delaware Fibreboard Box & Millwork Corporation Delaware Sierra-at-Tahoe, Inc. Delaware Norandex Inc. Delaware EX-23 11 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into Fibreboard Corporation's previously filed Registration Statements on Form S-8, File No. 33- 60412, No. 33-26449 and No. 33-26450. ARTHUR ANDERSEN & CO. San Francisco, California, March 24, 1995. EX-27 12 EXHIBIT 27
5 This Schedule contains summary financial information extracted from Fibreboard's audited financial statements for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 8842 0 42764 2352 76656 138333 190817 75850 1185983 63443 101293 42 0 0 145347 1185983 363705 363705 295202 295202 0 569 4931 45437 18402 27035 0 0 0 27035 6.02 6.01